##### Table of Contents



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 ended December 31, 2010
 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)
 (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
    
    The Nasdaq Global Marketordinary shares, par value $0.01 per ordinary share
 None
 None
 20,735,401 ordinary shares, par value US$0.01 per share;
28,550,704 high-vote ordinary shares, par value US$0.01 per share.
 Yes o No þ
 o þ
  þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  þ Board o Other o
 o o
 o þ




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##### Table of Contents



TABLE OF CONTENTS
 PagePART IItem 1: Identity of Directors, Senior Management and Advisers
    
    
    5Item 2: Offer Statistics and Expected Timetable
    
    
    5Item 3: Key Information
    
    
    5Item 4: Information on the Company
    
    
    19Item 4A: Unresolved Staff Comments
    
    
    29Item 5: Operating and Financial Review and Prospects
    
    
    29Item 6: Directors, Senior Management and Employees
    
    
    44Item 7: Major Shareholders and Related Party Transactions
    
    
    55Item 8: Financial Information
    
    
    63Item 9: The Offer and Listing
    
    
    64Item 10: Additional Information
    
    
    65Item 11: Quantitative and Qualitative Disclosure About Market Risk
    
    
    69Item 12: Description of Securities other than Equity Securities
    
    
    70PART IIItem 13: Defaults, Dividend Arrearages and Delinquencies
    
    
    70Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    71Item 15: Controls and Procedures
    
    
    71Item 16A: Audit Committee Financial Expert
    
    
    72Item 16B: Code of Ethics
    
    
    72Item 16C: Principal Accountant Fees and Services
    
    
    72
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PageItem 16D: Exemptions from the Listing Standards for Audit Committees
    
    
    73Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    73Item 16F: Changes in Registrants Certifying Accountant
    
    
    73Item 16G: Corporate Governance
    
    
    74PART IIIItem 17: Financial Statements
    
    
    74Item 18: Financial Statements
    
    
    74Item 19. Exhibits
    
    
    75Exhibit 3.2Exhibit 4.20Exhibit 4.21Exhibit 4.25Exhibit 4.26Exhibit 4.27Exhibit 4.28Exhibit 4.29Exhibit 4.30Exhibit 4.31Exhibit 4.32Exhibit 4.33Exhibit 4.34Exhibit 4.35Exhibit 4.36Exhibit 4.37Exhibit 4.38Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2
   - 3 -




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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
   - 4 -




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Item 3: Key InformationRisk Factors Item 4: Information on the
CompanyBusiness Item 5: Operating and Financial Review and Prospects.
  
 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
  Exchange Rate Information
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SELECTED CONSOLIDATED FINANCIAL DATA
 eLong, Inc.Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands, except for per share data)Selected Consolidated Statements of
Operations DataNet revenues
    
    
    249,841
    
    
    
    297,586
    
    
    
    327,313
    
    
    
    357,894
    
    
    
    481,917
    
    
    
    73,018Gross profit
    
    
    187,596
    
    
    
    215,089
    
    
    
    230,317
    
    
    
    250,959
    
    
    
    345,027
    
    
    
    52,277Total operating expenses
    
    
    (203,608
    )
    
    
    (229,678
    )
    
    
    (271,999
    )
    
    
    (239,712
    )
    
    
    (297,956
    )
    
    
    (45,145
    )Income/(loss) from operations
    
    
    (16,012
    )
    
    
    (14,589
    )
    
    
    (41,682
    )
    
    
    11,247
    
    
    
    47,071
    
    
    
    7,132Income/(loss) from continuing
operations
    
    
    (444
    )
    
    
    (25,691
    )
    
    
    (76,593
    )
    
    
    19,903
    
    
    
    20,628
    
    
    
    3,126Net income/(loss)
    
    
    1,040
    
    
    
    (25,588
    )
    
    
    (76,593
    )
    
    
    19,903
    
    
    
    20,628
    
    
    
    3,126Income/(loss) per share from
continuing operations
    
    
    (0.01
    )
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.43
    
    
    
    0.07Total basic net income/(loss) per share
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.43
    
    
    
    0.07Total diluted net income/(loss) per share
    
    
    0.02
    
    
    
    (0.51
    )
    
    
    (1.54
    )
    
    
    0.40
    
    
    
    0.40
    
    
    
    0.06Income/(loss) per ADS from
continuing operations
    
    
    (0.02
    )
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    0.84
    
    
    
    0.86
    
    
    
    0.14Total basic net income/(loss) per ADS
    
    
    0.04
    
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    0.84
    
    
    
    0.86
    
    
    
    0.14Total diluted net income/(loss) per ADS
    
    
    0.04
    
    
    
    (1.02
    )
    
    
    (3.08
    )
    
    
    0.80
    
    
    
    0.80
    
    
    
    0.12
 eLong, Inc.As of December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected Consolidated Balance Sheet DataCash and cash equivalents
    
    
    1,199,323
    
    
    
    1,138,447
    
    
    
    321,541
    
    
    
    639,468
    
    
    
    381,426
    
    
    
    57,792Short-term
investments
    
    
    
    
    
    
    19,120
    
    
    
    635,810
    
    
    
    313,467
    
    
    
    580,005
    
    
    
    87,880Working capital(1)
    
    
    1,106,345
    
    
    
    1,079,590
    
    
    
    898,693
    
    
    
    938,834
    
    
    
    944,903
    
    
    
    143,167Property and equipment, net
    
    
    37,809
    
    
    
    43,962
    
    
    
    52,484
    
    
    
    44,005
    
    
    
    41,896
    
    
    
    6,348Total assets
    
    
    1,334,908
    
    
    
    1,331,668
    
    
    
    1,137,964
    
    
    
    1,183,950
    
    
    
    1,269,197
    
    
    
    192,303Long-term obligations
    
    
    980
    
    
    
    
    
    
    
    477
    
    
    
    1,186
    
    
    
    499
    
    
    
    76Accumulated deficit
    
    
    (102,056
    )
    
    
    (127,644
    )
    
    
    (204,237
    )
    
    
    (184,334
    )
    
    
    (165,760
    )
    
    
    (25,115
    )Shareholders equity
    
    
    1,199,799
    
    
    
    1,184,611
    
    
    
    1,012,181
    
    
    
    1,043,500
    
    
    
    1,094,869
    
    
    
    165,889
 (1)
    
    Represents the amount of total consolidated current assets less total consolidated current liabilities.  - 6 -




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eLong, Inc.Year ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Selected
Consolidated Cash
Flow DataNet cash provided
by (used in)
operating
activities
    
    
    76,554
    
    
    
    42,349
    
    
    
    (14,076
    )
    
    
    69,014
    
    
    
    85,387
    
    
    
    12,937Net cash provided
by (used in)
investing
activities
    
    
    72,985
    
    
    
    (43,638
    )
    
    
    (641,501
    )
    
    
    248,306
    
    
    
    (324,676
    )
    
    
    (49,193
    )Net cash provided
by (used in)
financing
activities
    
    
    95,140
    
    
    
    7,355
    
    
    
    (98,331
    )
    
    
    948
    
    
    
    (5,446
    )
    
    
    (825
    )
 Exchange Rate Information
 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 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 the value of our ADSs and  our ability to pay
dividends.
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Average Exchange Rates of Renminbi per U.S. Dollar
 AverageYear ended December 31, 2006
    
    
    7.9579Year ended December 31, 2007
    
    
    7.5806Year ended December 31, 2008
    
    
    6.9193Year ended December 31, 2009
    
    
    6.8295Year ended December 31, 2010
    
    
    6.7603
  Recent Exchange Rates of Renminbi per U.S. Dollar
 High
    
    
    LowDecember 2010
    
    
    6.6745
    
    
    
    6.6000January 2011
    
    
    6.6364
    
    
    
    6.5809February 2011
    
    
    6.5965
    
    
    
    6.5520March 2011
    
    
    6.5743
    
    
    
    6.5483April 2011
    
    
    6.5477
    
    
    
    6.4900May 2011
    
    
    6.5073
    
    
    
    6.4786
 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 substantially all of our operations in China and are governed by a legal and
regulatory environment that differs significantly from that of the United States. Additional risks
referred to elsewhere in this annual report, and other risks which are not currently known to us or
that we currently deem immaterial may also have an adverse impact on our business operations and financial condition.
 Risks Related to Our Business
 We have sustained losses in the past and cannot assure you that we will be profitable in the
future.
  A slow-down of, or increased volatility in, economic growth in China may adversely affect our
growth and profitability.
  Declines or disruptions in the travel industry may reduce our revenues.
  
    
    outbreaks, or the fear of outbreaks, of H1N1 flu, severe acute respiratory
syndrome, avian flu or other diseases;
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
    
    travel-related accidents;
    
    unseasonable or extreme weather;
    
    natural or man-made disasters;
    
    increased prices or fees in the hotel, airline or other travel-related sectors;
    
    threats of war or threats or incidents of terrorism; and
    
    general economic downturns.
  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, Internet search engines and distribution partners.
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Our business may be harmed if we fail to strengthen our brand and provide high quality service to
our customers and business partners.
  Substantial uncertainties exist with respect to the interpretation and application of PRC laws and
regulations restricting foreign investment 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 and/or our affiliated Chinese entities discontinue any or all portions
of our Internet content provision, air ticketing or travel agency businesses.
  Our operations may be materially and adversely affected if we or any of our subsidiaries or
affiliated Chinese entities fails to obtain or maintain all relevant permits and approvals, or if
the PRC government imposes additional restrictions in, the air ticketing, travel agency or Internet
industries.
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We are controlled by Expedia and conflicts of interest may arise between Expedia and us.
   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 cash, cash equivalents, restricted cash and short-term investments effectively.
  We may not be able to successfully execute future acquisitions, alliances or affiliations or to
efficiently manage any acquired businesses.
  Our results may fluctuate due to seasonality in the travel industry in China.
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Our business depends on the technology infrastructure and service of third parties.
  Our business is subject to risks associated with protection of confidential data, online payments
and credit card fraud.
   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.
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We may become involved in costly and time-consuming litigation regarding our intellectual property
rights or our website contents.
   Our contractual arrangements with our consolidated affiliated Chinese entities may result in
adverse tax consequences to us.
  If our affiliated Chinese entities violate their contractual agreements with us, our business could
be harmed, and the outcome of any litigation to enforce our contractual rights would be uncertain.
  We may be unable to collect long-term loans to the shareholders of our consolidated affiliated
entities in China.
   - 13 -




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Risks Related to Doing Business in the Peoples Republic of China
 We would be adversely affected by the cancellation, modification or discontinuation of any
preferential tax treatments currently available to us.
        - 14 -




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Fluctuation in the value of the Renminbi may materially and adversely affect our financial results
and the value of our company and ADSs.
   Uncertainties and restrictions in the PRC legal system may have a material and adverse impact on
our business and financial condition.
  Inflation in China may have an adverse effect on our financial condition and results of operations.
  We may be required to withhold PRC income tax on any dividends we pay you (if any), and any gain
you realize on the transfer of ADSs or ordinary shares may also be subject to PRC withholding tax.
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Governmental control of currency conversion may affect the value of our ADSs and our ability to pay
dividends.
  PRC regulations may limit our ability to transfer our funds held overseas into China.
  Our subsidiaries and affiliated 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.
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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. Controls  and Procedures
 The market price for our ADSs is volatile.
  
    
    actual or anticipated fluctuations in our quarterly or annual financial or operating
results;
    
    changes in financial estimates, recommendations or evaluations by securities analysts;
    
    general market and index trends in the Nasdaq stock market;
    
    changes in the economic performance or market valuation of other travel, e-commerce
or Internet companies;
    
    changes in the economic performance or market valuation of other publicly-listed
companies with significant 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 by us, our major
shareholders or our senior management; and
    
    potential or actual litigation.
  Future sales by our existing shareholders of a substantial number of our ordinary shares or ADSs
could adversely affect the price of our ADSs.
 Item 7: Major Shareholders
and Related Party TransactionsMajor Shareholders.
 We may be a passive foreign investment company in any year, 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
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You may be subject to limitations on transfer of your ADSs or the exercise of your voting rights as
an ADS holder.
   We currently follow home country practice in lieu of complying with certain requirements of the
Nasdaq Listing Rules. This may afford less protection to holders of our ordinary shares and ADSs.
  You may not be able to participate in future securities or rights offerings, which may cause
dilution to your holdings.
  You may not receive distributions on ordinary shares (if any)
or any value for them if it is illegal or impractical to make them available to you.
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You may face difficulties in protecting your interests, and your ability to protect your rights
through courts in the U.S. may be limited, because we are incorporated under Cayman Islands law,
conduct substantially all of our operations in China and all of our senior executive officers
reside outside the United States.
     
 Item 4: Information on the Company.
 4A: History and Development of the Company
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Item 7: Major Shareholders and Related Party
TransactionsMajor Shareholders Related Party Transactions.
  Acquisitions and Dispositions
 www.sinohotel.com www.sunnychina.com www.huoche.com www.huoche.com.cn www.zhuna.cn Item 3: Key InformationRisk FactorsWe may not be able to successfully
execute future acquisitions, alliances or affiliations or to efficiently manage any acquired
businesses
 Capital Expenditures
  4B: Business Overview
   - 20 -




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Our Services
  Hotel reservations
   Air ticketing
    - 21 -




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Other
 Item 5: Operating and
Financial Review and ProspectsOperating ResultsPrincipal Factors Affecting Our Results of Operations
 Distribution
  Websites http://www.eLong.com http://www.eLong.net
 Call center
 Mobile Applications m.eLong.com
 Affiliates.
 Marketing
  Online marketing Item 3: Key InformationRisk FactorsWe are dependent on our ability to
establish and maintain favorable arrangements with our travel suppliers, Internet search engines
and distribution partners
 Co-marketing relationships
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eCoupon program.
 eLong membership program
 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
 Seasonality
 Item 5: Operating and Financial Review and ProspectsMajor Factors Affecting the Travel
IndustrySeasonality Item 3: Key InformationRisk
FactorsRisks Relating to Our BusinessOur results may
fluctuate due to seasonality in the travel industry in China 
 Governmental Regulation
 Regulatory Authorities
  
    
    the State Administration for Industry and Commerce (the SAIC);
    
    the Ministry of Commerce (the MOFCOM);
    
    the Ministry of Public Security (the MPS);
  - 23 -




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
    
    the Ministry of Industry and Information Technology (the MIIT);
    
    the Civil Aviation Administration of China (the CAAC);
    
    the China National Aviation Transportation Association (the CNATA);
    
    the China National Tourism Administration (the CNTA); and
    
    the Beijing Communications Administration (the BCA).
 Scope of Regulation
 4C:
Organizational Structure
  Internet and e-Commerce
 Measures for the Administration of Internet Information Services (2000)
 Tentative Measures for Administration on Network Commodities Trading and
Related Service Activities
 Tentative Administrative Rules for Internet Culture,
 Administrative Rules on the Filing of Commercial
Websites
   - 24 -




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Information Security and Censorship
  Provisions on Technological Measures for
Internet Security Protection
 Supervision and Disposal Measures for Contract-related Illegal Activities
 Consumer Data Protection & Privacy
   Measures for the Administration of Communication Network Security
Protection
 Air ticketing
 Rules Concerning the
Affirmation for the Qualification of Aviation Transportation Sales Agencies .
  - 25 -




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Circular on Change in the Management of Domestic Aviation Service Fare
 Travel Agency
 Regulation on Travel Agencies Administration of Travel Agencies Regulations Implementing Rules for the Regulation on Travel Agencies
  Measures for Dealing with Tourism Complaints
 Administrative Measures for Liability Insurance 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 the value of our ADSs and our ability to pay dividends 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
  - 26 -




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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).
  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
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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 cancellation, modification or discontinuation of
any preferential tax treatments currently available to us.
 Labor Law
 Employment Contract Law of the PRC
 Tort Law
 Tort Liability Law of the Peoples
Republic of China
 4C: Organizational Structure
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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 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.
 OVERVIEW
  Major Factors Affecting the Travel Industry
  Condition of the overall economy
 Seasonality
 Disruptions.
 
    
    outbreaks, or the fear of outbreaks, of H1N1 flu, severe acute
respiratory syndrome, avian flu or other diseases;
    
    travel-related accidents;
  - 29 -




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
    
    unseasonable or extreme weather;
    
    natural or man-made disasters;
    
    increased prices or fees in the hotel, airline or other travel-related sectors;
    
    threats of war or threats or incidents of terrorism; and
    
    general economic downturns.
  OPERATING RESULTS
 Principal Factors Affecting Our Results of Operations
 Revenues
  Year ended December 31,2008
    
    2009
    
    2010RMB
    
    
    %
    
    RMB
    
    
    %
    
    RMB
    
    
    US$
    
    
    %(in thousands, except for percentage data)RevenuesHotel reservation(1)
    
    
    253,458
    
    
    
    73
    %
    
    
    256,830
    
    
    
    68
    %
    
    
    346,449
    
    
    
    52,493
    
    
    
    68
    %Air ticketing(2)
    
    
    77,205
    
    
    
    22
    %
    
    
    96,036
    
    
    
    25
    %
    
    
    123,092
    
    
    
    18,650
    
    
    
    24
    %Other(3)
    
    
    17,763
    
    
    
    5
    %
    
    
    26,666
    
    
    
    7
    %
    
    
    42,478
    
    
    
    6,436
    
    
    
    8
    %Total revenues
    
    
    348,426
    
    
    
    100
    %
    
    
    379,532
    
    
    
    100
    %
    
    
    512,019
    
    
    
    77,579
    
    
    
    100
    %
 (1)
    
    Revenues from our hotel reservation services are determined by the number of room nights we book and the commissions we earn. Generally, 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.(2)
    
    Revenues derived from air ticketing represent the second largest component of total revenues. We conduct our air ticketing business through contractual arrangements with our
affiliated Chinese entities as well as local agents for the issuance of air tickets. Historically, we also had contractual arrangements with local agents for the delivery of air tickets and
the collection of air ticket payments, but ceased such services in the fourth quarter of 2010. Commissions from air ticketing services are recognized upon the delivery of the ticket to the
customer, net of estimated cancellations. In some instances, airlines provide discretionary commissions if we achieve performance targets. Such commissions are recognized on a cash basis
because we cannot reasonably estimate them.(3)
    
    Other revenue consists primarily of advertising revenue from Beijing Information and Beijing Xici and commission revenue from the sale of travel insurance sold with our air tickets in 2010. We recognize
the travel insurance revenue when the travel insurance is issued to the customer, net of cancellations.  - 30 -




---



##### Table of Contents



Cost of services
 Operating expenses
       - 31 -




---



##### Table of Contents



Income tax.
  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.
  - 32 -




---



##### Table of Contents



Impairment of goodwill and certain intangible assets.
 Provision for doubtful accounts.
 Deferred income tax
   - 33 -




---



##### Table of Contents



Business Combinations: Overall
 Provision for loyalty points.
 eCoupons.
 Share-based compensation. Compensation-Stock Compensation: Overall
 Business
combinations
   - 34 -




---



##### Table of Contents



Revenue recognition.
    Revenue Recognition: Overall Revenue Recognition: Principal
Agent Considerations
 Results of Operations
  Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues:Hotel reservation
    
    
    253,457,540
    
    
    
    256,830,079
    
    
    
    346,448,668
    
    
    
    52,492,253Air ticketing
    
    
    77,205,429
    
    
    
    96,035,495
    
    
    
    123,092,052
    
    
    
    18,650,310Other
    
    
    17,762,577
    
    
    
    26,666,458
    
    
    
    42,477,663
    
    
    
    6,436,010Total revenues
    
    
    348,425,546
    
    
    
    379,532,032
    
    
    
    512,018,583
    
    
    
    77,578,573Business tax and surcharges
    
    
    21,112,717
    
    
    
    21,638,510
    
    
    
    30,101,947
    
    
    
    4,560,901Net revenues
    
    
    327,312,829
    
    
    
    357,893,522
    
    
    
    481,916,636
    
    
    
    73,017,672Cost of services
    
    
    96,996,309
    
    
    
    106,934,784
    
    
    
    136,889,793
    
    
    
    20,740,878Gross profit
    
    
    230,316,520
    
    
    
    250,958,738
    
    
    
    345,026,843
    
    
    
    52,276,794Operating expenses:Service development
    
    
    52,584,041
    
    
    
    58,121,508
    
    
    
    80,045,838
    
    
    
    12,128,157Sales and marketing
    
    
    163,528,250
    
    
    
    133,195,446
    
    
    
    167,322,622
    
    
    
    25,351,912General and administrative
    
    
    53,652,427
    
    
    
    47,670,045
    
    
    
    49,944,996
    
    
    
    7,567,424Amortization of intangible assets
    
    
    848,906
    
    
    
    653,439
    
    
    
    642,453
    
    
    
    97,341Charges related to property and
equipment and intangible assets
    
    
    1,384,814
    
    
    
    71,635
    
    
    
    
    
    
    
    (Loss)/ income from operations
    
    
    (41,681,918
    )
    
    
    11,246,665
    
    
    
    47,070,934
    
    
    
    7,131,960Other income (expenses):Interest income
    
    
    29,020,353
    
    
    
    12,880,473
    
    
    
    6,791,885
    
    
    
    1,029,073Foreign exchange loss
    
    
    (60,937,889
    )
    
    
    (431,856
    )
    
    
    (25,933,051
    )
    
    
    (3,929,250
    )Other expenses, net
    
    
    
    
    
    
    (11,608
    )
    
    
    (409,195
    )
    
    
    (61,999
    )Total other (expenses)/income, net
    
    
    (31,917,536
    )
    
    
    12,437,009
    
    
    
    (19,550,361
    )
    
    
    (2,962,176
    )(Loss)/income before income tax expense
    
    
    (73,599,454
    )
    
    
    23,683,674
    
    
    
    27,520,573
    
    
    
    4,169,784Income tax expense
    
    
    2,993,678
    
    
    
    3,780,585
    
    
    
    6,892,165
    
    
    
    1,044,268Net (loss)/income
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    20,628,408
    
    
    
    3,125,516
  - 35 -




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##### Table of Contents



2010 Compared to 2009
 Revenues
 Year ended December 31,2009
    
    
    % of
    
    2010
    
    
    
    
    
    
    % of
    
    %RMB
    
    
    revenues
    
    RMB
    
    
    US$
    
    
    revenues
    
    growth(in thousands, except percentage data)RevenuesHotel reservation
    
    
    256,830
    
    
    
    68
    %
    
    
    346,449
    
    
    
    52,493
    
    
    
    68
    %
    
    
    35
    %Air ticketing
    
    
    96,036
    
    
    
    25
    %
    
    
    123,092
    
    
    
    18,650
    
    
    
    24
    %
    
    
    28
    %Other
    
    
    26,666
    
    
    
    7
    %
    
    
    42,478
    
    
    
    6,436
    
    
    
    8
    %
    
    
    59
    %Total revenues
    
    
    379,532
    
    
    
    100
    %
    
    
    512,019
    
    
    
    77,579
    
    
    
    100
    %
    
    
    35
    %
  Year ended December 31,%2009
    
    
    2010
    
    
    growthNumber of room nights booked (000s)
    
    
    4,316
    
    
    
    6,378
    
    
    
    48
    %Average commission per room night (RMB)
    
    
    60
    
    
    
    54
    
    
    
    (10
    %)Number of air tickets sold (000s)
    
    
    2,205
    
    
    
    2,441
    
    
    
    11
    %Average commission per air ticket (RMB)
    
    
    44
    
    
    
    50
    
    
    
    14
    %
  Hotel Reservations.
  - 36 -




---



##### Table of Contents



Air ticketing.
 Other revenues
 Business tax and surcharges
 Cost of services and gross profit
 Operating expenses
 Year ended December 31,2009
    
    2010% of net
    
    
    
    
    
    
    
    
    
    % of net
    
    %RMB
    
    
    revenues
    
    RMB
    
    
    US$
    
    
    revenues
    
    growth(in thousands, except for percentage data)Operating expensesService development
    
    
    58,122
    
    
    
    16
    %
    
    
    80,046
    
    
    
    12,128
    
    
    
    17
    %
    
    
    38
    %Sales and marketing
    
    
    133,195
    
    
    
    37
    %
    
    
    167,323
    
    
    
    25,353
    
    
    
    35
    %
    
    
    26
    %General and
administrative
    
    
    47,670
    
    
    
    14
    %
    
    
    49,945
    
    
    
    7,567
    
    
    
    10
    %
    
    
    5
    %Amortization of
intangible assets
    
    
    653
    
    
    
    
    
    
    
    642
    
    
    
    97
    
    
    
    
    
    
    
    (2
    %)Changes related to
property and equipment
and intangible assets
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    %)Total operating expenses
    
    
    239,712
    
    
    
    67
    %
    
    
    297,956
    
    
    
    45,145
    
    
    
    62
    %
    
    
    24
    %
  Service development.
  - 37 -




---



##### Table of Contents



Sales and marketing.
 General and administrative.
 Other income (expenses), net.
 Income tax expense.
 Net income
 2009 Compared to 2008
 Revenues
 Year ended December 31,2008
    
    2009% of
    
    
    
    
    
    % of
    
    %RMB
    
    
    revenues
    
    RMB
    
    
    revenues
    
    growth(in thousands, except percentage data)RevenuesHotel reservation
    
    
    253,458
    
    
    
    73
    %
    
    
    256,830
    
    
    
    68
    %
    
    
    1
    %Air ticketing
    
    
    77,205
    
    
    
    22
    %
    
    
    96,036
    
    
    
    25
    %
    
    
    24
    %Other
    
    
    17,763
    
    
    
    5
    %
    
    
    26,666
    
    
    
    7
    %
    
    
    50
    %Total revenues
    
    
    348,426
    
    
    
    100
    %
    
    
    379,532
    
    
    
    100
    %
    
    
    9
    %
  - 38 -




---



##### Table of Contents



Year ended December 31,%2008
    
    
    2009
    
    
    growthNumber of room nights booked (000s)
    
    
    3,945
    
    
    
    4,316
    
    
    
    9
    %Average commission per room night (RMB)
    
    
    64
    
    
    
    60
    
    
    
    (6
    %)Number of air tickets sold (000s)
    
    
    1,788
    
    
    
    2,205
    
    
    
    23
    %Average commission per air ticket (RMB)
    
    
    43
    
    
    
    44
    
    
    
    2
    %
  Hotel Reservations.
 Air ticketing.
 Other
revenues
 Business tax and surcharges
 Cost of services and gross profit
 Operating expenses
 Year ended December 31,2008
    
    2009% of net
    
    
    
    
    
    % of net
    
    %RMB
    
    
    revenues
    
    RMB
    
    
    revenues
    
    growth(in thousands, except for percentage data)Operating expensesService development
    
    
    52,584
    
    
    
    16
    %
    
    
    58,122
    
    
    
    16
    %
    
    
    11
    %Sales and marketing
    
    
    163,528
    
    
    
    50
    %
    
    
    133,195
    
    
    
    37
    %
    
    
    (19
    %)General and administrative
    
    
    53,653
    
    
    
    16
    %
    
    
    47,670
    
    
    
    14
    %
    
    
    (11
    %)Amortization of intangible
assets
    
    
    849
    
    
    
    
    
    
    
    653
    
    
    
    
    
    
    
    (23
    %)Changes related to property
and equipment and intangible
assets
    
    
    1,385
    
    
    
    1
    %
    
    
    72
    
    
    
    
    
    
    
    (95
    %)Total operating expenses
    
    
    271,999
    
    
    
    83
    %
    
    
    239,712
    
    
    
    67
    %
    
    
    (12
    %)
  Service development.
  - 39 -




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##### Table of Contents



Sales and marketing.
 General and administrative.
 Other income (expenses), net.
 Income tax expense.
 Net income
 LIQUIDITY AND CAPITAL RESOURCES
 Liquidity
   Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(in thousands)Net cash provided
by (used in)
operating
activities
    
    
    (14,076
    )
    
    
    69,014
    
    
    
    85,387
    
    
    
    12,937Net cash provided
by (used in)
investing
activities
    
    
    (641,501
    )
    
    
    248,306
    
    
    
    (324,676
    )
    
    
    (49,193
    )Net cash provided
by (used in)
financing
activities
    
    
    (98,331
    )
    
    
    948
    
    
    
    (5,446
    )
    
    
    (825
    )Effect of foreign
exchange rate
changes on cash
    
    
    (62,997
    )
    
    
    (341
    )
    
    
    (13,307
    )
    
    
    (2,016
    )Net increase
(decrease) in cash
and cash
equivalents
    
    
    (816,905
    )
    
    
    317,927
    
    
    
    (258,042
    )
    
    
    (39,097
    )Cash and cash
equivalents at
beginning of year
    
    
    1,138,446
    
    
    
    321,541
    
    
    
    639,468
    
    
    
    96,889Cash and cash
equivalents at end
of year
    
    
    321,541
    
    
    
    639,468
    
    
    
    381,426
    
    
    
    57,792Short-term
investments at end of year
    
    
    635,810
    
    
    
    313,467
    
    
    
    580,005
    
    
    
    87,880Total cash
and equivalents and short-term investments at end of year
    
    
    957,351
    
    
    
    952,935
    
    
    
    961,431
    
    
    
    145,672
  - 40 -




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##### Table of Contents



Operating activities
 Investing activities
 Financing activities
  Capital Resources
 Item 3: Key InformationRisk
Factors
 TREND INFORMATION
  OFF-BALANCE SHEET ARRANGEMENTS
   - 41 -




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##### Table of Contents



CONTRACTUAL OBLIGATIONS
  Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MorePayments
    
    
    Less than
    
    
    1-3
    
    
    3-5
    
    
    than(in RMB millions)
    
    due
    
    
    1 year
    
    
    Years
    
    
    Years
    
    
    5 yearsOperating Lease Obligations(1)
    
    
    47.3
    
    
    
    9.8
    
    
    
    29.6
    
    
    
    7.9
    
    
    
    
 (1)
    
    Includes future minimum lease payments under operating leases, including lease payments on our branch offices, with initial
or remaining lease terms in excess of one year as of December 31, 2010. For our headquarters in Beijing, the total leased
space under contract is approximately 10,000 square meters. The annual payment under the lease is RMB9.0 million (US$1.4
million), subject to an increase beginning in October 2012. Lease contract terms for our other offices vary from six months
to three years, and the total leased space under the agreements is 2,600 square meters. The annual payment under the leases
is RMB1.9 million (US$0.3 million). In April 2010, we extended the term of the expiry of the lease from 2012 to 2015. 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 Inflation in China may have an adverse effect on our financial condition and results of operations.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest rate risk
    - 42 -




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##### Table of Contents



2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010(-30%)
    
    
    (-15%)
    
    
    Actual
    
    
    (+15%)
    
    
    (+30%)RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Interest income
    
    
    4,754
    
    
    
    5,773
    
    
    
    6,792
    
    
    
    7,811
    
    
    
    8,830
 Foreign exchange risk
  2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010(-10%)
    
    
    (-5%)
    
    
    Actual
    
    
    (+5%)
    
    
    (+10%)RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Foreign exchange gain/(loss)
    
    
    (86,444
    )
    
    
    (43,222
    )
    
    
    (25,933
    )
    
    
    43,222
    
    
    
    86,444
 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 Item 3: Key InformationRisk FactorsRisks Related to Our
BusinessWe may not use our cash, cash equivalents, restricted cash and short-term investments
effectively.
 Item 7: Major Shareholders and Related Party
TransactionsRelated Party TransactionsMay 2011 Share
Issuance and Sale to TCH Sapphire and Expedia Asia
Pacific.
 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Note (2) Summary of
Significant Accounting Policies(aa) Recently issued accounting pronouncements
  - 43 -




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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Major Shareholders
   Name
    
    Age
    
    PositionGuangfu Cui
    
    42
    
    Chief Executive Officer & DirectorMike Doyle
    
    41
    
    Chief Financial OfficerJason Xie
    
    34
    
    Chief Operating OfficerGary Ding
    
    37
    
    Vice President of OperationsSami Farhad
    
    38
    
    Vice President & General CounselJames Li
    
    37
    
    Vice President of SalesJack Wang
    
    37
    
    Vice President of Partner Service GroupWei Xue
    
    48
    
    Vice President of Air BusinessHongyong Zhan
    
    40
    
    Vice President & Chief Technology OfficerHenrik Kjellberg(1)(3)
    
    40
    
    Chairman of the Board of DirectorsFernando Gil de Bernabé(2)
    
    46
    
    DirectorThomas Gurnee(2)(3)
    
    60
    
    DirectorDara Khosrowshahi(1)
    
    42
    
    DirectorDan Lynn(1)
    
    30
    
    DirectorJens Parkitny(1) (3)
    
    45
    
    DirectorCyril Ranque(1)
    
    41
    
    DirectorMichael Scown(2)
    
    52
    
    DirectorJohan Svanstrom(1)
    
    39
    
    DirectorXiaoguang Wu(4)
    
    35
    
    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.(4)
    
    Nominated by TCH Sapphire, a subsidiary of Tencent.  - 44 -




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##### Table of Contents



Biographical Information
 Executive Officers
              - 45 -




---



##### Table of Contents



Directors
      - 46 -




---



##### Table of Contents



- 47 -




---



##### Table of Contents



Board Practices
 Item 7: Major
ShareholdersRelated Party TransactionsAgreements with
Justin Tang
  - 48 -




---



##### Table of Contents



Committees of the Board of Directors
 Audit Committee
 Item 16A: Audit
Committee Financial Expert, Item 16C: Principal Accountant Fees and Services.
 Compensation Committee
   Duties of Directors
  Limitation on Liability and Other Indemnification Matters
  Compensation of Senior Management and Directors
 Compensation Arrangements with Directors. Compensation Arrangements
with Senior Executive Officers.
  Compensation Arrangements with Senior Executive Officers.
 Share Ownership.
  - 49 -




---



##### Table of Contents



Employment Agreements with Executive Officers
 Employment agreement with Guangfu Cui Non-Competition Agreements with Our Senior Executive
Officers Equity Compensation Plan and Grants.
 Employment agreements with other senior executive officers.
  Non-competition agreements with our senior executive officers
 Share Ownership
 Item 7: Major Shareholders and Related Party Transactions Equity Compensation Plans and Grants
 Equity Compensation Plans and Grants
  2001 Plan
    - 50 -




---



##### Table of Contents



2004 Plan
  Stock Options Granted under the 2004 Plan
  Ordinarysharesunderlyingoutstandingoptions
    
    
    Exercise PriceOption Holder
    
    granted
    
    
    (US$)
    
    
    Date of grantThomas Gurnee
    
    
    30,000
    (1)
    
    
    6.75
    
    
    November 2, 2004Guangfu Cui
    
    
    91,112
    (2)
    
    
    4.50
    
    
    September 4, 2007400,000
    (3)
    
    
    8.82
    
    
    December 6, 2010Michael Scown
    
    
    30,000
    (1)
    
    
    3.935
    
    
    January 9, 2008Mike Doyle
    
    
    125,984
    (4)
    
    
    3.175
    
    
    May 29, 2009Other employees
    
    
    273,768
    
    
    From 4.95 to 10.46
    
    From July 23, 2004 
to April 12, 2011Total
    
    
    950,864
 (1)
    
    These options are fully vested and exercisable.(2)
    
    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 start date of the employees employment with us.(3)
    
    Vests over a four year period with 25% of the option vesting on each of the first, second, third and fourth
 anniversary of the grant date.(4)
    
    Vests over a three year period with 30% of the option vesting on each of the first and second anniversaries of the grant
date, and 40% of the option vesting on the third anniversary of the grant date. The option expires on the fifth
anniversary of the grant date. The option immediately vests upon the occurrence of a change of control as defined in the
2009 Plan.  - 51 -




---



##### Table of Contents



Performance Units Granted under the 2004 Plan
   Ordinary SharesunderlyingOutstandingPerformance Unit Holder
    
    Performance Units
    
    
    Date of grantThomas Gurnee
    
    
    4,612
    (1)
    
    December 1, 20085,650
    (1)
    
    December 1, 20095,224
    (1)
    
    December 1, 2010Michael Scown
    
    
    4,612
    (1)
    
    December 1, 20085,650
    (1)
    
    December 1, 20095,224
    (1)
    
    December 1, 2010Fernando Gil de Bernabé
    
    
    5,224
    (1)
    
    December 1, 2010Guangfu Cui
    
    
    44,444
    (2)
    
    September 4, 2007Mike Doyle
    
    
    78,949
    (2)
    
    May 29, 2009Sami Farhad
    
    
    44,500
    (2)
    
    May 22, 2008Jason Xie
    
    
    28,986
    (2)
    
    January 9, 2008Other employees
    
    
    327,113
    
    
    from October 2, 2006 
to May 9, 2011Total
    
    
    560,188
  - 52 -




---



##### Table of Contents



(1)
    
    The performance units vest 33% each year on the anniversary of December 1 of the grant date and are
settled in cash. A recurring annual grant is made to each  of our non-employee directors.(2)
    
    Twenty percent of the performance units granted  vest on the first, second, third,
fourth and fifth year anniversaries of the start date of the employees employment with us. 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; and
    
    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.
  Item 16G: Corporate Governance
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##### Table of Contents



Ordinary SharesUnderlying Outstanding
    
    
    Exercise PriceOption Holder
    
    Options Granted
    
    
    (US$)
    
    
    Date of grantGuangfu Cui
    
    
    83,779
    
    
    
    3.175
    
    
    May 29 2009110,000
    
    
    
    5.695
    
    
    March 9, 2010Mike Doyle
    
    
    80,000
    
    
    
    5.695
    
    
    March 9, 2010288,000
    
    
    
    6.815
    
    
    March 7, 2011Sami Farhad
    
    
    47,439
    
    
    
    3.175
    
    
    May 29 200955,000
    
    
    
    5.695
    
    
    March 9, 2010120,000
    
    
    
    6.815
    
    
    March 7, 2011Jason Xie
    
    
    53,543
    
    
    
    3.175
    
    
    May 29, 200953,000
    
    
    
    5.695
    
    
    March 9, 2010130,000
    
    
    
    6.815
    
    
    March 7, 2011Other employees
    
    
    2,963,449
    
    
    3.175 to 6.815
    
    May 29, 2009 to  March 7, 2011Total
    
    
    3,984,210
  Options Granted to Expedia Asia Pacific
   - 54 -




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##### Table of Contents



Employees
  As of December 31,2008
    
    
    2009
    
    
    2010General and administrative
    
    
    198
    
    
    
    176
    
    
    
    164Cost of services
    
    
    1,030
    
    
    
    905
    
    
    
    1,024Sales and marketing
    
    
    365
    
    
    
    248
    
    
    
    171Service development
    
    
    328
    
    
    
    436
    
    
    
    501Total
    
    
    1,921
    
    
    
    1,765
    
    
    
    1,860
  
 Item 7:
    
    Major Shareholders and Related Party Transactions
 Major Shareholders
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##### Table of Contents



High-vote Ordinary Shares Beneficially OwnedAmount
    
    
    %Principal ShareholdersExpedia Asia Pacific
    
    
    28,550,704
    
    
    
    85.0
    %TCH Sapphire
    
    
    5,038,500
    
    
    
    15.0
    %
 Ordinary Shares Beneficially Owned(1)Amount
    
    
    %Principal ShareholdersExpedia Asia Pacific
    
    
    8,952,839
    
    
    
    26.3
    %Oak Pacific Interactive(2)
    
    
    6,257,382
    
    
    
    18.4
    %TCH Sapphire Limited
    
    
    6,031,500
    
    
    
    17.8
    %Lawrence Auriana(3)*
    
    
    2,911,111
    
    
    
    8.6
    %
 (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)
    
    Based on a Schedule 13D (Amendment No. 4)
filed by Oak Pacific Interactive with the
SEC on June 24, 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)
    
    Based on a Schedule 13G/A filed on
February 14, 2011. Represents 2,911,111
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. *
    
    Lawrence Auriana and Expedia Asia Pacific
are parties to an Investors Agreement,
dated July 23, 2004, whereby he agreed
to vote his shares in the manner
provided in the Investors Agreement,
including for the election of directors
designated by Expedia. On May 18, 2010,
the Investors Agreement was amended to
terminate these voting provisions.  - 56 -




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##### Table of Contents



Related Party Transactions
  Share Issuance and Sale to TCH Sapphire and Expedia Asia Pacific.
  
    
    a three-year lock up period for the newly-issued shares acquired by TCH
Sapphire (the Tencent Shares), other than certain permitted transfers by TCH
Sapphire to its affiliates;
 
    
    a right of first offer in favor of Expedia Asia Pacific for transfers
by TCH Sapphire of the Tencent Shares;
 
    
    the redesignation of the TCH Sapphire high-vote ordinary shares as
ordinary shares prior to any transfer to a third party;
 
    
    restrictions on transfers of the Tencent Shares to certain parties
deemed to be competitors of eLong;
 
    
    preemptive rights in favor Expedia Asia Pacific and TCH Sapphire with
respect to future issuances of equity; and
 
    
    consent rights in favor of TCH Sapphire with respect to actions by eLong to
alter the rights of the ordinary or high-vote shares in a manner adverse to TCH
Sapphire or to dissolve, liquidate or windup the company.
   Transaction Agreement and Non-Compete Covenant.
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##### Table of Contents



Other Agreements with Expedia or Expedia Affiliates
 Expedia Affiliate Network Cooperation.
 Hotels.com Cooperation Agreements. http//www.hotels.cn
 PSG Cooperation Agreement
 TripAdvisor and Kuxun Cooperation Agreements http//www.daodao.com www.daodao.com www.kuxun.cn
 Indemnification Agreement with Expedia.
  - 58 -




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##### Table of Contents



Agreements with Justin Tang
 Transfer of Equity Interest in Beijing Information and Beijing Media.
 Escrow Agreement and Indemnification Agreement
 Arrangements with Our Affiliated Chinese Entities
 Item 4: Information on the Company4C: Organizational Structure.
 Beijing Information
 Technical services agreement.
 Equity
interests pledge agreements.
 Trademark license agreement.
 Domain name license agreement. www.eLong.com www.eLong.net
  - 59 -




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##### Table of Contents



Business operation agreement.
 Loan agreement.
 Agreement relating to exclusive purchase right of equity interest
 Guarantee agreements
 Supplemental letter agreement.
  - 60 -




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##### Table of Contents



Beijing Media
 Advertising technical consulting and services agreement.
 Equity interests pledge agreement.
 Cooperation agreement.
 Business operation agreement.
 Loan agreement.
  - 61 -




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##### Table of Contents



Agreements relating to exclusive purchase right of equity interest.
 Trademark license agreement.
 Beijing Air
 Technical consulting and services agreement.
 Equity interest pledge agreement.
 Business operation agreement.
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##### Table of Contents



Cooperation agreement.
 Trademark license agreement.
 Technology transfer agreement.
 eLong Information
 Loan
agreement
 Beijing Xici
 Assets
transfer agreement
 
 Item 8:
    
    Financial Information.
 Consolidated Financial Statements
 Item 18. Financial Statements
 Legal Proceedings
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##### Table of Contents



Dividend Policy
 Item 3: Key InformationRisk FactorsRisks Related
to Doing Business in the Peoples Republic of ChinaWe may be required to withhold PRC income tax on any
dividends we pay you (if any), and any gain you realize on the transfer of ADSs or ordinary
shares may also be subject to PRC withholding tax, Governmental control of currency conversion
may affect the value of our ADSs and our ability to pay dividends, Our subsidiaries and affiliated 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.
 Significant Changes since December 31, 2010
  Item 4:
Information on the Company4A: History and Development of the Company Item 7: Major
Shareholders and Related Party TransactionsMajor Shareholders Item 7: Major Shareholders and Related Party TransactionsRelated
Party TransactionsShare Issuance and Sale to TCH Sapphire and Expedia Asia Pacific
 
 Item 9:
    
    The Offer and Listing.
 General
  Trading on the Nasdaq Global Market
  High
    
    
    LowUS$
    
    
    US$Most Recent Full Financial YearsJanuary 1, 2006 through December 31, 2006
    
    
    16.39
    
    
    
    10.03January 1, 2007 through December 31, 2007
    
    
    14.10
    
    
    
    7.10January 1, 2008 through December 31, 2008
    
    
    10.25
    
    
    
    3.15January 1, 2009 through December 31, 2009
    
    
    16.97
    
    
    
    3.74January 1, 2010 through December 31, 2010
    
    
    21.99
    
    
    
    9.10Most Recent Fiscal QuartersJanuary 1, 2009 through March 31, 2009
    
    
    7.98
    
    
    
    3.74April 1, 2009 through June 30, 2009
    
    
    7.62
    
    
    
    5.50July 1, 2009 through September 30, 2009
    
    
    10.71
    
    
    
    6.26October 1, 2009 through December 31, 2009
    
    
    16.97
    
    
    
    9.33January 1, 2010 through March 31, 2010
    
    
    12.50
    
    
    
    9.10April 1, 2010 through June 30, 2010
    
    
    14.66
    
    
    
    10.00July 1, 2010 through September 30, 2010
    
    
    20.20
    
    
    
    11.81October 1, 2010 through December 31, 2010
    
    
    21.99
    
    
    
    16.26January 1, 2011 through March 31, 2011
    
    
    20.00
    
    
    
    12.50Most Recent Six MonthsDecember 2010
    
    
    20.15
    
    
    
    16.26January 2011
    
    
    20.00
    
    
    
    16.70February 2011
    
    
    17.50
    
    
    
    12.80March 2011
    
    
    14.49
    
    
    
    12.50April 2011
    
    
    14.95
    
    
    
    14.02May 2011
    
    
    29.60
    
    
    
    14.51
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##### Table of Contents



Item 10: Additional Information.
 Memorandum and Articles of Association
  Material Contracts
 Item 19: Exhibits
 Exchange Controls
 Item 4: Information on the Company4B:
Business OverviewGovernmental RegulationRegulation of Foreign Currency Exchange and
Dividend Distribution, 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 the value of our ADSs and our ability
to pay dividends Item 3: Key InformationRisk FactorsPRC
regulations may limit our ability to transfer our funds held overseas into China.
 Taxation
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Cayman Islands Taxation
  United States Federal Income Taxation
   
    
    certain financial institutions;
    
    dealers in securities or currencies;
    
    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; or
    
    U.S. persons whose functional currency is not the U.S. dollar;
  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 individual 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; or
    
    an estate or trust the income of which is subject to U.S. federal income taxation, regardless of its source.
  ADSs.
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##### Table of Contents



Passive foreign investment company rules.
   
    
    the gain and excess distribution will be allocated ratably over the
holding period for the ordinary shares or ADSs;
    
    the amount allocated to the taxable year in which the gain or excess
distribution is realized and to years before we became a PFIC will be
taxed as ordinary income;
    
    the amount allocated to each other taxable year, with certain
exceptions, will be taxed at the highest tax rate in effect for that
year; and
    
    the interest charge generally applicable to underpayments of tax will
be imposed in respect of the tax attributable to each such other
taxable year.
 
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##### Table of Contents



Distributions on ADSs or ordinary shares.
  Item 3: Key InformationRisk FactorsRisks Related to Doing Business in the
Peoples Republic of ChinaWe may be required to withhold PRC income tax on the dividends we pay
you (if any), and any gain you realize on the transfer of ADSs or ordinary shares may also be
subject to PRC withholding tax
 Sale, exchange or other disposition of ADSs or ordinary shares.
 Item 3: Key InformationRisk FactorsRisks Related to Doing Business in
the Peoples Republic of ChinaWe may be required to withhold PRC income tax on the dividends we
pay you (if any), and any gain you realize on the transfer of ADSs or ordinary shares may also be
subject to PRC withholding tax
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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.
 Information Reporting and Backup Withholding
   Documents on Display
  http://www.sec.gov
 http://www.elong.net/AboutUs/sec_filings.html
  Subsidiary Information
 Item 4: Information on the
Company4C: Organizational Structure
 
 Item 11:
    
    Quantitative and Qualitative Disclosure About Market Risk.
 Item 5: Operating and Financial Review and ProspectsQuantitative and
Qualitative Disclosures About Market Risk
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##### Table of Contents



Item 12: Description of Securities Other Than Equity Securities.
 D: American Depositary Shares
 Fees and Charges Our ADS Holders May Have to Pay
  Fee
    
    Service$5.00 per 100 ADSs (or portion thereof)
    
    Issuance of ADSs, including issuances
resulting from a distribution of shares or
rights or other property Cancellation of ADSs for the purpose of
withdrawal, including if the Deposit Agreement
terminates$0.02 per ADS (or portion thereof)
    
    Any cash distribution to registered ADS holders$1.50 per ADR (or portion thereof)
    
    Permitted transfers of ADRs pursuant to the
Deposit AgreementA fee equivalent to the fee that would be payable if securities
distributed to the holder had been shares and the shares had been
deposited for issuance of ADSs.
    
    Distribution of securities distributed to
holders of deposited securities which are
distributed by the depositary to registered ADS
holders$0.02 per ADS (or portion thereof) per calendar year
    
    Depositary servicesFee
    
    ServiceRegistration or transfer fees
    
    Transfer and registration of shares on our share register to or from the name
of the depositary or its agent when the holder deposits or withdraws sharesExpenses of the depositary
    
    Cable, telex and facsimile transmissions (when expressly provided in the
deposit agreement)Converting foreign currency to U.S. dollarsTaxes and other governmental charges
the depositary or the custodian may
have to pay on any ADS or share
underlying an ADS, e.g., stock
transfer taxes, stamp duty or
withholding taxes
    
    As necessaryAny charges incurred by the depositary 
or its agents for servicing the 
deposited securities
    
    As necessary
 Payments Made by the Depositary to Us
  
 PART II
 
 Item 13:
    
    Defaults, Dividend Arrearages and Delinquencies.
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##### Table of Contents



Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds.
 Use of Proceeds
  Item 4: Information on
the Company4A: History and Development of the Company
 
 Item 15: Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
  Managements Report on Internal Control over Financial Reporting.
   Changes in Internal Control over Financial Reporting.
  Limitations on Controls.
  Report of Independent Registered Public Accounting Firm
 
    - 71 -




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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.
  2009
    
    
    2010RMB
    
    
    RMB(in 000)
    
    
    (in 000)Audit
Fees(1) (KPMG)
    
    
    369
    
    
    
    169Audit
Fees(1) (Ernst & Young Hua Ming)
    
    
    5,622
    
    
    
    6,928Total
    
    
    5,991
    
    
    
    7,097
 (1)
    
    Audit Fees are the aggregate fees
billed by Ernst & Young Hua Ming and
KPMG for the audit of our consolidated
annual financial statements and
procedures related to our quarterly
financial statements.  - 72 -




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##### Table of Contents



Item 16D: Exemptions from the Listing Standards for Audit Committees.
  
 Item 16E:
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
   Number of Ordinary
    
    
    Purchase Price
    
    
    Average Price PaidMonth
    
    Shares Purchased
    
    
    (US$)
    
    
    Per Ordinary ShareMay 2010
    
    
    3,420,000
    (1)
    
    
    23,940,000
    
    
    
    7.00June 2010
    
    
    118,582
    (2)
    
    
    777,791
    
    
    
    6.56September 2010
    
    
    900
    (3)
    
    
    4,725
    
    
    
    5.25March 2011
    
    
    12,857
    (3)
    
    
    67,499
    
    
    
    5.25May 2011
    
    
    5,400,500
    (4)
    
    
    41,169,361
    
    
    
    7.62Total
    
    
    8,952,839
    
    
    
    65,959,376
    
    
    
    7.37
 (1)
    
    Expedia Asia Pacific stated, in a Schedule 13D filed with the SEC on May
28, 2010, that Expedia Asia Pacific, on May 18, 2010 purchased 2,400,000 ordinary shares from
Purple Mountain Holding, Ltd. and Justin Tang (including 1,372,570 ordinary shares and
1,027,430 ordinary shares represented by 513,715 ADSs), and on May 28, 2010 purchased
1,000,000 ordinary shares represented by 500,000 ADSs from Lawrence Auriana, as well as 20,000
ordinary shares represented by 10,000 ADSs from Ira S. Nordlicht and Helen S. Scott.(2)
    
    Open-market purchases.(3)
    
    Exercise of mirror options. For additional information, see Item 6.
Directors, Senior Management and EmployeesOptions Granted to Expedia Asia Pacific.(4)
    
    Expedia Asia Pacific purchased 5,400,500 newly-issued ordinary shares on
May 16, 2011. For additional information, see Item 4. Information on the Company4A:
History and Development of the Company. 
 Item 16F:
    
    Changes in Registrants Certifying Accountant
   - 73 -




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Item 16G: Corporate Governance.
  
 PART III
 
 Item 17: Financial Statements.
  
 Item 18:
    
    Financial Statements.
   - 74 -




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Item 19:
    
    Exhibits.
 1.1
    
    
    Third Amended and Restated
Memorandum of Association of
eLong, Inc. (incorporated by
reference to Exhibit 3.1 from
periodic report on Form 6-K
furnished to the SEC on December
30, 2010).1.2
    
    
    Third Amended and Restated
Articles of Association of eLong,
Inc. (incorporated by reference
to Exhibit 3.2 from periodic
report on Form 6-K furnished to
the SEC on December 30, 20102.1
    
    
    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).3.2
    
    
    Amendment to Investors Agreement,
dated May 18, 2010, by and among
eLong, Inc. and Expedia Asia
Pacific-Alpha Limited.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 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).4.4
    
    
    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).4.5
    
    
    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).4.6
    
    
    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).
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4.7
    
    
    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).4.8
    
    
    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).4.9
    
    
    Amended and Restated Equity Interests Pledge Agreement among eLongNet Information Technology (Beijing)
Co., Ltd., Beijing eLong 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).4.10
    
    
    Amended and Restated Business Operation Agreement among eLongNet Information Technology (Beijing) Co.,
Ltd., Beijing eLong Air Services Co., Ltd., Beijing eLong Information Technology 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).4.11
    
    
    Amended and Restated Cooperative Agreement between Beijing Air Services Co., Ltd. and Beijing eLong
Information Technology 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).4.12
    
    
    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).4.13
    
    
    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).4.14
    
    
    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).4.15
    
    
    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).4.16
    
    
    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).4.17
    
    
    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).
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4.18
    
    
    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 (incorporated by reference to
Exhibit 4.27 to the companys Annual Report on Form 20-F filed with the SEC on June 18, 2009).4.19
    
    
    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 (incorporated by reference to
Exhibit 4.28 to the companys Annual Report on Form 20-F filed with the SEC on June 18, 2009).4.20
    
    
    eLong, Inc. 2009 Share and Annual Incentive Plan, as amended4.21
    
    
    Technology (Software Copyright) Transfer Agreement,
dated Jan. 1, 2010, by and
between Beijing Air Services Co., Ltd., and eLongNet
Information Technology (Beijing) Co., Ltd.4.22
    
    
    The Third Amended and Restated Equity Interests Pledge
Agreement dated April 21, 2008, between eLongNet Information
Technology (Beijing) Co., Ltd. and Jack Wang (incorporated
by reference to Exhibit 4.32 to the companys Annual Report
on Form 20-F filed with the SEC on June 18, 2009).4.23
    
    
    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 (incorporated
by reference to Exhibit 4.34 to the companys Annual Report
on Form 20-F filed with the SEC on June 18, 2009).4.24
    
    
    Letter Agreement, dated May 1, 2009, among eLong, Inc.,
Guangfu Cui, Justin Tang and Jack Wang (incorporated by
reference to Exhibit 4.36 to the companys Annual Report on
Form 20-F filed with the SEC on June 18, 2009).4.25
    
    
    Share and Debt transfer Agreement, dated June 11, 2010, among
eLong, Inc., Justin Tang, and Guangfu Cui.4.26
    
    
    Share and Debt transfer Agreement, dated June 11, 2010, among
eLong, Inc., Justin Tang, Guangfu Cui and Jack Wang.4.27
    
    
    The Fourth Amended and Restated Loan Agreement, dated June
11, 2010, among eLong, Inc., Guangfu Cui and Jack Wang.4.28
    
    
    The Fourth Amended and Restated Equity Interests Pledge
Agreement, dated June 11, 2010, between eLongNet Information
Technology (Beijing) Co., Ltd. and Guangfu Cui.4.29
    
    
    The Fourth Amended and Restated Exclusive Purchase Right
Agreement, dated June 11, 2010, among eLong, Inc., Beijing
eLong Information Technology Co., Ltd., eLongNet Information
Technology (Beijing) Co., Ltd., and Guangfu Cui.4.30
    
    
    The Fourth Amended and Restated Business Operation
Agreement, dated June 11, 2010, among Beijing eLong
Information Technology Co., Ltd., eLongNet Information
Technology (Beijing) Co., Ltd., Guangfu Cui, and Jack Wang.4.31
    
    
    The Fifth Amended and Restated Loan Agreement, dated June
11, 2010, between eLong, Inc., and Guangfu Cui.
  - 77 -




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##### Table of Contents



4.32
    
    
    The Fifth Amended and Restated Equity Interests Pledge Agreement,
dated June 11, 2010, between eLongNet Information Technology
(Beijing) Co., Ltd. and Guangfu Cui.4.33
    
    
    The Fifth Amended and Restated Exclusive Purchase Right Agreement,
dated June 11, 2010, among eLong, Inc., Beijing Asia Media
Interactive Advertising Co., Ltd., eLongNet Information Technology
(Beijing) Co., Ltd. and Guangfu Cui.4.34
    
    
    The Fifth Amended and Restated Business Operation Agreement, dated
June 11, 2010, among eLongNet Information Technology (Beijing) Co.,
Ltd., Beijing Asia Media Interactive Advertising Co., Ltd. and
Guangfu Cui.4.35
    
    
    Form of Loan Agreement between eLong, Inc. and eLongNet Information
Technology (Beijing) Co., Ltd.4.36
    
    
    Indemnification Agreement, dated May 18, 2010, by and among eLong, Inc.,
eLongNet Information Technology (Beijing) Co., Ltd., Expedia, Inc., and
Expedia Asia Pacific-Alpha Limited.4.37
    
    
    Indemnification Agreement, dated April 13, 2011, by and among Purple
Mountain Holding Ltd, Yue (Justin) Tang and eLong, Inc.4.38
    
    
    Securities Escrow Agreement, dated April 13, 2011, by and among Purple
Mountain Holding Ltd., Yue (Justin) Tang and eLong, Inc.4.39
    
    
    Share Purchase Agreement, dated May 16, 2011, between eLong, Inc. and TCH
Sapphire Limited (incorporated by reference from Exhibit 4.1 of periodic
report on Form 6-K furnished to the SEC on May 20, 2011).4.40
    
    
    Share Purchase Agreement, dated May 16, 2011, between eLong, Inc. and
Expedia Asia Pacific-Alpha Limited (incorporated by reference from
Exhibit 4.2 of periodic report on Form 6-K furnished to the SEC on May
20, 2011).4.41
    
    
    Investor Rights Agreement, dated May 16, 2011, among eLong, Inc., Expedia
Asia Pacific-Alpha Limited and TCH Sapphire Limited (incorporated by
reference from Exhibit 4.3 of periodic report on Form 6-K furnished to
the SEC on May 20, 2011).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.15.2
    
    
    Consent of TransAsia Lawyers.
  - 78 -




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##### Table of Contents



SIGNATURES
   eLong, Inc./s/ Guangfu CuiGuangfu CuiChief Executive Officer/s/ Mike DoyleMike DoyleChief Financial Officer  - 79 -




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
  F-1




---



##### Table of Contents



eLong, Inc.
Consolidated Balance Sheets
 December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$ASSETSCurrent assets:Cash and cash equivalents
    
    
    639,468,119
    
    
    
    381,425,946
    
    
    
    57,791,810Restricted cash
    
    
    60,000,000
    
    
    
    60,600,000
    
    
    
    9,181,818Short-term investments
    
    
    313,466,666
    
    
    
    580,005,239
    
    
    
    87,879,582Accounts receivable, net
    
    
    45,353,114
    
    
    
    58,891,202
    
    
    
    8,922,909Amounts due from related parties
    
    
    321,247
    
    
    
    1,240,005
    
    
    
    187,880Prepaid expenses
    
    
    7,870,540
    
    
    
    11,429,403
    
    
    
    1,731,728Other current assets
    
    
    10,960,875
    
    
    
    24,209,316
    
    
    
    3,668,078Total current assets
    
    
    1,077,440,561
    
    
    
    1,117,801,111
    
    
    
    169,363,805Property and equipment, net
    
    
    44,005,090
    
    
    
    41,896,394
    
    
    
    6,347,938Investment in equity affiliate
    
    
    
    
    
    
    12,680,000
    
    
    
    1,921,212Goodwill
    
    
    31,950,019
    
    
    
    61,060,783
    
    
    
    9,251,634Intangible assets, net
    
    
    749,920
    
    
    
    5,855,467
    
    
    
    887,192Other non-current assets
    
    
    29,804,318
    
    
    
    29,903,505
    
    
    
    4,530,834Total assets
    
    
    1,183,949,908
    
    
    
    1,269,197,260
    
    
    
    192,302,615LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    41,905,401
    
    
    
    54,363,783
    
    
    
    8,236,937Income taxes payable
    
    
    2,908,320
    
    
    
    5,002,058
    
    
    
    757,888Amounts due to related parties
    
    
    1,098,586
    
    
    
    1,872,126
    
    
    
    283,655Deferred revenue
    
    
    4,046,684
    
    
    
    14,478,113
    
    
    
    2,193,653Accrued expenses and other current liabilities
    
    
    88,647,084
    
    
    
    97,182,441
    
    
    
    14,724,613Total current liabilities
    
    
    138,606,075
    
    
    
    172,898,521
    
    
    
    26,196,746Other liabilities
    
    
    1,843,536
    
    
    
    1,430,055
    
    
    
    216,675Total liabilities
    
    
    140,449,611
    
    
    
    174,328,576
    
    
    
    26,413,421Commitments and contingencies (note 10)Shareholders 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, 2009 and 2010: 23,085,589 and
24,739,131; outstanding shares as at December
31, 2009 and 2010: 18,817,507 and 20,735,401
    
    
    1,879,312
    
    
    
    1,991,115
    
    
    
    301,684High vote ordinary shares: US$0.01 par value;
authorized shares: 50,000,000; issued and
outstanding shares as at December 31, 2009 and
2010: 28,550,704
    
    
    2,362,999
    
    
    
    2,362,999
    
    
    
    358,030Treasury stock, at cost (4,000,000 and
3,719,928 shares of common stock as at December
31, 2009 and 2010, respectively)
    
    
    (103,392,701
    )
    
    
    (96,152,839
    )
    
    
    (14,568,612
    )Additional paid-in capital
    
    
    1,326,984,833
    
    
    
    1,352,427,354
    
    
    
    204,913,235Accumulated deficit
    
    
    (184,334,146
    )
    
    
    (165,759,945
    )
    
    
    (25,115,143
    )Total shareholders equity
    
    
    1,043,500,297
    
    
    
    1,094,868,684
    
    
    
    165,889,194Total liabilities and shareholders equity
    
    
    1,183,949,908
    
    
    
    1,269,197,260
    
    
    
    192,302,615
   F-2




---



##### Table of Contents



eLong, Inc.
Consolidated Statements of Operations
 Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Revenues:Hotel reservation
    
    
    253,457,540
    
    
    
    256,830,079
    
    
    
    346,448,868
    
    
    
    52,492,253Air ticketing
    
    
    77,205,429
    
    
    
    96,035,495
    
    
    
    123,092,052
    
    
    
    18,650,310Other
    
    
    17,762,577
    
    
    
    26,666,458
    
    
    
    42,477,663
    
    
    
    6,436,010Total revenues
    
    
    348,425,546
    
    
    
    379,532,032
    
    
    
    512,018,583
    
    
    
    77,578,573Business tax and surcharges
    
    
    21,112,717
    
    
    
    21,638,510
    
    
    
    30,101,947
    
    
    
    4,560,901Net revenues
    
    
    327,312,829
    
    
    
    357,893,522
    
    
    
    481,916,636
    
    
    
    73,017,672Cost of services
    
    
    96,996,309
    
    
    
    106,934,784
    
    
    
    136,889,793
    
    
    
    20,740,878Gross profit
    
    
    230,316,520
    
    
    
    250,958,738
    
    
    
    345,026,843
    
    
    
    52,276,794Operating expenses:Service development
    
    
    52,584,041
    
    
    
    58,121,508
    
    
    
    80,045,838
    
    
    
    12,128,157Sales and marketing
    
    
    163,528,250
    
    
    
    133,195,446
    
    
    
    167,322,622
    
    
    
    25,351,912General and administrative
    
    
    53,652,427
    
    
    
    47,670,045
    
    
    
    49,944,996
    
    
    
    7,567,424Amortization of intangible assets
    
    
    848,906
    
    
    
    653,439
    
    
    
    642,453
    
    
    
    97,341Charges related to property and equipment and intangible assets
    
    
    1,384,814
    
    
    
    71,635
    
    
    
    
    
    
    
    (Loss)/income from operations
    
    
    (41,681,918
    )
    
    
    11,246,665
    
    
    
    47,070,934
    
    
    
    7,131,960Other income (expenses):Interest income
    
    
    29,020,353
    
    
    
    12,880,473
    
    
    
    6,791,885
    
    
    
    1,029,073Foreign exchange loss
    
    
    (60,937,889
    )
    
    
    (431,856
    )
    
    
    (25,933,051
    )
    
    
    (3,929,250
    )Other expenses, net
    
    
    
    
    
    
    (11,608
    )
    
    
    (409,195
    )
    
    
    (61,999
    )Total other income (expenses), net
    
    
    (31,917,536
    )
    
    
    12,437,009
    
    
    
    (19,550,361
    )
    
    
    (2,962,176
    )(Loss)/income before income tax expense
    
    
    (73,599,454
    )
    
    
    23,683,674
    
    
    
    27,520,573
    
    
    
    4,169,784Income tax expense
    
    
    2,993,678
    
    
    
    3,780,585
    
    
    
    6,892,165
    
    
    
    1,044,268Net (loss)/income
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    20,628,408
    
    
    
    3,125,516Basic net (loss)/income per share
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.43
    
    
    
    0.07Diluted net (loss)/income per share
    
    
    (1.54
    )
    
    
    0.40
    
    
    
    0.40
    
    
    
    0.06
   F-3




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Shareholders Equity
 Ordinary shares
    
    
    High vote ordinary shares
    
    
    Treasury stock
    
    
    
    
    
    
    
    
    
    
    TotalNumber of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Additional paid-
    
    
    
    
    
    
    shareholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    in capital
    
    
    Accumulated deficit
    
    
    equityRMB
    
    
    
    
    
    
    RMB
    
    
    
    
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBDecember 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,593,132
    )
    
    
    (76,593,132
    )Exercise of stock options and warrants
    
    
    50,732
    
    
    
    3,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    553,317
    
    
    
    
    
    
    
    556,943Exercise of performance units
    
    
    140,954
    
    
    
    9,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,832
    )
    
    
    
    
    
    
    Settlement of company 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
    )
    
    
    1,012,181,393Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,903,089
    
    
    
    19,903,089Exercise of stock options and warrants
    
    
    79,784
    
    
    
    5,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,201,032
    
    
    
    
    
    
    
    1,206,482Exercise of performance units
    
    
    224,204
    
    
    
    15,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,319
    )
    
    
    
    
    
    
    Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,209,333
    
    
    
    
    
    
    
    10,209,333December 31, 2009
    
    
    22,817,507
    
    
    
    1,879,312
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    (4,000,000
    )
    
    
    (103,392,701
    )
    
    
    1,326,984,833
    
    
    
    (184,334,146
    )
    
    
    1,043,500,297Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,628,408
    
    
    
    20,628,408Exercise of stock options and warrants
    
    
    1,717,882
    
    
    
    103,371
    
    
    
    
    
    
    
    
    
    
    
    203,582
    
    
    
    5,262,595
    
    
    
    8,394,251
    
    
    
    (349,621
    )
    
    
    13,410,596Exercise of performance units
    
    
    200,012
    
    
    
    8,432
    
    
    
    
    
    
    
    
    
    
    
    76,490
    
    
    
    1,977,267
    
    
    
    (269,089
    )
    
    
    (1,704,586
    )
    
    
    12,024Share-based compensation cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,317,359
    
    
    
    
    
    
    
    17,317,359December 31, 2010
    
    
    24,735,401
    
    
    
    1,991,115
    
    
    
    28,550,704
    
    
    
    2,362,999
    
    
    
    (3,719,928
    )
    
    
    (96,152,839
    )
    
    
    1,352,427,354
    
    
    
    (165,759,945
    )
    
    
    1,094,868,684December 31, 2010 - US$
    
    
    
    
    
    
    301,684
    
    
    
    
    
    
    
    358,030
    
    
    
    
    
    
    
    (14,568,612
    )
    
    
    204,913,235
    
    
    
    (25,115,143
    )
    
    
    165,889,194
   F-4




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##### Table of Contents



eLong, Inc.
Consolidated Statements of Cash Flows
 Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Cash flows from operating activities:Net (loss)/income
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    20,628,408
    
    
    
    3,125,516Adjustments to reconcile net (loss)/income to net cash provided
by/(used in) operating activities:Foreign exchange loss
    
    
    61,081,290
    
    
    
    709,527
    
    
    
    17,446,995
    
    
    
    2,643,484Charges related to property and equipment and intangible assets
    
    
    1,384,814
    
    
    
    71,635
    
    
    
    
    
    
    
    Allowance for doubtful accounts
    
    
    1,880,618
    
    
    
    49,556
    
    
    
    (200,390
    )
    
    
    (30,362
    )Loss on disposal of property and equipment
    
    
    608,337
    
    
    
    176,609
    
    
    
    149,186
    
    
    
    22,604Depreciation of property and equipment
    
    
    19,164,181
    
    
    
    20,110,213
    
    
    
    19,384,294
    
    
    
    2,937,014Amortization of intangible assets
    
    
    848,906
    
    
    
    653,465
    
    
    
    642,453
    
    
    
    97,342Share-based compensation expense
    
    
    7,123,939
    
    
    
    11,239,905
    
    
    
    18,543,568
    
    
    
    2,809,632Other expenses, net
    
    
    
    
    
    
    
    
    
    
    409,195
    
    
    
    61,999Deferred income tax expense (benefit)
    
    
    826,679
    
    
    
    26,216
    
    
    
    (7,076,682
    )
    
    
    (1,072,225
    )Changes in operating assets and liabilities, net of impact from
acquisitions:Accounts receivable, net
    
    
    (3,166,193
    )
    
    
    (2,884,690
    )
    
    
    (13,328,242
    )
    
    
    (2,019,431
    )Prepaid expenses and other current assets
    
    
    (9,440,406
    )
    
    
    5,444,664
    
    
    
    (9,748,448
    )
    
    
    (1,477,037
    )Other non-current assets
    
    
    (1,448,257
    )
    
    
    701,535
    
    
    
    182,592
    
    
    
    27,665Amounts due from related parties
    
    
    406,486
    
    
    
    196,291
    
    
    
    (918,758
    )
    
    
    (139,206
    )Accounts payable
    
    
    (18,633,432
    )
    
    
    7,987,137
    
    
    
    12,500,251
    
    
    
    1,893,977Deferred revenue
    
    
    
    
    
    
    4,046,684
    
    
    
    10,431,429
    
    
    
    1,580,520Accrued expenses and other current liabilities
    
    
    (1,800,781
    )
    
    
    7,023,459
    
    
    
    15,567,525
    
    
    
    2,358,717Amounts due to related parties
    
    
    3,203,577
    
    
    
    (6,463,600
    )
    
    
    773,540
    
    
    
    117,203Other long-term liabilities
    
    
    477,006
    
    
    
    22,340
    
    
    
    
    
    
    
    Net cash provided by/(used in) operating activities
    
    
    (14,076,368
    )
    
    
    69,014,035
    
    
    
    85,386,916
    
    
    
    12,937,412Cash flows from investing activities:Purchase of property and equipment
    
    
    (32,860,203
    )
    
    
    (11,989,450
    )
    
    
    (17,592,765
    )
    
    
    (2,665,570
    )Payment for investment in equity affiliate
    
    
    
    
    
    
    
    
    
    
    (7,180,000
    )
    
    
    (1,087,879
    )Acquisitions, net of cash acquired
    
    
    
    
    
    
    (1,000,000
    )
    
    
    (28,541,230
    )
    
    
    (4,324,429
    )Proceeds from disposal of property and equipment
    
    
    119,213
    
    
    
    175,896
    
    
    
    28,332
    
    
    
    4,293Proceeds from disposal of business, net of direct expense
    
    
    10,830,373
    *
    
    
    
    
    
    
    
    
    
    
    Proceeds from disposal of investment
    
    
    323,639
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from short-term investments
    
    
    39,120,000
    
    
    
    635,557,578
    
    
    
    593,943,986
    
    
    
    89,991,513Increase in restricted cash
    
    
    
    
    
    
    (60,000,000
    )
    
    
    (600,000
    )
    
    
    (90,909
    )Purchase of short-term investments
    
    
    (655,016,833
    )
    
    
    (313,604,389
    )
    
    
    (864,734,239
    )
    
    
    (131,020,340
    )Payments made on behalf of related parties
    
    
    (4,016,726
    )
    
    
    (834,104
    )
    
    
    
    
    
    
    Net cash provided by/(used in) investing activities
    
    
    (641,500,537
    )
    
    
    248,305,531
    
    
    
    (324,675,916
    )
    
    
    (49,193,321
    )Cash flows from financing activities:Repurchase of ordinary shares
    
    
    (103,392,701
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options and stock warrants
    
    
    657,736
    
    
    
    1,206,482
    
    
    
    13,410,596
    
    
    
    2,031,908Proceeds received on behalf of related parties
    
    
    4,403,978
    
    
    
    276,901
    
    
    
    
    
    
    
    Settlement of the payable to former shareholders
    
    
    
    
    
    
    (535,767
    )
    
    
    (18,856,519
    )
    
    
    (2,857,048
    )Net cash provided by/(used in) financing activities
    
    
    (98,330,987
    )
    
    
    947,616
    
    
    
    (5,445,923
    )
    
    
    (825,140
    )Effect of foreign exchange rate changes on cash
    
    
    (62,997,444
    )
    
    
    (340,232
    )
    
    
    (13,307,250
    )
    
    
    (2,016,250
    )Net increase (decrease) in cash and cash equivalents
    
    
    (816,905,336
    )
    
    
    317,926,950
    
    
    
    (258,042,173
    )
    
    
    (39,097,299
    )Cash and cash equivalents at beginning of year
    
    
    1,138,446,505
    
    
    
    321,541,169
    
    
    
    639,468,119
    
    
    
    96,889,109Cash and cash equivalents at end of year
    
    
    321,541,169
    
    
    
    639,468,119
    
    
    
    381,425,946
    
    
    
    57,791,810Supplemental disclosures of cash flow information:Cash paid for income taxes
    
    
    4,095,258
    
    
    
    2,067,808
    
    
    
    11,875,109
    
    
    
    1,799,259Noncash accrual for purchase of equipment and software
    
    
    343,604
    
    
    
    644,263
    
    
    
    574,244
    
    
    
    87,007Contingent consideration for acquisition
    
    
    
    
    
    
    1,421,608
    
    
    
    3,809,579
    
    
    
    577,209
 *
    
    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-5




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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-6




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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
  Air ticketing services
   F-7




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Other services
  i) Other travel services
   ii) Non-travel services
    Deferred revenue
 Revenue
Recognition: Customer Payments and Incentives
 (g) Income taxes
  Income Taxes, Overall
  F-8




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (h) Share-based compensation
 CompensationStock Compensation Overall,
      F-9




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  (i) Loyalty points provision
  (j) Cash and cash equivalents
  (k) Restricted cash
  (l) Short-term investments
   F-10




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (m) Accounts receivable
  (n) Property and equipment
 Intangibles-Goodwill and Other: Internal-Use Software Intangibles-Goodwill
and Other: Website Development Costs
 Capitalized software development cost
    
    3 yearsComputer equipment and purchased system software
    
    3-5 yearsFurniture, fixtures and office equipment
    
    5 years
   (o) Investment in equity affiliate
 InvestmentsEquity Method and
Joint Ventures
   F-11




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (p) Business combinations
 Business Combinations
  (q) Goodwill and other intangible assets
 Intangibles-Goodwill and Other:
Goodwill
     F-12




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (r) Impairment of long-lived assets
 Property, Plant and Equipment Overall.
 (s) Employee benefit plans
  (t) Statutory reserves
  (u) Net (loss)/income per share
   F-13




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (v) Advertising expense
  (w) Segment reporting
 Segment Reporting: Overall
  (x) Operating leases
  (y) Financial instruments
  (z) Treasury stock
   F-14




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Equity, Treasury Stock
 (aa) Recently issued accounting pronouncements
 Improvements to Financial Reporting by Enterprises
Involved With Variable Interest Entities
 Revenue Recognition:
Multiple-Deliverable Revenue Arrangementsa Consensus of the FASB Emerging Issues Task Force
 IntangiblesGoodwill and Other: When
to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative
Carrying Amounts
 Business Combinations: Disclosure of
Supplementary Pro Forma Information for Business Combinations
  F-15




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (3) ACQUISITIONS
  December 31,2009
    
    
    2010Intangible assets with indefinite lives
    
    
    
    
    
    
    3,600,000Intangible assets with definite lives
    
    
    460,000
    
    
    
    2,148,000Goodwill
    
    
    1,950,000
    
    
    
    29,110,764Total
    
    
    2,410,000
    
    
    
    34,858,764
  (4) ACCOUNTS RECEIVABLE
  December 31,2009
    
    
    2010Accounts receivable
    
    
    45,701,976
    
    
    
    59,195,998Allowance for doubtful accounts
    
    
    (348,862
    )
    
    
    (304,796
    )Accounts receivable, net
    
    
    45,353,114
    
    
    
    58,891,202
  Year ended December 31,2008
    
    
    2009
    
    
    2010Balance at the beginning of year
    
    
    1,795,120
    
    
    
    3,516,047
    
    
    
    348,862Additions/(reversals) charged to bad debt expense
    
    
    1,833,407
    
    
    
    (2,604
    )
    
    
    (209,845
    )Reversals/(write-offs) charged against the
allowance
    
    
    (112,480
    )
    
    
    (3,164,581
    )
    
    
    165,779Balance at the end of year
    
    
    3,516,047
    
    
    
    348,862
    
    
    
    304,796
   F-16




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (5) PROPERTY AND EQUIPMENT, NET
  December 31,2009
    
    
    2010Computer equipment
    
    
    43,010,651
    
    
    
    47,040,136Furniture and office equipment
    
    
    7,033,391
    
    
    
    6,915,877Leasehold improvements
    
    
    6,958,391
    
    
    
    7,411,073Purchased software
    
    
    25,773,632
    
    
    
    26,146,286Capitalized software development costs
    
    
    26,088,517
    
    
    
    35,047,083108,864,582
    
    
    
    122,560,455Less: accumulated depreciation and amortization
    
    
    (66,605,037
    )
    
    
    (82,569,818
    )Software development projects in progress
    
    
    1,745,545
    
    
    
    1,905,757Property and equipment, net
    
    
    44,005,090
    
    
    
    41,896,394
   (6) INVESTMENT IN EQUITY AFFILIATE
   December 31,2010Investment cost at the beginning of the year
    
    
    Addition due to investment in Affiliate Company
    
    
    12,680,000Investment cost at the end of the year
    
    
    12,680,000
  F-17




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
    December 31,2010Fair value of net assets acquired
    
    
    20,868Identified intangible assets
    
    
    834,000Deferred tax liabilities arising from the acquisition
    
    
    (208,500
    )Goodwill
    
    
    12,033,632Total purchase price
    
    
    12,680,000
  December 31,2010
    
    
    Useful livesTrade name
    
    
    814,000
    
    
    5 yearsCustomer list
    
    
    20,000
    
    
    5 yearsTotal identified intangible assets
    
    
    834,000
   F-18




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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 31,2009
    
    
    2010Goodwill at the beginning of the year
    
    
    30,000,019
    
    
    
    31,950,019Addition due to acquisitions
    
    
    1,950,000
    
    
    
    29,110,764Goodwill at the end of the year
    
    
    31,950,019
    
    
    
    61,060,783
   December 31,2009
    
    
    2010Intangible assets with indefinite lives
    
    
    
    
    
    
    3,600,000Intangible assets with definite lives, net
    
    
    749,920
    
    
    
    2,255,467Total intangible assets, net
    
    
    749,920
    
    
    
    5,855,467
    December 31,2009
    
    
    2010Customer lists
    
    
    5,391,240
    
    
    
    6,291,240Trade names
    
    
    120,000
    
    
    
    120,000Copyrights
    
    
    
    
    
    
    192,000Internet domain names
    
    
    
    
    
    
    1,056,000Less: accumulated amortization
    
    
    (4,761,320
    )
    
    
    (5,403,773
    )Total intangible assets with definite lives, net
    
    
    749,920
    
    
    
    2,255,467Useful lives of intangible assets with definite lives, in years
    
    
    5
    
    
    
    5
  F-19




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Amortization2011
    
    
    547,2002012
    
    
    547,2002013
    
    
    499,2002014
    
    
    458,6672015
    
    
    203,200Total
    
    
    2,255,467
 (8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31,2009
    
    
    2010Accrual payroll and welfare
    
    
    15,662,838
    
    
    
    17,813,746Accrued loyalty points program expenses
    
    
    13,433,614
    
    
    
    14,931,156Accrued commission to third-party
distribution partners
    
    
    8,328,497
    
    
    
    7,570,864Tax-related payables
    
    
    3,881,604
    
    
    
    4,014,802Other accrued expenses
    
    
    10,371,025
    
    
    
    15,943,603Other payables
    
    
    5,768,689
    
    
    
    8,292,033Advances and deposits from customers
    
    
    5,084,655
    
    
    
    5,769,841Business and other taxes
    
    
    3,150,205
    
    
    
    5,935,275Payable to former shareholders
    
    
    22,231,241
    
    
    
    2,101,542Accrued purchase consideration
    
    
    
    
    
    
    11,000,000Contingent purchase consideration
    
    
    734,716
    
    
    
    3,809,579Total accrued expenses and
other current liabilities
    
    
    88,647,084
    
    
    
    97,182,441
   F-20




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (9) INCOME TAXES
  Cayman
  China
    F-21




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Income Taxes: Other Considerations or Special Areas
    For the year ended December 31,2008
    
    
    2009
    
    
    2010Cayman
    
    
    (47,821,384
    )
    
    
    (6,168,957
    )
    
    
    (39,345,451
    )China
    
    
    (25,778,070
    )
    
    
    29,852,631
    
    
    
    66,866,024Total
    
    
    (73,599,454
    )
    
    
    23,683,674
    
    
    
    27,520,573
  For the year ended December 31,2008
    
    
    2009
    
    
    2010Current
    
    
    2,166,999
    
    
    
    3,754,369
    
    
    
    13,968,847Deferred
    
    
    826,679
    
    
    
    26,216
    
    
    
    (7,076,682
    )Total
    
    
    2,993,678
    
    
    
    3,780,585
    
    
    
    6,892,165
  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 31,2008
    
    
    2009
    
    
    2010Deferred income tax expense (benefit) (exclusive
of the effect of the component below)
    
    
    (4,322,294
    )
    
    
    1,578,116
    
    
    
    (2,574,290
    )Increase/(decrease) in the valuation allowance
for deferred tax assets
    
    
    5,148,973
    
    
    
    (1,551,900
    )
    
    
    (4,502,392
    )Deferred income tax expense (benefit)
    
    
    826,679
    
    
    
    26,216
    
    
    
    (7,076,682
    )
  For the year ended December 31,2008
    
    
    2009
    
    
    2010Computed expected tax (benefit) expense at PRC statutory
rates
    
    
    (18,399,863
    )
    
    
    5,920,918
    
    
    
    6,880,143Increase (reduction) in income taxes resulting from:Change in the valuation allowance for deferred tax assets
allocated to income tax expense
    
    
    5,148,973
    
    
    
    (1,551,900
    )
    
    
    (4,502,392
    )Adjustment to deferred tax assets and liabilities for
changes in enacted tax rates
    
    
    459,128
    
    
    
    
    
    
    
    (104,396
    )Expired net operating loss carry forwards
    
    
    286,655
    
    
    
    603,615
    
    
    
    1,030,521Effect of differing tax rates in different jurisdictions
inside PRC
    
    
    3,009,342
    
    
    
    (2,902,609
    )
    
    
    (6,397,170
    )Effect of differing tax rates in jurisdictions outside PRC
    
    
    11,873,654
    
    
    
    1,542,239
    
    
    
    9,837,757Prior year tax return true up
    
    
    169,787
    
    
    
    83,490
    
    
    
    55,634Non deductible entertainment expenses
    
    
    115,547
    
    
    
    118,248
    
    
    
    113,613Non deductible allowance for doubtful accounts
    
    
    366,536
    
    
    
    38,286
    
    
    
    73,374Others
    
    
    (36,081
    )
    
    
    (71,702
    )
    
    
    (94,919
    )Income tax expense
    
    
    2,993,678
    
    
    
    3,780,585
    
    
    
    6,892,165
    F-23




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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 31,2009
    
    
    2010Deferred tax assets:Operating loss carryforwards
    
    
    1,203,255
    
    
    
    1,178,413Operating loss carryforwards, pre-acquisition
    
    
    561,457
    
    
    
    Property and equipment
    
    
    225,834
    
    
    
    201,322Accrued expenses and deferred revenue
    
    
    4,374,485
    
    
    
    7,754,382Total gross deferred tax assets
    
    
    6,365,031
    
    
    
    9,134,117Less: valuation allowance
    
    
    (5,272,690
    )
    
    
    (770,298
    )Net deferred tax assets
    
    
    1,092,341
    
    
    
    8,363,819Deferred tax liabilities:Intangible assets with definite lives
    
    
    78,615
    
    
    
    Software capitalization
    
    
    657,298
    
    
    
    930,708Total deferred tax liabilities
    
    
    735,913
    
    
    
    930,708Total net deferred tax assets
    
    
    356,428
    
    
    
    7,433,111Deferred tax assets, net:Current, included in prepaid expenses and other current assets
    
    
    686,069
    
    
    
    7,754,382Non-current, included in other non-current assets
    
    
    327,657
    
    
    
    609,437Deferred tax liabilities, included in other liabilities:
    
    
    657,298
    
    
    
    930,708
     F-24




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (10) COMMITMENTS
 Commitments
   Minimumleasepayments2011
    
    
    9,821,6502012
    
    
    10,172,8062013
    
    
    9,836,5262014
    
    
    9,539,5582015 and thereafter
    
    
    7,918,347Total
    
    
    47,288,887
  Guarantee
   F-25




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (11) SHARE-BASED COMPENSATION
 Stock options
       For the year ended December 31,2008
    
    
    2009
    
    
    2010Weighted average grant date fair value per share
    
    US$
    2.13
    
    
    US$
    1.08
    
    
    US$
    2.20Expected volatility
    
    
    55
    %
    
    
    43
    %
    
    
    49
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    Expected life
    
    5.88 years
    
    
    3.55 years
    
    
    2.92 yearsRisk-free interest rate (per annum)
    
    
    3.25
    %
    
    
    1.88
    %
    
    
    1.15
    %
   F-26




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  WeightedWeighted
    
    
    Average
    
    
    AggregatedAverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    Price
    
    
    Term
    
    
    thousands)Outstanding at December 31, 2009
    
    
    2,979,169
    
    
    US$
    0.58Exercised
    
    
    (1,401,210
    )
    
    US$
    0.52Outstanding at December 31, 2010
    
    
    1,577,959
    
    
    US$
    0.63
    
    
    
    0.60 years
    
    
    US$
    14,626Vested at December 31, 2010
    
    
    1,577,959
    
    
    US$
    0.63
    
    
    
    0.60 years
    
    
    US$
    14,626Exercisable at December 31, 2010
    
    
    1,577,959
    
    
    US$
    0.63
    
    
    
    0.60 years
    
    
    US$
    14,626
  WeightedWeighted
    
    
    Average
    
    
    AggregatedAverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    Price
    
    
    Term
    
    
    thousands)Outstanding at
December 31, 2009
    
    
    866,526
    
    
    US$
    4.77Granted
    
    
    478,934
    
    
    US$
    8.36Exercised
    
    
    (141,722
    )
    
    US$
    4.81Forfeited
    
    
    (53,536
    )
    
    US$
    3.77Outstanding at
December 31, 2010
    
    
    1,150,202
    
    
    US$
    6.27
    
    
    
    6.30 years
    
    
    US$
    4,181Vested and
expected to vest at
December 31, 2010
    
    
    1,025,618
    
    
    US$
    6.22
    
    
    
    6.17 years
    
    
    US$
    3,771Exercisable at
December 31, 2010
    
    
    501,636
    
    
    US$
    5.07
    
    
    
    4.19 years
    
    
    US$
    2,271
  F-27




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  WeightedWeighted
    
    
    Average
    
    
    AggregatedAverage
    
    
    Remaining
    
    
    IntrinsicNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Value (Inof Shares
    
    
    Price
    
    
    Term
    
    
    thousands)Outstanding at December 31, 2009
    
    
    1,248,819
    
    
        US$
    3.18Granted
    
    
    1,259,800
    
    
        US$
    5.70Exercised
    
    
    (174,050
    )
    
    US$
    3.18Forfeited
    
    
    (181,710
    )
    
    US$
    4.44Expired
    
    
    (2,362
    )
    
    US$
    3.18Outstanding at December 31, 2010
    
    
    2,150,497
    
    
        US$
    4.54
    
    
    
    3.83 years
        
    US$
    11,517Vested and expected to vest at December 31, 2010
    
    
    1,883,075
    
    
        US$
    4.55
    
    
    
    3.84 years
    
    
    US$
    10,065Exercisable at December 31, 2010
    
    
    193,510
    
    
        US$
    3.18
    
    
    
    3.41 years
    
    
    US$
    1,301
   Expedia Options
   F-28




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    
    
    
    
    WeightedWeighted
    
    
    Remaining
    
    
    
    
    
    
    AverageRange of Exercise
    
    
    
    
    
    Average Price
    
    
    Contractual Life
    
    
    
    
    
    
    ExercisePrices
    
    Shares
    
    
    Per Share
    
    
    (Years)
    
    
    Shares
    
    
    Price$0.10  $2.00
    
    
    1,577,959
    
    
    $
    0.63
    
    
    
    0.60
    
    
    
    1,577,959
    
    
    $
    0.63$2.01  $4.00
    
    
    1,137,681
    
    
    $
    3.20
    
    
    
    3.50
    
    
    
    261,305
    
    
    $
    3.26$4.01  $6.00
    
    
    1,698,788
    
    
    $
    5.51
    
    
    
    4.28
    
    
    
    386,241
    
    
    $
    5.14$6.01  $8.00
    
    
    54,078
    
    
    $
    6.68
    
    
    
    3.92
    
    
    
    47,600
    
    
    $
    6.75$8.01  $10.00
    
    
    407,762
    
    
    $
    8.82
    
    
    
    9.84
    
    
    
    
    
    
    
    $10.01  $12.00
    
    
    2,390
    
    
    $
    10.46
    
    
    
    4.89
    
    
    
    
    
    
    
    $0.10  $12.00
    
    
    4,878,658
    
    
    $
    3.68
    
    
    
    3.37
    
    
    
    2,273,105
    
    
    $
    1.83
 Performance Units
     F-29




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Weighted averageNumber of Shares
    
    
    grant date fair valueBalance at December 31, 2009
    
    
    1,099,794
    
    
    US$
    4.06Granted
    
    
    38,882
    
    
    US$
    7.20Settled
    
    
    (200,012
    )
    
    US$
    4.18Forfeited
    
    
    (88,118
    )
    
    US$
    4.75Balance at December 31, 2010
    
    
    850,546
    
    
    US$
    4.11
  Number of SharesBalance at December 31, 2009
    
    
    59,760Granted
    
    
    20,896Settled
    
    
    (7,944
    )Balance at December 31, 2010
    
    
    72,712
  For the year ended December 31,2008
    
    
    2009
    
    
    2010Cost of services
    
    
    324,824
    
    
    
    837,280
    
    
    
    1,192,063Service development
    
    
    2,320,096
    
    
    
    3,130,644
    
    
    
    6,533,851Sales and marketing
    
    
    972,150
    
    
    
    1,974,556
    
    
    
    3,394,531General and administrative
    
    
    3,506,869
    
    
    
    5,297,425
    
    
    
    7,423,123Total
    
    
    7,123,939
    
    
    
    11,239,905
    
    
    
    18,543,568
  F-30




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (12) ORDINARY SHARES
 Ordinary Shares
    High-Vote Ordinary Shares
   Treasury stock
   F-31




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (13) NET (LOSS)/INCOME PER SHARE
   For the year ended December 31,2008
    
    
    2009
    
    
    2010Net (loss)/income applicable to shareholders
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    20,628,408Denominator for basic net (loss)/income per share:Weighted average number of shares outstanding
    
    
    49,784,263
    
    
    
    47,181,821
    
    
    
    48,377,733Dilutive effect of stock options
    
    
    
    
    
    
    2,599,392
    
    
    
    2,753,096Dilutive effect of performance units
    
    
    
    
    
    
    185,791
    
    
    
    524,319Dilutive effect of warrants
    
    
    
    
    
    
    6,250
    
    
    
    108Denominator for diluted net (loss)/income per share:
    
    
    49,784,263
    
    
    
    49,973,254
    
    
    
    51,655,256Basic net (loss)/income per share
    
    
    (1.54
    )
    
    
    0.42
    
    
    
    0.43Diluted net (loss)/income per share
    
    
    (1.54
    )
    
    
    0.40
    
    
    
    0.40
 (14) RISKS AND CONCENTRATION
 Credit and concentration risks
     F-32




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Business and economic risks
    Business disruption and disaster risks
  Foreign exchange risk
    F-33




---



##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (15) SEGMENT INFORMATION
    Year ended December 31 2010Hotel
    
    
    Air
    
    
    Other
    
    
    Corporate
    
    
    TotalRevenues
    
    
    346,448,868
    
    
    
    123,092,052
    
    
    
    42,477,663
    
    
    
    
    
    
    
    512,018,583Business tax and surcharges
    
    
    (17,447,565
    )
    
    
    (6,770,063
    )
    
    
    (5,884,319
    )
    
    
    
    
    
    
    (30,101,947
    )Cost of services *
    
    
    (59,774,578
    )
    
    
    (65,686,554
    )
    
    
    (10,236,598
    )
    
    
    (1,192,063
    )
    
    
    (136,889,793
    )Service development
expenses *
    
    
    (24,104,919
    )
    
    
    (7,486,971
    )
    
    
    (12,053,536
    )
    
    
    (36,400,412
    )
    
    
    (80,045,838
    )Unallocated operating
expenses:Sales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167,322,622
    )
    
    
    (167,322,622
    )General and administrative
    
    
    (2,704,069
    )
    
    
    (5,816,013
    )
    
    
    
    
    
    
    (41,424,914
    )
    
    
    (49,944,996
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (642,453
    )
    
    
    (642,453
    )Charges related to
property and equipment and
intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Loss)/income from
operations
    
    
    242,417,737
    
    
    
    37,332,451
    
    
    
    14,303,210
    
    
    
    (246,982,464
    )
    
    
    47,070,934Total other expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,550,361
    )
    
    
    (19,550,361
    )(Loss)/income from
operations before income
taxes
    
    
    242,417,737
    
    
    
    37,332,451
    
    
    
    14,303,210
    
    
    
    (266,532,825
    )
    
    
    27,520,573
 *
    
    Depreciation expense of RMB7,392,731 and RMB3,353,680 is included in
Cost of services and Service development expenses for the Hotel and
Air segments. No depreciation expense is included in the Other and
Corporate segments.  F-34




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 Year ended December 31, 2009Hotel
    
    
    Air
    
    
    Other
    
    
    Corporate
    
    
    TotalRevenues
    
    
    256,830,079
    
    
    
    96,035,494
    
    
    
    26,666,459
    
    
    
    
    
    
    
    379,532,032Business tax and surcharges
    
    
    (12,841,504
    )
    
    
    (5,281,952
    )
    
    
    (3,515,054
    )
    
    
    
    
    
    
    (21,638,510
    )Cost of services *
    
    
    (42,813,077
    )
    
    
    (56,600,637
    )
    
    
    (6,683,790
    )
    
    
    (837,280
    )
    
    
    (106,934,784
    )Service development expenses *
    
    
    (15,175,454
    )
    
    
    (5,347,386
    )
    
    
    (8,910,568
    )
    
    
    (28,688,100
    )
    
    
    (58,121,508
    )Unallocated operating expenses:Sales and marketing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133,195,446
    )
    
    
    (133,195,446
    )General and administrative
    
    
    (3,770,297
    )
    
    
    (3,770,297
    )
    
    
    
    
    
    
    (40,129,451
    )
    
    
    (47,670,045
    )Amortization of intangibles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (653,439
    )
    
    
    (653,439
    )Charges related to property and
equipment and intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71,635
    )
    
    
    (71,635
    )(Loss)/income from operations
    
    
    182,229,747
    
    
    
    25,035,222
    
    
    
    7,557,047
    
    
    
    (203,575,351
    )
    
    
    11,246,665Total other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,437,008
    
    
    
    12,437,008(Loss)/income from
operations before income taxes
    
    
    182,229,747
    
    
    
    25,035,222
    
    
    
    7,557,047
    
    
    
    (191,138,343
    )
    
    
    23,683,673
 *
    
    Depreciation expense of RMB6,499,125 and RMB4,057,761 is included in Cost of services and Service development expenses for
the Hotel and Air segments. No depreciation expense is included in the Other and Corporate segments. Year ended December 31, 2008Hotel
    
    
    Air
    
    
    Other
    
    
    Corporate
    
    
    TotalRevenues
    
    
    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
    )Unallocated operating
expenses:Sales 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
    )(Loss)/income from
operations
    
    
    185,377,930
    
    
    
    10,936,292
    
    
    
    3,097,884
    
    
    
    (241,094,024
    )
    
    
    (41,681,918
    )Total other expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,917,536
    )
    
    
    (31,917,536
    )(Loss)/income from
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 is included in the Other
and Corporate segments.  F-35




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (16) RELATED PARTY TRANSACTIONS
  Commercial agreements with Expedia
       F-36




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
  Services provided by and to Expedia
    Subleases to Expedia
  Transactions with Match.com
  Amount due from Affiliate Company
   F-37




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 (17) SUBSEQUENT EVENTS
   (18) CONDENSED FINANCIAL INFORMATION OF THE COMPANY
    F-38




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
eLong, Inc.
Condensed Balance Sheets
 December 31,2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    US$ASSETSCurrent assets:Cash and cash equivalents
    
    
    475,898,155
    
    
    
    81,880,839
    
    
    
    12,406,188Short-term investment
    
    
    313,466,666
    
    
    
    440,005,239
    
    
    
    66,667,460Amounts due from subsidiaries
    
    
    109,172,520
    
    
    
    308,528,730
    
    
    
    46,746,777Amounts due from related parties
    
    
    
    
    
    
    278,639
    
    
    
    42,218Prepaid expenses and other current assets
    
    
    2,027,351
    
    
    
    1,617,212
    
    
    
    245,032Total current assets
    
    
    900,564,692
    
    
    
    832,310,659
    
    
    
    126,107,675Goodwill
    
    
    4,247,250
    
    
    
    4,247,250
    
    
    
    643,523Investment in subsidiaries
    
    
    163,811,294
    
    
    
    264,742,953
    
    
    
    40,112,569Total assets
    
    
    1,068,623,236
    
    
    
    1,101,300,862
    
    
    
    166,863,767LIABILITIES AND SHAREHOLDERS
EQUITYCurrent liabilities:Accrued expenses and other current liabilities
    
    
    25,122,939
    
    
    
    6,432,178
    
    
    
    974,573Shareholders equity:Series 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, 2009 and 2010: 23,085,589 and 24,739,131;
outstanding shares as at December
31, 2009 and 2010: 18,817,507 and 20,735,401
    
    
    1,879,312
    
    
    
    1,991,115
    
    
    
    301,684High 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
    
    
    
    358,030Treasury stock, at cost (4,000,000
shares and 3,719,928 shares of
common stock as at December 31,
2009 and 2010, respectively)
    
    
    (103,392,701
    )
    
    
    (96,152,839
    )
    
    
    (14,568,612
    )Additional paid-in capital
    
    
    1,326,984,833
    
    
    
    1,352,427,354
    
    
    
    204,913,235Accumulated deficit
    
    
    (184,334,146
    )
    
    
    (165,759,945
    )
    
    
    (25,115,143
    )Total shareholders equity
    
    
    1,043,500,297
    
    
    
    1,094,868,684
    
    
    
    165,889,194Total liabilities and
shareholders equity
    
    
    1,068,623,236
    
    
    
    1,101,300,862
    
    
    
    166,863,767
  F-39




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 eLong, Inc.
Condensed Statements of Operations
 Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Net Revenues
    
    
    
    
    
    
    
    
    
    
    1,423,829
    
    
    
    215,732Cost of services
    
    
    324,824
    
    
    
    837,280
    
    
    
    1,192,063
    
    
    
    180,616Gross profit
    
    
    (324,824
    )
    
    
    (837,280
    )
    
    
    231,766
    
    
    
    35,116Operating expenses:Service development
    
    
    2,320,096
    
    
    
    3,130,643
    
    
    
    6,533,851
    
    
    
    989,977Sales and marketing
    
    
    972,150
    
    
    
    1,974,556
    
    
    
    3,394,531
    
    
    
    514,323General and administrative
    
    
    10,282,464
    
    
    
    10,284,818
    
    
    
    11,991,310
    
    
    
    1,816,865Loss from operations
    
    
    (13,899,534
    )
    
    
    (16,227,297
    )
    
    
    (21,687,926
    )
    
    
    (3,286,049
    )Other income (expenses):Interest income
    
    
    24,532,977
    
    
    
    10,742,636
    
    
    
    2,670,452
    
    
    
    404,614Foreign exchange loss
    
    
    (58,454,827
    )
    
    
    (684,296
    )
    
    
    (21,489,220
    )
    
    
    (3,255,942
    )Share of net (loss)/income of subsidiaries and VIEs
    
    
    (28,771,748
    )
    
    
    26,072,046
    
    
    
    59,973,859
    
    
    
    9,086,947Other
    
    
    
    
    
    
    
    
    
    
    1,161,243
    
    
    
    175,946Total other income (expenses), net
    
    
    (62,693,598
    )
    
    
    36,130,386
    
    
    
    42,316,334
    
    
    
    6,411,565Net (loss)/income
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    20,628,408
    
    
    
    3,125,516
  F-40




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 eLong, Inc.
Condensed Statements of Cash Flows
 Year ended December 31,2008
    
    
    2009
    
    
    2010
    
    
    2010RMB
    
    
    RMB
    
    
    RMB
    
    
    US$Cash flows from operating activities:Net (loss)/income
    
    
    (76,593,132
    )
    
    
    19,903,089
    
    
    
    20,628,408
    
    
    
    3,125,516Adjustments to reconcile net (loss)/income to net
cash provided by/(used in) operating activities:Share of net loss/(income) of subsidiaries and VIEs
    
    
    28,771,748
    
    
    
    (26,072,046
    )
    
    
    (59,973,859
    )
    
    
    (9,086,948
    )Foreign exchange loss
    
    
    58,573,829
    
    
    
    709,546
    
    
    
    13,848,414
    
    
    
    2,098,244Share-based compensation expense
    
    
    7,123,939
    
    
    
    11,239,907
    
    
    
    18,543,568
    
    
    
    2,809,632Allowance for doubtful accounts
    
    
    48,267
    
    
    
    
    
    
    
    
    
    
    
    Amortization of intangible assets
    
    
    220,000
    
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities, net
of impact from acquisitions:Amounts due from subsidiaries
    
    
    2,389,304
    
    
    
    300,105
    
    
    
    1,318,340
    
    
    
    199,748Amounts due from related parties
    
    
    
    
    
    
    
    
    
    
    (278,639
    )
    
    
    (42,218
    )Prepaid expenses and other current assets
    
    
    1,766,409
    
    
    
    1,556,268
    
    
    
    410,139
    
    
    
    62,142Amounts due to related parties
    
    
    262,739
    
    
    
    (1,580,622
    )
    
    
    
    
    
    
    Accrued expenses and other current liabilities
    
    
    (1,940,439
    )
    
    
    (1,291,196
    )
    
    
    (857,281
    )
    
    
    (129,890
    )Net cash provided by/(used in) operating activities
    
    
    20,622,664
    
    
    
    4,765,051
    
    
    
    (6,360,910
    )
    
    
    (963,774
    )Cash flows from investing activities:Proceeds from disposal of investment
    
    
    323,639
    
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (40,957,800
    )
    
    
    (6,205,727
    )Proceeds from short-term investment
    
    
    
    
    
    
    615,557,578
    
    
    
    593,943,986
    
    
    
    89,991,513Purchase of short-term investment
    
    
    (615,016,833
    )
    
    
    (313,604,389
    )
    
    
    (724,734,239
    )
    
    
    (109,808,218
    )Net cash provided by/(used in) investing activities
    
    
    (614,693,194
    )
    
    
    301,953,189
    
    
    
    (171,748,053
    )
    
    
    (26,022,432
    )Cash flows from financing activities:Repurchase of ordinary shares
    
    
    (103,392,701
    )
    
    
    
    
    
    
    
    
    
    
    Providing loans to subsidiaries
    
    
    (53,889,750
    )
    
    
    
    
    
    
    (200,674,550
    )
    
    
    (30,405,235
    )Exercise of stock options and stock warrants
    
    
    657,736
    
    
    
    1,206,482
    
    
    
    13,331,387
    
    
    
    2,019,907Settlement of the payable to former shareholder
    
    
    
    
    
    
    (535,767
    )
    
    
    (18,856,519
    )
    
    
    (2,857,048
    )Net cash provided by/(used in) financing activities
    
    
    (156,624,715
    )
    
    
    670,715
    
    
    
    (206,199,682
    )
    
    
    (31,242,376
    )Effect of foreign exchange rate changes on cash
    
    
    (60,933,776
    )
    
    
    (340,250
    )
    
    
    (9,708,671
    )
    
    
    (1,471,011
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (811,629,021
    )
    
    
    307,048,705
    
    
    
    (394,017,316
    )
    
    
    (59,699,593
    )Cash and cash equivalents at beginning of year
    
    
    980,478,471
    
    
    
    168,849,450
    
    
    
    475,898,155
    
    
    
    72,105,781Cash and cash equivalents at end of year
    
    
    168,849,450
    
    
    
    475,898,155
    
    
    
    81,880,839
    
    
    
    12,406,188
  F-41




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##### Table of Contents



eLong, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts in Renminbi (RMB)
 eLong, Inc.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
 (a) Basis of presentation
  (b) Commitments
   F-42