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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year endedDecember 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-50984
 eLong, Inc.
 (Exact name of Registrant as specified in its charter)
 Cayman Islands
 (Jurisdiction of incorporation or organization)
 
 Beijing 100016, Peoples Republic of China
 (Address of principal executive offices)
 
 (Name, Telephone and Facsimile number and Address of Company Contact Person)
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredAmerican Depositary Shares, each
representing two ordinary
shares, par value $0.01 per
ordinary share
    
    The NASDAQ Global Market
 
 None
 None
 
 18,513,519 ordinary shares, par value US$0.01 per share;
28,550,704 high-vote ordinary shares, par value US$0.01 per share.
 o þ
 o þ
  þ o
 o o
  Large accelerated filer  o
    
    Accelerated filer  þ
    
    Non-accelerated filer  o
  þ o o
 o o
 o þ




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TABLE OF CONTENTS
 PagePART IItem 1: Identity of Directors, Senior Management and Advisers
    
    
    3Item 2: Offer Statistics and Expected Timetable
    
    
    3Item 3: Key Information
    
    
    3Item 4: Information on the Company
    
    
    17Item 4A: Unresolved Staff Comments
    
    
    31Item 5: Operating and Financial Review and Prospects
    
    
    31Item 6: Directors, Senior Management and Employees
    
    
    52Item 7: Major Shareholders and Related Party Transactions
    
    
    66Item 8: Financial Information
    
    
    77Item 9: The Offer and Listing
    
    
    78Item 10: Additional Information
    
    
    79Item 11: Quantitative and Qualitative Disclosure About Market Risk
    
    
    84Item 12: Description of Securities other than Equity Securities
    
    
    84PART IIItem 13: Defaults, Dividend Arrearages and Delinquencies
    
    
    84Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    84Item 15: Controls and Procedures
    
    
    85Item 16A: Audit Committee Financial Expert
    
    
    87Item 16B: Code of Ethics
    
    
    87Item 16C: Principal Accountant Fees and Services
    
    
    87Item 16D: Exemptions from the Listing Standards for Audit Committees
    
    
    88Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    88Item 16G: Corporate Governance
    
    
    88PART IIIItem 17: Financial Statements
    
    
    89Item 18: Financial Statements
    
    
    89Item 19. Exhibits
    
    
    89Exhibit 4.24Exhibit 4.27Exhibit 4.28Exhibit 4.29Exhibit 4.30Exhibit 4.31Exhibit 4.32Exhibit 4.33Exhibit 4.34Exhibit 4.35Exhibit 4.36Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2Exhibit 15.3
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
 Item 3: Key
InformationRisk Factors Item 4: Information on the CompanyBusiness Item 5: Operating and
Financial Review and Prospects, Item 3: Key InformationRisk Factors
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PART I
 
 Item 1: Identity of Directors, Senior Management and Advisers.
  
 Item 2: Offer Statistics and Expected Timetable.
  
 Item 3: Key Information.
 Selected Financial Data
 Item 5: Operating and Financial Review and Prospects
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SELECTED CONSOLIDATED FINANCIAL DATA
 eLong, Inc.Year ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands, except for per share data)Selected Consolidated
Statements of
Operations DataNet revenues
    
    
    124,767
    
    
    
    179,842
    
    
    
    249,841
    
    
    
    297,586
    
    
    
    327,313
    
    
    
    47,975Gross profit
    
    
    108,273
    
    
    
    139,395
    
    
    
    187,596
    
    
    
    215,089
    
    
    
    230,317
    
    
    
    33,758Total operating expenses
    
    
    (131,059
    )
    
    
    (185,624
    )
    
    
    (203,608
    )
    
    
    (229,678
    )
    
    
    (271,999
    )
    
    
    (39,867
    )Income (loss) from
operations
    
    
    (22,786
    )
    
    
    (46,229
    )
    
    
    (16,012
    )
    
    
    (14,589
    )
    
    
    (41,682
    )
    
    
    (6,109
    )Income (loss) from
continuing operations
    
    
    (20,803
    )
    
    
    (43,285
    )
    
    
    (444
    )
    
    
    (25,691
    )
    
    
    (76,593
    )
    
    
    (11,227
    )Net income (loss)
    
    
    (18,982
    )
    
    
    (60,518
    )
    
    
    1,040
    
    
    
    (25,588
    )
    
    
    (76,593
    )
    
    
    (11,227
    )Income (loss) per share
from continuing
operations
    
    
    (1.14
    )
    
    
    (0.87
    )
    
    
    (0.01
    )
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )Total basic income
(loss) per share
    
    
    (1.04
    )
    
    
    (1.22
    )
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )Total diluted income
(loss) per share
    
    
    (1.04
    )
    
    
    (1.22
    )
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )Income (loss) per ADS
from continuing
operations
    
    
    (2.28
    )
    
    
    (1.74
    )
    
    
    (0.02
    )
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    (0.46
    )Total basic income
(loss) per ADS
    
    
    (2.08
    )
    
    
    (2.44
    )
    
    
    0.04
    
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    (0.46
    )Total diluted income
(loss) per ADS
    
    
    (2.08
    )
    
    
    (2.44
    )
    
    
    0.04
    
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    (0.46
    )
 eLong, Inc.As of December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated
Balance Sheet DataCash and cash
equivalents
    
    
    610,047
    
    
    
    988,560
    
    
    
    1,199,323
    
    
    
    1,138,447
    
    
    
    321,541
    
    
    
    47,130Working
capital(1)
    
    
    639,099
    
    
    
    1,013,590
    
    
    
    1,106,345
    
    
    
    1,079,590
    
    
    
    898,693
    
    
    
    131,725Property and
equipment, net
    
    
    15,428
    
    
    
    33,306
    
    
    
    37,809
    
    
    
    43,962
    
    
    
    52,484
    
    
    
    7,693Total assets
    
    
    741,074
    
    
    
    1,188,421
    
    
    
    1,334,908
    
    
    
    1,331,668
    
    
    
    1,137,964
    
    
    
    166,796Long-term obligation
    
    
    
    
    
    
    2,287
    
    
    
    980
    
    
    
    
    
    
    
    
    
    
    
    Accumulated deficit
    
    
    (43,205
    )
    
    
    (103,097
    )
    
    
    (102,056
    )
    
    
    (127,644
    )
    
    
    (204,237
    )
    
    
    (29,936
    )Shareholders equity
    
    
    678,889
    
    
    
    1,088,330
    
    
    
    1,199,799
    
    
    
    1,184,611
    
    
    
    1,012,181
    
    
    
    148,359
 
 (1)     Represents the amount of total consolidated current assets less total consolidated current liabilities.  4




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eLong, Inc.Year ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated Cash Flow DataNet cash provided by (used in)
operating activities
    
    
    (5,339
    )
    
    
    30,478
    
    
    
    76,554
    
    
    
    42,349
    
    
    
    (14,076
    )
    
    
    (2,063
    )Net cash provided by (used in)
investing activities
    
    
    (30,140
    )
    
    
    (32,813
    )
    
    
    72,985
    
    
    
    (43,638
    )
    
    
    (641,501
    )
    
    
    (94,027
    )Net cash provided by (used in)
financing activities
    
    
    572,460
    
    
    
    404,058
    
    
    
    95,140
    
    
    
    7,355
    
    
    
    (98,331
    )
    
    
    (14,413
    )
 Exchange Rate Information
  Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the Peoples Republic of
ChinaGovernmental control of currency conversion may affect our ability to pay dividends and the
value of our ADSs Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the
Peoples Republic of ChinaFluctuation in the value of the Renminbi may materially and adversely affect our
financial results and the value of our company and ADSs.
  Average Exchange Rates of Renminbi per U.S. Dollar
 AverageYear ended December 31, 2004
    
    
    8.2768Year ended December 31, 2005
    
    
    8.1826Year ended December 31, 2006
    
    
    7.9579Year ended December 31, 2007
    
    
    7.5806Year ended December 31, 2008
    
    
    6.9193
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Recent Exchange Rates of Renminbi per U.S. Dollar
 High
    
    
    LowNovember 2008
    
    
    6.8373
    
    
    
    6.8220December 2008
    
    
    6.8842
    
    
    
    6.8225January 2009
    
    
    6.8403
    
    
    
    6.8225February 2009
    
    
    6.8470
    
    
    
    6.8241March 2009
    
    
    6.8438
    
    
    
    6.8240April 2009
    
    
    6.8361
    
    
    
    6.8180
 Risk Factors
 You should carefully consider each of the following risks and uncertainties associated with
our company and the ownership of our securities. You should pay particular attention to the fact
that we conduct our operations in China and are governed by a legal and regulatory environment that
differs significantly from the environment of the United States or other countries with which you
may be familiar. Additional risks not currently known to us or that we currently deem immaterial
may also have an adverse impact on our business operations.
 Risks Related to Our Business
 We have sustained losses in the past and cannot assure you that we will grow or be profitable in
the future.
  Declines or disruptions in the travel industry may reduce our revenues.
  
    
    declines in economic growth, recessions, and financial or other economic crises;
    
    increases in prices in the hotel, airline or other travel-related sectors;
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
    
    the occurrence of travel-related accidents;
    
    outbreaks, or the fear of outbreaks, of H1N1 flu (swine flu), severe acute
respiratory syndrome, avian flu or other diseases;
    
    terrorist attacks or threats of terrorist attacks or wars;
    
    natural disasters or poor weather conditions.
  Our business may be harmed if we fail to strengthen our brand and provide high quality service to
our customers and business partners.
  We may not be able to compete successfully against our current or future competitors.
  We are dependent on our ability to establish and maintain favorable arrangements with our travel
suppliers and distribution partners.
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Substantial uncertainties exist with respect to the interpretation and application of PRC laws and
regulations restricting foreign investment in the air ticketing, travel agency and Internet content
provision businesses as well as other laws affecting our ownership structure and business
operations.
   
    
    levying fines or confiscating our income or the income of our affiliated Chinese entities;
    
    revoking our business licenses or the business licenses of our affiliated Chinese entities;
    
    requiring us and/or our affiliated Chinese entities to restructure our
ownership structure or operations; and
    
    requiring that we discontinue any or all portions of our Internet
content provision, air ticketing or travel agency businesses.
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Our operations may be materially and adversely affected if we or any of our affiliated Chinese
entities fails to obtain or maintain all relevant permits and approvals in the heavily regulated
air ticketing, travel agency, and Internet industries.
  We are controlled by Expedia and conflicts of interest may arise.
    We depend on our senior executives and other employees, and our business may be severely disrupted
if we lose their services.
  We may not use our existing cash, cash equivalents and short-term investments effectively.
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Our quarterly results may fluctuate due to seasonality in the travel industry in China.
  We may not be able to successfully execute future acquisitions or efficiently manage any acquired
business.
  Our business depends on the technology infrastructure and service of third parties.
  Our business is subject to risks associated with protection of confidential data and credit
card fraud.
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We do not have comprehensive off-site backup systems or business insurance.
   Our commission revenues may decrease if our hotel suppliers fail to accurately report data
concerning our customer hotel stays.
  We may become involved in litigation regarding our intellectual property rights or our website
contents.
    11




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If our affiliated Chinese entities violate their contractual agreements with us, our business could
be harmed, and we may have to resort to litigation to enforce our rights, which could be
time-consuming and ineffective.
  Risks Related to Doing Business in the Peoples Republic of China
 A slow-down of, or increased volatility in, economic growth in China may adversely affect our
growth and profitability.
  We would be adversely affected by the discontinuation of any preferential tax treatments currently
available to us.
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Uncertainties and restrictions in the PRC legal system may have a material and adverse impact on
our business and limit the protections available to you.
  Fluctuation
in the value of the Renminbi may materially and adversely affect our financial results and the value
of our company and ADSs.
   Governmental control of currency conversion may affect our ability to pay dividends and the value
of our ADSs.
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PRC regulations may limit our ability to transfer our funds held overseas into China.
  Our subsidiaries and affiliated Chinese entities in China are subject to restrictions on paying
dividends or making other payments to us, which may decrease our primary internal source of funds.
  Our online business relies on the telecommunications infrastructure of Chinas Internet.
 e.g.
 Risks Related to Ownership of Our ADSs or Ordinary Shares and Our Trading Market
 Failure to maintain effective internal controls could have a material and adverse effect on the
trading price of our ADSs.
 Item 15. Control and Procedures
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The market price for our ADSs may be volatile.
  
    
    actual or anticipated fluctuations in our quarterly operating results;
    
    changes in financial estimates and evaluations by securities analysts;
    
    general market and index trends in the NASDAQ stock market;
    
    changes in the economic performance or market valuations of other
travel, Internet, online commerce or publicly listed companies with
substantial operations in China;
    
    announcements by us or our competitors of new services, acquisitions,
strategic partnerships, joint ventures or capital commitments;
    
    additions or departures of key personnel;
    
    sales or repurchases of additional ordinary shares or ADSs; and
    
    potential litigation.
  Future sales by our existing shareholders of a substantial number of our ordinary shares or ADSs in
the public market could adversely affect the price of our ADSs.
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We
believe we are likely to be classified as
a passive foreign investment company for the 2008 calendar year and may be classified
as a passive foreign investment company for future
years, which would result in adverse U.S.
federal income tax consequences to U.S. holders of our ADSs.
 Item 10: Additional
InformationTaxationUnited States Federal Income TaxationPassive foreign investment company
rules
 You may not receive distributions on ordinary shares or any value for them if it is illegal or
impractical to make them available to you.
  You may be subject to limitations on transfer of your ADSs or the exercise of your voting rights as
an ADS holder.
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You may have fewer rights, and may have less protection for your interests as a shareholder, than
you would if you were a shareholder of a U.S. company.
   
 Item 4: Information on the Company.
 4A: Corporate History
      17




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4B: Business
   Our Services
  Hotel reservations
    18




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Air ticketing
  Non-travel services
 Item 5: Operating and
Financial Review and ProspectsPrincipal Factors Affecting Our Results of Operations
 Supplier Relationship Management and Distribution
   19




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Call center
 Websites http://www.eLong.com http://www.eLong.net
 Telephone booking services.
 Reseller network
 Marketing and Brand Promotion
  Online marketing
 Traditional media advertising
  20




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Co-marketing relationships
 eLong membership program
 Direct marketing
 Corporate social responsibility
 Technology
    21




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Competition
 Item 3: Key InformationRisk
FactorsRisks Related to Our BusinessWe may not be able to compete successfully against our
current or future competitors.
 Intellectual Property
  www.eLong.com, www.eLong.net www.eLong.cn www.xici.net, www.lohoo.com
 Seasonality
 Item 5: Operating and Financial Review and ProspectsMajor Factors Affecting the Travel
IndustrySeasonality in the travel service industry Item 3: Key InformationRisk
FactorsRisks Relating to Our BusinessOur quarterly results are likely to fluctuate because of
seasonality in the travel industry in China 
 Capital Expenditures
 Item 5: Operating and Financial Review and ProspectsLiquidity and Capital Resources
 Governmental Regulation
 Regulatory Authorities
  
    
    the MIIT(formerly known as the Ministry of Information, or MII);
    
    the State Council Information Office (the SCIO);
  22




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
    
    the State Administration for Industry and Commerce (the SAIC);
    
    the Ministry of Commerce (the MOFCOM);
    
    the Ministry of Public Security (the MPS) ;
    
    the Civil Aviation Administration of China (the CAAC); and
    
    the China National Tourism Administration (the CNTA).
 Scope of Regulation
 4C. Organizational Structure
  Telecommunications Laws and Regulations
 Telecommunications Regulations of the Peoples Republic of China
 Catalogue of Telecommunications Services by Category
  23




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Regulations on the Administration of Foreign-Invested Telecommunications Enterprises Amended Regulations for the Administration of Foreign-Invested Telecommunications Enterprises
 Administrative Measures for Telecommunications Business Operating Licenses
 Notice of the Ministry of Information Industry on
Intensifying the Administration of Foreign Investment in Value-added Telecommunications Services
   24




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Internet Information Services
 Measures for the Administration of Internet Information Services (2000)(
  Information Security and Censorship
  
    
    The Law of the Peoples Republic of China on the Preservation of State
Secrets(1988) and its Implementing Rules (1990);
    
    The Law of the Peoples Republic of China Regarding State
Security(1993) and its Implementing Rules (1994);
    
    Rules of the Peoples Republic of China for Protecting the Security of
Computer Information Systems(1994);
    
    Notice Concerning Work Relating to the Filing of Computer Information
Systems with International Connections(1996);
    
    Administrative Regulations for the Protection of Secrecy on Computer
Information Systems Connected to International Networks(1999);
    
    Regulations for the Protection of State Secrets for Computer
Information Systems on the Internet(2000);
    
    Notice issued by the Ministry of Public Security of the Peoples
Republic of China Regarding Issues Relating to the Implementation of
the Administrative Measure for the Security Protection of
International Connections to Computer Information Networks (2000);
    
    The Decision of the Standing Committee of the National Peoples
Congress Regarding the Safeguarding of Internet Security(2000); and
    
    Measures for the Administration of Commercial Website Filings for the
Record(2002) and their Implementing Rules (2002).
  25




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
    
    A breach of public securityincludes breach of national security or
disclosure of state secrets; infringement on state, social or
collective interests or the legal rights and interests of citizens; or
illegal or criminal activities.
    
    Socially destabilizing contentincludes any action that incites
defiance or violation of Chinese laws; incites subversion of state
power and the overturning of the socialist system; fabricates or
distorts the truth, spreads rumors or disrupts social order; advocates
cult activities; or spreads feudal superstition, involves obscenities,
pornography, gambling, violence, murder, or horrific acts or
instigates criminal acts.
    
    State secretsare defined as matters that affect the security and
interest of the state. This broad term covers such as national
defense, diplomatic affairs, policy decisions on state affairs,
national economic and social development, political parties and other
State secrets that the State Secrecy Bureau has determined should be
safeguarded.
 Administrative Rules on the Filing of Commercial
Websites Detailed Implementing Rules
for the Measures for the Administration of Commercial Website Filings for the Record
 
    
    register with the Beijing AIC and obtain electronic registration marks;
    
    place the registration marks on their websites homepages; and
    
    register their website names with the Beijing AIC.
  Consumer Data Protection & Privacy
  Measures for the Administration of Internet E-mail Services
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Air ticketing. Regulations on the Administration of Civil Aviation Transportation Sales Agencies Rules Concerning the Affirmation for the Qualification of Aviation
Transportation Sales Agencies.
 Foreign Investment Industrial Guidance Catalogue Second Supplementary Regulations regarding
Foreign Investment in Civil Aviation Transportation Industry
 Circular on Change in the Management of Domestic Aviation
Service Fare
 Travel Agency
 Travel agency. Regulation on Travel Agencies Administration of Travel Agencies
Regulations Implementing Rules for the Regulation on Travel Agencies
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Implementing Rules for Regulation on the Administration of Travel Agencies
 Regulation of Foreign Currency Exchange and Dividend Distribution
 Foreign currency exchange.
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in ChinaGovernmental control
of currency conversion may affect our ability to pay dividends and
the value of our ADSs Item 3: Key InformationRisk FactorsRisks Related to Doing Business in ChinaPRC
regulations may limit our ability to transfer our funds held overseas into China
   28




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Dividend distribution.
 
    
    the Sino-foreign Equity Joint Venture Law (2001);
    
    the Regulations of Implementation of the Sino-foreign Equity Joint Venture Law (2001);
    
    the Foreign Investment Enterprise Law (2000); and
    
    the Regulations of Implementation of the Foreign Investment Enterprise Law (2001).
   Corporate Income Tax Law Implementation Rules for the CIT Law
 Notice on Issues Regarding
Recognition of Overseas Incorporated Enterprises Controlled by PRC Domestic Enterprises as PRC
Resident Enterprises Based on the De Facto Management Body Criteria
  29




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Item 3: Key Information About the Company: Risk
FactorsRisks Related to Doing Business in ChinaWe would be adversely affected by the
discontinuation of any preferential tax treatments currently available to us in the PRC.
 Employment Law
 Employment Contract Law of the PRC
 4C: Organizational Structure
    
    
    Beijing eLong Information Technology Co., Ltd., or Beijing
Information, which holds a license for Internet content provision
services (ICP license), a license for call center services, and a
license for value added telecommunications services (SP license)
which provides us the right to conduct wireless services including but
not limited to short messaging services and multimedia messaging
services.
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
    
    Beijing eLong Air Services Co., Ltd. (Beijing Air), which holds
domestic and international air ticketing licenses.
    
    Beijing eLong International Travel Co., Ltd. (Beijing Travel), which
holds domestic and international (inbound/outbound) travel agency
licenses.
    
    Hangzhou eLong Air Service Co., Ltd. (Hangzhou Air), which holds
domestic and international air ticketing licenses.
    
    Beijing Xici Interactive Information Technology Co. Ltd. (Beijing
Xici), which holds an ICP license and a special Bulletin Board System
(BBS) permit.
   4D:
Property and Equipment
  
 Item 4A: Unresolved Staff Comments.
  
 Item 5:
Operating and Financial Review and Prospects.
 You should read the following discussion of our financial condition and results of operations
in conjunction with our audited consolidated financial statements and the related notes and other
financial information included elsewhere in this annual report. This discussion contains
forward-looking statements. See Special Note Regarding Forward Looking Statements at the
beginning of this annual report. We caution you that our business and financial performance are
subject to substantial risks and uncertainties. In
evaluating our business, you should carefully consider the information provided under Item 3.
Key InformationRisk Factors in this annual report.
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OVERVIEW
  Major Factors Affecting the Travel Industry
  Growth in the overall economy and demand for travel services in China
 Seasonality in the travel service industry
 Disruptions in the travel industry.
 
    
    outbreaks, or the fear of outbreaks, of H1N1 flu (swine flu), severe acute
respiratory syndrome, avian flu or other diseases;
    
    travel-related accidents;
    
    unseasonable or extreme weather, such as the severe snow and ice
storms which hit south China in the first quarter of 2008;
    
    natural disasters, such as the severe earthquake and aftershocks
hitting Sichuan Province in May 2008;
    
    major events, such as the Summer Olympic Games held in Beijing in August 2008;
  32




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
    
    threats of war or incidents of terrorism;
    
    general economic downturns, such as the current global financial crisis; and
    
    increased prices in the hotel, airline or other travel-related industries.
 OPERATING RESULTS
 Principal Factors Affecting Our Results of Operations
 Revenues
  Year ended December 31,2006
    
    
    2007
    
    
    2008RMB
    
    
    %
    
    
    RMB
    
    
    %
    
    
    RMB
    
    
    US$
    
    
    %(in thousands, except for percentage data)RevenuesHotel reservation
commissions(1)
    
    
    209,275
    
    
    
    79
    %
    
    
    240,803
    
    
    
    76
    %
    
    
    253,458
    
    
    
    37,150
    
    
    
    73
    %Air ticketing commissions(2)
    
    
    38,288
    
    
    
    15
    %
    
    
    57,456
    
    
    
    18
    %
    
    
    77,205
    
    
    
    11,316
    
    
    
    22
    %Other travel revenue(3)
    
    
    8,398
    
    
    
    3
    %
    
    
    5,588
    
    
    
    2
    %
    
    
    1,284
    
    
    
    189
    
    
    
    0
    %Total travel revenue
    
    
    255,961
    
    
    
    97
    %
    
    
    303,847
    
    
    
    96
    %
    
    
    331,947
    
    
    
    48,655
    
    
    
    95
    %Non travel(4)
    
    
    8,583
    
    
    
    3
    %
    
    
    11,550
    
    
    
    4
    %
    
    
    16,479
    
    
    
    2,415
    
    
    
    5
    %264,544
    
    
    
    100
    %
    
    
    315,397
    
    
    
    100
    %
    
    
    348,426
    
    
    
    51,070
    
    
    
    100
    %
 
 (1)
    
    Revenues from our hotel reservation services are determined by the number of room nights
we book and the commissions we earn. Our customers pay the hotels directly, and we collect
our commissions based on the number of room nights our customers stay. Our commission from
hotel reservation services is recognized after hotel customers have completed their hotel
stay, based on our confirmation with the hotel of the customers stay. Because we act as
an agent in transactions with no risk of losses due to obligations for cancelled visits,
we recognize our revenues from hotel transactions on a net basis in our statements of
operations.  33




---



##### Table of Contents



(2)
    
    Revenues derived from our air ticketing service currently represent the second largest
component of our travel-related revenues. We conduct our air ticketing business through
contractual arrangements with our affiliated Chinese entities as well as local agents for
the issuance and delivery of air tickets and collection of air ticketing fares.
Commissions from air ticketing services are recognized upon the delivery of the ticket to
the customer, net of estimated cancellations. Contracts with certain airlines contain
discretionary escalating commissions that are subject to achieving specific performance
targets. Such escalating commissions are recognized on a cash basis because we cannot
reasonably estimate such commissions.(3)
    
    Other travel revenue for 2007 primarily includes vacation packages revenue and revenue
sharing with Travelscape. The vacation packages business was suspended in July 2007.(4)
    
    Non travel revenue for 2006, 2007 and 2008 primarily includes Internet advertising revenue.   Cost of services
 Operating expenses
   34




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Income tax.
   35




---



##### Table of Contents



Acquisitions and Disposals
     36




---



##### Table of Contents



Critical Accounting Policies
   
    
    the selection of critical accounting policies; and
    
    the judgments and other uncertainties affecting the application of
those critical accounting policies.
  Depreciation.
 Impairment of long-lived assets.
  37




---



##### Table of Contents



Impairment of goodwill and certain intangible assets.
 Provision for doubtful accounts.
 Deferred income tax
 Accounting for Income Taxes
  38




---



##### Table of Contents



Provision for loyalty points.
 Share-based compensation.
   39




---



##### Table of Contents



Revenue recognition.
 Results of Operations
  Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues:Travel
    
    
    255,960,988
    
    
    
    303,846,548
    
    
    
    331,947,035
    
    
    
    48,654,750Other
    
    
    8,582,692
    
    
    
    11,550,123
    
    
    
    16,478,511
    
    
    
    2,415,319Total revenues
    
    
    264,543,680
    
    
    
    315,396,671
    
    
    
    348,425,546
    
    
    
    51,070,069Business tax and surcharges
    
    
    14,702,612
    
    
    
    17,810,292
    
    
    
    21,112,717
    
    
    
    3,094,572Net revenues
    
    
    249,841,068
    
    
    
    297,586,379
    
    
    
    327,312,829
    
    
    
    47,975,497Cost of services
    
    
    62,245,355
    
    
    
    82,497,585
    
    
    
    96,996,309
    
    
    
    14,217,121Gross profit
    
    
    187,595,713
    
    
    
    215,088,794
    
    
    
    230,316,520
    
    
    
    33,758,376Operating expenses:Service development
    
    
    41,921,653
    
    
    
    48,602,279
    
    
    
    52,584,041
    
    
    
    7,707,445Sales and marketing
    
    
    99,091,184
    
    
    
    126,971,094
    
    
    
    163,528,250
    
    
    
    23,968,963General and administrative
    
    
    61,534,710
    
    
    
    52,005,466
    
    
    
    53,652,427
    
    
    
    7,864,042Amortization of intangible
assets
    
    
    1,060,000
    
    
    
    1,060,000
    
    
    
    848,906
    
    
    
    124,427Charges related to
property and equipment and
intangible assets
    
    
    
    
    
    
    1,038,896
    
    
    
    1,384,814
    
    
    
    202,977Loss from operations
    
    
    (16,011,834
    )
    
    
    (14,588,941
    )
    
    
    (41,681,918
    )
    
    
    (6,109,478
    )Other income (expenses):Interest income
    
    
    51,429,793
    
    
    
    55,470,781
    
    
    
    29,020,353
    
    
    
    4,253,624Foreign exchange loss
    
    
    (33,016,052
    )
    
    
    (65,819,578
    )
    
    
    (60,937,889
    )
    
    
    (8,931,900
    )Other
    
    
    (10,775
    )
    
    
    131,630
    
    
    
    
    
    
    
    Total other income
(expenses), net
    
    
    18,402,966
    
    
    
    (10,217,167
    )
    
    
    (31,917,536
    )
    
    
    (4,678,276
    )Income/(loss) from continuing
operations before income tax
expense
    
    
    2,391,132
    
    
    
    (24,806,108
    )
    
    
    (73,599,454
    )
    
    
    (10,787,754
    )Income tax expense
    
    
    2,835,259
    
    
    
    885,343
    
    
    
    2,993,678
    
    
    
    438,795
  40




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Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Loss from continuing
operations
    
    
    (444,127
    )
    
    
    (25,691,451
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )Income from discontinued
operations before income tax
expense (including gain on
disposal of RMB 2,649,682 in
2006)
    
    
    1,226,768
    
    
    
    112,260
    
    
    
    
    
    
    
    Income tax expense of
discontinued operations
    
    
    24,302
    
    
    
    8,420
    
    
    
    
    
    
    
    Total income from
discontinued operations,
net of tax
    
    
    1,202,466
    
    
    
    103,840
    
    
    
    
    
    
    
    Net income/(loss) before
cumulative effect of
change in accounting
principle
    
    
    758,339
    
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )Cumulative effect of
change in accounting
principle
    
    
    282,072
    
    
    
    
    
    
    
    
    
    
    
    Net income/(loss)
    
    
    1,040,411
    
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )
 2008 Compared to 2007
 Revenues
 Year ended December 31,2007
    
    
    2008% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    US$
    
    
    revenues
    
    
    growth(in thousands, except percentage data)RevenuesHotel commissions
    
    
    240,803
    
    
    
    76
    %
    
    
    253,458
    
    
    
    37,150
    
    
    
    73
    %
    
    
    5
    %Air ticketing commissions
    
    
    57,456
    
    
    
    18
    %
    
    
    77,205
    
    
    
    11,316
    
    
    
    22
    %
    
    
    34
    %Other travel revenue
    
    
    5,588
    
    
    
    2
    %
    
    
    1,284
    
    
    
    189
    
    
    
    0
    %
    
    
    -77
    %Total travel revenue
    
    
    303,847
    
    
    
    96
    %
    
    
    331,947
    
    
    
    48,655
    
    
    
    95
    %
    
    
    9
    %Non travel
    
    
    11,550
    
    
    
    4
    %
    
    
    16,479
    
    
    
    2,415
    
    
    
    5
    %
    
    
    43
    %Total revenues
    
    
    315,397
    
    
    
    100
    %
    
    
    348,426
    
    
    
    51,070
    
    
    
    100
    %
    
    
    10
    %
  41




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##### Table of Contents



Year ended December 31,%2007
    
    
    2008
    
    
    growthNumber of room nights booked
    
    
    3,711,000
    
    
    
    3,945,000
    
    
    
    6
    %Average commission per room night (RMB)
    
    
    65
    
    
    
    64
    
    
    
    -1
    %Number of air tickets sold
    
    
    1,416,000
    
    
    
    1,788,000
    
    
    
    26
    %Average commission per air ticket (RMB)
    
    
    41
    
    
    
    43
    
    
    
    5
    %
  Hotel.
 Air ticketing.
 Other revenues
 Business tax and surcharges.
 Cost of services and gross profit
 Operating expenses
  42




---



##### Table of Contents



Year ended December 31,2007
    
    
    2008% of net
    
    
    
    
    
    
    
    
    
    
    % of net
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    US$
    
    
    revenues
    
    
    growth(in thousands, except for percentage data)Operating expensesService development
    
    
    48,602
    
    
    
    16
    %
    
    
    52,584
    
    
    
    7,707
    
    
    
    16
    %
    
    
    8
    %Sales and marketing
    
    
    126,971
    
    
    
    43
    %
    
    
    163,528
    
    
    
    23,969
    
    
    
    50
    %
    
    
    29
    %General and administrative
    
    
    52,006
    
    
    
    18
    %
    
    
    53,653
    
    
    
    7,864
    
    
    
    16
    %
    
    
    3
    %Amortization of intangible assets
    
    
    1,060
    
    
    
    
    
    
    
    849
    
    
    
    124
    
    
    
    
    
    
    
    -20
    %Write-down of property and
equipment and intangible assets
    
    
    1,039
    
    
    
    
    
    
    
    1,385
    
    
    
    203
    
    
    
    1
    %
    
    
    33
    %Total operating expenses
    
    
    229,678
    
    
    
    77
    %
    
    
    271,999
    
    
    
    39,867
    
    
    
    83
    %
    
    
    18
    %
  Service development.
 Sales and marketing.
 General and administrative.
 Other income (loss), net.
  43




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##### Table of Contents



Income tax expense.
 Net loss
 2007 Compared to 2006
 Revenues
 Year ended December 31,2006
    
    
    2007% of
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    US$
    
    
    revenues
    
    
    growth(in thousands, except percentage data)RevenuesHotel commissions
    
    
    209,275
    
    
    
    79
    %
    
    
    240,803
    
    
    
    33,011
    
    
    
    76
    %
    
    
    15
    %Air ticketing commissions
    
    
    38,288
    
    
    
    15
    %
    
    
    57,456
    
    
    
    7,877
    
    
    
    18
    %
    
    
    50
    %Other travel revenue
    
    
    8,398
    
    
    
    3
    %
    
    
    5,588
    
    
    
    766
    
    
    
    2
    %
    
    
    -33
    %Total travel revenue
    
    
    255,961
    
    
    
    97
    %
    
    
    303,847
    
    
    
    41,654
    
    
    
    96
    %
    
    
    19
    %Non travel
    
    
    8,583
    
    
    
    3
    %
    
    
    11,550
    
    
    
    1,583
    
    
    
    4
    %
    
    
    35
    %Total revenues
    
    
    264,544
    
    
    
    100
    %
    
    
    315,397
    
    
    
    43,237
    
    
    
    100
    %
    
    
    19
    %
  Year ended December 31,%2006
    
    
    2007
    
    
    growthNumber of room nights booked
    
    
    3,251,000
    
    
    
    3,711,000
    
    
    
    14
    %Average commission per room night (RMB)
    
    
    64
    
    
    
    65
    
    
    
    2
    %Number of air tickets sold
    
    
    1,006,000
    
    
    
    1,416,000
    
    
    
    41
    %Average commission per air ticket (RMB)
    
    
    38
    
    
    
    41
    
    
    
    8
    %
   44




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##### Table of Contents



Air ticketing.
 Other revenues
 Business tax and surcharges.
 Cost of services and gross profit
 Operating expenses
  45




---



##### Table of Contents



Year ended December 31,2006
    
    
    2007% of net
    
    
    
    
    
    
    
    
    
    
    % of net
    
    
    %RMB
    
    
    revenues
    
    
    RMB
    
    
    US$
    
    
    revenues
    
    
    growth(in thousands, except for percentage data)Operating expensesService development
    
    
    41,922
    
    
    
    17
    %
    
    
    48,602
    
    
    
    6,663
    
    
    
    16
    %
    
    
    16
    %Sales and marketing
    
    
    99,091
    
    
    
    40
    %
    
    
    126,971
    
    
    
    17,406
    
    
    
    43
    %
    
    
    28
    %General and administrative
    
    
    61,535
    
    
    
    25
    %
    
    
    52,006
    
    
    
    7,130
    
    
    
    18
    %
    
    
    -15
    %Amortization of intangible assets
    
    
    1,060
    
    
    
    
    
    
    
    1,060
    
    
    
    145
    
    
    
    
    
    
    
    Write-down of property and
equipment and intangible assets
    
    
    
    
    
    
    
    
    
    
    1,039
    
    
    
    142
    
    
    
    
    
    
    
    N/ATotal operating expenses
    
    
    203,608
    
    
    
    82
    %
    
    
    229,678
    
    
    
    31,486
    
    
    
    77
    %
    
    
    13
    %
  Service development.
 Sales and marketing.
 General and administrative.
 Other income (expense), net.
  46




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##### Table of Contents



Income tax expense.
 Net loss
 LIQUIDITY AND CAPITAL RESOURCES
 Liquidity
   Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Net cash provided by (used in)operating activities
    
    
    76,554
    
    
    
    42,349
    
    
    
    (14,076
    )
    
    
    (2,063
    )Net cash provided by (used in) investing activities
    
    
    72,985
    
    
    
    (43,638
    )
    
    
    (641,501
    )
    
    
    (94,027
    )Net cash provided by (used in) financing activities
    
    
    95,140
    
    
    
    7,355
    
    
    
    (98,331
    )
    
    
    (14,413
    )Effect of foreign exchange rate changes on cash
    
    
    (33,917
    )
    
    
    (66,943
    )
    
    
    (62,997
    )
    
    
    (9,234
    )Net increase (decrease) in cash and cash equivalents
    
    
    210,763
    
    
    
    (60,876
    )
    
    
    (816,905
    )
    
    
    (119,737
    )Cash and cash equivalents at beginning of year
    
    
    988,560
    
    
    
    1,199,323
    
    
    
    1,138,446
    
    
    
    166,867Cash and cash equivalents at end of year
    
    
    1,199,323
    
    
    
    1,138,447
    
    
    
    321,541
    
    
    
    47,130
 Operating activities
  47




---



##### Table of Contents



Investing activities
 Financing activities
  Capital Resources
 Item 3: Key InformationRisk Factors
 TREND INFORMATION
   48




---



##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
  CONTRACTUAL OBLIGATIONS
  More thanTotal Payments due

    
    Less than 1 year

    
    1-3 Years

    
    3-5 Years
    
    
    5 yearsOperating Lease Obligations(1)
    
    RMB41.7 million
    
    RMB11.7 million
    
    RMB30.0 million
    
    
    
    
    
    
    Purchase Obligations(2)
    
    RMB1.5 million
    
    RMB1.2 million
    
    RMB0.3 million
    
    
    
    
    
    
    Total
    
    RMB43.2 million
    
    RMB12.9 million
    
    RMB30.3 million
    
    
    
    
    
    
    
 
 (1)
    
    Includes future minimum lease payments under non-cancelable
operating leases, including lease payments on our branch
offices, with initial or remaining lease terms in excess of
one year as of December 31, 2008. In November 2008, we
renewed leases for 10,089 square meters of office space in
Beijing for our headquarters. The annual payment under the
lease is RMB9.9 million (US$1.5 million). For branches, our
lease contract terms vary from one to three years, and the
total leased space under the agreements is 3,407 square
meters of office space. The annual payment under the leases
is RMB2.4 million (US$0.4 million).(2)
    
    We have outstanding purchase obligations totaling RMB1.5
million, which are primarily related to contracts for
provision of services at airports and railway stations. We
accrue the amount once the services are rendered by our
service providers. The above table indicates our
contractual obligations as of December 31, 2008, the actual
payment amounts may differ as agreements are renegotiated,
cancelled or terminated. INFLATION AND MONETARY RISK
 Item 3. Key information on the CompanyRisk FactorsRisk related to Doing
Business in the Peoples Republic of ChinaA slow-down of, or increased volatility in, economic
growth in China may adversely affect our growth and profitability
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   49




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##### Table of Contents



Interest rate risk
    2008
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008(-10%)
    
    
    (-5%)
    
    
    Actual
    
    
    (5%)
    
    
    (10%)RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB(in 000)
    
    
    (in 000)
    
    
    (in 000)
    
    
    (in 000)
    
    
    (in 000)Interest Income In 2008 Full Year
    
    
    26,118
    
    
    
    27,569
    
    
    
    29,020
    
    
    
    30,471
    
    
    
    31,922
 Foreign exchange risk
   50




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##### Table of Contents



2008
    
    
    2008 Actual
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008(-10%)
    
    
    (-6.47%)
    
    
    (-5%)
    
    
    0%
    
    
    5%
    
    
    10%RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB(in 000)
    
    
    (in 000)
    
    
    (in 000)
    
    
    (in 000)
    
    
    (in 000)
    
    
    (in 000)Foreign Exchange Gain/(Loss) In 2008 Full Year
    
    
    (94,185
    )
    
    
    (60,938
    )
    
    
    (47,093
    )
    
    
    0
    
    
    
    47,093
    
    
    
    94,185
 Item 3.
Key InformationRisk FactorsRisks Related to Doing Business in the Peoples Republic of
ChinaFluctuation of the Renminbi may materially and adversely affect our financial results and
the value of our company and ADSs.
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
      51




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##### Table of Contents



Item 6: Directors, Senior Management and Employees.
 Directors and Senior Management
  Item 7:
Major Shareholders and Related Party Transactions
  52




---



##### Table of Contents



Name
    
    Age
    
    
    PositionGuangfu Cui
    
    
    40
    
    
    Chief Executive OfficerMike Doyle
    
    
    39
    
    
    Chief Financial OfficerSami Farhad
    
    
    36
    
    
    Vice President & General CounselJames Li
    
    
    36
    
    
    Vice President of SalesKenneth Liao
    
    
    47
    
    
    Vice President & Chief Technology OfficerJack Wang
    
    
    36
    
    
    Vice President of Partner Service GroupJason Xie
    
    
    33
    
    
    Vice President of Business DevelopmentYu Zheng
    
    
    35
    
    
    Vice President of Marketing & Operations
 Name
    
    Age
    
    
    PositionHenrik Kjellberg(1)(3)
    
    
    38
    
    
    Chairman of the Board of DirectorsLeo Austin(2)
    
    
    37
    
    
    DirectorThomas Gurnee(2)(3)
    
    
    58
    
    
    DirectorArthur Hoffman(1)
    
    
    40
    
    
    DirectorJens Parkitny(1) (3)
    
    
    43
    
    
    DirectorCyril Ranque(1)
    
    
    40
    
    
    DirectorMichael Scown(2)
    
    
    50
    
    
    DirectorJohan Svanstrom(1)
    
    
    37
    
    
    DirectorJustin Tang
    
    
    38
    
    
    Director
 
 (1)
    
    Nominated by Expedia Asia Pacific. Mr. Kjellberg is the chairman of the board of directors.(2)
    
    Member of the audit committee of our board of directors. Mr. Gurnee is the chairman of the audit committee.(3)
    
    Member of the compensation committee of our board of directors. Mr. Kjellberg is chairman of the
compensation committee. Biographical Information
 Executive Officers and Directors
    53




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55




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56




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Board Practices
 Directors, Executive
Officers and Senior Management
 Compensation of Executive Officers and Directors Employment
Agreements with Executive Officers
 Committees of the Board of Directors
 Audit Committee
   57




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Compensation Committee
   Duties of Directors
  Limitation on Liability and Other Indemnification Matters
  Compensation of Senior Management and Directors
 Compensation Arrangements with Directors.
  58




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Compensation
Arrangements with Senior Executive Officers.
 Cash Compensation.
  Stock-based Compensation.
  Ordinary Shares underlyingPerformance Unit Holder
    
    Performance Units
    
    
    Date of grantChris Chan
    
    
    25,414
    (2)
    
    January 9, 2008Qi Chen
    
    
    74,626
    (1)(3)
    
    January 9, 2008James Li
    
    
    50,826
    (2)
    
    January 9, 2008Kenneth Liao
    
    
    5,084
    (2)
    
    January 9, 2008Jack Wang
    
    
    53,334
    (1)
    
    January 9, 2008Jason Xie
    
    
    72,464
    (1)
    
    January 9, 2008Yu Zheng
    
    
    73,440
    (1)
    
    January 9, 2008Sami Farhad
    
    
    74,166
    (1)
    
    May 22, 2008Total
    
    
    429,354
 
 (1)
    
    Twenty percent of the performance units vest on each of
the first, second, third, fourth and fifth anniversaries
of the start date of the employees employment with us.(2)
    
    Forty percent, thirty percent and thirty percent of the
performance units vest on each of the third, fourth and
fifth anniversaries of the grant date.(3)
    
    Ms. Chen resigned as our Vice President of Human
Resources, effective October 31, 2008. All of her
performance units were unvested and forfeited upon her
resignation  59




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##### Table of Contents



Employment Agreements with Executive Officers
 Employment agreement with Guangfu Cui Non-Competition Agreements with Our Senior Executive
Officers
 Employment agreements with other senior executive officers. Compensation Arrangements with Executive Officers
  Non-Competition agreements with our senior executive officers
  60




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Separation agreement.
 Share Ownership
 Item 7: Major Shareholders and Related Party Transactions Share-Based Compensation Plans and Options Grants
 Share-Based Compensation Plans and Grants
   2001 Plan
  Ordinary shares underlying
    
    
    Exerciseoptions granted
    
    
    priceOption Grantee
    
    and outstanding(1)
    
    
    (US$)
    
    
    Date of grant

    
    Date of expirationJustin Tang
    
    
    2,750,000
    (2)
    
    
    0.50
    
    
    April 18, 2001
    
    April 17, 2011Justin Tang
    
    
    156,250
    (2)
    
    
    1.53
    
    
    September 1, 2003
    
    August 31, 2013Other employees
    
    
    101,988
    
    
    
    1.53
    
    
    January 1, 2004
    
    December 31, 2013Total
    
    
    3,008,238
 
 (1)
    
    All options are fully vested and exercisable.(2)
    
    Such options were originally granted to Justin Tang. In
April 2004, Mr. Tang transferred such options to Purple
Mountain Holding, Ltd., a corporation over which Mr. Tang
holds ultimate investment power.  61




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##### Table of Contents



2004 Plan
  Stock Options Granted under the 2004 Plan
  Ordinary shares
    
    
    ExerciseOption Holder
    
    underlying outstanding options granted(1)
    
    
    Price (US$)
    
    
    Date of grant

    
    Date of expirationJustin Tang
    
    
    306,250
    (2)
    
    
    5.25
    
    
    July 23, 2004
    
    July 22, 2014Other employees
    
    
    49,000
    
    
    
    5.25
    
    
    July 23, 2004
    
    July 22, 2014Thomas Gurnee
    
    
    30,000
    (3)
    
    
    6.75
    
    
    November 2, 2004
    
    November 1, 2014Other employees
    
    
    29,200
    
    
    
    6.75
    
    
    November 2, 2004
    
    November 1, 2014Chris Chan
    
    
    50,000
    (4)
    
    
    4.95
    
    
    April 30, 2007
    
    April 29, 2017James Li
    
    
    20,000
    (4)
    
    
    4.95
    
    
    April 30, 2007
    
    April 29, 2017Other employees
    
    
    100,000
    (4)
    
    
    4.95
    
    
    April 30, 2007
    
    April 29, 2017Kenneth Liao
    
    
    50,000
    (4)
    
    
    4.50
    
    
    December 6, 2007
    
    December 5, 2017Guangfu Cui
    
    
    111,112
    (4)
    
    
    4.50
    
    
    September 4, 2007
    
    September 3, 2017Leo Austin
    
    
    30,000
    (3)
    
    
    3.935
    
    
    January 9, 2008
    
    January 8, 2018Michael Scown
    
    
    30,000
    (3)
    
    
    3.935
    
    
    January 9, 2008
    
    January 8, 2018Total
    
    
    805,562
 In addition, in May 2009,
we granted 125,984 stock options under the 2004 Plan to our chief financial officer. 
 (1)
    
    Unless otherwise noted, all options vest with respect to
twenty-five percent of the shares covered thereby on the
first anniversary of the grant date and as to an
additional one-sixteenth of the shares covered thereby
every three months thereafter until the fourth anniversary
of the grant date. In addition, pursuant to the terms of
the 2004 Plan, unless otherwise determined by our board of
directors, if, during the one-year period following a
change in control, such option holder incurs a termination
of employment by us other than by reason of death,
disability or cause or the option holder resigns for good
reason, the option holder shall be entitled as of the
termination of employment to an additional 12 months of
vesting of the stock option to the extent unvested as of
the termination of employment.(2)
    
    This option is fully vested and exercisable.(3)
    
    Vests over a period of three years from the grant date, at
the rate of 5,000 ordinary shares every six months. In the
event that Expedia effects a going private transaction of
us pursuant to Rule 13e-3(a)(3) under the Securities
Exchange Act of 1934 , any unvested portion of the stock
option shall become vested as of the effective date of the
going private transaction.(4)
    
    Vests over a five year period with 20% of the option
vesting on each of the first, second, third, fourth and
fifth anniversary of the grant date.  62




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Performance Units Granted under the 2004 Plan
   Ordinary Shares underlyingOutstandingPerformance Unit Holder
    
    Performance Units(1)
    
    
    Date of grantOther employees
    
    
    13,726
    (2)
    
    October 2, 2006Other employees
    
    
    2,022
    
    
    October 2, 2006Justin Tang
    
    
    3,334
    (3)
    
    March 6, 2007Chris Chan
    
    
    25,132
    
    
    April 30, 2007James Li
    
    
    2,012
    
    
    April 30, 2007Other employees
    
    
    53,278
    
    
    April 30, 2007Kenneth Liao
    
    
    44,444
    
    
    December 6, 2007Guangfu Cui
    
    
    88,890
    
    
    September 4, 2007Leo Austin
    
    
    6,667
    (4)
    
    January 9, 2008Michael Scown
    
    
    6,667
    (4)
    
    January 9, 2008Chris Chan
    
    
    25,414
    (5)
    
    January 9, 2008Kenneth Liao
    
    
    5,084
    (5)
    
    January 9, 2008
  63




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##### Table of Contents



Ordinary Shares underlyingOutstandingPerformance Unit Holder
    
    Performance Units(1)
    
    
    Date of grantJames Li
    
    
    50,826
    (5)
    
    January 9, 2008Other employees
    
    
    252,866
    (5)
    
    January 9, 2008Jack Wang
    
    
    53,334
    (6)
    
    January 9, 2008Jason Xie
    
    
    57,972
    
    
    January 9, 2008Yu Zheng
    
    
    73,440
    (6)
    
    January 9, 2008Other employees
    
    
    147,568
    
    
    January 9, 2008Sami Farhad
    
    
    74,166
    
    
    May 22, 2008Other employees
    
    
    61,474
    
    
    May 22, 2008Other employees
    
    
    15,250
    (6)
    
    May 22, 2008Leo Austin
    
    
    13,832
    (7)
    
    December 1, 2008Thomas Gurnee
    
    
    13,832
    (7)
    
    December 1, 2008Michael Scown
    
    
    13,832
    (7)
    
    December 1, 2008Justin Tang
    
    
    13,832
    (7)
    
    December 1, 2008Total
    
    
    1,118,894
 
 (1)
    
    Unless otherwise noted below, twenty percent of the performance units granted to an employee
vest on of the first, second, third, fourth and fifth year anniversaries of the start date of
the employees employment with us.(2)
    
    Twenty percent of the performance units vest on of the first, second, third, fourth and fifth
year anniversaries of the grant date.(3)
    
    The performance units vest on January 1, 2010, and upon vesting, may be settled either with a
cash payment equal to the then fair market value of the underlying ordinary shares so vested
or by delivery of the number of our ordinary shares that is equal to the number of
performance units then vested.(4)
    
    3,333 of the performance units vest on December 18, 2009 and 3,334 of the performance units
vest on December 18, 2010.(5)
    
    Forty percent, thirty percent and thirty percent, respectively, of the performance units will
vest on each of the third, fourth and fifth anniversaries of the grant date.(6)
    
    Twenty percent of the employees performance units have vested, but have not yet been settled.(7)
    
    One third of the performance units will vest on each of December 1, 2010, 2011 and 2012, and
upon vesting the performance units will be settled in cash. A recurring annual grant will be
made to each member of our board of directors who is not our employee or an employee of
Expedia (or an Expedia affiliate). See Compensation of Senior Executive Officers and
DirectorsCompensation Arrangements with Directors above. In addition,
in May 2009, we granted 177,248 performance units to our chief
financial officer and other employees under the 2004 Plan.  64




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2009 Plan
  
    
    Upon the occurrence of a change in control, the 2009 Plan provides for immediate
vesting of the then outstanding options or other equity grants under the 2009 Plan to
employees with the rank of Vice President or above;
 
    
    Within two years following the date of a change of control, if the employment of a
recipient of an award under the 2009 Plan is terminated or resigns for good reason (as
defined under the 2009 Plan), such employees options and other equity grants would vest;
and
 
    
    Members of our board of directors currently are not eligible to receive grants under
the 2009 Plan.
  Item 16G: Corporate Governance
 Options Granted to Expedia Asia Pacific
    65




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##### Table of Contents



Employees
  As of December 31,2006
    
    
    2007
    
    
    2008General and administrative
    
    
    206
    
    
    
    203
    
    
    
    198Cost of services
    
    
    870
    
    
    
    957
    
    
    
    1,030Sales and marketing
    
    
    459
    
    
    
    365
    
    
    
    365Service development
    
    
    318
    
    
    
    252
    
    
    
    328Total
    
    
    1,853
    
    
    
    1,777
    
    
    
    1,921
   
 Item 7:
Major Shareholders and Related Party Transactions.
     66




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Ordinary Shares beneficially owned(1)Amount
    
    
    %Principal ShareholdersOak Pacific Interactive(2)
    
    
    6,229,270
    
    
    
    33.5
    %Purple Mountain Holding, Ltd.(3)*
    
    
    4,151,442
    
    
    
    22.3
    %Lawrence Auriana(4)*
    
    
    3,911,111
    
    
    
    21.0
    %Senior Executive Officers and DirectorsJustin Tang(5)*
    
    
    4,457,692
    
    
    
    23.9
    %
 
 (1)
    
    Beneficial ownership is determined in accordance with the
rules of the SEC and includes voting or investment power with respect
to stock as well as options, warrants or rights.(2)
    
    Data as of June 9, 2009, based on a Schedule 13D
(Amendment No. 3) filed by Oak Pacific Interactive with
the SEC on June 10, 2009. The address for Oak Pacific
Interactive is c/o Wilson Chu, Esq., Haynes and Boone, LLP, 2323
Victory Avenue, Suite 700, Dallas, TX 75219.(3)
    
    Represents 1,245,192 ordinary shares, of which
1,245,190 ordinary shares are represented by 622,595 ADSs,
and 2,906,250 ordinary shares issuable upon the
exercise of options held by Purple Mountain Holding, Ltd.
that are fully vested as of April 30, 2009. Justin Tang
holds investment power over the securities held by Purple
Mountain Holding, Ltd. The address for Purple Mountain
Holding, Ltd. is No. 3701, Fortune Plaza, 7 Dong Sanhuan
Middle Road, Chao Yang District, Beijing 100020, China.(4)
    
    Based on a Schedule 13G/A filed on February 17, 2009.
Represents 3,911,111 ordinary shares held for the benefit
of Mr. Auriana. Mr. Auriana has placed his shares in a
discretionary trust account with Sandgrain Securities
Inc., with Angelo Frank Perrone being authorized to direct
the disposition of such shares. As a result, Sandgrain
Securities Inc. and Mr. Perrone may also be deemed to
beneficially own the shares. The address for Mr. Auriana
is 140 E. 45th Street, 43rd Floor, New York, NY 10017.  67




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##### Table of Contents



(5)
    
    Includes the ordinary shares and ordinary shares issuable
upon the exercise of options held by Purple Mountain
Holding, Ltd. listed above and described in footnote no. 3
above. In addition, this number includes 306,250 ordinary
shares issuable upon the exercise of options held by
Justin Tang that are vested as of April 30, 2009. The
address for Mr. Tang is No. 3701, Fortune Plaza, 7 Dong
Sanhuan Middle Road, Chao Yang District, Beijing 100020,
China.*
    
    These shareholders (either directly or through entities
over which they control) and Expedia Asia Pacific are
parties to an investors agreement, dated July 23, 2004,
whereby they have agreed to vote any of our shares they
hold for the election of directors and other matters in
the manner provided in the investors agreement, including
for the election of directors designated by Expedia. By
virtue of the investors agreement, Expedia, through
Expedia Asia Pacific, may be deemed to beneficially own
all of the shares held by these shareholders. Other
parties to the investors agreement include Expedia,
Billable Development, Ltd., Lawrence Auriana, Ira S.
Nordlicht and Helen S. Scott, JTWROS, Purple Mountain
Holding, Ltd., Mind Trade Assets Limited, Gold Partner
Consultants Limited, Top River Assets Limited, Sun Li Ming
and Wang Yi Jie. Related Party Transactions
 Our Transactions with Expedia Asia Pacific
 Transaction Agreement and Non-Compete Covenant. Item 4: Information About the Company4A Corporate History.
    68




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##### Table of Contents



Other
Business Arrangements with Expedia or its affiliates
  Inventory Procurement Agreement.
 Services Agreement
 Global hotel inventory sourcing.
 Agreements with Egencia.
 Advertising Procurement Agreement.
 Hotels.com Cooperation
Agreement
 TripAdvisor
Cooperation Agreements
  69




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##### Table of Contents



Other Related Party Transactions
 eLong-Match.com eDodo Sale.
  eLong-Match.com China Subleases.
 Second Supplement to the Asset Purchase Agreement.
 Arrangements with our Affiliated Chinese Entities
  
    
    Beijing Information, which holds a license for Internet content
provision services (which includes the right to issue online
advertisements), a license for call center services, and a license for
short messaging services.
  70




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##### Table of Contents




    
    Beijing Media, which holds a license to provide advertising services.
 
    
    Beijing Air, which holds the domestic and international air ticketing licenses.
 
    
    Beijing Travel, which holds a license for domestic PRC travel and
international (inbound/outbound) travel services.
 
    
    Hangzhou Air, which holds a domestic and international air ticketing licenses.
 
    
    Beijing Xici, which holds an ICP license and a special Bulletin Board System (BBS) permit.
  Beijing Information
 Technical services agreement.
 Equity interests pledge agreements.
  71




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##### Table of Contents



Trademark license agreement.
 Domain name license agreement. www.eLong.com www.eLong.net
 Cooperative agreement.
 
    
    develop the hotel-booking market by negotiating with hotels on behalf of Beijing Information;
 
    
    provide relevant market and hotel information to Beijing Information;
 
    
    send booking orders to hotels and accept confirmation responses from
hotels for Beijing Information; and
 
    
    accept commissions and services fees from hotels on behalf of Beijing Information.
  Business operation agreement.
  72




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Loan agreement.
 Agreement relating to exclusive purchase right of equity interest
 Guarantee Agreements
 Copyright License Agreement. Supplemental Letter Agreement.
  73




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##### Table of Contents



Beijing Media
 Advertising technical consulting and services agreement.
 Equity interests pledge agreements.
 Cooperative agreement.
 Business operation agreement.
  74




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##### Table of Contents



Loan agreement.
 Agreements relating to exclusive purchase right of equity interest.
 Trademark license agreement.
  75




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##### Table of Contents



Beijing Air
 Technical consulting and services agreement.
 Equity interest pledge agreement.
 Business operation agreement.
  76




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##### Table of Contents



Cooperative agreement.
 Trademark license agreement.
 Beijing Travel
 Cooperative agreement.
 eLong Information
 Loan Agreement
 
 Item 8: Financial Information.
 Consolidated Financial Statements
 Item 18. Financial Statements
 Legal Proceedings
   77




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##### Table of Contents



Dividend Policy
 Item 3: Key InformationRisk
FactorsRisks Relating to Ownership of Our ADSs or Ordinary Shares and Our Trading MarketYou may
not receive distributions on ordinary shares or any value for them if it is illegal or impractical
to make them available to you and Our subsidiaries and affiliated Chinese entities in China are
subject to restrictions on paying dividends or making other payments to us, which may decrease our
internal sources of funds and ability to pay dividends.
 Significant Changes since December 31, 2008
 Item 6: Directors, Senior Management and
EmployeesShare-Based Compensation Plans and Grants2009
Plan.
 In May 2009,
we granted 1,259,843 stock options to our senior executive officers
and other employees under the 2009 Plan, as well as 125,984 stock
options to our chief financial officer and 177,248 performance units
to our chief financial officer and other employees under the 2004 Plan. 
 Item 9: The Offer and Listing.
 General
  Trading on the NASDAQ Global Market
  High
    
    
    LowUS$
    
    
    US$October 28, 2004 through December 31, 2004
    
    
    24.30
    
    
    
    13.70January 1, 2005 through December 31, 2005
    
    
    18.06
    
    
    
    7.61January 1, 2006 through December 31, 2006
    
    
    15.55
    
    
    
    10.14January 1, 2007 through December 31, 2007
    
    
    13.99
    
    
    
    7.10January 1, 2008 through December 31, 2008
    
    
    10.12
    
    
    
    6.66
  78




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##### Table of Contents



High
    
    
    LowUS$
    
    
    US$Most Recent Fiscal QuartersJanuary 1, 2007 through March 31, 2007
    
    
    13.99
    
    
    
    9.51April 1, 2007 through June 30, 2007
    
    
    10.41
    
    
    
    9.20July 1, 2007 through September 30, 2007
    
    
    10.42
    
    
    
    8.59October 1, 2007 through December 31, 2007
    
    
    12.28
    
    
    
    7.10January 1, 2008 through March 31, 2008
    
    
    8.77
    
    
    
    7.38April 1, 2008 through June 30, 2008
    
    
    10.12
    
    
    
    7.10July 1, 2008 through September 30, 2008
    
    
    7.47
    
    
    
    6.97October 1, 2008 through December 31, 2008
    
    
    7.39
    
    
    
    6.66January 1, 2009 through March 31, 2009
    
    
    7.70
    
    
    
    4.23
 High
    
    
    LowUS$
    
    
    US$Most Recent Six MonthsNovember 2008
    
    
    7.33
    
    
    
    6.86December 2008
    
    
    7.25
    
    
    
    7.00January 2009
    
    
    7.70
    
    
    
    6.86February 2009
    
    
    7.45
    
    
    
    5.15March 2009
    
    
    6.65
    
    
    
    4.23April 2009
    
    
    7.34
    
    
    
    6.00
  
 Item 10: Additional Information.
 Memorandum and Articles of Association
  Material Contracts
 Item 19: Exhibits
  79




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##### Table of Contents



Exchange Controls
 Item 3:
Key InformationRisk FactorsRisks Related to Doing Business in the Peoples Republic of
ChinaGovernmental control of currency conversion may affect our ability to pay dividends and the
value of our ADSs Item 3: Key InformationRisk FactorsPRC
regulations may limit our ability to transfer our funds held overseas
into China.
 Taxation
  Cayman Islands Taxation
  United States Federal Income Taxation
   80




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##### Table of Contents




    
    banks;
 
    
    dealers in securities or currencies;
 
    
    financial institutions;
 
    
    insurance companies;
 
    
    tax-exempt organizations;
 
    
    persons holding ADSs or ordinary shares as part of hedging,
conversion, constructive sale, straddle or other integrated
transactions;
 
    
    traders in securities that have elected the mark-to-market method of accounting;
 
    
    persons who own 5% or more of our shares;
 
    
    U.S. persons whose functional currency is not the U.S. dollar; or
 
    
    Non-U.S. Holders (as defined below).
  A U.S. Holder holding or considering acquiring or disposing of our ADSs or ordinary shares is urged to consult
his or her own tax advisor concerning the U.S. federal, state, local and non-U.S. income and other tax
consequences of the holding, ownership, purchase, disposition or sale of our ADSs or ordinary shares in light of such U.S. Holders particular
circumstances.
  
    
    a citizen or resident of the United States;
 
    
    a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States, any state
thereof, or the District of Columbia;
 
    
    an estate the income of which is subject to U.S. federal income
taxation, regardless of its source; or
 
    
    a trust if it is subject to the primary supervision of a court within
the United States and one or more U.S. persons have the authority to
control all substantial decisions of the trust or has a valid election
in effect under applicable U.S. Treasury regulations to be treated as
a U.S. person.
  81




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##### Table of Contents



ADSs.
 Distributions on ADSs or ordinary shares.
 
    
    a corporation incorporated in a possession of the United States;
 
    
    a foreign corporation that is eligible for the benefits of a
comprehensive income tax treaty with the United States that includes
an exchange of information program; or
 
    
    a foreign corporation whose stock with respect to which a dividend is
paid or whose ADSs backed by such stock are readily tradable on an
established securities market within the United States.
     82




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##### Table of Contents



Sale, exchange or other disposition of ADSs or ordinary shares.
 Passive foreign investment company rules.
   l
    
    the gain or excess distribution
will be allocated ratably over the
holding period for the ordinary shares or ADSs;l
    
    the amount allocated to the taxable year in which the
gain or excess distribution is realized will be taxed as ordinary income;l
    
    the amount allocated to each prior
year in which we were a PFIC, with certain exceptions,
will be taxed at the highest tax rate in effect for that year; andl
    
    the interest charge generally applicable to underpayments of tax will
be imposed in respect of the tax attributable to each such prior
year.
     A U.S. Holder is urged to consult his or her tax advisor concerning the U.S. federal income
tax consequences of an investment in our ADSs or ordinary shares under the passive foreign
investment company rules.
 Taxation of Holders of ADSs or Shares in Other Countries
   83




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##### Table of Contents



Documents on Display
  http://www.sec.gov
 http://www.elong.net/AboutUs/sec_filings.html
 Subsidiary Information
 Information on the
CompanyOrganizational Structure
 
 Item 11: Quantitative and Qualitative Disclosure About Market Risk.
 Operating and Financial Review and ProspectsQuantitative and
Qualitative Disclosures About Market Risk
 
 Item 12: Description of Securities Other Than Equity Securities.
  
 PART II
 
 Item 13: Defaults, Dividend Arrearages and Delinquencies.
  
 Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds.
 Use of Proceeds
   84




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##### Table of Contents



Item 15: Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
  Managements Report on Internal Control over Financial Reporting.
   Report of Independent Registered Public Accounting Firm
     85




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##### Table of Contents



Limitations on Controls.
  Changes in Internal Control over Financial Reporting.
   86




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##### Table of Contents



Item 16A: Audit Committee Financial Expert.
  
 Item 16B: Code of Business Conduct and Ethics.
 http://www.eLong.net/AboutUs/code_conduct.html
 
 Item 16C: Principal Accountant Fees and Services.
  2007
    
    
    2008RMB
    
    
    RMB(in 000)
    
    
    (in 000)Audit Fees (KPMG)(1)
    
    
    4,515
    
    
    
    1,645Audit Fees (Ernst & Young)(1)
    
    
    
    
    
    
    4,752Total
    
    
    4,515
    
    
    
    6,397
 
 (1)
    
    Audit Fees are the aggregate fees billed by KPMG or Ernst
& Young for the audit of our consolidated annual financial
statements and procedures related to our quarterly
financial statements. We were billed approximately
RMB6.4million (US$0.9 million) for 2008 in Audit Fees. We
have not yet been fully billed by Ernst & Young for audit
fees in relation to the year ended December 31, 2008.   87




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Item 16D: Exemptions from the Listing Standards for Audit Committees.
  
 Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
  2008
    
    Number of
    
    
    Purchase Price
    
    
    Average Price Paid Per
    
    
    Average Price Paid PerMonth
    
    ADSs Purchased
    
    
    (US$)*
    
    
    ADS (US$)*
    
    
    Ordinary Share (US$)*March
    
    
    81,800
    
    
    
    694,113.33
    
    
    
    8.49
    
    
    
    4.24April
    
    
    97,761
    
    
    
    864,544.43
    
    
    
    8.84
    
    
    
    4.42May
    
    
    140,632
    
    
    
    1,300,740.26
    
    
    
    9.25
    
    
    
    4.62June
    
    
    223,600
    
    
    
    1,682,507.89
    
    
    
    7.52
    
    
    
    3.76July
    
    
    143,039
    
    
    
    1,048,446.49
    
    
    
    7.33
    
    
    
    3.66August
    
    
    157,290
    
    
    
    1,128,873.05
    
    
    
    7.18
    
    
    
    3.59September
    
    
    227,100
    
    
    
    1,619,139.10
    
    
    
    7.13
    
    
    
    3.56October
    
    
    428,000
    
    
    
    3,077,547.00
    
    
    
    7.19
    
    
    
    3.60November
    
    
    344,000
    
    
    
    2,487,193.90
    
    
    
    7.23
    
    
    
    3.62December
    
    
    156,778
    
    
    
    1,120,689.80
    
    
    
    7.15
    
    
    
    3.57Total
    
    
    2,000,000
    
    
    
    15,023,795.24
    
    
    
    7.51
    
    
    
    3.76
 
 *
    
    Cost and average price data includes trading commissions. Some numbers may not add due to
rounding. 
 Item 16G:
Corporate Governance.
   88




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PART III
 
 Item 17:
Financial Statements.
  
 Item 18:
Financial Statements.
  
 Item 19:
Exhibits.
 1.1
    
    Second Amended and Restated Memorandum
of Association of eLong, Inc.
(incorporated by reference to Exhibit
3.1 from Amendment No. 1 to the
companys Registration Statement on Form
F-1 filed with the SEC on October 12,
2004).1.2
    
    Second Amended and Restated Articles of
Association of eLong, Inc. (incorporated
by reference to Exhibit 3.2 from
Amendment No. 1 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 12, 2004).2.1
    
    Deposit Agreement between eLong, Inc.
and JPMorgan Chase Bank (incorporated by
reference to Exhibit 99(a) to the
companys Registration Statement on Form
F-6 filed with the SEC on October 8,
2004).2.2
    
    Amendment No. 1 to Deposit Agreement
(incorporated by reference to Exhibit
99(a)(2) to the companys Post-Effective
Registration Statement on Form F-6 filed
with the SEC on April 11, 2005).3.1
    
    Investors Agreement among eLong, Inc.,
IACT Asia Pacific Limited (currently
known as Expedia Asia Pacific-Alpha
Limited) and other parties thereto,
dated July 23, 2004 (incorporated by
reference to Exhibit 4.6 to the
companys Registration Statement on Form
F-1 filed with the SEC on October 7,
2004).4.1
    
    Stock Option Agreement between
Registrant and IACT Asia Pacific Limited
(currently known as Expedia Asia
Pacific-Alpha Limited), dated July 23,
2004 (incorporated by reference to
Exhibit 4.10 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.2
    
    Amended and Restated Technical Services
Agreement between eLongNet Information
Technologies (Beijing) Co., Ltd. and
Beijing eLong Information Technologies
Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit
10.6 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.3
    
    Amended and Restated Equity Interests
Pledge Agreement between eLong Net
Information Technology (Beijing) Co.,
Ltd. and Justin Tang, dated July 20,
2004 (incorporated by reference to
Exhibit 10.8 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).
  89




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4.4
    
    Amended and Restated Trademark License
Agreement between eLongNet Information
Technology (Beijing) Co., Ltd. and
Beijing eLong Information Technology
Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit
(incorporated by reference to Exhibit
10.10 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.5
    
    Amended and Restated Domain Name License
Agreement between eLongNet Information
Technology (Beijing) Co., Ltd. and
Beijing eLong Information Technology
Co., Ltd. dated July 20, 2004
(incorporated by reference to Exhibit
10.11 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.6
    
    Amended and Restated Cooperative
Agreement between eLongNet Information
Technology (Beijing) Co., Ltd. and
Beijing eLong Information Technology
Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit
10.12 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.7
    
    Amended and Restated Exclusive Purchase
Right Agreement between eLong, Inc.,
Justin Tang, eLongNet Information
Technology (Beijing) Co., Ltd., and
Beijing eLong Information Technology
Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit
10.15 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.8
    
    Cooperative Agreement between Beijing
Asia Media Interactive Advertising Co.,
Ltd. and Beijing eLong Information
Technology Co., Ltd., dated July 20,
2004 (incorporated by reference to
Exhibit 10.17 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.9
    
    Trademark License Agreement between
eLongNet Information Technology
(Beijing) Co., Ltd. and Beijing Asia
Media Interactive Advertising Co., Ltd.,
dated July 20, 2004 (incorporated by
reference to Exhibit 10.18 to the
companys Registration Statement on Form
F-1 filed with the SEC on October 7,
2004).4.10
    
    Amended and Restated Advertising
Technical Consulting and Services
Agreement between eLongNet Information
Technology (Beijing) Co., Ltd. and
Beijing Asia Media Interactive
Advertising Co., Ltd., dated July 20,
2004 (incorporated by reference to
Exhibit 10.19 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.11
    
    Amended and Restated Equity Interests
Pledge Agreement between eLongNet
Information Technology (Beijing) Co.,
Ltd. and Justin Tang, dated July 20,
2004 (incorporated by reference to
Exhibit 10.20 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.12
    
    Amended and Restated Exclusive Purchase
Right Agreement among eLong, Inc.,
Justin Tang, Beijing Asia Media
Interactive Advertising Co., Ltd., and
eLongNet Information Technology
(Beijing) Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit
10.23 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).
  90




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4.13
    
    Amended and Restated Technical
Consulting Services Agreement between
eLongNet Information Technology
(Beijing) Co., Ltd., Beijing Air
Services Co., Ltd., dated July 20, 2004
(incorporated by reference to Exhibit
10.25 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.14
    
    Amended and Restated Equity Interests
Pledge Agreement among eLongNet
Information Technology (Beijing) Co.,
Ltd., Beijing eLongNet Information
Technology Co., Ltd. and Beijing Asia
Media Interactive Advertising Co., Ltd.,
dated July 20, 2004 (incorporated by
reference to Exhibit 10.26 to the
companys Registration Statement on Form
F-1 filed with the SEC on October 7,
2004).4.15
    
    Amended and Restated Business Operation
Agreement among eLongNet Information
Technology (Beijing) Co., Ltd., Beijing
eLong Air Services Co., Ltd., eLongNet
Information Technology (Beijing) Co.,
Ltd. and Beijing Asia Media Interactive
Advertising Co., Ltd., dated July 20,
2004 (incorporated by reference to
Exhibit 10.27 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.16
    
    Amended and Restated Cooperative
Agreement between Beijing Air Services
Co., Ltd. and Beijing eLong Information
Co., Ltd. dated July 20, 2004
(incorporated by reference to Exhibit
10.28 to the companys Registration
Statement on Form F-1 filed with the SEC
on October 7, 2004).4.17
    
    Trademark License Agreement between
eLongNet Information Technology
(Beijing) Co., Ltd. and Beijing eLong
Air Services Co., Ltd. dated July 20,
2004 (incorporated by reference to
Exhibit 10.29 to the companys
Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.18
    
    Transaction Agreement among IACT Asia Pacific Limited (an entity currently known as
Expedia Asia Pacific-Alpha Limited), InterActiveCorp, eLongNet Information Technology
(Beijing) Co., Ltd., eLongNet Hi-Tech (Beijing) Co., dated July 23, 2004 (incorporated
by reference to Exhibit 10.35 to the companys Registration Statement on Form F-1 filed
with the SEC on October 7, 2004).4.19
    
    Transfer and Escrow Contribution Agreement among IACT Asia Pacific Limited (an entity
currently known as Expedia Asia Pacific), certain selling shareholders and Registrant,
dated July 23, 2004 (incorporated by reference to Exhibit 10.36 to the companys
Registration Statement on Form F-1 filed with the SEC on October 7, 2004).4.20
    
    eLong, Inc. Stock Option Plan (incorporated by reference to Exhibit 4.13 to Amendment
No. 1 to the companys Registration Statement on Form F-1filed with the SEC on
October 12, 2004).
  91




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4.21
    
    eLong, Inc. Stock and Annual Incentive Plan (incorporated by reference to Exhibit 4.14
to Amendment No. 1 to the companys Registration Statement on Form F-1filed with the
SEC on October 12, 2004).4.22
    
    Termination and Settlement Agreement between eLong, Inc. and Justin Tang, dated as of
January 23, 2006 (incorporated by reference to Exhibit 4.44 to the companys Annual
Report on Form 20-F filed with the SEC on June 29, 2006).4.23
    
    Employment Agreement between eLong, Inc. and Guangfu Cui, effective as of October 8,
2007 (incorporated by reference to Exhibit 4.58 to the companys Annual Report on Form
20-F filed with the SEC on June 30, 2008).4.24*
    
    Amendment to Employment Agreement between eLong, Inc. and Guangfu Cui.4.25
    
    Strategic Agreement for Cooperation in the PRC Corporate Travel Market between eLong,
Inc. and Expedia Corporate Travel, LLC (currently known as Egencia, LLC), effective as
of November 12, 2007 (incorporated by reference to Exhibit 4.59 to the companys Annual
Report on Form 20-F filed with the SEC on June 30, 2008).4.26
    
    Waiver Agreement between eLong Inc, eLongNet Information Technology (Beijing) Co., Ltd.
and Expedia Inc. effective as of November 13, 2007 (incorporated by reference to
Exhibit 4.60 to the companys Annual Report on Form 20-F filed with the SEC on
June 30, 2008).4.27*
    
    Waiver Agreement among eLong, Inc., eLongNet Information Technology (Beijing) Co.,
Ltd., Expedia Inc. and Expedia Asia Pacific-Alpha Limited, effective as of November 1,
2008.4.28*
    
    Waiver Agreement among eLong Inc, eLongNet Information Technology (Beijing) Co., Ltd.,
Expedia Inc. and Expedia Asia Pacific-Alpha Limited, effective as of April 7, 2009.4.29*
    
    eLong, Inc. 2009 Share and Annual Incentive Plan.4.30*
    
    The Third Amended and Restated Loan Agreement, dated April 21, 2008, among eLong, Inc.,
Justin Tang, Guangfu Cui and Jack Wang.4.31*
    
    The Third Amended and Restated Equity Interests Pledge Agreement, dated April 21, 2008,
between eLongNet Information Technology (Beijing) Co., Ltd. and Guangfu Cui.4.32*
    
    The Third Amended and Restated Equity Interests Pledge Agreement, dated April 21, 2008,
between eLongNet Information Technology (Beijing) Co., Ltd. and Jack Wang.4.33*
    
    The Third Amended and Restated Exclusive Purchase Right Agreement, dated April 21,
2008, among eLong, Inc., Beijing eLong Information Technology Co., Ltd., eLongNet
Information Technology (Beijing) Co., Ltd., and Guangfu Cui.
  92




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4.34*
    
    The Third Amended and Restated Exclusive Purchase Right Agreement, dated April 21,
2008, among eLong, Inc., Beijing eLong Information Technology Co., Ltd., eLongNet
Information Technology (Beijing) Co., Ltd., and Jack Wang.4.35*
    
    The Third Amended and Restated Business Operation Agreement, dated April 21, 2008,
among eLong, Inc., eLongNet Information Technology (Beijing) Co., Ltd., Guangfu Cui,
Justin Tang and Jack Wang.4.36*
    
    Letter Agreement, dated May 1, 2009, among eLong, Inc., Guangfu Cui, Justin Tang and
Jack Wang.4.37
    
    The Fourth Amended and Restated Loan Agreement dated December 28, 2007 by and between eLong,
Inc., Justin Tang and Guangfu Cui (incorporated by reference to Exhibit 4.61 of the companys
Annual Report on Form 20-F filed with the SEC on June 30, 2008).4.38
    
    The Fourth Amended and Restated Equity Interests Pledge Agreement dated December 28, 2007
between eLongNet Information Technology (Beijing) Co., Ltd. and Guangfu Cui (incorporated by
reference to Exhibit 4.62 of the companys Annual Report on Form 20-F filed with the SEC on
June 30, 2008).4.39
    
    The Fourth Amended and Restated Exclusive Purchase Right Agreement dated December 28, 2007 by
and between eLong, Inc., Guangfu Cui, Beijing Asia Media Interactive Advertising Co., Ltd.,
and eLongNet Information Technology (Beijing) Co., Ltd. (incorporated by reference to Exhibit
4.63 of the companys Annual Report on Form 20-F filed with the SEC on June 30, 2008).4.40
    
    The Fourth Amended and Restated Business Operation Agreement dated December 28, 2007 by and
among the eLongNet Information Technology (Beijing) Co., Ltd., Beijing Asia Media Interactive
Advertising Co., Ltd., Justin Tang, and Guangfu Cui (incorporated by reference to Exhibit 4.64
of the companys Annual Report on Form 20-F filed with the SEC on June 30, 2008).8.1*
    
    Subsidiaries of Registrant.12.1*
    
    Certification of Chief Executive Officer Required by Rule 13a-14(a).12.2*
    
    Certification of Chief Financial Officer Required by Rule 13a-14(a).13.1*
    
    Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code.13.2*
    
    Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code.15.1*
    
    Consent of Independent Registered Public Accounting Firm (Ernst & Young Hua Ming).15.2*
    
    Consent of Independent Registered
Public Accounting Firm (KPMG).15.3*
    
    Consent of TransAsia Lawyers.
  93




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SIGNATURES
  
 eLong, Inc./s/ Guangfu Cui

Guangfu CuiChief Executive Officer/s/ Mike Doyle

Mike DoyleChief Financial Officer
  94




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Report of Independent Registered Public Accounting Firm
 
     
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
  F-2




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##### Table of Contents



eLong, Inc.
Consolidated Balance Sheets
 December 31,2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    US$ASSETSCurrent assets:Cash and cash equivalents
    
    
    1,138,446,505
    
    
    
    321,541,169
    
    
    
    47,129,523Restricted assets
    
    
    11,274,166
    
    
    
    
    
    
    
    Short-term investment
    
    
    19,120,000
    
    
    
    635,809,729
    
    
    
    93,193,071Accounts receivable, net
    
    
    41,138,242
    
    
    
    42,471,028
    
    
    
    6,225,142Due from related parties
    
    
    924,024
    
    
    
    517,538
    
    
    
    75,858Prepaid expenses
    
    
    5,684,638
    
    
    
    8,840,112
    
    
    
    1,295,729Other current assets
    
    
    9,960,117
    
    
    
    14,819,774
    
    
    
    2,172,190Total current assets
    
    
    1,226,547,692
    
    
    
    1,023,999,350
    
    
    
    150,091,513Property and equipment, net
    
    
    43,961,584
    
    
    
    52,483,690
    
    
    
    7,692,736Goodwill
    
    
    30,000,019
    
    
    
    30,000,019
    
    
    
    4,397,218Intangible assets, net
    
    
    2,192,265
    
    
    
    943,359
    
    
    
    138,272Other non-current assets
    
    
    28,966,622
    
    
    
    30,537,915
    
    
    
    4,476,059Total assets
    
    
    1,331,668,182
    
    
    
    1,137,964,333
    
    
    
    166,795,798LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    57,957,209
    
    
    
    34,146,053
    
    
    
    5,004,918Income taxes payable
    
    
    1,238,452
    
    
    
    1,152,325
    
    
    
    168,901Due to related parties
    
    
    4,528,560
    
    
    
    8,119,389
    
    
    
    1,190,090Accrued expenses and other current liabilities
    
    
    83,233,309
    
    
    
    81,888,166
    
    
    
    12,002,662Total current liabilities
    
    
    146,957,530
    
    
    
    125,305,933
    
    
    
    18,366,571Other liabilities
    
    
    100,000
    
    
    
    477,007
    
    
    
    69,917Total liabilities
    
    
    147,057,530
    
    
    
    125,782,940
    
    
    
    18,436,488Commitments and contingenciesShareholders equitySeries A preferred shares: US$0.01 par value;
authorized shares: 8,205,620 issued and
outstanding shares: Nil
    
    
    
    
    
    
    
    
    
    
    Series B preferred shares: US$0.01 par value
authorized shares: 50,000,000 issued and
outstanding shares: Nil
    
    
    
    
    
    
    
    
    
    
    Ordinary shares: US$0.01 par value; authorized
shares: 150,000,000; issued shares as at
December 31, 2007 and 2008: 23,073,671 and
23,073,671; outstanding shares as at December
31, 2007 and 2008: 22,318,501 and 22,513,519
    
    
    1,844,849
    
    
    
    1,858,543
    
    
    
    272,414High-vote ordinary shares: US$0.01 par value;
authorized shares: 50,000,000; issued and
outstanding shares: 28,550,704
    
    
    2,362,999
    
    
    
    2,362,999
    
    
    
    346,354Treasury stock, at cost (4,000,000 shares of
common stock as at December 31 2008 and nil
shares of common stock as at December 31 2007)
    
    
    
    
    
    
    (103,392,701
    )
    
    
    (15,154,665
    )Additional paid-in capital
    
    
    1,308,046,907
    
    
    
    1,315,589,787
    
    
    
    192,831,042Accumulated deficit
    
    
    (127,644,103
    )
    
    
    (204,237,235
    )
    
    
    (29,935,835
    )Total shareholders equity
    
    
    1,184,610,652
    
    
    
    1,012,181,393
    
    
    
    148,359,310Total liabilities and shareholders equity
    
    
    1,331,668,182
    
    
    
    1,137,964,333
    
    
    
    166,795,798
   F-3




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Operations
 Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues:Travel
    
    
    255,960,988
    
    
    
    303,846,548
    
    
    
    331,947,035
    
    
    
    48,654,750Other
    
    
    8,582,692
    
    
    
    11,550,123
    
    
    
    16,478,511
    
    
    
    2,415,319Total revenues
    
    
    264,543,680
    
    
    
    315,396,671
    
    
    
    348,425,546
    
    
    
    51,070,069Business tax and surcharges
    
    
    14,702,612
    
    
    
    17,810,292
    
    
    
    21,112,717
    
    
    
    3,094,572Net revenues
    
    
    249,841,068
    
    
    
    297,586,379
    
    
    
    327,312,829
    
    
    
    47,975,497Cost of services
    
    
    62,245,355
    
    
    
    82,497,585
    
    
    
    96,996,309
    
    
    
    14,217,121Gross profit
    
    
    187,595,713
    
    
    
    215,088,794
    
    
    
    230,316,520
    
    
    
    33,758,376Operating expenses:Service development
    
    
    41,921,653
    
    
    
    48,602,279
    
    
    
    52,584,041
    
    
    
    7,707,445Sales and marketing
    
    
    99,091,184
    
    
    
    126,971,094
    
    
    
    163,528,250
    
    
    
    23,968,963General and administrative
    
    
    61,534,710
    
    
    
    52,005,466
    
    
    
    53,652,427
    
    
    
    7,864,042Amortization of intangible assets
    
    
    1,060,000
    
    
    
    1,060,000
    
    
    
    848,906
    
    
    
    124,427Charges related to property and equipment
and intangible assets
    
    
    
    
    
    
    1,038,896
    
    
    
    1,384,814
    
    
    
    202,977Loss from operations
    
    
    (16,011,834
    )
    
    
    (14,588,941
    )
    
    
    (41,681,918
    )
    
    
    (6,109,478
    )Other income (expenses):Interest income
    
    
    51,429,793
    
    
    
    55,470,781
    
    
    
    29,020,353
    
    
    
    4,253,624Foreign exchange loss
    
    
    (33,016,052
    )
    
    
    (65,819,578
    )
    
    
    (60,937,889
    )
    
    
    (8,931,900
    )Other
    
    
    (10,775
    )
    
    
    131,630
    
    
    
    
    
    
    
    Total other income (expenses), net
    
    
    18,402,966
    
    
    
    (10,217,167
    )
    
    
    (31,917,536
    )
    
    
    (4,678,276
    )Income/(loss) from continuing operations
before income tax expense
    
    
    2,391,132
    
    
    
    (24,806,108
    )
    
    
    (73,599,454
    )
    
    
    (10,787,754
    )Income tax expense
    
    
    2,835,259
    
    
    
    885,343
    
    
    
    2,993,678
    
    
    
    438,795Loss from continuing operations
    
    
    (444,127
    )
    
    
    (25,691,451
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )Income from discontinued operations before
income tax expense (including gain on
disposal of RMB 2,649,682 in 2006)
    
    
    1,226,768
    
    
    
    112,260
    
    
    
    
    
    
    
    Income tax expense of discontinued operations
    
    
    24,302
    
    
    
    8,420
    
    
    
    
    
    
    
    Total income from discontinued
operations, net of tax
    
    
    1,202,466
    
    
    
    103,840
    
    
    
    
    
    
    
    Net income/(loss) before cumulative
effect of change in accounting principle
    
    
    758,339
    
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )Cumulative effect of change in accounting
principle
    
    
    282,072
    
    
    
    
    
    
    
    
    
    
    
    Net income/(loss)
    
    
    1,040,411
    
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )Net
income/(loss) per shareContinuing operations
    
    
    (0.01
    )
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )Discontinued operations
    
    
    0.02
    
    
    
    0.00
    *
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    Net income/(loss) per share
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )Diluted net
income/ (loss) per shareContinuing operations
    
    
    (0.01
    )
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )Discontinued operations
    
    
    0.02
    
    
    
    0.00
    *
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    Diluted net income/ (loss) per share
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    (0.23
    )
 *
    
    Representing per share amount which is less than RMB 0.01.   F-4




---



##### Table of Contents



eLong,Inc.  Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss)
 AccumulatedOrdinary shares
    
    
    High-vote Ordinary shares
    
    
    Treasury stock
    
    
    Additional
    
    
    
    
    
    other
    
    
    
    
    
    TotalNumber
    
    
    
    
    
    Number
    
    
    
    
    
    Number of
    
    
    
    
    
    paid-in
    
    
    Deferred
    
    
    comprehensive
    
    
    Accumulated
    
    
    shareholdersof Shares
    
    
    Amount
    
    
    of Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    compensation
    
    
    income(loss)
    
    
    deficit
    
    
    equityRMB
    
    
    
    
    
    RMB
    
    
    
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBJanuary 1, 2006
    
    
    21,788,707
    
    
    
    1,803,626
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    
    
    
    
    
    
    
    
    1,214,810,902
    
    
    
    (27,618,582
    )
    
    
    68,236
    
    
    
    (103,096,903
    )
    
    
    1,088,330,278Unrealized loss on investment securities, net of
taxes of nil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96,802
    )
    
    
    
    
    
    
    (96,802
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,040,411
    
    
    
    1,040,411Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    943,609Exercise of stock options and warrants
    
    
    319,922
    
    
    
    25,211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,069,096
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,094,307Amortization of mirror options granted to a common
shareholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adoption of SFAS No.123R
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,618,582
    )
    
    
    27,618,582
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,260,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,260,600Capital contribution from sale of business to entity
under common control
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,170,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,170,501December 31, 2006
    
    
    22,108,629
    
    
    
    1,828,837
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    
    
    
    
    
    
    
    
    1,297,692,517
    
    
    
    
    
    
    
    (28,566
    )
    
    
    (102,056,492
    )
    
    
    1,199,799,295Realized loss on investment securities upon
disposal, net of taxes of nil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,566
    
    
    
    
    
    
    
    28,566Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,587,611
    )
    
    
    (25,587,611
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,559,045
    )Exercise of stock options and warrants
    
    
    192,718
    
    
    
    14,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,135,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,149,851Exercise of performance units
    
    
    17,154
    
    
    
    1,291
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,291
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,220,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,220,551December 31, 2007
    
    
    22,318,501
    
    
    
    1,844,849
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    
    
    
    
    
    
    
    
    1,308,046,907
    
    
    
    
    
    
    
    
    
    
    
    (127,644,103
    )
    
    
    1,184,610,652Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,593,132
    )
    
    
    (76,593,132
    )Exercise of stock options
    
    
    50,732
    
    
    
    3,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    553,317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    556,943Exercise of performance units
    
    
    140,954
    
    
    
    9,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,832
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Settlement of shares granted to independent directors
    
    
    3,332
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,793Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,898,838
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,898,838Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,000,000
    )
    
    
    (103,392,701
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,392,701
    )December 31, 2008
    
    
    22,513,519
    
    
    
    1,858,543
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    (4,000,000
    )
    
    
    (103,392,701
    )
    
    
    1,315,589,787
    
    
    
    
    
    
    
    
    
    
    
    (204,237,235
    )
    
    
    1,012,181,393December 31,
2008  US$
    
    
    
    
    
    
    272,414
    
    
    
    
    
    
    
    346,354
    
    
    
    
    
    
    
    (15,154,665
    )
    
    
    192,831,042
    
    
    
    
    
    
    
    
    
    
    
    (29,935,835
    )
    
    
    148,359,310
   F-5




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Cash Flows
 Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2008RMB
    
    RMB
    
    RMB
    
    US$Cash flows from operating activities:Net income (loss)
    
    
    1,040,411
    
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )
    
    
    (11,226,549
    )Adjustments to reconcile net income (loss) to
net cash provided by /(used in) operating
activities:Minority interest (related to discontinued
operations)
    
    
    (111,573
    )
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of change in accounting
principle
    
    
    (282,072
    )
    
    
    
    
    
    
    
    
    
    
    Foreign exchange loss
    
    
    33,258,502
    
    
    
    65,917,833
    
    
    
    61,081,290
    
    
    
    8,952,919Charges related to property and equipment and
intangible assets
    
    
    
    
    
    
    1,038,896
    
    
    
    1,384,814
    
    
    
    202,978Allowance for doubtful accounts
    
    
    957,149
    
    
    
    2,206,673
    
    
    
    1,880,618
    
    
    
    275,649Loss on disposal of property and equipment
    
    
    414,395
    
    
    
    208,229
    
    
    
    608,337
    
    
    
    89,166Depreciation of property and equipment and
amortization of intangible assets
    
    
    12,813,406
    
    
    
    16,565,314
    
    
    
    20,013,087
    
    
    
    2,933,395Utilization of pre-acquisition net operating
loss carry forwards
    
    
    4,083,112
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation expense
    
    
    12,221,421
    
    
    
    6,002,062
    
    
    
    7,123,939
    
    
    
    1,044,183Gain on discontinued operations
    
    
    (2,649,682
    )
    
    
    
    
    
    
    
    
    
    
    Deferred income tax (benefit)/expense
    
    
    (3,237,776
    )
    
    
    (1,682,525
    )
    
    
    826,679
    
    
    
    121,170Gain on disposal of investment
    
    
    
    
    
    
    (134,089
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities,
net of impact from acquisitions:Accounts receivable
    
    
    5,460,245
    
    
    
    (14,497,502
    )
    
    
    (3,166,193
    )
    
    
    (464,081
    )Prepaid expenses and other current assets
    
    
    (996,705
    )
    
    
    (4,641,390
    )
    
    
    (9,440,406
    )
    
    
    (1,383,717
    )Other non-current assets
    
    
    (4,136,713
    )
    
    
    (18,257,591
    )
    
    
    (1,448,257
    )
    
    
    (212,277
    )Amounts due from related parties
    
    
    (462,059
    )
    
    
    (1,707,080
    )
    
    
    406,486
    
    
    
    59,580Accounts payable
    
    
    10,374,149
    
    
    
    23,449,811
    
    
    
    (18,633,432
    )
    
    
    (2,731,174
    )Accrued expenses and other current liabilities
    
    
    6,134,981
    
    
    
    (7,686,495
    )
    
    
    (1,800,781
    )
    
    
    (263,948
    )Amounts due to related parties
    
    
    1,672,376
    
    
    
    1,154,821
    
    
    
    3,203,577
    
    
    
    469,561Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    477,006
    
    
    
    69,917Net cash provided by/(used in) operating
activities
    
    
    76,553,567
    
    
    
    42,349,356
    
    
    
    (14,076,368
    )
    
    
    (2,063,228
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (20,661,826
    )
    
    
    (22,190,033
    )
    
    
    (32,860,203
    )
    
    
    (4,816,446
    )Acquisitions, net of cash acquired
    
    
    (7,894,780
    )
    
    
    (250,000
    )
    
    
    
    
    
    
    Proceeds from disposal of property and
equipment
    
    
    615,178
    
    
    
    206,437
    
    
    
    119,213
    
    
    
    17,474Proceeds from disposal of business, net
direct expense
    
    
    113,947,501
    
    
    
    
    
    
    
    10,830,373
    *
    
    
    1,587,450
    *Proceeds from disposal of investment
    
    
    
    
    
    
    
    
    
    
    323,639
    
    
    
    47,437Proceeds from short-term investment
    
    
    
    
    
    
    
    
    
    
    39,120,000
    
    
    
    5,733,968Increase in restricted assets
    
    
    (11,384,231
    )
    
    
    (373,326
    )
    
    
    
    
    
    
    Purchase of short-term investment
    
    
    
    
    
    
    (19,120,000
    )
    
    
    (655,016,833
    )
    
    
    (96,008,330
    )Payment relating to discontinued operations
    
    
    
    
    
    
    (15,567
    )
    
    
    
    
    
    
    Payments made on behalf of related parties
    
    
    (1,636,646
    )
    
    
    (1,895,678
    )
    
    
    (4,016,726
    )
    
    
    (588,747
    )Net cash provided by/(used in) investing
activities
    
    
    72,985,196
    
    
    
    (43,638,167
    )
    
    
    (641,500,537
    )
    
    
    (94,027,194
    )Cash flows from financing activities:Repurchase of ordinary shares
    
    
    
    
    
    
    
    
    
    
    (103,392,701
    )
    
    
    (15,154,665
    )Exercise of stock options and stock warrants
    
    
    6,094,306
    
    
    
    3,149,851
    
    
    
    657,736
    
    
    
    96,407Payments for initial public offering costs
    
    
    (8,487,133
    )
    
    
    
    
    
    
    
    
    
    
    Repayment of short-term loan
    
    
    (6,000,000
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from release of restricted cash, net
of expenses
    
    
    75,706,911
    
    
    
    
    
    
    
    
    
    
    
    Proceeds received on behalf of related parties
    
    
    
    
    
    
    4,777,439
    
    
    
    4,403,978
    
    
    
    645,508Payable to former shareholders
    
    
    26,693,515
    
    
    
    
    
    
    
    
    
    
    
    Receipts in advance (refund) in relation to
share option exercise
    
    
    1,132,594
    
    
    
    (572,082
    )
    
    
    
    
    
    
    Net cash provided by/(used in) financing
activities
    
    
    95,140,193
    
    
    
    7,355,208
    
    
    
    (98,330,987
    )
    
    
    (14,412,750
    )Effect of foreign exchange rate changes on
cash
    
    
    (33,916,633
    )
    
    
    (66,942,571
    )
    
    
    (62,997,444
    )
    
    
    (9,233,777
    )Net increase (decrease) in cash and cash
equivalents
    
    
    210,762,323
    
    
    
    (60,876,174
    )
    
    
    (816,905,336
    )
    
    
    (119,736,949
    )Cash and cash equivalents at beginning of year
    
    
    988,560,356
    
    
    
    1,199,322,679
    
    
    
    1,138,446,505
    
    
    
    166,866,472Cash and cash equivalents at end of year
    
    
    1,199,322,679
    
    
    
    1,138,446,505
    
    
    
    321,541,169
    
    
    
    47,129,523Supplemental disclosures of cash flow
information:Cash paid for income taxes
    
    
    1,963,628
    
    
    
    14,238,145
    
    
    
    4,095,258
    
    
    
    600,258Accrual for purchase of equipment and software
    
    
    4,823,503
    
    
    
    5,521,328
    
    
    
    343,604
    
    
    
    50,363
 *
    
    The proceeds from disposal of business represents the cash received in 2008 in connection with
the disposal to Match.com of the online dating business operated under the name of eDodo in 2006.   F-6




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Amounts in Renminbi (RMB)
 (1) ORGANIZATION AND DESCRIPTION OF BUSINESS
    (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Consolidation
  (b) Basis of presentation
  (c) Use of estimates
   F-7




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (d) Foreign currencies
   (e) Commitments and contingencies
  (f) Revenue recognition
  Hotel reservation services
 Reporting Revenue Gross as a Principal versus
Net as an Agent
 Air
ticketing services
   F-8




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 Other travel services
  Non- travel services
    (g) Income taxes
  Accounting for
Income Taxes
 Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109
 Accounting for Income TaxesSpecial
Areas
  F-9




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (h) Share-based compensation
 Accounting for Stock-Based Compensation Share-Based Payment Accounting for Stock Issued to Employees
     F-10




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
   Accounting for Equity Instruments That are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
  (i) Loyalty points provision
  (j) Cash and cash equivalents
  (k) Short-term investment
   F-11




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (l) Accounts receivable
  (m) Property and equipment
 Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use Accounting for Web Site Development Costs
 Capitalized software development cost
    
    3 yearsComputer equipment and system software
    
    3-5 yearsFurniture, fixtures and office equipment
    
    5 years
  (n) Goodwill and other intangible assets
 Goodwill and Other Intangible
Assets
   F-12




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
   (o) Impairment of long-lived assets
 Accounting for Impairment or Disposal of Long-Lived Assets
 (p) Employee benefit plans
  (q) Statutory reserves
  (r) Net income/ (loss) per share
   F-13




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (s) Advertising expense
  (t) Segment reporting
 Disclosures about Segment of an Enterprise and Related
Information
  (u) Operating leases
  (v) Financial instruments
  (w) Treasury stock
   F-14




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (x) Recently issued accounting pronouncements
 Business Combinations
 Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51
  Disclosures about Derivative Instruments and
Hedging Activities
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles
  F-15




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (3) ACQUISITIONS AND DISCONTINUED OPERATIONS
 Raytime
  Online Dating Division
    F-16




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Year ended December 31,2006
    
    

2007
    
    
    2008Revenues
    
    
    13,173,371
    
    
    
    
    
    
    
    Earnings before income tax
    
    
    1,226,768
    
    
    
    112,260
    
    
    
    Income tax expense
    
    
    24,302
    
    
    
    8,420
    
    
    
    
 (4) RESTRICTED ASSETS
  (5) ACCOUNTS RECEIVABLE
  December 31,2007
    
    
    2008Accounts receivable
    
    
    42,933,362
    
    
    
    45,987,075Allowance for doubtful accounts
    
    
    (1,795,120
    )
    
    
    (3,516,047
    )Accounts receivable, net
    
    
    41,138,242
    
    
    
    42,471,028
  Year ended December 31,2006
    
    
    2007
    
    
    2008Balance at the beginning of year
    
    
    4,128,344
    
    
    
    4,192,172
    
    
    
    1,795,120Additions charged to bad debt expense
    
    
    809,147
    
    
    
    1,596,659
    
    
    
    1,833,407Write-offs charged against the allowance
    
    
    (745,319
    )
    
    
    (3,993,711
    )
    
    
    (112,480
    )Balance at the end of year
    
    
    4,192,172
    
    
    
    1,795,120
    
    
    
    3,516,047
 (6) PROPERTY AND EQUIPMENT, NET
  December 31,2007
    
    
    2008Computer equipment
    
    
    36,147,057
    
    
    
    43,235,392Furniture and office equipment
    
    
    7,860,456
    
    
    
    8,091,043Leasehold improvements
    
    
    7,608,024
    
    
    
    6,584,550Purchased software
    
    
    20,177,194
    
    
    
    25,435,464Capitalized software development costs
    
    
    6,446,696
    
    
    
    16,475,29278,239,427
    
    
    
    99,821,741Less: Accumulated depreciation and amortization
    
    
    (37,324,263
    )
    
    
    (50,597,909
    )Projects in progress
    
    
    3,046,420
    
    
    
    3,259,858Property and equipment, net
    
    
    43,961,584
    
    
    
    52,483,690
  F-17




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
     (7) GOODWILL AND INTANGIBLE ASSETS
  December 31,2007
    
    
    2008Goodwill
    
    
    30,000,019
    
    
    
    30,000,019Intangible assets with definite lives, net
    
    
    1,792,265
    
    
    
    943,359Intangible asset with indefinite life
    
    
    400,000
    
    
    
    Total intangible assets, net
    
    
    2,192,265
    
    
    
    943,359
     F-18




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  December 31,2007
    
    
    2008Customer lists
    
    
    5,051,240
    
    
    
    5,051,240Less: accumulated amortization
    
    
    (3,258,975
    )
    
    
    (4,107,881
    )1,792,265
    
    
    
    943,359Useful lives of intangible assets with definite lives
    
    
    5
    
    
    
    5
  Amortization2009
    
    
    628,9062010
    
    
    314,4532011
    
    
    2012
    
    
    2013
    
    
    Total
    
    
    943,359
 (8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31,2007
    
    
    2008Accrual payroll and welfare
    
    
    14,515,756
    
    
    
    10,076,423Accrued loyalty points program expenses
    
    
    12,099,438
    
    
    
    13,278,634Other accrued expenses
    
    
    23,295,036
    
    
    
    24,176,330Other payables
    
    
    3,458,133
    
    
    
    4,402,010Receipts in advance for exercise of share option
    
    
    8,898
    
    
    
    8,898Advances and deposits from customers
    
    
    1,976,560
    
    
    
    4,054,393Expedia Asia Pacific mirror share option
    
    
    114,850
    
    
    
    Business and other taxes
    
    
    3,410,000
    
    
    
    3,103,891Payable to former shareholders
    
    
    24,354,638
    
    
    
    22,787,587Total accrued expenses and
other current liabilities
    
    
    83,233,309
    
    
    
    81,888,166
   F-19




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (9) REVENUES
  For the year ended December 31,2006
    
    
    2007
    
    
    2008Travel:Hotel reservation
    
    
    209,275,155
    
    
    
    240,803,384
    
    
    
    253,457,540Air ticketing
    
    
    38,287,644
    
    
    
    57,455,084
    
    
    
    77,205,429Other
    
    
    8,398,189
    
    
    
    5,588,080
    
    
    
    1,284,066Total travel revenues
    
    
    255,960,988
    
    
    
    303,846,548
    
    
    
    331,947,035Non-travel
    
    
    8,582,692
    
    
    
    11,550,123
    
    
    
    16,478,511Total revenues
    
    
    264,543,680
    
    
    
    315,396,671
    
    
    
    348,425,546
 (10) INCOME TAXES
  Cayman
  China
     F-20




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
        For the year ended December31,2006
    
    
    2007
    
    
    2008Cayman
    
    
    (7,478,861
    )
    
    
    (22,639,736
    )
    
    
    (47,494,616
    )PRC
    
    
    9,869,993
    
    
    
    (2,166,372
    )
    
    
    (26,104,838
    )Total
    
    
    2,391,132
    
    
    
    (24,806,108
    )
    
    
    (73,599,454
    )
  F-21




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  For the year ended December 31,2006
    
    
    2007
    
    
    2008Current
    
    
    6,073,035
    
    
    
    2,567,868
    
    
    
    2,166,999Deferred
    
    
    (3,237,776
    )
    
    
    (1,682,525
    )
    
    
    826,679Total
    
    
    2,835,259
    
    
    
    885,343
    
    
    
    2,993,678
   For the year ended December 31,2006
    
    
    2007
    
    
    2008Deferred tax benefit (exclusive of the effect of the component below)
    
    
    (1,038,082
    )
    
    
    (1,763,334
    )
    
    
    (4,322,294
    )Increase/(decrease) in the valuation allowance for deferred tax assets
    
    
    (2,199,694
    )
    
    
    80,809
    
    
    
    5,148,973Deferred income tax expense (benefit)
    
    
    (3,237,776
    )
    
    
    (1,682,525
    )
    
    
    826,679
   For the year ended December 31,2006
    
    
    2007
    
    
    2008Computed expected tax (benefit) expense at PRC statutory rates
    
    
    789,073
    
    
    
    (8,186,016
    )
    
    
    (18,399,863
    )Increase (reduction) in income taxes resulting from:Change in the valuation allowance for deferred tax assets allocated to income tax
expense
    
    
    (2,199,694
    )
    
    
    80,809
    
    
    
    5,148,973Adjustment to deferred tax assets and liabilities for changes in enacted tax rates
    
    
    1,685,801
    
    
    
    (3,180
    )
    
    
    459,128Expired net operating loss carry forwards
    
    
    
    
    
    
    314,985
    
    
    
    286,655Effect of tax exemption and reduction inside PRC
    
    
    (115,680
    )
    
    
    
    
    
    
    Effect of differing tax rates in different jurisdictions inside PRC
    
    
    (2,100,638
    )
    
    
    (78,000
    )
    
    
    3,009,342Effect of differing tax rates in jurisdiction outside PRC
    
    
    2,468,024
    
    
    
    7,471,113
    
    
    
    11,873,654Prior year tax return true up
    
    
    
    
    
    
    (1,064,117
    )
    
    
    169,787Non deductible entertainment expenses
    
    
    160,214
    
    
    
    90,453
    
    
    
    115,547Non deductible personnel expenses
    
    
    1,768,487
    
    
    
    1,123,265
    
    
    
    Non deductible allowance for doubtful accounts
    
    
    97,612
    
    
    
    576,746
    
    
    
    366,536Nonqualified tax deductions
    
    
    243,759
    
    
    
    187,450
    
    
    
    Others
    
    
    38,301
    
    
    
    371,835
    
    
    
    (36,081
    )Income tax expense
    
    
    2,835,259
    
    
    
    885,343
    
    
    
    2,993,678
  F-22




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
    For the year ended December 31,2007
    
    
    2008Deferred tax assets:Operating loss carryforwards
    
    
    1,045,976
    
    
    
    3,365,883Operating loss carryforwards, pre-acquisition
    
    
    1,127,070
    
    
    
    1,136,556Property and equipment
    
    
    255,741
    
    
    
    110,030Accrued expenses
    
    
    3,750,254
    
    
    
    2,830,607Total gross deferred tax assets
    
    
    6,179,041
    
    
    
    7,443,076Less: valuation allowance
    
    
    (1,675,617
    )
    
    
    (6,824,590
    )Net deferred tax assets
    
    
    4,503,424
    
    
    
    618,486Deferred tax liabilities:Intangible asset with indefinite life
    
    
    100,000
    
    
    
    Intangible assets with definite lives
    
    
    516,486
    
    
    
    235,842Restricted assets
    
    
    2,677,615
    
    
    
    Total deferred tax liabilities
    
    
    3,294,101
    
    
    
    235,842Total net deferred tax assets
    
    
    1,209,323
    
    
    
    382,644Deferred tax assets, net: Current, included in prepaid expenses and other current assets
    
    
    1,072,639
    
    
    
    22,924 Non-current, included in other non-current assets
    
    
    236,684
    
    
    
    359,720Deferred tax liabilities, included in other liabilities:
    
    
    100,000
    
    
    
    
      F-23




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  (11) COMMITMENTS AND CONTINGENCY
   Minimumleasepayments2009
    
    
    11,689,3292010
    
    
    10,430,2182011
    
    
    10,154,3462012
    
    
    9,445,5182013
    
    
    Total
    
    
    41,719,411
  (12) SHARE-BASED COMPENSATION
 Stock options
     F-24




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  For the year ended December 31,2006
    
    
    2007
    
    
    2008Weighted average grant date fair value per share
    
    $
    3.49
    
    
    $
    2.81
    
    
    $
    2.13Weighted average assumptions usedExpected volatility
    
    
    50
    %
    
    
    55
    %
    
    
    55
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    Expected life
    
    6.35 years
    
    
    6.5 years
    
    
    5.88 yearsRisk-free interest rate (per annum)
    
    
    4.22
    %
    
    
    4.43
    %
    
    
    3.25
    %
  WeightedWeighted
    
    
    Average
    
    
    Aggregatedaverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    price
    
    
    Term
    
    

thousands)Balance at December 31, 2006
    
    
    3,267,681
    
    
    US$
    0.66Granted
    
    
    
    
    
    
    Exercised
    
    
    (161,718
    )
    
    US$
    1.53Forfeited
    
    
    (15,096
    )
    
    US$
    1.53Expired
    
    
    (20,000
    )
    
    US$
    1.53Balance at December 31, 2007
    
    
    3,070,867
    
    
    US$
    0.61Granted
    
    
    
    
    
    
    Exercised
    
    
    (50,732
    )
    
    US$
    1.53Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    3,020,135
    
    
    US$
    0.59
    
    
    2.52 years
    
    
    US$
    8,932Fully vested and exercisable as of December 31, 2008
    
    
    3,020,135
    
    
    US$
    0.59
    
    
    2.52 years
    
    
    US$
    8,932
   WeightedWeighted
    
    
    Average
    
    
    Aggregatedaverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    price
    
    
    Term
    
    
    thousands)Balance at December 31, 2006
    
    
    1,438,275
    
    
    US$
    5.53Granted
    
    
    711,112
    
    
    US$
    4.80Exercised
    
    
    (31,000
    )
    
    US$
    5.25Forfeited
    
    
    (495,714
    )
    
    US$
    5.27Expired
    
    
    (59,124
    )
    
    US$
    5.51Balance at December 31, 2007
    
    
    1,563,549
    
    
    US$
    5.29Granted
    
    
    60,000
    
    
    US$
    3.94Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (149,125
    )
    
    US$
    5.04Expired
    
    
    (654,862
    )
    
    US$
    5.58Balance at December 31, 2008
    
    
    819,562
    
    
    US$
    5.01
    
    
    7.05 years
    
    
    US$
    Unvested as of December 31, 2008
    
    
    304,890
    
    
    US$
    4.54
    
    
    8.60 years
    
    
    US$
    Fully vested and exercisable as of December 31, 2008
    
    
    514,672
    
    
    US$
    5.29
    
    
    6.13 years
    
    
    US$
    
  F-25




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
   Expedia Options
     Options Outstanding
    
    
    Options ExercisableWeighted AverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    WeightedShares (In
    
    
    Average Price
    
    
    Contractual Life
    
    
    Shares (In
    
    
    AverageRange of Exercise Prices
    
    thousands)
    
    
    Per Share
    
    
    (Years)
    
    
    thousands)
    
    
    Exercise Price$0.10 - $2.00
    
    
    3,020
    
    
    $
    0.59
    
    
    
    2.52
    
    
    
    3,020
    
    
    $
    0.59$2.01 - $4.00
    
    
    110
    
    
    $
    3.91
    
    
    
    8.99
    
    
    
    30
    
    
    $
    3.91$4.01 - $6.00
    
    
    650
    
    
    $
    5.04
    
    
    
    6.83
    
    
    
    425
    
    
    $
    5.18$6.01 - $8.00
    
    
    59
    
    
    $
    6.75
    
    
    
    5.84
    
    
    
    59
    
    
    $
    6.75$0.10 - $8.00
    
    
    3,839
    
    
    $
    1.54
    
    
    
    3.49
    
    
    
    3,534
    
    
    $
    1.28
  F-26




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Performance Units
    Weighted averageNumber of Shares
    
    
    grant date fair valueBalance at December 31, 2006
    
    
    294,924
    
    
    US$
    6.37Granted
    
    
    545,880
    
    
    US$
    4.83Settled
    
    
    (17,154
    )
    
    US$
    6.46Forfeited
    
    
    (297,422
    )
    
    US$
    5.92Cancelled
    
    
    (1,856
    )
    
    US$
    7.12Balance at December 31, 2007
    
    
    524,372
    
    
    US$
    5.02Granted
    
    
    1,056,796
    
    
    US$
    4.02Settled
    
    
    (140,954
    )
    
    US$
    5.14Forfeited
    
    
    (257,258
    )
    
    US$
    4.51Cancelled
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    1,182,956
    
    
    US$
    4.22Fully vested and exercisable as of December 31, 2008
    
    
    30,156
    
    
    US$
    4.31
  Number of SharesBalance at December 31, 2006
    
    
    30,000Granted
    
    
    20,000Settled
    
    
    Forfeited
    
    
    (6,666
    )Cancelled
    
    
    Balance at December 31, 2007
    
    
    43,334Granted
    
    
    75,328Settled
    
    
    (36,664
    )Forfeited
    
    
    (3,334
    )Cancelled
    
    
    Balance at December 31, 2008
    
    
    78,664Fully vested and exercisable as of December 31, 2008
    
    
    
  For the year ended December31,2006
    
    
    2007
    
    
    2008Cost of services
    
    
    135,095
    
    
    
    210,764
    
    
    
    324,824Service development
    
    
    2,760,459
    
    
    
    2,983,797
    
    
    
    2,320,096Sales and marketing
    
    
    572,952
    
    
    
    680,315
    
    
    
    972,150General and administrative
    
    
    8,752,915
    
    
    
    2,127,186
    
    
    
    3,506,869Total
    
    
    12,221,421
    
    
    
    6,002,062
    
    
    
    7,123,939
  F-27




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Warrants
   (13) ORDINARY SHARES
 Ordinary Shares
   High-Vote Ordinary Shares
    Treasury stock
   F-28




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (14) EARNINGS (LOSS) PER ORDINARY SHARE
   For the year ended December 31,2006
    
    
    2007
    
    
    2008Net income (loss) applicable to ordinary shareholders
    
    
    1,040,411
    
    
    
    (25,587,611
    )
    
    
    (76,593,132
    )Denominator for basic income (loss) per share:Weighted average number of ordinary shares outstanding
    
    
    50,391,885
    
    
    
    50,756,869
    
    
    
    49,784,263Denominator for diluted income (loss) per share:
    
    
    53,749,470
    
    
    
    50,756,869
    
    
    
    49,784,263Basic income (loss) per share
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )Diluted income (loss) per share
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
 (15) CONCENTRATION OF RISKS
 Credit and concentration risks
    Business and economic risks
    Foreign exchange risk.
   F-29




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
  (16) SEGMENT INFORMATION
     Year ended December 31, 2008Hotel
    
    
    Air
    
    
    Others
    
    
    Corporate
    
    
    Total(RMB)Revenues
    
    
    253,457,540
    
    
    
    77,205,429
    
    
    
    17,762,577
    
    
    
    
    
    
    
    348,425,546Business tax and surcharges
    
    
    (12,672,877
    )
    
    
    (4,246,299
    )
    
    
    (4,193,541
    )
    
    
    
    
    
    
    (21,112,717
    )Cost of services *
    
    
    (39,093,304
    )
    
    
    (53,365,857
    )
    
    
    (4,212,324
    )
    
    
    (324,824
    )
    
    
    (96,996,309
    )Service development expenses *
    
    
    (12,914,857
    )
    
    
    (5,258,409
    )
    
    
    (6,258,828
    )
    
    
    (28,151,947
    )
    
    
    (52,584,041
    )Total contribution
    
    
    188,776,502
    
    
    
    14,334,864
    
    
    
    3,097,884
    
    
    
    (28,476,771
    )
    
    
    177,732,479Unallocated operating expensesSales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163,528,250
    )
    
    
    (163,528,250
    )General and administrative
    
    
    (3,398,572
    )
    
    
    (3,398,572
    )
    
    
    
    
    
    
    (46,855,283
    )
    
    
    (53,652,427
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (848,906
    )
    
    
    (848,906
    )Charges related to
property and equipment
and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,384,814
    )
    
    
    (1,384,814
    )Income(loss) from operations
    
    
    185,377,930
    
    
    
    10,936,292
    
    
    
    3,097,884
    
    
    
    (241,094,024
    )
    
    
    (41,681,918
    )Total other income
(expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,917,536
    )
    
    
    (31,917,536
    )Income(loss) from
continuing operations
before income taxes
    
    
    185,377,930
    
    
    
    10,936,292
    
    
    
    3,097,884
    
    
    
    (273,011,560
    )
    
    
    (73,599,454
    )
 *
    
    Depreciation expense of RMB6,508,451 and RMB4,293,288 is included in Cost of services and
Service development expenses for the Hotel and Air segments. No depreciation expense in the Others
and Corporate segments.  F-30




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 Year ended December 31, 2007Hotel
    
    
    Air
    
    
    Others
    
    
    Corporate
    
    
    Total(RMB)Revenues
    
    
    240,803,384
    
    
    
    57,455,084
    
    
    
    17,138,203
    
    
    
    
    
    
    
    315,396,671Business tax and surcharges
    
    
    (12,040,169
    )
    
    
    (3,160,030
    )
    
    
    (2,610,093
    )
    
    
    
    
    
    
    (17,810,292
    )Cost of services *
    
    
    (33,412,658
    )
    
    
    (40,231,011
    )
    
    
    (831,738
    )
    
    
    (8,022,178
    )
    
    
    (82,497,585
    )Service development expenses *
    
    
    (7,300,479
    )
    
    
    (3,202,201
    )
    
    
    (10,531,839
    )
    
    
    (27,567,760
    )
    
    
    (48,602,279
    )Total contribution
    
    
    188,050,078
    
    
    
    10,861,842
    
    
    
    3,164,533
    
    
    
    (35,589,938
    )
    
    
    166,486,515Unallocated operating
expensesSales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126,971,094
    )
    
    
    (126,971,094
    )General and administrative
    
    
    (3,044,231
    )
    
    
    (3,044,231
    )
    
    
    
    
    
    
    (45,917,004
    )
    
    
    (52,005,466
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,060,000
    )
    
    
    (1,060,000
    )Charges related to
property and equipment
and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,038,896
    )
    
    
    (1,038,896
    )Income(loss) from operations
    
    
    185,005,847
    
    
    
    7,817,611
    
    
    
    3,164,533
    
    
    
    (210,576,932
    )
    
    
    (14,588,941
    )Total other income
(expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,217,167
    )
    
    
    (10,217,167
    )Income(loss) from
continuing operations
before income taxes
    
    
    185,005,847
    
    
    
    7,817,611
    
    
    
    3,164,533
    
    
    
    (220,794,099
    )
    
    
    (24,806,108
    )
 *
    
    Depreciation expense of RMB2,586,968 and RMB2,074,495 is included in Cost of services and
Service development expenses for the Hotel and Air segments. No depreciation expense in the Others
and Corporate segments. Year ended December 31, 2006Hotel
    
    
    Air
    
    
    Others
    
    
    Corporate
    
    
    Total(RMB)Revenues
    
    
    209,275,155
    
    
    
    38,287,644
    
    
    
    16,980,881
    
    
    
    
    
    
    
    264,543,680Business tax and surcharges
    
    
    (10,463,758
    )
    
    
    (2,105,820
    )
    
    
    (2,133,034
    )
    
    
    
    
    
    
    (14,702,612
    )Cost of services *
    
    
    (28,762,854
    )
    
    
    (24,409,252
    )
    
    
    (1,122,947
    )
    
    
    (7,950,302
    )
    
    
    (62,245,355
    )Service development expenses *
    
    
    (4,969,639
    )
    
    
    (5,705,147
    )
    
    
    (7,989,936
    )
    
    
    (23,256,931
    )
    
    
    (41,921,653
    )Total contribution
    
    
    165,078,904
    
    
    
    6,067,425
    
    
    
    5,734,964
    
    
    
    (31,207,233
    )
    
    
    145,674,060Unallocated
operating expensesSales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,091,184
    )
    
    
    (99,091,184
    )General and administrative
    
    
    (2,570,851
    )
    
    
    (2,570,851
    )
    
    
    
    
    
    
    (56,393,008
    )
    
    
    (61,534,710
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,060,000
    )
    
    
    (1,060,000
    )Income(loss) from operations
    
    
    162,508,053
    
    
    
    3,496,574
    
    
    
    5,734,964
    
    
    
    (187,751,425
    )
    
    
    (16,011,834
    )Total other income
(expenses), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,402,966
    
    
    
    18,402,966Income(loss) from
continuing operations
before income taxes
    
    
    162,508,053
    
    
    
    3,496,574
    
    
    
    5,734,964
    
    
    
    (169,348,459
    )
    
    
    2,391,132
 *
    
    Depreciation expense of RMB1,782,927 and RMB1,125,495 is included in Cost of services and
Service development expenses for the Hotel and Air segments. No depreciation expense in the Others
and Corporate segments.  F-31




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (17) RELATED PARTY TRANSACTIONS
  Commercial agreements with Expedia
   Services provided by and to Expedia
     Subleases to Expedia
  Transactions with Match.com
   F-32




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##### Table of Contents



eLong, Inc.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 Amounts in Renminbi (RMB)
 (18) SUBSEQUENT EVENTS
  In May 2009,
we granted 1,259,843 stock options to our senior executive officers and
other employees under the 2009 Plan, as well as 125,984 stock options to
our chief financial officer and 177,248 Performance Units to our chief
financial officer and other employees under the 2004 Plan.  F-33




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description4.24
    *
    
    Amendment to Employment Agreement between eLong, Inc. and Guangfu
Cui.4.26
    
    
    Waiver Agreement between eLong Inc, eLongNet Information
Technology (Beijing) Co., Ltd. and Expedia Inc. effective as of
November 13, 2007 (incorporated by reference to Exhibit 4.60 to
the companys Annual Report on Form 20-F filed with the SEC on
June 30, 2008).4.27
    *
    
    Waiver Agreement among eLong, Inc., eLongNet Information
Technology (Beijing) Co., Ltd., Expedia Inc. and Expedia Asia
Pacific-Alpha Limited, effective as of November 1, 2008.4.28
    *
    
    Waiver Agreement among eLong Inc, eLongNet Information Technology
(Beijing) Co., Ltd., Expedia Inc. and Expedia Asia Pacific-Alpha
Limited, effective as of April 7, 2009.4.29
    *
    
    eLong, Inc. 2009 Share and Annual Incentive Plan.4.30
    *
    
    The Third Amended and Restated Loan Agreement, dated April 21,
2008, among eLong, Inc., Justin Tang, Guangfu Cui and Jack Wang.4.31
    *
    
    The Third Amended and Restated Equity Interests Pledge Agreement,
dated April 21, 2008, between eLongNet Information Technology
(Beijing) Co., Ltd. and Guangfu Cui.4.32
    *
    
    The Third Amended and Restated Equity Interests Pledge Agreement,
dated April 21, 2008, between eLongNet Information Technology
(Beijing) Co., Ltd. and Jack Wang.4.33
    *
    
    The Third Amended and Restated Exclusive Purchase Right
Agreement, dated April 21, 2008, among eLong, Inc., Beijing
eLong Information Technology Co., Ltd., eLongNet Information
Technology (Beijing) Co., Ltd., and Guangfu Cui.4.34
    *
    
    The Third Amended and Restated Exclusive Purchase Right
Agreement, dated April 21, 2008, among eLong, Inc., Beijing
eLong Information Technology Co., Ltd., eLongNet Information
Technology (Beijing) Co., Ltd., and Jack Wang.4.35
    *
    
    The Third Amended and Restated Business Operation Agreement,
dated April 21, 2008, among eLong, Inc., eLongNet Information
Technology (Beijing) Co., Ltd., Guangfu Cui, Justin Tang and Jack
Wang.4.36
    *
    
    Letter Agreement, dated May 1, 2009, among eLong, Inc., Guangfu
Cui, Justin Tang and Jack Wang.4.37
    
    
    The Fourth Amended and Restated Loan Agreement dated December 28, 2007 by and between eLong,
Inc., Justin Tang and Guangfu Cui (incorporated by reference to Exhibit 4.61 of the companys
Annual Report on Form 20-F filed with the SEC on June 30,
2008).4.38
    
    
    The Fourth Amended and Restated Equity Interests Pledge Agreement dated December 28, 2007
between eLongNet Information Technology (Beijing) Co., Ltd. and Guangfu Cui (incorporated by
reference to Exhibit 4.62 of the companys Annual Report on Form 20-F filed with the SEC on
June 30, 2008).4.39
    
    
    The Fourth Amended and Restated Exclusive Purchase Right Agreement dated December 28, 2007 by
and between eLong, Inc., Guangfu Cui, Beijing Asia Media Interactive Advertising Co., Ltd.,
and eLongNet Information Technology (Beijing) Co., Ltd. (incorporated by reference to Exhibit
4.63 of the companys Annual Report on Form 20-F filed with
the SEC on June 30, 2008).4.40
    
    
    The Fourth Amended and Restated Business Operation Agreement dated December 28, 2007 by and
among the eLongNet Information Technology (Beijing) Co., Ltd., Beijing Asia Media Interactive
Advertising Co., Ltd., Justin Tang, and Guangfu Cui (incorporated by reference to Exhibit 4.64
of the companys Annual Report on Form 20-F filed with the
SEC on June 30, 2008).8.1
    *
    
    Subsidiaries of Registrant.12.1
    *
    
    Certification of Chief Executive Officer Required by Rule
13a-14(a).12.2
    *
    
    Certification of Chief Financial Officer Required by Rule
13a-14(a).13.1
    *
    
    Certification of Chief Executive Officer Required by Rule
13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
United States Code.13.2
    *
    
    Certification of Chief Financial Officer Required by Rule
13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
United States Code.15.1
    *
    
    Consent of Independent Registered Public Accounting Firm (Ernst &
Young Hua Ming).15.2
    *
    
    Consent of Independent Registered Public Accounting Firm (KPMG)15.3
    *
    
    Consent of TransAsia Lawyers.