##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 20-F
 
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(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, 2009.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 or
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 Commission file number: 001-33328
 XINHUA SPORTS & ENTERTAINMENT LIMITED
 (Exact name of Registrant as specified in its charter)
 N/A  (Translation of Registrants name into English)
 Cayman Islands  (Jurisdiction of incorporation or organization)
 Beijing, 100026, Peoples Republic of China
 
 
  
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredAmerican depositary shares, each 
representing two common shares, par 
value US$0.001 per share
    
    The NASDAQ Stock Market LLC
(The NASDAQ Global Market)
 
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
 
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
 
 176,466,050 common shares, par value US$0.001 per share as of December 31, 2009.
 Yes o No þ
 Yes o No þ
 þ o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 þ o o
 o o
 o þ
  Yes
o No o




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##### 



TABLE OF CONTENTS
 Item 1. Identity of Directors, Senior Management and Advisers
    
    
    3Item 2. Offer Statistics and Expected Timetable
    
    
    3Item 3. Key Information
    
    
    3Item 4. Information on the Company
    
    
    27Item 4A. Unresolved Staff Comments
    
    
    61Item 5. Operating and Financial Review and Prospects
    
    
    61Item 6. Directors, Senior Management and Employees
    
    
    93Item 7. Major Shareholders and Related Party Transactions
    
    
    103Item 8. Financial Information
    
    
    109Item 9. The Offer and Listing
    
    
    111Item 10. Additional Information
    
    
    111Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    118Item 12. Description of Securities Other Than Equity Securities
    
    
    119Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    120Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    120Item 15. Controls and Procedures
    
    
    120Item 16A. Audit Committee Financial Expert
    
    
    120Item 16B. Code of Ethics
    
    
    121Item 16C. Principal Accountant Fees and Services
    
    
    121Item 16D. Exemptions From The Listing Standards For Audit Committees
    
    
    121Item 16E. Purchases of Equity Securities By The Issuer And Affiliated Purchasers
    
    
    121Item 16F. Change In Registrants Certifying Accountant
    
    
    122Item 16G. Corporate Governance
    
    
    122Item 17. Financial Statements
    
    
    122Item 18. Financial Statements
    
    
    122Item 19. Exhibits
    
    
    122Exhibit 4.62Exhibit 4.63Exhibit 4.64Exhibit 4.65Exhibit 4.66Exhibit 4.67Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1
   i




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INTRODUCTION
  
    
    we, us, our company, our, XSEL and Xinhua Sports & Entertainment refer
to Xinhua Sports & Entertainment Limited, and its subsidiaries, including direct
subsidiaries and affiliated entities, except where the context requires otherwise;
 
    
    production of or to produce drama series refer to co-production with third
parties who hold drama series production licenses or to cooperate with third parties
who hold drama series production licenses to produce;
 
    
    shares or common shares refers to our class A common shares;
 
    
    ADSs refers to our American depositary shares, each of which represents two common
 shares, and ADRs refers to the American depositary receipts that evidence our ADSs;
 
    
    China or PRC refers to the Peoples Republic of China, excluding, for the
purpose of this annual report on Form 20-F only, Taiwan, Hong Kong and Macau;
 
    
    GAAP refers to general accepted accounting principles in the United States;
 
    
    all references to RMB or Renminbi are to the legal currency of China, all
references to $, dollars, US$, USD and U.S. dollars are to the legal currency
of the United States and all references to HK$ are to the legal currency of Hong
Kong;
 
    
    any discrepancies in any table between the amounts identified as total amounts and
the sum of the amounts listed therein are due to rounding; and
 
    
    the conversion of RMB into U.S. dollars in this annual report is based on the noon
buying rate in The City of New York for cable transfers of RMB as certified for customs
purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all
translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual
report were made at a rate of RMB6.8259 to $1.00, the noon buying rate in effect as of
December 31, 2009.
  FORWARD-LOOKING INFORMATION
  
    
    our goals and strategies;
 
    
    our ongoing extension into the sports and entertainment markets;
 
    
    our future business development, financial condition and results of operations;
 
    
    projected revenues, profits, earnings and other estimated financial information;
  2




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
    
    our plans to expand our Internet presence, and expand into new media, such as,
broadband wireless and Internet television;
 
    
    the growth or acceptance of our integrated platform;
 
    
    our plans to identify and create new advertising networks that target specific
consumer demographics, which could allow us to charge a separate fee; and
 
    
    competition in the PRC media and advertising industries.
   PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected Financial Data
    3




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Period
    
    
    
    Periodfrom
    
    
    
    fromJanuary 1, 2005 to
    
    
    
    May 26,May 25,
    
    
    
    2005(1) to
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended2005
    
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,(Predecessor)
    
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(In thousands, except for per share data)Selected consolidated statement of operations dataNet revenues:Advertising services
    
    $
    
    
    
    
    $
    
    
    
    $
    35,628
    
    
    $
    75,337
    
    
    $
    99,575
    
    
    $
    78,016Advertising sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,141
    
    
    
    21,912
    
    
    
    21,215Total net revenues
    
    
    
    
    
    
    
    
    
    
    
    35,628
    
    
    
    83,478
    
    
    
    121,487
    
    
    
    99,231Cost of revenues:Advertising services
    
    
    
    
    
    
    
    
    
    
    
    23,954
    
    
    
    54,255
    
    
    
    71,230
    
    
    
    61,888Advertising sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,805
    
    
    
    9,483
    
    
    
    23,554Total cost of revenues
    
    
    
    
    
    
    
    
    
    
    
    23,954
    
    
    
    58,060
    
    
    
    80,713
    
    
    
    85,442Operating expenses:Selling and distribution
    
    
    
    
    
    
    
    
    
    
    
    2,355
    
    
    
    5,662
    
    
    
    10,683
    
    
    
    7,708General and administrative
    
    
    
    
    
    
    
    4
    
    
    
    10,131
    
    
    
    17,890
    
    
    
    45,604
    
    
    
    27,762Impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,938
    
    
    
    176,772Loss on disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,721
    
    
    
    25,640Total operating expenses
    
    
    
    
    
    
    
    4
    
    
    
    12,486
    
    
    
    23,552
    
    
    
    220,946
    
    
    
    237,882Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,262
    
    
    
    1,251
    
    
    
    2,065Income (loss) from operations
    
    
    
    
    
    
    
    (4
    )
    
    
    (812
    )
    
    
    4,128
    
    
    
    (178,921
    )
    
    
    (222,028
    )Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    
    (167
    )
    
    
    5,745
    
    
    
    (27,308
    )
    
    
    4,651Equity in loss of an investment
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    Provision for income taxes (benefit)
    
    
    
    
    
    
    
    
    
    
    
    (164
    )
    
    
    671
    
    
    
    1,728
    
    
    
    (4,057
    )Net income (loss) from continuing operations
    
    
    
    
    
    
    
    (4
    )
    
    
    (867
    )
    
    
    9,202
    
    
    
    (207,957
    )
    
    
    (213,320
    )Discontinued operations, net of taxes
    
    
    (884
    )
    
    
    
    1,484
    
    
    
    5,915
    
    
    
    20,140
    
    
    
    (66,274
    )
    
    
    (100,296
    )Net income (loss)
    
    
    (884
    )
    
    
    
    1,480
    
    
    
    5,048
    
    
    
    29,342
    
    
    
    (274,231
    )
    
    
    (313,616
    )Net income (loss) attributable to non-controlling
interest
    
    
    
    
    
    
    
    129
    
    
    
    1,704
    
    
    
    1,303
    
    
    
    641
    
    
    
    (2,041
    )Net income (loss) attributable to XSEL
    
    $
    (884
    )
    
    
    $
    1,351
    
    
    $
    3,344
    
    
    $
    28,039
    
    
    $
    (274,872
    )
    
    $
    (311,575
    )Deemed dividend on redeemable
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    (2,157
    )
    
    
    
    
    
    
    
    
    
    
    Dividends declared to redeemable
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    (5,335
    )
    
    
    (1,338
    )
    
    
    (2,000
    )
    
    
    (2,560
    )Net income (loss) attributable to holders of
common shares
    
    
    (884
    )
    
    
    
    1,351
    
    
    
    (4,148
    )
    
    
    26,701
    
    
    
    (276,872
    )
    
    
    (314,135
    )Net income (loss) from continuing operations per
share:Basic  Class A common share
    
    $
    
    
    
    
    $
    
    
    
    $
    (0.18
    )
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Basic  Class B common share
    
    $
    
    
    
    
    $
    
    
    
    $
    (0.18
    )
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Diluted  Class A common share
    
    $
    
    
    
    
    $
    
    
    
    $
    (0.18
    )
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Diluted  Class B common share
    
    $
    
    
    
    
    $
    
    
    
    $
    (0.18
    )
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Net income (loss) from discontinued operations per
share:Basic  Class A common share
    
    $
    
    
    
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Basic  Class B common share
    
    $
    (7.85
    )
    
    
    $
    0.03
    
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    Diluted  Class A common share
    
    $
    
    
    
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Diluted  Class B common share
    
    $
    (7.85
    )
    
    
    $
    0.03
    
    
    $
    0.10
    
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    Shares used in computation:Basic  Class A common share
    
    
    
    
    
    
    
    
    
    
    
    5,084
    
    
    
    66,166
    
    
    
    85,927
    
    
    
    157,730Basic  Class B common share
    
    
    113
    
    
    
    
    42,613
    
    
    
    44,693
    
    
    
    50,055
    
    
    
    49,917
    
    
    
    Diluted  Class A common share
    
    
    
    
    
    
    
    
    
    
    
    5,084
    
    
    
    86,315
    
    
    
    85,927
    
    
    
    157,730Diluted  Class B common share
    
    
    113
    
    
    
    
    42,613
    
    
    
    44,693
    
    
    
    50,055
    
    
    
    49,917
    
    
    
    Dividend per redeemable convertible preferred share
    
    $
    
    
    
    
    $
    
    
    
    $
    0.34
    
    
    $
    0.08
    
    
    $
    6.67
    
    
    $
    7.81
 
 (1)
    
    Date XFL acquired 60% of EconWorld Media, which equity interest was transferred to us on
January 12, 2006.  4




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As of December 31,2008
    
    
    2009(In thousands)Selected consolidated balance sheet dataCash and cash equivalents
    
    $
    54,089
    
    
    $
    13,230Goodwill
    
    
    46,993
    
    
    
    7,238Intangible assets
    
    
    200,529
    
    
    
    19,298Total assets
    
    
    508,250
    
    
    
    242,559Convertible loan-current
    
    
    
    
    
    
    59,379Total current liabilities
    
    
    106,275
    
    
    
    201,755Convertible loan-non current
    
    
    33,200
    
    
    
    Net assets (liabilities)
    
    
    268,791
    
    
    
    (26,170
    )Total
equity (deficiency)
    
    
    238,185
    
    
    
    (59,936
    )
  Exchange Rate Information
   5




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Noon Buying RatePeriod
    
    Period End
    
    Average(1)
    
    Low
    
    High2005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010January
    
    
    6.8268
    
    
    
    6.8269
    
    
    
    6.8295
    
    
    
    6.8258February
    
    
    6.8258
    
    
    
    6.8285
    
    
    
    6.8330
    
    
    
    6.8258March
    
    
    6.8258
    
    
    
    6.8262
    
    
    
    6.8270
    
    
    
    6.8254April
    
    
    6.8247
    
    
    
    6.8256
    
    
    
    6.8275
    
    
    
    6.8229May
    
    
    6.8305
    
    
    
    6.8275
    
    
    
    6.8310
    
    
    
    6.8245June
    
    
    6.7815
    
    
    
    6.8184
    
    
    
    6.8323
    
    
    
    6.7815July (through July 9, 2010)
    
    
    6.7720
    
    
    
    6.7762
    
    
    
    6.7807
    
    
    
    6.7709
 
 (1)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated using
the average of the daily rates during the relevant period. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks related to our business
 There is substantial doubt as to our ability to continue as a going concern, which could
adversely affect our ability to meet our ongoing financing needs as well as to obtain third
party financing.
   6




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We have sustained net losses in the past and may continue to sustain net losses in the future or
may not grow as expected.
   We may not be able to comply with the financial covenants contained in an outstanding
secured convertible loan facility, which would give the lenders under such facility the right to
require us to repay the outstanding balance at any time. We may not be able to make such a
repayment on demand, and any acceleration of the loan would have an adverse effect on our
financial condition.
     7




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Under the terms of our advertising agency agreement with Shaanxi Television Station, it held the
right to terminate the agreement if we failed to make certain required payments. Shaanxi
Television Station exercised this right on June 30, 2010, which could have a material and
adverse impact on our business and financial conditions.
  We have substantial indebtedness and may incur substantial additional indebtedness in the
future, which could adversely affect our financial health and our ability to generate sufficient
cash to satisfy our outstanding and future debt obligations.
  
    
    limit our ability to satisfy our obligations under our debt;
 
    
    increase our vulnerability to adverse general economic and industry conditions;
 
    
    require us to dedicate a substantial portion of our cashflow from operations to
servicing and repaying our indebtedness, thereby reducing the availability of our
cashflow to fund working capital, capital expenditures and other general corporate
purposes;
 
    
    limit our flexibility in planning for or reacting to changes in our businesses and
the industry in which we operate;
 
    
    place us at a competitive disadvantage compared to our competitors that have less
debt; and
 
    
    increase the cost of additional financing.
  We are refocusing our scope of operations to include sports and entertainment media. Failure to
successfully implement these new business strategies could have an adverse effect on our
financial condition, results of operations and cashflow from operations.
   8




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We may need additional capital to finance general operating costs and future acquisitions and we
may not be able to obtain it.
  Our successive acquisitions make evaluating our business and prospects difficult.
  
    
    successfully integrate the recently acquired companies;
 
    
    navigate the regulatory landscape and respond to changes in the regulatory
environment;
 
    
    offer new and innovative services to attract and retain an audience and readers;
 
    
    attract additional advertisers and increase advertising fees;
 
    
    increase awareness of our branded media platforms;
 
    
    respond to competitive market conditions;
 
    
    manage risks associated with intellectual property rights;
 
    
    maintain effective control of our costs and expenses;
 
    
    raise sufficient capital to sustain and expand our business; and
 
    
    attract, retain and motivate qualified personnel.
  9




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We may not be able to achieve the benefits we expect from recent and future acquisitions, and
recent and future acquisitions may have an adverse effect on our ability to manage our business.
    We rely on key contracts and business relationships, and if our current or future business
partners or contracting counterparties fail to perform, or terminate, any of their contractual
arrangements with us for any reason or cease operations, or should we fail to adequately
identify key business relationships, our business could be disrupted, our reputation may be
harmed and we may have to resort to litigation to enforce our rights, which may be time
consuming and expensive.
   10




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We are not a party to some of the key contracts on which we rely. Instead, we have contracts
with companies which in turn have these key contracts with third parties. If the third parties
fail to perform or terminate any of these key contracts for any reason or cease operations, our
business could be disrupted, our reputation may be harmed and we will not be able to enforce our
rights in court.
    11




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Our future success depends on attracting advertisers who will advertise across our various
platforms. If we fail to attract a sufficient number of advertisers, our operating results and
revenues may not meet expectations.
  We derive a substantial proportion of our revenues from advertising, and the advertising market
is particularly volatile.
  
    
    a downturn in economic conditions in China or around the globe;
 
    
    a decision to shift advertising expenditure to other media and platforms;
 
    
    a deterioration of the ratings of our programs;
 
    
    a change of government policy with regard to the types of programs that can be
broadcast; or
 
    
    a decline in advertising spending in general.
  Our operating results may fluctuate, which makes our results difficult to predict and could
cause our results to fall short of expectations.
   If we do not maintain and develop our brands and those of our strategic partners, we will not be
able to attract an audience and readers to the media platforms we use.
   12




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If we do not compete successfully against new and existing competitors, we may lose our market
share, and our operating results may be adversely affected.
   Our business depends substantially on the continuing efforts of our key executives. Our
business may be severely disrupted if we lose their services.
   Our senior management and employees have worked together for a short period of time, which may
make it difficult for you to evaluate their effectiveness and ability to address challenges.
   13




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If we are unable to attract, train and retain key individuals, highly skilled employees and
important talents, our business may be adversely affected.
  We may not be able to prevent others from using our intellectual property, which may harm our
business and expose us to litigation.
     Failure to achieve and maintain effective internal controls could have a material and adverse
effect on the trading price of our ADSs.
    14




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Our strategy of expanding our television programming and new media presence may not be well
received or may be more expensive than we expected.
   
    
    sufficient demand for these services from our existing and potential audience and
readers, and sufficient advertising revenues from customers, to offset the substantial
investment we will make in order to provide them;
 
    
    our ability to compete effectively with other providers of these services;
 
    
    our ability to adapt and develop our services in order to conform to market
conditions and customer needs; and
 
    
    our ability to form, acquire or cooperate with Internet content and service
providers and obtain the appropriate licenses to conduct this business.
  Risks related to the regulation of our business and to our structure
 If the PRC government finds that the agreements that establish the structure for operating our
China businesses do not comply with PRC governmental restrictions on foreign investment in the
media and telecommunications industries, or if these regulations or the interpretation of
existing regulations change in the future, we could be subject to severe penalties or be forced
to relinquish our interests in those operations.
   15




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
    
    revoking the business and operating licenses of our PRC subsidiaries or affiliates;
 
    
    confiscating relevant income and imposing fines and other penalties;
 
    
    discontinuing or restricting our PRC subsidiaries or affiliates operations;
 
    
    requiring us or our PRC subsidiaries or affiliates to restructure the relevant
ownership structure or operations; or
 
    
    imposing conditions or requirements with which we or our PRC subsidiaries or
affiliates may not be able to comply.
    We rely on contractual arrangements with our PRC operating affiliates and their subsidiaries and
shareholders for our China operations, which may not be as effective in providing operational
control as direct ownership.
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The shareholders of our PRC affiliated entities may breach our agreements with them or may have
potential conflicts of interest with us, and we may not be able to enter further agreements to
extract economic benefits from these entities, which may materially and adversely affect our
business and financial condition.
   Contractual arrangements we have entered into with our subsidiaries and affiliated entities or
acquisitions of offshore entities that conduct PRC operations through affiliates in China may be
subject to scrutiny by the PRC tax authorities, and we may have to pay additional taxes or be
found ineligible for a tax exemption.
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Changes to the interpretation of certain PRC tax policies will cause us to incur additional
tax liability, which will have an adverse effect on our financial condition.
  Certain of our PRC operating companies or strategic partners have previously engaged or may
currently engage in activities without appropriate licenses or approvals or outside the
authorized scope of their business licenses or permitted activities. This could subject those
companies to fines and other penalties, which could have a material adverse effect on our
business.
   Any limitation on the ability of our subsidiaries and affiliated entities to make dividend or
distribution payments to us could have a material adverse effect on our ability to conduct our
business.
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We may be treated as a resident enterprise for PRC tax purposes and our global income may be
subject to PRC tax under PRC tax law, which would have a material adverse effect on our results
of operations.
    Foreign holders of our ADSs or common shares may be subject to PRC withholding tax on dividends
payable by us and on gains realized on the sale of our ADSs or common shares if we are
classified as a PRC resident enterprise.
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The PRC government may prevent us or our strategic partners from producing or distributing, and
we or they may be subject to liability for content that it believes is inappropriate.
   We may be subject to litigation for information provided in our media services, which may be
time-consuming and costly to defend.
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Control or significant influence by our existing shareholders may limit your ability to affect
the outcome of decisions requiring the approval of shareholders.
  Risks related to doing business in China
 Adverse changes in economic and political policies of the PRC government could have a material
adverse effect on the overall economic growth of China, which could adversely affect our
business.
   Uncertainties with respect to the PRC legal system could adversely affect us.
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The regulations on mergers and acquisitions of PRC enterprises may delay or inhibit our ability
to complete certain mergers and acquisitions and expand our business or maintain our market
shares.
    Recent PRC regulations relating to offshore investment activities by PRC residents may increase
our administrative burden and restrict our domestic, overseas and cross-border investment
activities. If our shareholders who are PRC residents fail to make any required applications
and filings under such regulations, we may be unable to distribute profits and may become
subject to liability under PRC laws.
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Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
  Fluctuation in the value of the RMB may have a material adverse effect on your investment.
   23




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We have limited insurance coverage in China.
  Risks related to the ADSs
 The market price for our ADSs may be volatile.
  
    
    announcements of technological or competitive developments;
 
    
    regulatory developments in our target markets affecting us, our customers or our
competitors;
 
    
    announcements of studies and reports relating to the circulation, ratings, audience
or readership size or composition, quality or effectiveness of our and our strategic
partners products and services or those of our competitors;
 
    
    actual or anticipated fluctuations in our quarterly operating results;
 
    
    changes in financial estimates by securities research analysts;
 
    
    changes in the economic performance or market valuations of other media and
advertising companies;
 
    
    addition or departure of our executive officers and key personnel;
 
    
    fluctuations in the exchange rates between the U.S. dollar and RMB;
 
    
    release or expiration of lock-up or other transfer restrictions on our outstanding
ADSs; and
 
    
    sales or perceived sales of additional ADSs.
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Our ADSs are currently at risk for delisting from the Nasdaq Global Market. Delisting could
adversely affect the liquidity of our ADSs and the market price of our ADSs could decrease, and
our ability to obtain adequate financing for the continuation of our operations would be
substantially impaired.
  Substantial future sales or perceived sales of our ADSs in the public market could cause the
price of our ADSs to decline.
  You may not have the same voting rights as the holders of our common shares and may not receive
voting materials in time to be able to exercise your right to vote.
  Your right to participate in any future rights offerings may be limited, which may cause
dilution to your holdings and you may not receive cash dividends if it is impractical to make
them available to you.
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We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than that under U.S. law, you may have
less protection for your shareholder rights than you would under U.S. law.
   Our memorandum and articles of association contain anti-takeover provisions that could adversely
affect the rights of holders of our common shares and ADSs.
   
    
    Our board of directors has the authority to establish from time-to-time one or more
series of preferred shares without action by our shareholders and to determine, with
respect to any series of preferred shares: the terms and rights of that series,
including the designation of the series; the number of shares of the series; the
dividend rights, dividend rates, conversion rights and voting rights; and the rights
and terms of redemption and liquidation preferences.
 
    
    Our board of directors may issue series of preferred shares without action by our
shareholders to the extent available authorized but unissued preferred shares exist.
Accordingly, the issuance of preferred shares may adversely affect the rights of the
holders of the common shares. Issuance of preference shares may dilute the voting
power of holders of common shares.
 
    
    Subject to applicable regulatory requirements, our board of directors may issue
additional common shares without action by our shareholders to the extent available
authorized but unissued shares exist.
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You may have difficulty enforcing judgments obtained against us.
  We may be classified as a passive foreign investment company, which could result in adverse U.S.
federal income tax consequences to U.S. Holders of our ADSs or common shares.
  We incur increased costs as a result of being a public company.
  
 Item 4. Information on the Company
 A. History and Development of the Company
   27




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B. Business Overview
     
    
    Broadcast, which refers to the sale of advertising and the consulting on content for
and the distribution of our programming through television and radio channels, as well
as the new media mobile value-added services we provide to mobile phone users in China.
With our business partners, we are consulting on content for four premium tier digital
pay television channels to tap into the rapidly growing digital Chinese television
market; and
 
    
    Advertising, which refers to our advertising agency that plans, creates and places
advertising for websites, television, print media, radio, campus billboards and outdoor
media, as well as online advertising sales and our below-the-line marketing services.
 Economic Observer
   28




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Sports and entertainment strategies
   Sports
 
    
    Our partner was the only media outlet to offer a nationwide, free to air, live
broadcast of the National Football League (NFL) Superbowl XLII in February 2008;
 
    
    We obtained the exclusive China media rights for the UEFA Europa League (formerly
the UEFA Cup) during the 2009-2012 period;
 
    
    We purchased an equity stake in the All Sports Network, ASN, giving us exclusive
distribution rights via mobile, television, Internet and radio for ASNs content in
China. ASNs content includes National Collegiate Athletic Association (NCAA), National
Hockey League (NHL), extreme sports, motor racing and other top quality sports
programming. We made a full provision for the investment in ASN in 2009;
 
    
    We are in the process of acquiring the rights to provide consulting and advisory
services for four premium PayTV channels;
 
    
    We have established a high definition digital television channel focused on showing
fight programs; and
 
    
    We entered into a long-term contract with CSI Sports for Fight Sportsprogramming
giving us exclusive rights in China to their library. CSI Sports is the owner of one of
the largest fight libraries in the world with a wide variety of fight programs
worldwide.
 Entertainment
 
    
    We founded a subsidiary, Xinhua Media Entertainment, which will structure, finance
and execute co-production films deals in China in association with China Film Group and
major Hollywood studios; and
 
    
    Our current film slate includes The Spy Next Doorstarring Jackie Chan, More Than a
Gamestarring Lebron James and Inseparablestarring two-time Academy Award Winner Kevin
Spacey. The Spy Next Doorwas released in China in March 2010 and Inseparableis
currently in post-production and will likely be released in either the fourth quarter
of 2010 or the first quarter of 2011.
  29




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Our services
 Broadcast
 Television
   Sports Programming
 Fight Sports Fight Sports
  Radio
   30




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Mobile interactive service
   Film coproduction
 The Spy Next Door More Than a Game Inseparable The Spy
Next Door Inseparable
  Television channel packaging services
  Pay TV
    31




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Print
 Newspaper
 Economic Observer Economic Observer
 Advertising
     Beijing Evening News Beijing Youth Daily
   32




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Arrangements with partners and suppliers
  Agreement regarding Shaanxi Television Station
   Agreement regarding China Youth League and associated websites.
 Agreements regarding Shanghai Camera.
     Agreement regarding our radio broadcast business.
   33




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Agreement regarding Money Journal. Money Journal
 Agreement regarding Chinese Venture. Weekly Journal Chinese Venture Weekly Journals
 Agreements by our Advertising Group securing advertising agency arrangements.
 
    
    an advertising agent contract between Shangtuo Zhiyang, a subsidiary of our affiliated entity,
Beijing Taide Advertising Co., Ltd., or Beijing Taide, and Beijing Yi Sheng Le Ju
Information Service Ltd., a sina.com company. Pursuant to the contract, Shangtuo
Zhiyang served as the advertising agent for sina.com with respect to the real estate
advertisements in Beijing and Tianjin. The contract initially covered the period from
January 1, 2008 and December 31, 2008, and it was amended and restated to cover the
period from January 1, 2009 and December 31, 2009. The contract was terminated as of
December 31, 2009.
 
    
    an advertising agent contract between Shangtuo Zhiyang and Beijing Sohu New Media
Information Technology Ltd., a sohu.com company. Pursuant to the contract, Shangtuo
Zhiyang served as the advertising agent for sohu.com and its affiliated websites. The
contract initially covered the period from January 1, 2008 and December 31, 2008, and
it was amended and restated to cover the period from January 1, 2009 and December 31,
2009. The contract was terminated as of December 31, 2009.
  34




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Our customers
  Broadcast
     Advertising
     35




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Print
 Economic Observer
 Distribution
   Our sales and marketing team
  Seasonality
  Competition
   36




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##### Table of Contents



Broadcast
  Advertising
  Print
 Economic Observer Investor Journal 21st Century Business Herald, First Financial Daily China Business Journal Economic Observer
 Money Journal Chinese Venture Caijing Magazine, New Fortune, Chinese Entrepreneur Business Week, Fortune Forbes Funds Observer Chinese Venture Money Journal
 Intellectual property
   Regulation
   37




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Regulatory authorities
  
    
    the National Peoples Congress;
 
    
    the State Council;
 
    
    the National Development & Reform Commission (formerly the State Development and
Planning Commission);
 
    
    the Ministry of Commerce, a combination of the former Ministry of Foreign Trade and
Economic Co-operation, the State Economy and Trade Commission, and the State
Development and Planning Commission;
 
    
    the State Administration for Industry and Commerce;
 
    
    the Ministry of Culture;
 
    
    the State Administration of Radio, Film & Television;
 
    
    the General Administration for Press and Publication (formerly the State Press and
Publications Administration);
 
    
    the National Bureau of Statistics; and
 
    
    the Ministry of Industry & Information Technology (formerly the Ministry of
Information Industry).
 Regulatory framework
  
    
    laws and regulations restricting and governing investments of private capital in
general and foreign capital in particular. For purposes of these restrictions under PRC
laws, foreign investment includes investment from Hong Kong, Taiwan and Macau. As a
result of these restrictions on investments of foreign and private capital, we conduct
our businesses in China substantially through contractual arrangements with our
affiliated PRC entities. To further comply with these restrictions, our affiliated PRC
entities in our Broadcasting Group operate through contractual arrangements with our
business partners, including a television station, radio stations, a newspaper press
office and a magazine press office;
 
    
    industry specific laws and regulations that govern the entities and business
activities within the specified industry;
 
    
    copyright and trademark protection and domain name registration regulations, which
we and our affiliated entities use to protect our and their intellectual property;
 
    
    regulations on foreign currency exchange; and
 
    
    regulations on tax.
   38




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Regulations on investment of foreign and private capital in the media, advertising and
telecommunications industries
  
    
    the Foreign Investment Industrial Guidance Catalog, or the Catalog, jointly
promulgated by the National Development & Reform Commission and the Ministry of
Commerce on October 31, 2007 and which became effective as of December 1, 2007;
 
    
    the Several Decisions on the Entry of Private Capital into the Culture Industry, or
the Decisions, issued by the State Council on April 13, 2005;
 
    
    the Several Opinions on Foreign Investment in the Culture Sector, or the Opinions,
jointly issued by the State Administration of Radio, Film and Television, the Ministry
of Culture, the General Administration for Press and Publication, the National
Development & Reform Commission and the Ministry of Commerce on July 6, 2005; and
 
    
    the Regulations for the Administration of Foreign-Invested Telecommunications
Enterprises, or the Regulations, issued by the State Council on December 11, 2001 and
revised on September 10, 2008.
      39




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Regulations on television, radio and movie industry
 Television and radio stations
    Radio and television program production
    40




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Movie industry
    Import and Broadcasting of Overseas TV Programs
   41




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Publication of Audio-Visual Programs through the Internet
     42




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Regulations on the publication industry
 Newspapers and magazines
 Publication of newspapers or magazines.
   Economic Observer Investor Journal Money Journal Chinese
Venture Investor Journal Money Journal Chinese Venture
 Distribution.
  43




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Money Journal Chinese Venture Economic Observer Investor
Journal
 Printing of publications
   Money Journal Chinese Venture Economic
Observer
 Money Journal Chinese Venture Economic Observer Investor Journal
 Distribution of publications
  Money Journal Chinese
Venture Economic Observer Money Journal
  44




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Regulations on the advertising industry
 Establishment of advertising entities
  
    
    the Advertising Law promulgated by the National Peoples Congress on October 27,
1994;
 
    
    the Administration Regulations of Advertising Industry, promulgated by the State
Council on October 26, 1987;
 
    
    the Implementation Rule of Advertising Industry Administration, or the
Implementation Rule, promulgated by the State Administration for Industry and Commence
on January 9, 1988, amended in 1998, 2000 and 2004, and effective as of January 1,
2005; and
 
    
    the Measures on Administration of Advertising Operation Licenses, promulgated by the
State Administration for Industry and Commence on November 30, 2004.
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Advertising content
    Operational matters of the advertising business
    46




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Radio and television advertisements
  
    
    be against the basic principles stipulated by the constitution;
 
    
    harm the national unity, sovereignty and territorial integrity, national security or
harm national honor and interests;
 
    
    incite ethnic hatred or ethnic discrimination, be against ethnic customs and habits,
undermine national unity or violate religious policy;
 
    
    disrupt the social order or undermine social stability;
 
    
    promote a cult, obscenity, gambling, violence, superstition, damage social morality
or national cultural traditions;
 
    
    insult, discriminate or slander others, infringe the legal rights of others;
 
    
    induce minors to act poorly or with bad values or endanger the physical and mental
health of minors;
 
    
    use absolute language to deceive and mislead the public, deliberately using the
wrong spelling or tampered idioms;
 
    
    use the national flag, national emblem, national anthem, the name, image, voice,
sayings, handwritings of national leaders, or the name or image of the state agencies
or officers of the same effect in commercial advertising;
 
    
    promote drugs, medical devices, medical and health information advertisements
promoting cure rates, efficiency, or using doctors, specialists, patients or public
figures to prove a curative effect; and
 
    
    other content prohibited by laws, regulations and administrative rules.
  
    
    advertisements published in the form of a news report;
 
    
    tobacco advertisements;
 
    
    prescription drugs advertisements;
 
    
    medical advertisements for drugs, food, medical equipment used for the treatment of
malignant tumors, liver disease, sexually transmitted diseases or drugs to improve
sexual functions;
 
    
    voice service advertisements such as those for name or fortune analysis, affinity
tests, or chat dating services;
 
    
    dairy products advertisements using the term breast-milk substitutes; and
 
    
    other advertisements prohibited by laws, regulations and administrative rules.
  47




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Outdoor advertising
   
    
    utilize traffic safety facilities and traffic signs;
 
    
    impede the use of public facilities, traffic safety facilities and traffic signs;
 
    
    obstruct commercial and public activities or damage the urban area landscape;
 
    
    be placed in restricted areas near government offices, cultural landmarks or
historical or scenic sites; or
 
    
    be placed in areas prohibited by the local governments from having outdoor
advertisements.
     48




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Marketing services
   Regulations on the telecommunications industry
  
    
    the Regulation on Telecommunications promulgated by the State Council on September
25, 2000;
 
    
    the Administrative Measures for Telecommunications Business Operating License
promulgated by the Ministry of Industry and Information on March 1, 2009; and
 
    
    The Catalogue of Classes of Telecommunications Businesses promulgated by the
Ministry of Information Industry on February 21, 2003.
    
    
    oppose the fundamental principles determined in the PRC Constitution;
 
    
    compromise state security, divulges state secrets, subvert state power or damage
national unity;
 
    
    harm the dignity or interests of the state;
 
    
    incite ethnic hatred or racial discrimination or damage inter-ethnic unity;
 
    
    sabotage Chinas religious policy or propagate heretical teachings or feudal
superstitions;
 
    
    deliver rumors, disturb social order or disrupt social stability;
 
    
    propagate obscenity, pornography, gambling, violence, murder or fear or incite the
commission of crimes;
 
    
    insult or slander a third party or infringe upon the lawful rights and interests of
a third party; or
 
    
    include other content prohibited by laws or administrative regulations.
  49




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Regulations on intellectual property protection
  Copyright
   Money Journal
 Trademark
   50




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Domain names
   Regulations on foreign currency exchange
 Foreign currency exchange
   Foreign exchange registration of offshore investment by PRC residents
   51




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Dividend distribution
  
    
    The Wholly Foreign Owned Enterprise Law, promulgated by the National Peoples
Congress on April 12, 1986 and amended on October 31, 2000;
 
    
    The Wholly Foreign Owned Enterprise Law Implementing Rules, promulgated by the
National Peoples Congress on December 12, 1990 and amended on April 12, 2001;
 
    
    The Enterprise Income Tax Law, promulgated by the National Peoples Congress on
March 16, 2007; and
 
    
    The Implementation Rules on Enterprise Income Tax Law, promulgated by the State
Council on December 6, 2007.
     52




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C. Organizational Structure
 Our corporate structure and contractual arrangements
  
    
    Broadcast
 
    
    Beijing Mobile Interactive Co., Ltd, or M-in, an affiliated entity with mobile
service provider licenses to operate wireless Mobile Value-Added Service (MVAS)
platforms nationwide in China; and
 
    
    Beijing Hantang Yueyi Culture & Media Co., Ltd, or Beijing Hangtang, an
affiliated entity that, through June 30, 2010 held the exclusive rights to sell
advertising for and the right to provide content to Shaanxi Satellite Television.
 
    
    Advertising
 
    
    Shenzhen Active Trinity Advertising Co., Ltd., or Shenzhen Trinity, an
affiliated entity that carries out advertising services;
 
    
    Beijing Taide Advertising Co., Ltd., or Beijing Taide, an affiliated entity
whose subsidiaries include Chinese advertising agencies that also produce
advertising;
 
    
    Beijing Xintai Huade Advertising Co., Ltd., or Xintai Huade, an affiliated
entity that carries out advertising services;
 
    
    Shanghai Singshine Marketing Service Co., Ltd., or Shanghai Singshine Marketing,
an affiliated entity that principally engages in below-the-line marketing;
 
    
    Beijing Jinjiu Tianyi Tianjiu Lianhe Advertising Co., Ltd., an affiliated entity
that primarily engages in online advertising;
 
    
    Shanghai IF Advertisement Design and Production Co., Ltd., an affiliated entity
that primarily engages in below-the-line marketing; and
 
    
    Shanghai Yifu Advertisement Design and Production Co., Ltd., or Shanghai Yifu,
an affiliated entity that primarily engages in below-the-line advertising;
  53




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
    
    Broadcast
 
    
    New China Media (Shanghai) Co., Ltd., or New China, which primarily engages in
providing services to Century Media Advertising; and
 
    
    Xinhua Media Entertainment, which engages in the development, production and
pre-production of film entertainment content.
 
    
    Advertising
 
    
    Active Advertising (Guangzhou) Co., Ltd., or Active Guangzhou, which primarily
operates as advertising agent for PRC customers.
  
    
    Advertising
 
    
    XSEL (Hong Kong) Limited, or Active Advertising Hong Kong, which primarily
operates as an advertising agent to place advertising on media in Hong Kong; and
 
    
    JTT Advertising Limited, or JTT, which primarily engages in below-the-line
marketing in Hong Kong.
  54




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(1)
    
    The remaining 25% equity interest in Xinhua Media Entertainment Limited is 17% owned by
Leeding Media, LLC, a company owned by David U. Lee, and 8% owned by K-Jam Media, Inc., a
company owned by Kia Jam.  55




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##### Table of Contents



(2)
    
    Contractual agreements consist of a secured loan agreement entered into by Wuxianshijie
(Beijing) Information Technology Co. Ltd, or Wuxianshijie, and Gao Fei, the 50% shareholder of
M-in, an exclusive equity purchase option agreement, an equity pledge agreement and a
subrogation agreement entered into among M-In, Wuxianshijie and Gao Fei; a secured loan
agreement entered into by Wuxianshijie and Xue Donghua, the 50% shareholder of M-in, an
exclusive equity purchase option agreement, an equity pledge agreement and a subrogation
agreement entered into among M-in, Wuxianshijie and Xue Donghua.(3)
    
    Contractual agreements consist of a secured loan agreement entered into among Jia Luo, Wan
Jun, the 51% shareholder of Shanghai Yuan Zhi Advertising Co., Ltd., or Yuan Zhi, and Li Guang
Jie, the 49% shareholder of Yuan Zhi, an exclusive equity purchase option agreement, an equity
pledge agreement and a subrogation agreement entered into among Jia Luo, Yuan Zhi, Wan Jun and
Li Guang Jie.(4)
    
    Contractual agreements consist of a secured loan agreement entered into among Nucom Media
Technology (Beijing) Co., Ltd., or Nucom Media, Yang Yu-Tao, Luo Yan and Wang Hao, the three
individual shareholders holding 25%, 25% and 50%, respectively, of the equity interest in Xin
Chuan Online (Beijing) Information Technology Co., Ltd, or Xin Chuan Online (Beijing), an
exclusive equity purchase option agreement, an equity pledge agreement and a subrogation
agreement entered into among Nucom Media, Xin Chuan Online (Beijing), Yang Yu-Tao, Luo Yan and
Wang Hao.(5)
    
    Contractual agreements consist of a secured loan agreement entered into among Nucom Media,
Yang Yu-Tao and Luo Yan, the two individual shareholders each holding 50% of the equity
interest in Beijing Shiji Xin Chuan Advertising Co., Ltd, or Beijing Shiji Xin Chuan
Advertising, an exclusive equity purchase option agreement, an equity pledge agreement and a
subrogation agreement entered into among Nucom Media, Beijing Shiji Xin Chuan Advertising,
Yang Yu-Tao and Luo Yan.(6)
    
    Contractual agreements consist of a secured loan agreement entered into among Active
Guangzhou, An Lizhang and Wang Yonghong, the two individual shareholders each holding 50% of
the equity interest in Beijing Taide, an exclusive equity purchase option agreement, an equity
pledge agreement and a subrogation agreement entered into among Active Guangzhou, Beijing
Taide, An Lizhang and Wang Yonghong.(7)
    
    Contractual agreements consist of a secured loan agreement entered into by Active Guangzhou
and Kuang Peiyue, the 50% shareholder of Xintai Huade, an exclusive equity purchase option agreement, an equity pledge agreement and a
subrogation agreement entered into among Xintai Huade, Active Guangzhou and Kuang Peiyue, a
secured loan agreement entered into by Active Guangzhou and Wang Yue, the 50% shareholder of
Xintai Huade, an exclusive equity purchase option agreement, an equity pledge agreement and a
subrogation agreement entered into among Xintai Huade, Active Guangzhou and Wang Yue.(8)
    
    Contractual agreements consist of a secured loan agreement entered into among Active
Guangzhou, An Lizhang and Zhang Wenjin, the two individual shareholders each holding 50% of
the equity interest in Shenzhen Trinity, an
exclusive equity purchase option agreement, an equity pledge agreement and a subrogation
agreement entered into among Active Guangzhou, Shenzhen Trinity, An Lizhang and Zhang Wenjin.(9)
    
    Contractual agreements consist of a secured loan agreement entered into by Guangzhou
Excellent Consulting Service Co., Ltd, or Guangzhou Excellent, and Kuang Peiyue, the 50%
shareholder of Shanghai Singshine Marketing, an exclusive equity purchase option agreement, an
equity pledge agreement and a subrogation agreement entered into among Kuang Peiyue, Shanghai
Singshine Marketing and Guangzhou Excellent; a secured loan agreement entered into by
Guangzhou Excellent and Guo Jingjing, the 50% shareholder of Shanghai Singshine Marketing, an
exclusive equity purchase option agreement, an equity pledge agreement and a subrogation
agreement entered into among Guo Jingjing, Shanghai Singshine Marketing and Guangzhou
Excellent. (10)
    
    Shanghai Singshine Marketing owns 60% of the equity interest in Shanghai Liangdian Zhongduan
Zhanshi Co., Ltd., or Shanghai Liangdian, a PRC company. The remaining 40% of the equity
interest in Shanghai Liangdian is owned as to 23% by Wu Xiuhui, 7% by Leng Liming, 5% by Hu
Shengzhong and 5% by Yin Zijian.(11)
    
    The remaining 20% equity interest of Shangtuo Zhiyang is held by Wang Xiao Yu. Wang Xiao Yu
is a manager of Shangtuo Zhiyang.  56




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
    
    exercise effective control over these affiliated entities and their respective
subsidiaries;
 
    
    receive a substantial portion of the economic benefits from the affiliated entity
and its subsidiaries in consideration for the services provided us; and
 
    
    have an exclusive option to purchase all or part of the equity interests in the
various affiliated entities and certain of their subsidiaries in each case when and to
the extent permitted by PRC law.
  Agreements that provide effective control over our affiliated entities
   57




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Loan agreement.
  
    
    a loan agreement in the amount of RMB 100,000 ($15,000), entered into between Wan
Jun, the 51 % shareholder of Yuan Zhi and Li Guang Jie, the 49% shareholder of Yuan
Zhi, as borrowers, and Jia Luo, as lender;
 
    
    a loan agreement in the amount of RMB0.5 million ($73,000), entered into between
Fang Quan, the 50% shareholder of Guangzhou Jingshi, as borrower, and EconWorld
(Shanghai) Co., Ltd., or EconWorld Shanghai, as lender;
 
    
    a loan agreement in the amount of RMB0.5 million ($73,000), entered into between
Wang Yong Hong, the 50% shareholder of Guangzhou Jingshi, as borrower, and EconWorld
Shanghai as lender;
 
    
    a loan agreement in the amount of RMB0.3 million ($44,000), entered into between
Zhang Wen Jin and Eric An, each a 50% shareholder of Shenzhen Trinity, as borrowers,
and Active Guangzhou, as lender;
 
    
    a loan agreement in the amount of RMB10.0 million ($1.5 million), entered into
between Eric An and Wang Yong Hong, each a 50% shareholder of Beijing Taide, as
borrowers, and Active Guangzhou, as lender;
 
    
    a loan agreement in the amount of RMB2.5 million ($0.4 million), entered into
between Kuang Peiyue, the 50% shareholder of Xintai Huade, as borrower, and Active
Guangzhou, as lender;
 
    
    a loan agreement in the amount of RMB2.5 million ($0.4 million), entered into
between Wang Yue, the 50% shareholder of Xintai Huade, as borrower, and Active
Guangzhou, as lender;
 
    
    a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into
between Gao Fei, the 50% shareholder of M-in, as borrower, and Wuxianshijie, as lender;
 
    
    a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into
between Xue Donghua, the 50% shareholder of M-in, as borrower, and Wuxianshijie, as
lender;
 
    
    a loan agreement in the amount of RMB0.5 million ($73,000), entered into between
Kuang Peiyue, the 50% shareholder of Shanghai Singshine Marketing, as borrower, and
Guangzhou Excellent, as lender;
 
    
    a loan agreement in the amount of RMB0.5 million ($73,000), entered into between Guo
Jingjing, the 50% shareholder of Shanghai Singshine Marketing, as borrower, and
Guangzhou Excellent, as lender;
 
    
    a loan agreement in the amount of RMB1.5 million ($0.2 million), entered into
between Xue Donghua, the 50% shareholder of Shanghai Renhe Movie and Television
Intermediary Co., Ltd., or Shanghai Renhe, as borrower, and Beijing Century Media, as
lender;
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
    
    a loan agreement in the amount of RMB1.5 million ($0.2 million), entered into
between Wang Lingjun, the 50% shareholder of Shanghai Renhe, as borrower, and Beijing
Century Media, as lender;
 
    
    a loan agreement in the amount of RMB0.5 million ($73,000), entered into between
Wang Yue, the 100% shareholder of Shanghai Yifu, as borrower, and Shanghai IF, as
lender;
 
    
    a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into
between Song Peng, the 50% shareholder of Beijing Hantang, as borrower, and Taihui, as
lender;
 
    
    a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into
between Wu Chunming, the 50% shareholder of Beijing Hantang, as borrower, and Taihui,
as lender;
 
    
    a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into
between Yang Yu-Tao, the 25% shareholder of Xin Chuan Online (Beijing), as borrower,
and Nucom Media, as lender;
 
    
    a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into
between Luo Yan, the 20% shareholder of Beijing Shiji Xin Chuan Advertising, as
borrower, and Nucom Media, as lender;
 
    
    a loan agreement in the amount of RMB10.0 million ($1.5 million), entered into
between Wang Hao, the 50% shareholder of Beijing Shiji Xin Chuan Advertising, as
borrower, and Nucom Media, as lender;
 
    
    a loan agreement in the amount of RMB0.1 million ($15,000), entered into between
Yang Yu-Tao, the 50% shareholder of Beijing Shiji Xin Chuan Advertising, as borrower,
and Nucom Media, as lender; and
 
    
    a loan agreement in the amount of RMB0.1 million ($15,000), entered into between Luo
Yan, the 50% shareholder of Beijing Shiji Xin Chuan Advertising, as borrower, and Nucom
Media, as lender.
 Equity pledge agreement.
 Subrogation agreement.
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Agreements that provide the option to purchase the equity interest in the affiliated entity
 Exclusive equity purchase option agreement
 Agreements that transfer economic benefits to us
 Service agreement.
   
    
    the ownership structures of our variable interest entities, Beijing Hangtang,
Jiaseng, Yuan Zhi, Beijing Taide, Shenzhen Trinity, Xintai Huade, Guangzhou Jingshi,
M-in, Shanghai Singshine Marketing, Shanghai Renhe, and Shang Yifu, and our
subsidiaries in China comply in all material respects with all existing PRC laws and
regulations;
 
    
    the contractual arrangements among our PRC subsidiaries, affiliated entities and
their shareholders governed by PRC law are valid, binding and enforceable, and will not
result in any violation of PRC laws or regulations currently in effect; and
 
    
    the business operations of our subsidiaries in China and our affiliated entities and
their respective subsidiaries comply in all material respects with existing PRC laws
and regulations.
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D. Property, Plants and Equipment
  
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
  A. Operating Results
    Acquisitions
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Broadcast.
 
    
    Everfame.We acquired 100% of Everfame Developments ordinary shares for cash
consideration of $22.6 million on April 2, 2009. Everfame Development was incorporated
under the laws of the British Virgin Islands on August 7, 2008. Everfame Development,
its subsidiaries and VIEs, collectively, Everfame, are principally engaged in
organizing cultural communication activities, designing and producing advertisements
and acting as an advertising agent and publishing advertisements. Everfame had,
through June 30, 2010 a long-term advertising agreement with Shaanxi Television Station
through which Everfame held exclusive rights to provide advertising services to Shaanxi
Satellite Television. The purpose of the acquisition was to expand our geographic reach
and operating scope.
 
    
    M-in Group.We acquired 100% of the ordinary shares of East Alliance Limited on
June 4, 2007 at an initial price of approximately $9.5 million. East Alliance Limited
is an investment holding company for its wholly-owned subsidiaries and VIEs,
collectively M-in Group. In addition to the initial consideration, the equity owners
of M-in Group are entitled to additional consideration, 60% payable in cash and 40% in
our common shares, based on a predetermined earnout formula applied to aggregate
audited operating results through December 31, 2007 and 2008. M-in Group is a mobile
service provider that provides mobile value added services such as wireless application
protocol, or WAP, text messaging, multimedia messaging service, or MMS, and color ring
back tone variously supported by major mobile telecommunication operators in China.
M-in Group also has marketing and distribution channels including television, print,
Internet and other media, and creates and manages a wide range of mobile and online
interactive products. Based on M-in Groups audited operating results through December
31, 2008, we recorded additional consideration totaling $7.4 million for the year ended
December 31, 2009, which resulted in additional goodwill of $6.9 million. The
additional consideration consisted of a cash payment of $6.2 million and consideration
payable of 1.2 million as of December 31, 2009.
 
    
    Xinhua Media Entertainment.We established Xinhua Media Entertainment Limited, or
Xinhua Media Entertainment, in April of 2008 and hold 75% of its equity interest.
Xinhua Media Entertainment structures, finances and executes co-production film deals
in China.
 
    
    Beijing Perspective.Through Beijing Century Media, an affiliated entity, we
acquired 51.0% of the equity of Beijing Perspective Orient Movie and Television
Intermediary Co., Ltd., or Beijing Perspective Orient, on July 28, 2006. Xinhua
Financial Network financed the purchase price for this acquisition. On November 13,
2007, we acquired the remaining 49% of the equity of Beijing Perspective Orient for
approximately $10.5 million, of which approximately $8.3 million was settled by the
issuance of 2,043,347 of our common shares valued at $4.06 per share. Beijing
Perspective Orient and its subsidiaries, collectively Beijing Perspective. Beijing
Perspective engages in the production, distribution and syndication of Fortune China.
Beijing Perspective ceased operations on December 31, 2009.
 
    
    Beijing Century Media.XFL, through a subsidiary, lent funds to two PRC citizens,
who used the funds to buy a combined 100% equity interest in Beijing Century Media on
September 9, 2005. On the same day, the subsidiary of XFL entered into a set of
agreements with these two PRC citizens to give XFL effective control over Beijing
Century Media. XFL transferred its control of Beijing Century Media to us through one
of our affiliated entities on March 16, 2006 at a price of $11.4 million. This amount
was included in our promissory notes to XFL and Xinhua Financial Network. Beijing Century
Media ceased operations on December 31, 2009.
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Advertising.
 
    
    JCBN China.We acquired 100% of the ordinary shares of Shanghai Paxi Advertising
Co., Ltd. and its subsidiaries, collectively JCBN China, on November 27, 2007 for an
initial price of approximately $40.8 million. In addition, the equity owners of JCBN
China are entitled to additional consideration, 60% payable in cash and 40% in our
common shares based on a predetermined earnout formula applied to aggregate audited
operating results through December 31, 2008 and 2009. For the year ended December 31,
2009, based on JCBN Chinas audited operating results through December 31, 2008, we
recorded additional consideration totaling $23.0 million, which resulted in additional
goodwill of $23.0 million for the year ended December 31, 2009. The additional
consideration consisted of $9.1 million paid by cash, $9.2 million settled by the
issuance of 11,357,473 of our common shares and consideration payable of $4.7 million
as of December 31, 2009. JCBN China is a leading advertising agency in Chinas online
property and imported spirits sectors. We entered into an agreement
with the original selling shareholder of JCBN China in June 2010 to
transfer our interest in JCBN China back to it.
 
    
    Profitown Group.We acquired 100% of the ordinary shares of Profitown Development
Ltd. and its subsidiaries, collectively Profitown Group, on November 27, 2007 for an
initial price of approximately $2.2 million. In addition to the initial consideration,
the equity owners of Profitown Group are entitled to additional consideration, 60%
payable in cash and 40% in our common shares, based on a predetermined earnout formula
applied to aggregate audited operating results through December 31, 2008 and 2009. For
the year ended December 31, 2009, based on Profitown Groups audited operating results
through December 31, 2008, we recorded additional consideration totaling $1.7 million,
which resulted in additional goodwill of $0.3 million for the year ended December 31,
2009. The additional consideration consisted of $0.7 million settled by the issuance of
560,500 of our common shares and consideration payable of $1.0 million as of December
31, 2009. Profitown Group is principally engaged in below-the-line
marketing. We entered into an agreement with the original selling
shareholder of Profitown Group in June 2010 to transfer our interest
in Profitown Group back to it.
 
    
    Singshine Marketing.We acquired 100% of Singshine (Holdings) Hongkong Ltd.s
ordinary shares, and its subsidiaries and VIEs, collectively Singshine Marketing, on
June 11, 2007 for an initial price of approximately $6.4 million. In addition, the
shareholders of Singshine Marketing are entitled to additional cash consideration based
on a predetermined earnout formula applied to aggregate audited operating results
through December 31, 2007, 2008 and 2009. Singshine Marketing is engaged in
below-the-line marketing services. For the year ended December 31, 2009, based on
Singshine Marketings audited operating results through December 31, 2008, we recorded
additional consideration totaling $7.4 million, which resulted in additional goodwill
of $7.4 million for the year ended December 31, 2009. The additional consideration
consisted of a cash payment of $5.4 million and consideration payable of $2.0 million
as of December 31, 2009.
 General factors affecting our results of operations
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Specific factors affecting our results of operations
  
    
    the quality of the content and ratings of our strategic partners broadcast
programs;
 
    
    the reach and timing of our strategic partners broadcasts;
 
    
    the quality of the advertising we produce for advertisers;
 
    
    the pricing of our advertising;
 
    
    the pricing and quality of our marketing services, including events organization;
 
    
    the quality of the programming we create;
 
    
    the popularity of the programs; and
 
    
    the pricing of our television programs and production services.
 Results of Operations for Continuing Operations
 Revenues
 Net revenues from continuing operation.
  
    
    advertising services, including our below-the-line services, which accounted for
90.2%, 82.0% and 78.6% of our total net revenues for the years ended December 31, 2007,
2008 and 2009, respectively; and
 
    
    advertising sales, which accounted for 9.8%, 18.0% and 21.4% of our total net
revenues for the years ended December 31, 2007, 2008 and 2009, respectively.
 Advertising services revenues.
 
    
    Advertising and user service fees for mobile value-added services (by the Broadcast
Group).We generate revenues by providing mobile value-added services. We recognize
these revenues when services are delivered to mobile users. In June 2007, we began
recognizing revenues from advertising and user service fees for mobile value-added
services. Our consolidated results of operations for the year ended December 31, 2007
increased as we acquired our mobile value-added services operations in June 2007.
 
    
    Marketing services (by the Advertising Group). We generate revenues primarily for
online real estate, spirits and events organization. The fees we charge for marketing
services vary, depending primarily on competition and our estimated costs of providing
the services. We recognize these revenues when the services are provided.
 
    
    Acting as advertising agent to place advertisements on certain programs aired by
various television stations, on billboards on university campuses in Shanghai and in
certain print and electronic media (by the Advertising Group).We categorize our
revenues for providing consulting and advisory services as advertising services
revenues. We recognize these revenues when the services are provided.
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
    
    Designing and producing television, radio, print and billboard advertisements (by the
Advertising Group).We generate revenues from advertising broadcast on various
television stations during certain programs. We also generate revenues from advertising
on billboards placed on some university campuses in Shanghai and from advertising in
certain print and electronic media. We may also provide additional services in relation
to the placement and sales of advertisements, including the creation of the advertising
or research services as part of our service package. We recognize these revenues when
the related advertisements are aired on television, placed on the billboards or
published in the print or electronic media, respectively.
  Advertising sales revenues.
 
    
    Shaanxi Satellite Television (by the Broadcast Group).Primarily through Everfame
Developments affiliated entity, through June 30, 2010 we held exclusive rights to sell
advertising in and the right to provide content to Shaanxi Satellite Television. In
April 2009, we began generating revenues from advertising sales, sponsorship and
sponsored programming on Shaanxi Satellite Television. Our advertising agency
agreement with Shaanxi Television Station was terminated by Shannxi Television Station
on June 30, 2010 due to our failure to make required payments. As of December 31, 2009
there were approximately $68.8 million in long-term liabilities related to the
agreement, which were recorded in our consolidated balance sheet. Due to the
termination of this agreement, this balance was reduced by $64.2 million. As of
December 31, 2009 the related intangible assets were the advertising agency agreement
of $19.3 million and the television program and film rights of $4.4 million. We
derived revenue of $20.8 million from this agreement for the year ended December 31,
2009, which represents 14.9% of our total revenue for that period. Everfame will be
classified as a discontinued operation in the second quarter of 2010.
 
    
    Outdoor advertising (by the Advertising Group).We generate revenues from selling
advertising space on traditional outdoor billboards, large-scale visual displays on
architectural surfaces and inflatable billboards. We have the exclusive right to sell
advertisements on these surfaces, and typically other advertising agents engage us to
place such advertisements. We receive payments through these agents or, when an
advertiser directly advertises with us, from the advertiser directly. We recognize
these revenues when the related advertisements are displayed. Our consolidated results
of operations for the year ended December 31, 2006 did not include these revenues as we
acquired Xinhua Finance Media (Convey) Ltd. (formerly Good Speed Holdings Limited)
and its subsidiaries, collectively Convey, a major outdoor advertising operator in Hong
Kong and across southern China, on July 2, 2007. Our consolidated results of
operations for the years ended December 31, 2007 and 2008 included these revenues from
this date of the acquisition. We disposed of Convey on December 31, 2008.
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Operating costs and expenses
  Year Ended December 31,2007
    
    
    2008
    
    
    2009$
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %(In thousands, except percentages)Total net revenues
    
    
    83,478
    
    
    
    100.0
    
    
    
    121,487
    
    
    
    100.0
    
    
    
    99,231
    
    
    
    100.0Operating costs and expenses:Cost of revenuesAdvertising services
    
    
    54,255
    
    
    
    65.0
    
    
    
    71,230
    
    
    
    58.6
    
    
    
    61,888
    
    
    
    62.4Advertising sales
    
    
    3,805
    
    
    
    4.6
    
    
    
    9,483
    
    
    
    7.8
    
    
    
    23,554
    
    
    
    23.7Selling and distribution
    
    
    5,662
    
    
    
    6.8
    
    
    
    10,683
    
    
    
    8.8
    
    
    
    7,708
    
    
    
    7.8General and administrative
    
    
    17,890
    
    
    
    21.4
    
    
    
    45,604
    
    
    
    37.5
    
    
    
    27,762
    
    
    
    28.0Impairment charges
    
    
    
    
    
    
    
    
    
    
    159,938
    
    
    
    131.7
    
    
    
    176,772
    
    
    
    178.1Loss on disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    4,721
    
    
    
    3.9
    
    
    
    25,640
    
    
    
    25.8Total operating costs and expenses
    
    
    81,612
    
    
    
    97.8
    
    
    
    301,659
    
    
    
    248.3
    
    
    
    323,324
    
    
    
    325.8
 Cost of revenues.
 
    
    Advertising services.Advertising services costs primarily consist of our direct
costs to secure advertising time or space with various broadcast and print media, costs
to produce advertisements, mobile value-added services costs, marketing services costs
and research costs. Mobile value-added services costs represent our direct costs of
providing mobile value-added services. Marketing services costs represent our direct
costs of providing marketing services, including events organization.
 
    
    Advertising sales.Advertising sales costs primarily consist of (i) the fees we
paid to Shaanxi Television Station and amortization of these fees, in return for
advertising revenues generated from Shaanxi Satellite Television and (ii) costs to
maintain and operate our outdoor advertising network.
  Selling and distribution expenses.
 General and administrative expenses.
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Impairment charges.
 Loss on disposal of subsidiaries.
 Share-based compensation expenses
     
    
    We granted the following restricted common shares to our Chief Executive Officer:
 Number of
    
    
    
    
    
    
    Fair Value ofCommon
    
    
    Share Purchase
    
    
    Non-vested
    
    
    Type ofGrant Date
    
    Shares Granted
    
    
    Price
    
    
    Shares
    
    
    ValuationApril 2, 2010
    
    
    6,000,000
    
    
    Par value
    
    $
    0.33
    
    
    Market approach
 
    
    We granted the following restricted common shares to certain executives and
employees:
 Number of
    
    
    
    
    
    
    Fair Value ofCommon
    
    
    Share Purchase
    
    
    Restricted Class A
    
    
    Type ofGrant Date
    
    Shares Granted
    
    
    Price
    
    
    Common Shares
    
    
    ValuationJanuary 23, 2008
    
    
    5,536,000
    
    
    Par value
    
    $
    2.24
    
    
    Market approachJune 23, 2009
    
    
    180,000
    
    
    Par value
    
    $
    0.37
    
    
    Market approachJuly 11, 2009
    
    
    250,000
    
    
    Par value
    
    $
    0.42
    
    
    Market approachDecember 10, 2009
    
    
    800,000
    
    
    Par value
    
    $
    0.55
    
    
    Market approach
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
    
    We granted options to our employees and consultants as follows:
 Number of
    
    
    
    
    
    
    Fair Value ofCommon
    
    
    
    
    
    
    UnderlyingShares
    
    
    Option
    
    
    Common
    
    
    Fair Value ofUnderlying
    
    
    Exercise
    
    
    Shares at
    
    
    Option at
    
    
    Type ofGrant Date
    
    Options Granted
    
    
    Price
    
    
    Grant Date
    
    
    Grant Date
    
    
    ValuationApril 25, 2007
    
    
    90,000
    
    
    
    6.50
    
    
    
    5.20
    
    
    
    1.85
    
    
    Market ApproachSeptember 26, 2007
    
    
    120,000
    
    
    
    4.39
    
    
    
    4.39
    
    
    
    1.85
    
    
    Market ApproachApril 1, 2008
    
    
    400,000
    
    
    
    1.325
    
    
    
    1.62
    
    
    
    0.97
    
    
    Market ApproachApril 30, 2008
    
    
    60,000
    
    
    
    1.64
    
    
    
    2.075
    
    
    
    1.39
    
    
    Market ApproachJune 13, 2008
    
    
    120,000
    
    
    
    1.265
    
    
    
    1.265
    
    
    
    0.77
    
    
    Market ApproachJanuary 8, 2009
    
    
    1,000,000
    
    
    
    0.305
    
    
    
    0.325
    
    
    
    0.18
    
    
    Market ApproachDecember 31, 2009
    
    
    160,000
    
    
    
    0.425
    
    
    
    0.425
    
    
    
    0.24
    
    
    Market Approach
 
 (1)
    
    Total number of options granted in 2006 was 11,198,180, of which an aggregate of 3,072,596
options were exercised during 2007 and 2008 while 2,961,255 options lapsed during 2006, 2007,
2008 and 2009, mostly due to termination of employment.   Results of Operations for Discontinued Operations
 Revenues
 Net revenues from discontinued operations.
  Advertising services revenues.
 
    
    Acting as advertising agent to place advertisements on certain programs aired by
Inner Mongolia Satellite Television (by our Broadcast Group).In January 2007, we
began recognizing revenues from advertising, sponsorship and sponsored programming
directly rather than through Shanghai Camera, and at that point began to categorize our
revenues for advertising, sponsorship and sponsored programming in relation to Inner
Mongolia Satellite Television as advertising sales revenues. As we terminated this
business in 2009, the revenue was reclassified as discontinued operations for the years
ended December 31, 2007, 2008 and 2009.
 
    
    Research services (by the Advertising Group).We generated revenues for providing
research services to companies relating to market characteristics, consumer preferences
and opinions with respect to advertising and media content, as well as business and
technology issues. The fees we charged for research projects varied, depending on
competition and our estimated costs for providing the research services. We recognized
these revenues when the reported data was accepted by the customer. As we terminated
this business in 2009, the revenue was reclassified as discontinued operations for the
years ended December 31, 2007, 2008 and 2009.
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Advertising sales revenues.
 
    
    Inner Mongolia Satellite Television (by the Broadcast Group).Primarily through
Upper Step Holdings Limited, or Upper Step Holdings subsidiaries and affiliated
entities, we had a strategic partnership with Shanghai Camera, the content and
advertising provider to Inner Mongolia Satellite Television. In December 2006, we
began recognizing revenues from advertising sales, sponsorship and sponsored programs
directly, rather than through Shanghai Camera, as the services were performed, which
revenues were categorized as advertising sales revenues. In the year ended December
31, 2008, we generated revenues from advertising sales, sponsorship and sponsored
programming on Inner Mongolia Satellite Television through our strategic partnership
with Shanghai Camera, which had the exclusive rights to sell advertising for Inner
Mongolia Satellite Television. As we terminated this business in 2009, the revenue was
reclassified as discontinued operations for the years ended December 31, 2007, 2008 and
2009.
 
    
    China Radio Internationals EasyFM stations in Beijing and Shanghai (by the
Broadcast Group). We generated revenues from selling advertising time slots and
sponsorship on China Radio Internationals EasyFM stations in Beijing and Shanghai. We
recognized these revenues when the related advertisements were broadcast. As we
terminated this business in 2009, the revenue was reclassified as discontinued
operations for the years ended December 31, 2007, 2008 and 2009.
 
    
    Channel FM107.7, FM103.6 and FM90.0 of the Guangdong Peoples Radio Station (by the
Broadcast Group).We generated revenues from selling advertising time slots and
sponsorships on several radio channels of the Guangdong Peoples Radio Station,
including FM107.7, FM103.6 and FM90.0. We recognized these revenues when the related
advertisements were broadcast. As we terminated this business in 2009, the revenue was
reclassified as discontinued operations for the years ended December 31, 2007, 2008 and
2009.
 
    
    Economic Observer (by our print business).We generated revenues from selling
advertising space in the Economic Observer. We previously held the exclusive rights to
sell advertisements for the Economic Observer, and typically other advertising agents
engaged us to place advertisements on its pages. We received payments through these
agents or, when an advertiser directly advertised with us, from the advertiser. We
recognized these revenues when the related advertisements were published. As we
discontinued the operation of Economic Observerin 2009, the revenue was reclassified
as discontinued operation for the years ended December 31, 2007, 2008 and 2009.
 
    
    Money Journal and Chinese Venture (by our print business).We generated revenues
from selling advertising space in the Money Journaland Chinese Venture. Most
advertisements placed in these magazines result in revenues to us, except for those
advertisements placed in Money Journalby Dow Jones, most of which result in revenues
to Dow Jones. See Item 4.B. Information on the Company  Business overview 
Arrangements with partners and suppliers  Our Print Groups relationship with Dow
Jones. We generated some advertising sales revenues directly from advertisers, and
some through agents. We recognized these revenues when the related advertisements were
published. As we terminated this business in 2009, the revenue was reclassified as
discontinued operations for the years ended December 31, 2007, 2008 and 2009.
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Content production revenues.
    Publishing services revenues. Money Journal
 Money Journal Money
Journal
 Chinese Venture
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Operating costs and expenses
  Year Ended December 31,2007
    
    
    2008
    
    
    2009$
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %(In thousands, except percentages)Total net revenues
    
    
    51,361
    
    
    
    100.0
    
    
    
    64,544
    
    
    
    100.0
    
    
    
    41,429
    
    
    
    100.0Operating costs and expenses:Cost of revenues
    
    
    24,039
    
    
    
    46.8
    
    
    
    33,779
    
    
    
    52.3
    
    
    
    26,108
    
    
    
    63.0Selling and distribution
    
    
    9,215
    
    
    
    17.9
    
    
    
    12,263
    
    
    
    19.0
    
    
    
    7,247
    
    
    
    17.5General and administrative
    
    
    6,459
    
    
    
    12.6
    
    
    
    6,464
    
    
    
    10.0
    
    
    
    13,119
    
    
    
    31.7Impairment charges
    
    
    
    
    
    
    
    
    
    
    72,660
    
    
    
    112.6
    
    
    
    118,044
    
    
    
    284.9Loss on disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,940
    
    
    
    4.7Total operating costs and expenses
    
    
    39,713
    
    
    
    77.3
    
    
    
    125,166
    
    
    
    193.9
    
    
    
    166,458
    
    
    
    401.8
 Cost of revenues. Money Journal Chinese Venture Economic Observer Money Journal
 Selling and distribution expenses.
 General and administrative expenses.
 Impairment charges.
 Loss on disposal of subsidiaries.
 Taxation
   71




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The Cayman Islands, the British Virgin Islands and Hong Kong
  PRC
        72




---



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Critical Accounting Policies
   73




---



##### Table of Contents



Revenue recognition
    
    
    we secure the advertising media resources from television, websites and other
sources, and as a result, we bear the risk of ownership and are exposed to the risk
that we may not be able to sell the purchased resources;
 
    
    we are able to establish the prices charged to our customers; and
 
    
    we are obligated to pay for the purchased resources regardless of the collection
from the advertising customers and as a result we bear the credit risks for the
revenues generated with respect to our services.
  Impairment of goodwill
    74




---



##### Table of Contents



UpperStep (2)Singshine
    
    
    M-in
    
    
    JCBN
    
    
    Profitown
    
    
    
    
    
    
    & BeijingReporting Units
    
    XFA (1)
    
    
    Marketing
    
    
    Group
    
    
    China
    
    
    Group
    
    
    Everfame
    
    
    Perspective
    
    
    Total(In thousands)Fair value of
reporting unit
    
    $
    (10,587
    )
    
    $
    8,021
    
    
    $
    18,763
    
    
    $
    8,581
    
    
    $
    1,880
    
    
    $
    (39,094
    )
    
    $
    (11,701
    )
    
    $
    (24,137
    )Carrying value
excluding goodwill
(after impairment
of other long-lived
assets)
    
    $
    7,867
    
    
    $
    9,890
    
    
    $
    9,468
    
    
    $
    14,448
    
    
    $
    786
    
    
    $
    (64,455
    )
    
    $
    (12,102
    )
    
    $
    (34,098
    )Implied FV of
goodwill
    
    $
    
    
    
    $
    
    
    
    $
    9,295
    
    
    $
    
    
    
    $
    1,093
    
    
    $
    
    
    
    $
    
    
    
    
    N/AGoodwill before
impairment
    
    $
    9,120
    
    
    $
    15,340
    
    
    $
    6,933
    
    
    $
    36,975
    
    
    $
    305
    
    
    $
    10,037
    
    
    $
    11,689
    
    
    $
    90,399Goodwill Impairment
    
    $
    9,120
    
    
    $
    15,340
    
    
    Nil
    
    
    $
    36,975
    
    
    Nil
    
    
    $
    10,037
    
    
    $
    11,689
    
    
    $
    83,161Goodwill After
impairment
    
    Nil
    
    
    Nil
    
    
    $
    6,933
    
    
    Nil
    
    
    $
    305
    
    
    Nil
    
    
    Nil
    
    
    $
    7,238Discount rate used
for impairment test
    
    
    16
    %
    
    
    21
    %
    
    
    17.5
    %
    
    
    20
    %
    
    
    15
    %
    
    
    20
    %
    
    
    N/A
    
    
    
    N/A
 (1)
    
    XSEL Advertising Limited and its wholly- and majority-owned subsidiaries and VIEs
(collectively, XFA).(2)
    
    Upper Step Holdings Limited and its subsidiaries (collectively, Upper Step).  Reporting Units
    
    M-in Group
    
    
    Profitown Group(In thousands)Fair value of reporting unit
    
    $
    18,763
    
    
    $
    1,880Carrying value of reporting unit (after impairment
of goodwill and other long-lived assets)
    
    $
    16,401
    
    
    $
    1,091Percentage by which fair value exceeds carrying value
    
    
    14
    %
    
    
    72
    %
    75




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Impairment of intangible assets with definite lives
        76




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Allowance for doubtful accounts
  Income taxes
        77




---



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Valuation of share-based compensation
   Results of Operations
  Year Ended December 31,2007
    
    
    2008
    
    
    2009(In thousands, except per share data)Net revenues:Advertising services
    
    $
    75,337
    
    
    $
    99,575
    
    
    $
    78,016Advertising sales
    
    
    8,141
    
    
    
    21,912
    
    
    
    21,215Total net revenues
    
    
    83,478
    
    
    
    121,487
    
    
    
    99,231Cost of revenues:Advertising services
    
    
    54,255
    
    
    
    71,230
    
    
    
    61,888Advertising sales
    
    
    3,805
    
    
    
    9,483
    
    
    
    23,554Total cost of revenues
    
    
    58,060
    
    
    
    80,713
    
    
    
    85,442Operating expenses:Selling and distribution
    
    
    5,662
    
    
    
    10,683
    
    
    
    7,708General and administrative(1)
    
    
    17,890
    
    
    
    45,604
    
    
    
    27,762Impairment charges
    
    
    
    
    
    
    159,938
    
    
    
    176,772Loss on disposal of subsidiaries
    
    
    
    
    
    
    4,721
    
    
    
    25,640Total operating expenses
    
    
    23,552
    
    
    
    220,946
    
    
    
    237,882Other operating income
    
    
    2,262
    
    
    
    1,251
    
    
    
    2,065Income (loss) from operations
    
    
    4,128
    
    
    
    (178,921
    )
    
    
    (222,028
    )Other income (expense), net
    
    
    5,745
    
    
    
    (27,308
    )
    
    
    4,651Provision for income taxes (benefit)
    
    
    671
    
    
    
    1,728
    
    
    
    (4,057
    )Net income (loss) from continuing operation
    
    
    9,202
    
    
    
    (207,957
    )
    
    
    (213,320
    )Discontinued operation, net of taxes
    
    
    20,140
    
    
    
    (66,274
    )
    
    
    (100,296
    )Net income (loss)
    
    $
    29,342
    
    
    $
    (274,231
    )
    
    
    (313,616
    )Net income (loss) attributable to non-controlling interest
    
    
    1,303
    
    
    
    641
    
    
    
    (2,041
    )Net income (loss) attribute to XSEL
    
    
    28,039
    
    
    
    (274,872
    )
    
    
    (311,575
    )Deemed dividend on redeemable convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
  78




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Year Ended December 31,2007
    
    
    2008
    
    
    2009(In thousands, except per share data)Dividends declared to redeemable convertible preferred shares
    
    
    (1,338
    )
    
    
    (2,000
    )
    
    
    (2,560
    )Net income (loss) attributable to holders of common shares
    
    $
    26,701
    
    
    $
    (276,872
    )
    
    
    (314,135
    )Net income (loss) from continuing operations per share:Basic  class A common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Basic  class B common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Diluted  class A common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Diluted  class B common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Net income (loss) from discontinued operations per share:Basic  class A common share
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Basic  class B common share
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    Diluted  class A common share
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Diluted  class B common share
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    Shares used in computation:Basic  class A common share
    
    
    66,166
    
    
    
    85,927
    
    
    
    157,730Basic  class B common share
    
    
    50,055
    
    
    
    49,917
    
    
    
    Diluted  class A common share
    
    
    86,315
    
    
    
    85,927
    
    
    
    157,730Diluted  class B common share
    
    
    50,055
    
    
    
    49,917
    
    
    
    
 
 (1)
    
    Includes share-based compensation expenses of $3.1 million, $12.5 million and $2.4 million
for the years ended December 31, 2007, 2008 and 2009, respectively. Year ended December 31, 2009 Compared to Year Ended December 31, 2008
 Net revenues.
 
    
    Advertising services.Our net revenues from advertising services were $99.6 million
and $78.0 million, and constituted 82.0% and 78.6% of our total net revenues, for the
years ended December 31, 2008 and 2009, respectively. Our advertising services for
2008 and 2009 were derived primarily from advertising agency services for billboard and
website advertising medium and mobile value-added services, and marketing services,
including event organization, visual design and production. Our advertising services
revenues decreased by $21.6 million between 2008 and 2009 primarily due to a decrease
in below-the-line marketing services. Our advertising service revenues as a percentage
of total net revenues decreased in line with the decrease in overall advertising sales.
 
    
    Advertising sales.Our net revenues from advertising sales were $21.9 million and
$21.2 million, and constituted 18.0% and 21.4% of our total net revenues, for the years
ended December 31, 2008 and 2009, respectively. Our advertising sales revenues for
2008 mainly represented advertising revenues generated by billboard advertising. Our
advertising sales revenues for 2009 mainly represented revenue generated by sales of
advertising and sponsorship on Shaanxi Satellite Television. Our advertising sales
revenues decreased between 2008 and 2009 due to our disposal of Convey.
 Cost of revenues
 
    
    Advertising services. Our advertising services costs of $71.2 million and $61.9
million accounted for 88.3% and 72.4% of our total cost of revenues for the years ended
December 31, 2008 and 2009, respectively. Our advertising services costs in 2008 and
2009 were derived primarily from advertising agency services for billboard and website
advertising medium and mobile value-added services, and marketing services, including
event organization, visual design and production. Our advertising services costs
decreased by $9.3 million between 2008 and 2009 primarily due to a decrease in
below-the-line market services. Our advertising services costs as a percentage of total
cost of revenues fell in line with the decrease in revenues attributable to advertising services as a percentage
of total net revenues.
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
    
    Advertising sales. Our advertising sales costs of $9.5 million and $23.6 million
constituted 11.7% and 27.6% of our total cost of revenues for the years ended December
31, 2008 and 2009, respectively. Our advertising sales costs in 2008 primarily
consisted of costs associated with our outdoor advertising network. Our advertising
sales costs in 2009 primarily consisted of the cost of operating Shaanxi Satellite
Television and amortization costs incurred in connection with obtaining the license
rights for Shaanxi Satellite Television. Our advertising sales costs increased by $14.1
million between 2008 and 2009 primarily due to higher costs for operating television
compared with outdoor advertising.
 Operating expenses
 
    
    Selling and distribution expenses. Our selling and distribution expenses of $10.7
million and $7.7 million represented 4.8% and 3.2% of our total operating expenses for
the years ended December 31, 2008 and 2009, respectively. Our selling and distribution
expenses decreased by $3.0 million between 2008 and 2009 primarily due to a decrease in
amortization expenses of $2.7 million. Our selling and distribution expenses as a
percentage of our total operating expenses decreased between 2008 and 2009 primarily
due to a significant increase in general and administrative expenses and impairment
charges.
 
    
    General and administrative expenses. Our general and administrative expenses were
$45.6 million and $27.8 million, or 20.7% and 11.7% of our total operating expenses,
for the years ended December 31, 2008 and 2009, respectively. Our general and
administrative expenses decreased by $17.7 million between 2008 and 2009 primarily due
to a decrease in share-based compensation expenses, staff cost, auditor remuneration
and a group service charge to XFL of $9.9 million, $2.0 million, $1.9 million and $1.2
million, respectively. Our general and administrative expenses as a percentage of our
total operating expenses decreased in line with the decrease in general and
administrative expenses.
 
    
    Impairment charges. We had impairment charges of $159.9 million and $176.8 million,
or 72.4% and 74.3% of our total operating expenses, for the years ended December 31,
2008 and 2009, respectively. The impairment charges in 2008 mainly included impairment
of goodwill of $137.3 million and intangible assets of $11.9 million in connection with
our acquisitions of XFA, JCBN China, M-In Group and Singshine Communication. The
impairment of goodwill and intangible assets was mainly due to a decrease in the fair
value of the reporting units affected by the slowdown in the global economy and the
repositioning of our business to sports and entertainment. The impairment charges in
2009 included impairment of goodwill of $71.5 million and intangible assets of $98.4
million in connection with our acquisitions of XFA, JCBN China, M-In Group, Singshine
Communication and Everfame. The impairment of goodwill and intangible assets was the
result of a decrease in the fair value of the reporting units affected by the slowdown
in the global economy and termination of business units, resulting from our
repositioning to the sports and entertainment fields.
 
    
    Loss on disposal of subsidiaries. We had a loss on disposal of subsidiaries of $4.7
million and $25.6 million, or 2.1% and 10.8% of our total operating expenses, for the
year ended December 31, 2008 and 2009, respectively. The loss on disposal of
subsidiaries in 2008 was due to loss on disposal of our 85% equity interest in Convey.
On December 31, 2008 we entered into an agreement with Pariya Holdings Limited for the
sale of Convey. Pursuant to the terms of the agreement, the total consideration to be
paid for the asset transfer is $85.0 million and is subject to deduction of an earnout
payment, which is estimated to be approximately $10.6 million. The consideration will
be paid in six interest-free installment payments from the date of disposal through the
end of 2012. Should the actual net income of Convey for the 2008 earnout period be
lower or higher than currently estimated, there would be a corresponding impact on the
loss. The range of this potential impact ranges from a reduction of the loss by
approximately $11.0 million, thus becoming a gain on disposal of the subsidiary of $7.0
million, to an additional loss of approximately $29.0 million. The loss on disposal of
subsidiaries in 2009 was due to provision for consideration receivable of $25.6 million
for disposal of our 85% equity
interest in Convey driven by the uncertain visibility for settlement of certain amounts
receivable as determined during the fourth quarter of 2009.
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Other operating income
 Other income (expense), net
 Provision for income taxes (benefit)
 Net loss from continuing operations
 Net Income (loss) from discontinued operations net of taxes
 Net income attributable to non-controlling interests
  81




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Net loss attribute to XSEL.
 Year ended December 31, 2008 Compared to Year Ended December 31, 2007
 Net revenues
 
    
    Advertising services. Our net revenues from advertising services were $75.3 million
and $99.6 million, and constituted 90.2% and 82.0% of our total net revenues, for the
years ended December 31, 2007 and 2008, respectively. Our advertising services for
2007 and 2008 were derived primarily from advertising agency services for billboard and
website advertising medium and mobile value-added services, and marketing services,
including event organization, visual design and production. Our advertising services
revenue increased by $24.3 million between 2007 and 2008 primarily due to an increase
in the number of mobile users in China, full year operation of our subsidiaries
acquired in 2007, an increase in sales for our advertising platforms and the growth of
our business generally. Our advertising service revenues as a percentage of total net
revenues decreased primarily due to greater growth in other parts of our business.
 
    
    Advertising sales. Our net revenues from advertising sales were $8.1 million and
$21.9 million, and constituted 9.8% and 18.0% of our total net revenues, for the years
ended December 31, 2007 and 2008, respectively. Our advertising sales revenues for
2007 and 2008 included advertising revenues generated by billboard advertising. Our
advertising sales revenues increased by $13.8 million between 2007 and 2008 mainly due
to full year operation of Convey which we acquired in 2007.
 Cost of revenues
 
    
    Advertising services. Our advertising services costs of $54.3 million and $71.2
million accounted for 93.4% and 88.3% of our total cost of revenues for the years ended
December 31, 2007 and 2008, respectively. Our advertising services costs in 2007 and
2008 were derived primarily from advertising agency services for billboard and website
advertising medium and mobile value-added services, and marketing services, including
event organization, visual design and production. Our advertising services costs
increased by $16.9 million between 2007 and 2008 primarily due to the growth of our
business generally.
 
    
    Advertising sales. Our advertising sales costs of $3.8 million and $9.5 million
constituted 6.6% and 11.7% of our total cost of revenues for the years ended December
31, 2007 and 2008, respectively. Our advertising sales costs in 2007 and 2008
primarily represented our outdoor advertising network. Our advertising sales costs
increased by $5.7 million between 2007 and 2008 primarily due to full year operation of
Convey which we acquired in 2007.
 Operating expenses
 
    
    Selling and distribution expenses. Our selling and distribution expenses were $5.7
million and $10.7 million, representing 24.0% and 4.8% of our total operating expenses
for the years ended December 31, 2007 and 2008, respectively. Our selling and
distribution expenses increased by $5.0 million between 2007 and 2008 primarily due to
the net off effect of an increase in amortization expense of $3.0 million, an increase
in staff cost of $2.6 million and a decrease in marketing cost of $0.5 million. Our
selling and distribution expenses as a percentage of our total operating expenses
decreased between 2007 and 2008 primarily due to a significant increase in other
operating expenses, such as impairment charges and loss on disposal of subsidiaries.
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
    
    General and administrative expenses. Our general and administrative expenses were
$17.9 million and $45.6 million, or 76.0% and 20.7% of our total operating expenses,
for the years ended December 31, 2007 and 2008, respectively. Our general and
administrative expenses increased by $27.7 million between 2007 and 2008 primarily due
to an increase in staff cost of $4.7 million, an increase in share-based compensation
expenses of $9.4 million, an increase in legal and professional fees of $3.0 million
and an increase in rental expense of $1.1 million. Our general and administrative
expenses as a percentage of our total operating expenses decreased between 2007 and
2008 primarily due to a significant increase in other operating expenses, such as
impairment charges and loss on disposal of subsidiaries.
 
    
    Impairment charges. We had impairment charges of $159.9 million, or 72.4% of our
total operating expenses, for the year ended December 31, 2008, primarily due to
impairment of goodwill and intangible assets in connection with our acquisitions of
XFA, JCBN China, M-In Group and Singshine Communication. The impairment of goodwill of
$137.3 million and intangible assets of $11.9 million was a result of (i) the decrease
in the fair value of the reporting units affected by the slowdown in the global economy
and the repositioning of our business to sports and entertainment and (ii) impairment
of a promissory note issued by Sino Investment with accrued interest in the aggregate
of $8.5 million due to the Sino Investments default with respect to interest payments.
 
    
    Loss on disposal of subsidiaries. We had a loss on disposal of subsidiaries of $4.7
million, or 2.1% of our total operating expenses, for the year ended December 31, 2008,
due to loss on disposal of our equity interest in Convey. On December 31, 2008 we
entered into an agreement with Pariya Holdings Limited for the sale of Convey.
Pursuant to the terms of the agreement, the total consideration to be paid for the
asset transfer is $85.0 million and is subject to deduction of an earnout payment,
which is estimated to be approximately $10.6 million. The consideration will be paid
in six interest-free installment payments from the date of disposal through the end of
2012. Should the actual net income of Convey for the earn-out period be lower or
higher than currently estimated, there would be a corresponding impact on the loss.
The range of this potential impact ranges from a reduction of the loss by approximately
$11.0 million, thus becoming a gain on disposal of the subsidiary of $7.0 million, to
an additional loss of approximately $29.0 million.
 Other operating income
 Other income (expense), net
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Provision for income taxes (benefit)
 Net income (loss) from continuing operations
 Net Income (loss) from discontinued operations net of taxes
 Net income attributable to non-controlling interests
 Net income (loss) attribute to XSEL.
 Segment Discussion for Continuing Operations
  Year Ended December 31,2007
    
    
    2008
    
    
    2009(In thousands)Net revenues of reportable segments:Advertising
    
    
    74,141
    
    
    
    108,326
    
    
    
    62,103Broadcast
    
    
    9,337
    
    
    
    13,161
    
    
    
    37,128Total net revenues of our company
    
    
    83,478
    
    
    
    121,487
    
    
    
    99,231Cost of revenues and other operating expenses
excluding depreciation and amortization:Advertising
    
    
    57,154
    
    
    
    226,072
    
    
    
    133,554Broadcast
    
    
    6,140
    
    
    
    25,661
    
    
    
    115,999XSEL Corporate
    
    
    12,756
    
    
    
    39,156
    
    
    
    55,776Total cost of revenues and other operating
expenses excluding depreciation and
amortization
    
    
    76,050
    
    
    
    290,889
    
    
    
    305,329
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Year Ended December 31,2007
    
    
    2008
    
    
    2009(In thousands)Depreciation and amortization:Advertising
    
    
    3,684
    
    
    
    7,643
    
    
    
    3,383Broadcast
    
    
    1,740
    
    
    
    2,804
    
    
    
    13,675XSEL Corporate
    
    
    138
    
    
    
    323
    
    
    
    937Total depreciation and amortization
    
    
    5,562
    
    
    
    10,770
    
    
    
    17,995Other operating income (loss):Advertising
    
    
    
    
    
    
    781
    
    
    
    1,836Broadcast
    
    
    
    
    
    
    468
    
    
    
    95XSEL Corporate
    
    
    2,262
    
    
    
    2
    
    
    
    134Total other operating income
    
    $
    2,262
    
    
    $
    1,251
    
    
    $
    2,065Operating income (loss):Advertising
    
    
    13,303
    
    
    
    (124,608
    )
    
    
    (72,998
    )Broadcast
    
    
    1,457
    
    
    
    (14,836
    )
    
    
    (92,451
    )XSEL Corporate
    
    
    (10,632
    )
    
    
    (39,477
    )
    
    
    (56,579
    )Total operating income (loss)
    
    $
    4,128
    
    
    $
    (178,921
    )
    
    $
    (222,028
    )
 Year ended December 31, 2009 Compared to Year Ended December 31, 2008
 Net Revenues.
 
    
    Advertising.Our net revenues from the Advertising Group were $108.3 million and
$62.1 million, representing 89.2% and 62.6% of our total net revenues, for the years
ended December 31, 2008 and 2009, respectively. Our net revenues from the Advertising
Group in 2008 and 2009 primarily consisted of advertising sales revenues generated by
billboard advertising, advertising service revenues derived from advertising agency
services for print, television, billboard and website advertising medium, revenues
derived from marketing services, including event organization and visual design. The
decrease in our net revenues between 2008 and 2009 from the Advertising Group was
primarily attributable to a decrease in revenue derived from billboards as a result of
our disposal of Convey at the end of 2008 and a decrease in the revenue from
below-the-line marketing services due to strong competition in that market.
 
    
    Broadcast.Our net revenues from the Broadcast Group were $13.2 million and $37.1
million, and constituted 10.8% and 37.4% of our total net revenues, for the years ended
December 31, 2008 and 2009, respectively. Our net revenues from the Broadcast Group in
2009 primarily consisted of sales of mobile value-added services. Our net revenues
from the Broadcast Group in 2008 primarily consisted of sales of advertising and
sponsorship on Shaanxi Satellite Television and sales of mobile value-added services.
Our net revenues from the Broadcast Group increased between 2008 and 2009 primarily due
to an increase in the number of mobile users in China and the acquisition of Everfame
Group, which through June 30, 2010 held the exclusive advertising right for Shaanxi
Satellite Television.
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Cost of revenues and other expenses excluding depreciation and amortization.
 
    
    Advertising.Advertising Group costs of $226.1 million and $133.6 million,
representing 77.7% and 43.7% of our total cost of revenues and other operating expenses
excluding depreciation and amortization for the years ended December 31, 2008 and 2009,
respectively, primarily consisted of the
purchase of advertising time and space from various media outlets, event organization
costs, salaries and allowances, marketing cost, sales commissions, translation costs and
transportation costs. Our cost of revenues attributable to the Advertising Group fell
between 2008 and 2009 primarily due to a decrease in assets impairment of $55.1 million.
 
    
    Broadcast.Broadcast Group costs of $25.7 million and $116.0 million constituted
8.8% and 38.0% of our total cost of revenues and other operating expenses excluding
depreciation and amortization for the years ended December 31, 2008 and 2009,
respectively. Broadcast Group costs in 2008 primarily consisted of purchases of
software and hardware and costs associated with the operation of our mobile value-added
services system. Broadcast Group costs in 2009 primarily consisted of salaries and
allowances, the costs of purchasing distribution rights for programs, purchases of
software and hardware and cost associated with operation of our mobile value-added
services system. Our cost of revenues attributable to the Broadcast Group grew between
2008 and 2009 primarily due to an increase in asset impairment of $77.8 million and an
increase in the cost of purchasing distribution rights for programs for Shaanxi
Satellite Television, for which we held advertising rights in 2009.
 
    
    XSEL corporate.Corporate costs of $39.2 million and $55.8 million constituted
13.5% and 18.3% of our total cost of revenues and other operating expenses excluding
depreciation and amortization for the years ended December 31, 2008 and 2009,
respectively, and consisted primarily of staff benefits, staff salaries, auditor
remuneration and legal and professional fees. Our cost of revenues attributable to
XSEL corporate grew between 2008 and 2009 primarily due to an increase in impairment of
assets of $32.3 million partially offset by a decrease in share-based compensation
expenses of $9.9 million, a decrease in audit and related fees of $2.9 million and a
decrease in group service charges to XFL of $1.2 million.
 Year ended December 31, 2008 Compared to Year Ended December 31, 2007
 Net Revenues.
 
    
    Advertising.Our net revenues from the Advertising Group were $74.1 million and
$108.3 million, representing 88.8% and 89.2% of our total net revenues, for the years
ended December 31, 2007 and 2008, respectively. Our net revenues from the Advertising
Group in 2007 and 2008 primarily consisted of advertising sales revenues generated by
billboard advertising, advertising service revenues derived from advertising agency
services for billboard and website advertising medium, and revenues derived from
marketing services, including event organization and visual design. The increase in
2008 in our net revenues from the Advertising Group was primarily attributable to the
full year operation of our subsidiaries acquired in 2007, an increase in sales from our
advertising platforms and the growth of our business generally.
 
    
    Broadcast.Our net revenues from the Broadcast Group were $9.3 million and $13.2
million, and constituted 11.2% and 10.8% of our total net revenues, for the years ended
December 31, 2007 and 2008, respectively. Our net revenues from the Broadcast Group in
2007 and 2008 primarily consisted of sales of mobile value-added services. Our net
revenues from the Broadcast Group increased between 2007 and 2008 primarily due to an
increase in the number of mobile users in China.
 Cost of revenues and other expenses excluding depreciation and amortization.
 
    
    Advertising.Advertising Group costs of $57.2 million and $226.1 million,
representing 75.2% and 77.7% of our total cost of revenues and other operating expenses
excluding depreciation and amortization for the years ended December 31, 2007 and 2008,
respectively, primarily consisted of the purchase of advertising time or space from
various media outlets, events organization cost, salaries and allowances, marketing
cost, sales commissions, translation cost and transportation cost. Our cost of
revenues attributable to the Advertising Group grew between 2007 and 2008 primarily due
to the growth of our existing business, an increase in loss on our disposal of Convey of $4.7
million and an increase in assets impairment charge of $136.2 million.
  86




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
    
    Broadcast.Broadcast Group costs of $6.1 million and $25.7 million constituted 8.1%
and 8.8% of our total cost of revenues and other operating expenses excluding
depreciation and amortization for the years ended December 31, 2007 and 2008,
respectively. Broadcast Group costs in 2007 and 2008 primarily consisted of salaries
and allowances, purchases of software and hardware and cost associated with operation
of our mobile value-added services system. Our cost of revenues attributable to the
Broadcast Group grew between 2007 and 2008 primarily due to the growth of our existing
business, and an increase in asset impairment charges of $15.2 million.
 
    
    XSEL corporate.Corporate costs of $12.8 million and $39.2 million constituted
16.7% and 13.5% of our total cost of revenues and other operating expenses excluding
depreciation and amortization for the years ended December 31, 2007 and 2008,
respectively, and consisted primarily of staff benefits, staff salaries, auditor
remuneration and legal and professional fees. Our cost of revenues attributable to
XSEL corporate grew between 2007 and 2008 primarily due to our increased size due to
the growth of our existing business, and an impairment charge on a promissory note of
$8.5 million.
 B. Liquidity and Capital Resources
     87




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Year Ended December 31,2007
    
    
    2008
    
    
    2009(In thousands)Net cash provided by operating activities
    
    $
    20,293
    
    
    $
    14,982
    
    
    $
    1,975Net cash used in investing activities
    
    
    (164,922
    )
    
    
    (54,466
    )
    
    
    (29,431
    )Net cash provided by financing activities
    
    
    151,259
    
    
    
    46,521
    
    
    
    (13,006
    )Effect of exchange rate changes
    
    
    1,452
    
    
    
    2,616
    
    
    
    (9
    )Net increase in cash
    
    
    8,082
    
    
    
    9,653
    
    
    
    (40,471
    )Cash and cash equivalents at beginning of period
    
    
    36,354
    
    
    
    44,436
    
    
    
    54,089Less: Cash and cash equivalents at end of
period from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (388
    )Cash and cash equivalents at end of period
    
    $
    44,436
    
    
    $
    54,089
    
    
    $
    13,230
 Operating activities
      88




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Investing activities
    Financing activities
     89




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##### Table of Contents



Lender
    
    Principal
    
    Date of Loan
    
    Due Date
    
    Interest RateBank loan
    
    RMB 19.0 million ($2.8 million)
    
    May 12, 2009
    
    May 12, 2010
    
    4.78% per yearBank loan
    
    RMB 21.0 million ($3.1 million)
    
    May 14, 2009
    
    May 14, 2010
    
    4.78% per yearBank loan
    
    RMB 9.0 million ($1.3 million)
    
    December 21, 2009
    
    December 21, 2010
    
    5.31% per yearBank loan
    
    RMB 10.0 million ($1.5 million)
    
    December 21, 2009
    
    December 21, 2010
    
    5.31% per yearBank loan
    
    RMB 10.0 million ($1.5 million)
    
    December 21, 2009
    
    December 21, 2010
    
    5.31% per yearBank loan
    
    RMB 19.3 million ($2.8 million)
    
    February 1, 2009
    
    March 31, 2010
    
    4.78% per yearBank loan
    
    RMB 18.5 million ($2.7 million)
    
    February 1, 2009
    
    February 1, 2010
    
    4.78% per yearBank loan
    
    RMB 19.5 million ($2.8 million)
    
    September 8, 2009
    
    February 1, 2010
    
    4.78% per yearBank loan
    
    RMB 21.5 million ($3.1 million)
    
    September 8, 2009
    
    September 8, 2010
    
    4.78% per yearBank loan
    
    RMB 19.0 million ($2.8 million)
    
    April 27, 2009
    
    April 27, 2010
    
    4.78% per yearBank loan
    
    RMB 18.0 million ($2.6 million)
    
    December 10, 2009
    
    December 10, 2010
    
    4.78% per yearBank loan
    
    RMB 30.0 million ($4.4 million)
    
    December 10, 2009
    
    May 10, 2010
    
    4.86% per yearConvertible loan
    
    $33.2 million
    
    October 21, 2008
    
    October 21, 2012
    
    LIBOR + 7.00% per yearConvertible loan
    
    $24.6 million
    
    March 10, 2009
    
    October 21, 2012
    
    LIBOR + 7.00% per year
  Capital expenditures
  Recent Accounting Pronouncements
   90




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C. Research and Development
  D. Trend Information
   91




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E. Off-Balance Sheet Arrangements
  F. Contractual Obligations and Commercial Commitments
  Less Than
    
    
    
    
    
    
    
    
    
    More ThanPayment Due by December 31
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(In thousands)Debt obligations(1)
    
    $
    31,976
    
    
    $
    31,976
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    4,950
    
    
    
    2,004
    
    
    
    1,578
    
    
    
    1,367
    
    
    
    1Purchase obligations(2)
    
    
    2,443
    
    
    
    1,580
    
    
    
    557
    
    
    
    204
    
    
    
    102Other long-term
liabilities reflected on
the balance sheet(3)
    
    
    73,987
    
    
    
    9,924
    
    
    
    27,687
    
    
    
    34,933
    
    
    
    1,443Capital Obligations(4)(5)
    
    
    3,990
    
    
    
    3,990
    
    
    
    
    
    
    
    
    
    
    
    Convertible loan
    
    
    57,800
    
    
    
    57,800
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    175,146
    
    
    $
    107,274
    
    
    $
    29,822
    
    
    $
    36,504
    
    
    $
    1,546
 
 (1)
    
    Mainly represents loans from Shenzhen Development Bank, Shanghai Pudong Development Bank and
China Merchants Bank. See Item 5.B.  Operating and Financial Review and Prospects 
Liquidity and Capital Resources  Financing activities.(2)
    
    Represents obligations to pay landing fees, to pay for obtaining advertising production and
network services from various services providers and to pay for acquiring television dramas
from various sources.(3)
    
    Mainly represents commitments under contracts in relation to Shaanxi Satellite Television.
Shaanxi Television Station terminated its agreement with us on June 30, 2010.(4)
    
    Represents obligations under a purchase agreement we entered into on October 9, 2008 with
Prime Day Management Limited, or Prime Day, and certain other parties to acquire a 100% equity
interest in Starease Limited, which has interest in the operations of four digital pay
channels in the PRC. As of December 31, 2008, we have paid $11.1 million as a deposit and
made an advance of $5.3 million to Prime Day under the agreement. We also agreed to establish
a joint venture with Starease Group for the operation of these four cable pay channels. In
2009, we consulted Prime Day Management regarding the establishment of a high definition
digital television channel. However, pending government approval for the repositioning of
these four digital pay channels and establishment of the joint venture, the acquisition has
not yet been completed. The amount noted in the table above does not include the value of
our common shares.(5)
    
    We entered into an agreement with YMHK and several other parties on December 18, 2008.
Pursuant to the terms of the agreement, we agreed to provide working capital to YMHK in
accordance with business plans and budgets which must be agreed to by all investors in YMHK
and us. As of December 31, 2009 we had committed to pay $90,000 to YMHK based on the business
plans and budgets agreed in 2009. We plan to terminate the cooperation agreement with YMHK in
2010.  92




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Contingent consideration payable in connection with our acquisition of Convey
  
 Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management
  Directors and Executive Officers
    
    Age
    
    PositionZheng Jingsheng
    
    
    62
    
    
    Chairman of the Board of DirectorsFredy Bush
    
    
    51
    
    
    Chief Executive Officer and DirectorZhu Shan
    
    
    41
    
    
    Chief Operating Officer and DirectorAndrew Chang
    
    
    40
    
    
    Chief Financial OfficerGraham Earnshaw
    
    
    57
    
    
    President and DirectorJoseph Chan
    
    
    48
    
    
    Deputy Chief Operating OfficerLC Chang
    
    
    53
    
    
    PresidentRichard Young
    
    
    40
    
    
    Managing Director, Xinhua SportsAloysius T. Lawn(1)(4)
    
    
    51
    
    
    Independent DirectorJohn H. Springer(1)(2)(3)
    
    
    54
    
    
    Independent DirectorJohn McLean
    
    
    43
    
    
    General CounselLong Qiu Yun
    
    
    47
    
    
    Independent DirectorSteve Richards(1)
    
    
    41
    
    
    Independent DirectorLi Shantong
    
    
    65
    
    
    Independent DirectorDavid Green(2)(4)
    
    
    61
    
    
    Independent DirectorHarry Nam (3)(4)
    
    
    45
    
    
    Independent DirectorAllen Hsu
    
    
    57
    
    
    Independent Director
 
 (1)
    
    Member of the audit committee.(2)
    
    Member of the compensation committee.(3)
    
    Member of the nominating and corporate governance committee.(4)
    
    Member of the investment committee. Directors
 Zheng Jingsheng
 Fredy Bush
  93




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Zhu Shan China Business
 Graham Earnshaw
 Aloysius T. Lawn
 John H. Springer
 Long Qiu Yun
 Steve Richards
  94




---



##### Table of Contents



Li Shantong
 David Green
 Harry Nam
 Allen Hsu
 Executive officers
 Andrew Chang
 Joseph Chan
 LC Chang
  95




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##### Table of Contents



Richard H. Young cum laude
 John McLean
 B. Compensation of Directors and Executive Officers
 Cash compensation
  Share options
    CommonSharesUnderlying
    
    
    ExerciseGranted
    
    
    Price
    
    
    
    
    
    
    ExpirationOptions
    
    
    ($/share)
    
    
    Grant Date

    
    DateName:Fredy Bush
    
    
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    N/AZhu Shan
    
    
    700,000
    
    
    
    0.78
    
    
    July 11, 2006
    
    July 10, 2011Graham Earnshaw
    
    
    700,000
    
    
    
    0.78
    
    
    July 11, 2006
    
    July 10, 2011Andrew Chang
    
    
    900,000
    
    
    
    0.78
    
    
    July 11, 2006
    
    July 10, 2011Other individuals as a group
    
    
    8,168,180
    
    
    
    0.78
    
    
    July 11, 2006
    
    July 10, 2011Aloysius T. Lawn
    
    
    30,000
    
    
    
    6.50
    
    
    April 25, 2007
    
    April 24, 201730,000
    
    
    
    1.64
    
    
    April 30, 2008
    
    April 29, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019John H. Springer
    
    
    30,000
    
    
    
    6.50
    
    
    April 25, 2007
    
    April 24, 201730,000
    
    
    
    1.64
    
    
    April 30, 2008
    
    April 29, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019
  96




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##### Table of Contents



CommonSharesUnderlying
    
    
    ExerciseGranted
    
    
    Price
    
    
    
    
    
    
    ExpirationOptions
    
    
    ($/share)
    
    
    Grant Date
    
    DateLong Qiu Yun
    
    
    30,000
    
    
    
    6.50
    
    
    April 25, 2007
    
    April 24, 201720,000
    
    
    
    1.265
    
    
    June 13, 2008
    
    June 12, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019YGOF Manager, Ltd.
    
    
    30,000
    
    
    
    4.39
    
    
    Sept. 26, 2007
    
    Sept. 25, 201720,000
    
    
    
    1.265
    
    
    June 13, 2008
    
    June 12, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019Steve Richards
    
    
    30,000
    
    
    
    4.39
    
    
    Sept. 26, 2007
    
    Sept. 25, 201720,000
    
    
    
    1.265
    
    
    June 13, 2008
    
    June 12, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019Li Shantong
    
    
    30,000
    
    
    
    4.39
    
    
    Sept. 26, 2007
    
    Sept. 25, 201720,000
    
    
    
    1.265
    
    
    June 13, 2008
    
    June 12, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019David Green
    
    
    20,000
    
    
    
    1.265
    
    
    June 13, 2008
    
    June 12, 201820,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019Zheng Jingsheng
    
    
    20,000
    
    
    
    0.425
    
    
    Dec. 31, 2009
    
    Dec. 31, 2019David U. Lee
    
    
    400,000
    
    
    
    1.325
    
    
    April 1, 2008
    
    Dec. 31, 2011500,000
    
    
    
    0.305
    
    
    Jan. 8, 2009
    
    Jan. 8, 2014Richard Young
    
    
    500,000
    
    
    
    0.305
    
    
    Jan. 8, 2009
    
    Jan. 8, 2014John McLean
    
    
    780,000
    
    
    
    0.78
    
    
    July 11, 2006
    
    July 10, 2011Total
    
    
    13,148,180
  Termination of options.
 Administration.
 Vesting schedule.
 Option agreement.
 Option exercise.
 Third-party acquisition.
 Termination of plan.
  97




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Termination of options.
 Administration.
 Vesting schedule.
 Option exercise.
 Third-party acquisition.
 Termination of grant.
 C. Board Practices
 Board of Directors
  Committees of the Board of Directors
  Audit committee
  
    
    appointing, retaining and overseeing the work of the independent auditors, including
resolving disagreements between the management and the independent auditors relating to
financial reporting;
  98




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##### Table of Contents




    
    pre-approving all auditing and non-auditing services permitted to be performed by the
independent auditors;
 
    
    reviewing annually the independence and quality control procedures of the
independent auditors;
 
    
    discussing material off-balance sheet transactions, arrangements and obligations
with the management and the independent auditors;
 
    
    reviewing and approving all proposed related party transactions;
 
    
    discussing the annual audited financial statements with the management;
 
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
 
    
    meeting separately with the independent auditors to discuss critical accounting
policies, management letters, recommendations on internal controls, the auditors
engagement letter and independence letter and other material written communications
between the independent auditors and the management; and
 
    
    attending to such other matters that are specifically delegated to our audit
committee by our board of directors from time-to-time.
 Compensation committee
  
    
    reviewing and approving executive compensation;
 
    
    reviewing periodically and managing any long-term incentive compensation plans,
share option plans, annual bonuses, employee pension and welfare benefit plans;
 
    
    determining our policy with respect to change of control or parachute payments;
and
 
    
    managing and reviewing director and executive officer indemnification and insurance
matters.
 Nominating and corporate governance committee
  
    
    recommending to the board nominees for election or re-election to the board or for
appointments to fill any vacancies;
 
    
    reviewing annually the performance of each incumbent director in determining whether
to recommend such director for an additional term;
 
    
    overseeing the board in the boards annual review of its own performance and the
performance of the management; and
 
    
    considering, preparing and recommending to the board such policies and procedures
with respect to corporate governance matters as may be required to be disclosed under
the applicable laws or otherwise considered to be material.
  99




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Investment committee
  
    
    reviewing acquisition strategies with management and investigating acquisition
candidates on our behalf;
 
    
    recommending acquisition strategies and candidates to the board of directors;
 
    
    authorizing and approving acquisitions and investments by us valued in an amount not
to exceed, for any particular acquisition or investment, $5.0 million in cash, stock or
a combination thereof; and
 
    
    approving any bank loan, pledge, mortgage or charge of property and assets (whether
present or future), guarantees or similar transactions entered into by our company or
our subsidiaries in the ordinary course of business, provided that the total financing
obligations of our company or our subsidiaries in each such transaction shall not
exceed $10.0 million.
 Terms of Directors and Executive Officers
  Employment Agreement with Fredy Bush
  D. Employees
  Function
    
    Headquarters
    
    
    Print
    
    
    Advertising
    
    
    Broadcast
    
    
    TotalAdministration
    
    
    25
    
    
    
    6
    
    
    
    89
    
    
    
    10
    
    
    
    130Finance
    
    
    26
    
    
    
    8
    
    
    
    44
    
    
    
    16
    
    
    
    94General management
    
    
    9
    
    
    
    2
    
    
    
    16
    
    
    
    5
    
    
    
    32Information technology
    
    
    6
    
    
    
    
    
    
    
    9
    
    
    
    10
    
    
    
    25Pre-/post-production(1)
    
    
    2
    
    
    
    
    
    
    
    108
    
    
    
    48
    
    
    
    158Sales and marketing
    
    
    5
    
    
    
    73
    
    
    
    258
    
    
    
    42
    
    
    
    378Total
    
    
    73
    
    
    
    89
    
    
    
    524
    
    
    
    131
    
    
    
    817
 
 (1)
    
    Pre-/post-production includes our analyst, design, content production and research functions.  100




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E. Share Ownership
  
    
    each of our current directors and executive officers; and
 
    
    each person known to us to own beneficially more than 5.0% of our shares.
 Shares BeneficiallyOwned(1)(2)Number
    
    
    %Directors and Executive Officers:Fredy Bush(3)
    
    
    15,930,000
    
    
    
    6.0Zhu Shan
    
    
    *
    
    
    
    *Andrew Chang
    
    
    *
    
    
    
    *Graham Earnshaw
    
    
    *
    
    
    
    *Joseph Chan
    
    
    *
    
    
    
    *Richard Young
    
    
    *
    
    
    
    *Aloysius T. Lawn
    
    
    *
    
    
    
    *John McLean
    
    
    *
    
    
    
    *Long Qiu Yun
    
    
    *
    
    
    
    *Steve Richards
    
    
    *
    
    
    
    *Li Shantong
    
    
    *
    
    
    
    *David Green
    
    
    *
    
    
    
    *Allen Hsu(4)
    
    
    2,955,237
    
    
    
    1.1All directors and executive officers as a group(5)
    
    
    19,215,387
    
    
    
    7.2Principal Shareholders:Xinhua Finance Limited(6)
    
    
    50,054,618
    
    
    
    18.7Patriarch Partners Media Holdings, LLC(7)
    
    
    64,133,115
    
    
    
    24.0Dragon Era Group Limited(8)
    
    
    8,830,000
    
    
    
    3.3Yucaipa Global Partnership Fund L.P.(9)
    
    
    23,258,045
    
    
    
    8.7
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1.0% of our
outstanding common shares.  101




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##### Table of Contents



(1)
    
    Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, and includes voting or
investment power with respect to the securities.(2)
    
    Percentage of beneficial ownership of each listed person is based on 198,843,675 common
shares outstanding as of May 31, 2010, as well as (i) a convertible loan which may be
converted into 53,993,460 common shares by Patriarch, (ii) 52,512 Series B convertible
preferred shares which may be converted into 14,684,023 common shares by Yucaipa and (ii) the
common shares underlying share options and warrants exercisable by such person or group within
60 days of the date of this annual report.(3)
    
    Includes 8,825,000 common shares owned by Dragon Era Group Limited that are restricted and
held in the form of ADR evidencing 4,412,500 ADSs, and 5,000 common shares. Dragon Era Group
Limited is wholly-owned by Super Tiger Limited, which in turn is wholly-owned by The Fredy
Bush Trust, an irrevocable discretionary trust of which Ms. Bush is settlor. Also includes
440,000 common shares that are owned by The Fredy Bush Family Trust in the form of ADR
evidencing 220,000 ADSs, and 660,000 common shares. Also includes 6,000,000 restricted shares
issued to Ms. Bush in May 2010, which cannot be sold before April 2015 without the prior
approval of our company. Ms. Bush disclaims beneficial ownership of all of our shares held by
The Fredy Bush Family Trust. The business address of Ms. Bush is 31/F, The Center, 99 Queens
Road, Central, Hong Kong.(4)
    
    Includes 1,871,650 common shares held by Pac-Link Opportunity Fund, 98,508 common shares held by
Auto High Profits Limited and 985,079 common shares held by Tai Yuen Venture Capital Investment Corp.
Mr. Hsu is a member of the board of directors of the three shareholders and shares the investment and voting
power of such shares. Mr. Hsu disclaims beneficial ownership of all of the shares except to the extent of
his pecuniary interest therein.(5)
    
    Includes common shares held by all of our directors and executive officers as a group and
common shares issuable upon the exercise of all of the options within 60 days of the date of
this annual report held by all of our directors and executive officers.(6)
    
    Shares are common shares. Xinhua Finance Limited is a public company listed on the Mothers
Board of the Tokyo Stock Exchange. The business address of Xinhua Finance Limited is Suite
2103-4, Vicwood Plaza, 199 Des Voeux Road, Central, Hong Kong. The holdings of XFL in our
shares have decreased from 100% at our founding.(7)
    
    Includes 10,139,655 common shares beneficially owned by Patriarch Partners Media Holdings
LLC, of which 10,139,654 are restricted and held in restricted ADR form. Also include a $57.8
million convertible loan held by its affiliates that may be converted into 53,993,460 common
shares at any time. The business address of Patriarch Partners is 40 Wall Street, 25th Floor,
New York, NY 10005.(8)
    
    Includes 8,825,000 common shares that are restricted and held in the form of ADR evidencing
4,412,500 ADSs, and 5,000 common shares. Dragon Era Group Limited is wholly-owned by Super
Tiger Limited, which in turn is wholly-owned by The Fredy Bush Trust, an irrevocable
discretionary trust of which Fredy Bush, our chairman and chief executive officer, is settlor.
The business address of Dragon Era Group Limited is 31/F, The Center, 99 Queens Road,
Central, Hong Kong.(9)
    
    Includes 2,400,000 common shares that are held in the form of ADR evidencing 1,200,000 ADSs,
and 6,174,022 common shares. Also includes 52,512 Series B convertible preferred shares held
by Yucaipa Global Partnership Fund L.P. and its related entities, YGOF GP Ltd., Yucaipa Global
Holdings G.P. and RDBI LLC that may be converted into 14,684,023 common shares at any time.
See Item 7.B. Major shareholders and related party transactions  Related Party Transactions
 Transactions with Yucaipa for additional information on our agreements with Yucaipa.
Yucaipa Global Partnership Fund L.P. is controlled by Ronald W. Burkle and its business
address is 9130 W. Sunset Boulevard, Los Angeles, CA 90069.    102




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Item 7. Major Shareholders and Related Party Transactions
 A. Major Shareholders
  B. Related Party Transactions
 Contractual arrangements with our affiliated entities and their shareholders
  Transactions with XFL or its subsidiaries
  Contracts between us and XFL or its subsidiaries
     103




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Loan agreements and foreign currency agreement between us and XFL or its subsidiaries
    Transactions involving our acquisitions
  Transactions with David U. Lee, Leeding Media LLC, K-Jam Media Inc. and Kia Jam
    104




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Transactions with Shanghai Wai Gao Qiao (Group) Co., Ltd.
     Agreements regarding Shanghai Camera Media Investment Co., Ltd.
    Transactions with Patriarch Partners
   105




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Share purchase agreement between us and Patriarch Partners
   Investor rights agreement among us, Patriarch Partners and XFL
   2008 convertible loan facility agreement among us, Zohar CDO 2003-1, Limited and Zohar II
2005-1, Limited, together with Patriarch Partners Agency Services LLC
   106




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Transactions with Yucaipa
 Share purchase agreement between us and Yucaipa
     107




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Shareholders agreement among us, Yucaipa and XFL
  Registration rights agreement between us and Yucaipa
  Transactions with Hunan Television & Broadcast Intermediary Co., Ltd.
   Share restructuring
     108




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##### Table of Contents



Transaction with Fredy Bush
  Employment agreements
  Share option agreements
  C. Interests of Experts and Counsel Not applicable.
 
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
  Dividend Policy
     109




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Agreement with JCBN
   B. Significant Changes
   110




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Item 9. The Offer and Listing
 A. Offering and Listing Details
   Sales PriceHigh
    
    
    LowAnnual High and Low2007 (from March 9, 2007)
    
    $
    13.00
    
    
    $
    5.062008
    
    
    6.28
    
    
    
    0.312009
    
    
    1.98
    
    
    
    0.22Quarterly Highs and LowsFourth Quarter 2008
    
    
    1.59
    
    
    
    0.31First Quarter of 2009
    
    
    0.79
    
    
    
    0.22Second Quarter of 2009
    
    
    1.06
    
    
    
    0.45Third Quarter of 2009
    
    
    1.98
    
    
    
    0.79Fourth Quarter of 2009
    
    
    1.81
    
    
    
    0.80First Quarter of 2010
    
    
    0.89
    
    
    
    0.56Monthly Highs and LowsJanuary 2010
    
    
    0.89
    
    
    
    0.60February 2010
    
    
    0.79
    
    
    
    0.56March 2010
    
    
    0.74
    
    
    
    0.58April 2010
    
    
    0.87
    
    
    
    0.60May 2010
    
    
    0.68
    
    
    
    0.34June 2010
    
    
    0.37
    
    
    
    0.30July 2010 (through July 9, 2010)
    
    
    0.38
    
    
    
    0.29
 B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 Item 10. Additional Information
 A. Share Capital
  B. Memorandum and Articles of Association
   111




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C. Material Contracts
  D. Exchange Controls
  E. Taxation
  Cayman Islands Taxation
  United States Federal Income Taxation
   
    
    banks and other financial institutions;
 
    
    insurance companies;
 
    
    regulated investment companies;
 
    
    real estate investment trusts;
 
    
    broker-dealers;
 
    
    traders that elect to use a mark-to-market method of accounting;
 
    
    U.S. expatriates;
 
    
    tax-exempt entities;
 
    
    persons liable for alternative minimum tax;
  112




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
    
    persons holding an ADS or common share as part of a straddle, hedging, conversion or
integrated transaction;
 
    
    persons that actually or constructively own 10% or more of the total combined voting
power of all classes of our voting stock;
 
    
    persons who acquired ADSs or common shares pursuant to the exercise of any employee
share option or otherwise as compensation; or
 
    
    partnerships or other pass-through entities, or persons holding ADSs or common
 shares through such entities.
 INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL
TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR COMMON SHARES.
  
    
    an individual who is a citizen or resident of the United States;
 
    
    a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created or organized in the United States or under the laws of the United
States, any State thereof or the District of Columbia;
 
    
    an estate, the income of which is subject to U.S. federal income taxation regardless
of its source; or
 
    
    a trust that (i) is subject to the primary supervision of a court within the United
States and the control of one or more U.S. persons for all substantial decisions or
(ii) has a valid election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
    Taxation of dividends and other distributions on the ADSs or common shares
   113




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Taxation of disposition of ADSs or common shares
   114




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Passive foreign investment company
  
    
    at least 75% of its gross income for such year is passive income; or
 
    
    at least 50% of the value of its assets (based on an average of the quarterly values
of the assets) during such year is attributable to assets that produce passive income
or are held for the production of passive income.
     
    
    the excess distribution or recognized gain will be allocated ratably over your
holding period for the ADSs or common shares;
 
    
    the amount allocated to the current taxable year, and any taxable years in your
holding period prior to the first taxable year in which we were a PFIC, will be treated
as ordinary income; and
 
    
    the amount allocated to each other taxable year will be subject to the highest tax rate
in effect for individuals or corporations, as applicable, for each such year and the
interest charge generally applicable to underpayments of tax will be imposed on the
resulting tax attributable to each such year.
  115




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pro rata
   116




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You are strongly urged to consult your tax advisor regarding the application of the PFIC rules
to your investment in ADSs or common shares.
 Information reporting and backup withholding
   F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
   I. Subsidiary Information
   117




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Item 11. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate risk
  Foreign currency risk
   Inflation
   118




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Item 12. Description of Securities Other Than Equity Securities
 Debt Securities
  Warrants and Rights
  Other Securities
  American Depositary Shares
  Persons depositing or withdrawing shares must pay:
    
    For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
    
        Issuance of ADSs, including issuances
resulting from a distribution of shares or
rights or other property; or    Cancellation of ADSs for the purpose of
withdrawal, including if the deposit
agreement terminates$.02 (or less) per ADS
    
        Any cash distribution to youA fee equivalent to the fee that would be payable if
securities distributed to you had been shares and
the shares had been deposited for issuance of ADSs
    
        Distribution of securities distributed to
holders of deposited securities that are
distributed by the depositary to ADS
holders$.02 (or less) per ADSs per calendar year
    
        Depositary servicesRegistration or transfer fees
    
        Transfer and registration of shares on our
share register to or from the name of the
depositary or its agent when you deposit
or withdraw sharesExpenses of the depositary
    
        Cable, telex and facsimile transmissions
(when expressly provided in the deposit
agreement); or    Converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary
or the custodian have to pay on any ADS or share
underlying an ADS, for example, 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
  119




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PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
 
 Item 14. Material Modifications to the Rights Of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
   Changes in Internal Control over Financial Reporting
  Item 16.
 
 Item 16A. Audit Committee Financial Expert
   120




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Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
  2008
    
    
    2009Audit fees(1)
    
    $
    1,880,000
    
    
    $
    1,400,000Audit-related fees(2)
    
    $
    788,000
    
    
    $
    Tax fees(3)
    
    $
    3,000
    
    
    $
    20,000
 
 (1)
    
    Audit fees means the aggregate fees billed in each of the fiscal years listed for
professional services rendered by our principal auditors for the audits of our annual
financial statements in 2008 and 2009 and the audit of our internal controls over financial
reporting in 2008.(2)
    
    Audit-related fees means the aggregate fees billed in each of the fiscal years listed for
assurance and related services by our principal auditors that are reasonably related to the
performance of the audit or review of our financial statements and are not reported under
Audit Fees. Services comprising the fees disclosed under the category of Audit-Related
Fees in 2008 involve principally the interim review.(3)
    
    Tax fees means the fees billed for tax compliance services, including the preparation of
tax returns and tax consultations, such as tax advice related to employee share-based
compensation.  
 Item 16D. Exemptions From The Listing Standards For Audit Committees
  
 Item 16E. Purchases of Equity Securities By The Issuer And Affiliated Purchasers
  Total Number of
    
    
    ApproximateShares
    
    
    Dollar Value ofPurchased as
    
    
    Shares that MayTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    yet Beof Shares
    
    
    Average Price
    
    
    Announced
    
    
    PurchasedPeriod
    
    Purchased
    
    
    Paid per Share(1)
    
    
    Plan(2)
    
    
    Under the Plan(1)June 12  June 19, 2007
    
    
    1,932,000
    
    
    $
    4.47
    
    
    
    1,932,000
    
    
    $
    41,371,946March 19  March 31, 2008
    
    
    2,034,236
    
    
    $
    1.42
    
    
    
    2,034,236
    
    
    $
    38,489,716May 14  June 20, 2008
    
    
    1,382,654
    
    
    $
    1.44
    
    
    
    1,382,654
    
    
    $
    36,494,234Total
    
    
    5,348,890
    
    
    $
    2.52
    
    
    
    5,348,890
    
    
    $
    36,494,234
 
 (1)
    
    Each of our ADSs represents two common shares.(2)
    
    The repurchase plan was publicly announced on May 29, 2007 and provides for the repurchase of
up to $50.0 million of our common shares.  121




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Item 16F. Change In Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
   
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  
 Item 19. Exhibits
 Exhibit Number
    
    Description of Document1.1
    
    
    Amended and Restated Memorandum and Articles of Association (incorporated by reference to
Exhibit 3.2 from our F-1 registration statement (File No. 333-140808), as amended,
initially filed with the Commission on February 21, 2007).2.1
    
    
    Registrants Specimen American Depositary Receipt (incorporated by reference to Exhibit
4.1 from our F-1 registration statement (File No. 333-140808), as amended, initially
filed with the Commission on February 21, 2007).2.2
    
    
    Registrants Specimen Certificate for Common Shares (incorporated by reference to Exhibit
4.2 from our F-1 registration statement (File No. 333-140808), as amended, initially
filed with the Commission on February 21, 2007).2.3
    
    
    Form of Deposit Agreement among the Registrant, the depositary and holders of the
American depositary receipts (incorporated by reference to Exhibit 4.3 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.1
    
    
    Share Purchase Agreement, dated as of March 16, 2006, amended as of March 16, 2006,
between the Registrant and Patriarch Partners Media Holdings LLC (incorporated by
reference to Exhibit 4.5 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).4.2
    
    
    Investor Rights Agreement, dated as of March 16, 2006, among the Registrant, Xinhua
Finance Limited and Patriarch Partners Media Holdings LLC (incorporated by reference to
Exhibit 4.6 from our F-1 registration statement (File No. 333-140808), as amended,
initially filed with the Commission on February 21, 2007).
  122




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Exhibit Number
    
    Description of Document4.3
    
    
    Series B Preferred Share Purchase Agreement between Yucaipa Global Partnership Fund L.P.
and the Registrant, dated as of February 18, 2008 (incorporated by reference to Exhibit
4.57 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission
on May 19, 2008).4.4
    
    
    Shareholders Agreement among Yucaipa Global Partnership Fund L.P., Xinhua Finance Limited
and the Registrant, dated as of February 28, 2008 (incorporated by reference to Exhibit
4.58 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission
on May 19, 2008).4.5
    
    
    Registration Rights Agreement between the Registrant and Yucaipa Global Partnership Fund
L.P., dated as of February 28, 2008 (incorporated by reference to Exhibit 4.59 from our
annual report on Form 20-F (File No. 001-33328).4.6
    
    
    2007 Share Option Plan (incorporated by reference to Exhibit 10.1 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.7
    
    
    Form of Indemnification Agreement with the Registrants directors (incorporated by
reference to Exhibit 10.2 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).4.8
    
    
    Form of Employment Agreement between the Registrant and a Senior Executive Officer of the
Registrant (incorporated by reference to Exhibit 10.3 from our F-1 registration statement
(File No. 333-140808), as amended, initially filed with the Commission on February 21,
2007).4.9
    
    
    Trademark License Agreement, dated as of September 21, 2006, between the Registrant and
Xinhua Financial Network Limited (incorporated by reference to Exhibit 10.4 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.10
    
    
    English translation of Business Cooperation Agreement, amended and restated as of
November 6, 2006, among Economic Observer Press Office, Guangzhou Jingshi Culture
Intermediary Co., Ltd., Beijing Jingguan Xincheng Advertising Co., Ltd and Beijing
Jingshi Jingguan Advertising Co., Ltd. (incorporated by reference to Exhibit 10.5 from
our F-1 registration statement (File No. 333-140808), as amended, initially filed with
the Commission on February 21, 2007).4.11
    
    
    Form of Stock Option Agreements (incorporated by reference to Exhibit 10.6 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.12
    
    
    Consulting Agreement, dated as of November 1, 2006, between Jia Luo Business Consulting
(Shanghai) Co., Ltd. and Shanghai Camera Media Investment Co., Ltd. (incorporated by
reference to Exhibit 10.12 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).4.13
    
    
    Strategic Partnership Agreement, dated and supplemented as of June 15, 2006, among
Beijing Century Media Culture Co., Ltd., Hunan Television & Broadcast Intermediary Co.,
Ltd., Shenzhen Ronghan Investment Co., Ltd. and Beijing Perspective Orient Movie &
Television Intermediary Co., Ltd. (incorporated by reference to Exhibit 10.13 from our
F-1 registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.14
    
    
    Advertising Services Agreement, dated as of December 23, 2006, between Beijing Pioneer
Media Advertising Co., Ltd. and Shanghai Media Investment Co., Ltd. (incorporated by
reference to Exhibit 10.15 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).4.15
    
    
    Cooperation Agreement, dated as of November 1, 2006, between Beijing Century Media
Culture Co., Ltd. and Shanghai Camera Media Investment Co., Ltd. (incorporated by
reference to Exhibit 10.16 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).4.16
    
    
    Cooperation Agreement, dated as of June 5, 2006, between the Registrant and Small World
Television (incorporated by reference to Exhibit 10.17 from our F-1 registration
statement (File No. 333-140808), as amended, initially filed with the Commission on
February 21, 2007).
  123




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Exhibit
 Number
    
    Description of Document4.17
    
    
    English translation of Call Option Agreement regarding Economic Observer Press Office,
dated as of November 6, 2006, among Shandong Sanlian Group, Shandong Economic Observer
Co., Ltd., Economic Observer Press Office and Beijing Jingguan Xincheng Advertising Co.,
Ltd. (incorporated by reference to Exhibit 10.19 from our F-1 registration statement
(File No. 333-140808), as amended, initially filed with the Commission on February 21,
2007).4.18
    
    
    English translation of Exclusive Advertising Agreement regarding Beijing FM91.5 and
Shanghai FM87.9 of China Radio International, amended and restated as of November 28,
2006, between Beijing Guoguang Guangrong Advertising Co., Ltd. and Beijing Century Media
Advertising Co., Ltd. (incorporated by reference to Exhibit 10.20 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.19
    
    
    English translation of Money Journal Cooperation Agreement, amended and restated as of
September 20, 2006, among Hunan Television and Broadcasting Intermediary Co., Ltd., Money
Journal Press Office and Guangzhou Jingshi Culture Intermediary Co., Ltd. (incorporated
by reference to Exhibit 10.21 from our F-1 registration statement (File No. 333-140808),
as amended, initially filed with the Commission on February 21, 2007).4.20
    
    
    English Translation of Cooperation Agreement, dated as of September 25, 2005, between
Guangzhou Jingyu Culture Development Co., Ltd. and Beijing Qiannuo Advertising Co., Ltd.
(incorporated by reference to Exhibit 10.22 from our F-1 registration statement (File No.
333-140808), as amended, initially filed with the Commission on February 21, 2007).4.21
    
    
    Information Consulting Committee Organization Agreement, amended and restated as of
November 6, 2006, among Shandong Sanlian Group, Xinhua Finance Limited, Economic Observer
Press Office and Beijing Jingguan Xincheng Advertising Co., Ltd. (incorporated by
reference to Exhibit 10.23 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).4.22
    
    
    English Translation of Business Cooperation Agreement, amended and restated as of
November 6, 2006, among Shandong Sanlian Group, Shandong Economic Observer Co., Ltd.,
Economic Observer Press Office and Beijing Jingguan Xincheng Advertising Co., Ltd.
(incorporated by reference to Exhibit 10.24 from our F-1 registration statement (File No.
333-140808), as amended, initially filed with the Commission on February 21, 2007).4.23
    
    
    Cooperation Agreement in relation to Economic Observer, dated as of April 20, 2006, among
Xinhua Finance Limited, Shandong Economic Observer Co., Ltd., Shandong Sanlian Group and
Beijing Jingguan Xincheng Advertising Co., Ltd. (incorporated by reference to Exhibit
10.25 from our F-1 registration statement (File No. 333-140808), as amended, initially
filed with the Commission on February 21, 2007).4.24
    
    
    Form of Equity Pledge Agreement among the affiliated entity, the shareholder of the
affiliated entity and WFOE (incorporated by reference to Exhibit 10.26 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.25
    
    
    Form of Exclusive Equity Purchase Option Agreement between WFOE and shareholder of
affiliated entity (incorporated by reference to Exhibit 10.27 from our F-1 registration
statement (File No. 333-140808), as amended, initially filed with the Commission on
February 21, 2007).4.26
    
    
    Form of Subrogation Agreement among the affiliated entity, the shareholder of the
affiliated entity and the WFOE (incorporated by reference to Exhibit 10.28 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.27
    
    
    Service Agreement, dated as of January 23, 2006, between New China Media Co., Ltd. and
Beijing Century Media Advertising Co., Ltd. (incorporated by reference to Exhibit 10.29
from our F-1 registration statement (File No. 333-140808), as amended, initially filed
with the Commission on February 21, 2007).4.28
    
    
    Form of Deed of Non-Competition Undertaking and Release between shareholder and the
Registrant (incorporated by reference to Exhibit 10.31 from our F-1 registration
statement (File No. 333-140808), as amended, initially filed with the Commission on
February 21, 2007).4.29
    
    
    Form of Share Subscription Agreement dated as of September 22, 2006 (incorporated by
reference to Exhibit 10.32 from our F-1 registration statement (File No. 333-140808), as
amended, initially filed with the Commission on February 21, 2007).
  124




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Exhibit 
Number
    
    Description of Document4.30
    
    
    Agreement for the Sale and Purchase of Equity Interest and Subscription in Shanghai
Hyperlink Market Research Co., Ltd., dated as of June 14, 2006, among Stephen Xie Wei, Lu
Qinyong, Win Jei-Ching, Yang Jing, Shi Hui, Pang Lu, Yang Weidong, Xinhua Finance
Limited, Beijing Taide Advertising Co., Ltd., and Shanghai Hyperlink Market Research Co.,
Ltd. (incorporated by reference to Exhibit 10.34 from our F-1 registration statement
(File No. 333-140808), as amended, initially filed with the Commission on February 21,
2007).4.31
    
    
    Loan and Share Purchase Agreement in respect of shares in the capital of Upper Step
Holdings Limited, dated as of February 28, 2006, among the Registrant, Sino Investment
Holdings Limited and Sungolden Limited. (incorporated by reference to Exhibit 10.36 from
our F-1 registration statement (File No. 333-140808), as amended, initially filed with
the Commission on February 21, 2007).4.32
    
    
    Promissory Note dated as of November 10, 2006 issued by Sino Investment Holdings Limited
in favor of the Registrant (incorporated by reference to Exhibit 10.46 from our F-1
registration statement (File No. 333-140808), as amended, initially filed with the
Commission on February 21, 2007).4.33
    
    
    Share Purchase Agreement in respect of shares in the capital of EconWorld Media Limited,
dated as of December 18, 2006, among the Registrant, Fan Cho Tak Alex and others
(incorporated by reference to Exhibit 10.47 from our F-1 registration statement (File No.
333-140808), as amended, initially filed with the Commission on February 21, 2007).4.34
    
    
    Form of Employment Agreement between the Registrant and a Chief Officer of the Registrant
(incorporated by reference to Exhibit 10.48 from our F-1 registration statement (File No.
333-140808), as amended, initially filed with the Commission on February 21, 2007).4.35
    
    
    English translation of Strategic Cooperation Agreement, dated as of December 18, 2003 and
supplemented as of November 30, 2005, between Inner Mongolia Television Station and
Shanghai Camera Media Investment Co., Ltd. (incorporated by reference to Exhibit 99.2
from our F-1 registration statement (File No. 333-140808), as amended, initially filed
with the Commission on February 21, 2007).4.36
    
    
    English translation of Zhou Mo Wen Hui Cooperation Agreement dated as of August 8, 2005,
between Zhou Mo Wen Hui Press Office and Guangzhou Jingyu Culture Development Co., Ltd.
(incorporated by reference to Exhibit 99.3 from our F-1 registration statement (File No.
333-140808), as amended, initially filed with the Commission on February 21, 2007).4.37
    
    
    Content License Agreement, dated as of December 15, 2001, between China Economic
Information Service of Xinhua News Agency and Xinhua Financial Network Limited
(incorporated by reference to Exhibit 99.4 from our F-1 registration statement (File No.
333-140808), as amended, initially filed with the Commission on February 21, 2007).4.38
    
    
    Form of loan agreement between a wholly foreign-owned entity and a shareholder of an
affiliated entity (incorporated by reference to Exhibit 4.55 from our annual report on
Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).4.39
    
    
    Waiver of loan issued by Xinhua Finance Limited to the Registrant, dated as of June 30,
2007 (incorporated by reference to Exhibit 4.56 from our annual report on Form 20-F (File
No. 001-33328), filed with the Commission on May 19, 2008).4.40
    
    
    Share subscription agreement in respect of shares in the capital of Xinhua Finance Media
Limited, between Whole Fortune Limited and Xinhua Finance Media Limited, dated as of
October 31, 2007 (incorporated by reference to Exhibit 4.60 from our annual report on
Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).4.41
    
    
    Equity transfer agreement in respect of shares in Beijing Perspective Orient Movie and
Intermediary Co., Ltd., between Hunan Television & Broadcast Intermediary Co., Ltd. and
Beijing Century Culture Co., Ltd., dated as of October 31, 2007 (incorporated by
reference to Exhibit 4.61 from our annual report on Form 20-F (File No. 001-33328), filed
with the Commission on May 19, 2008).4.42
    
    
    Purchase agreement in respect of shares in the capital of Profitown Development Limited
and other assets therein, among Xinhua Finance Media Limited, Flash Star Worldwide
Limited, Profitown Development Limited and Chow Chi Yan, dated as of November 26, 2007
(incorporated by reference to Exhibit 4.62 from our annual report on Form 20-F (File No.
001-33328), filed with the Commission on May 19, 2008).
  125




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Exhibit 
Number
    
    Description of Document4.43
    
    
    Purchase agreement in respect of shares in the capital of East Alliance Limited and other
assets therein, among Xinhua Finance Media Limited, East Alliance Limited and other
parties set out herein, dated as of June 4, 2007 (incorporated by reference to Exhibit
4.63 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission
on May 19, 2008).4.44
    
    
    Purchase agreement in respect of Convey Advertising Group, among Xinhua Finance Media
Limited, Pariya Holdings Limited and Good Speed Holdings Limited, dated as of June 29,
2007 (incorporated by reference to Exhibit 4.64 from our annual report on Form 20-F (File
No. 001-33328), filed with the Commission on May 19, 2008).4.45
    
    
    Purchase agreement in respect of shares in the capital of Singshine (Holdings) Hongkong
Limited and other assets set out herein, among Xinhua Finance Media Limited, Singshine
(Holdings) Hongkong Limited, Zhang Jingyu, Hu Shengzhong, He Zhihao, Lu Qibo, Chen Hao
and Lu Hang, dated as of June 11, 2007 (incorporated by reference to Exhibit 4.65 from
our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19,
2008).4.46
    
    
    Cooperation agreement between Zhoumo Wen Hui Press Office and Beijing Qiannuo Advertising
Co., Ltd., dated as of November 10, 2006 (incorporated by reference to Exhibit 4.66 from
our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19,
2008).4.47
    
    
    Advertising agency agreement between Guangdong Peoples Radio Station and Guangzhou
Singshine Communication Co., Ltd., dated as of December 14, 2007 (incorporated by
reference to Exhibit 4.67 from our annual report on Form 20-F (File No. 001-33328), filed
with the Commission on May 19, 2008).4.48
    
    
    Cooperation agreement between Guangdong Peoples Radio Station and Guangzhou Singshine
Communication Co., Ltd., dated as of November 1, 2006 (incorporated by reference to
Exhibit 4.68 from our annual report on Form 20-F (File No. 001-33328), filed with the
Commission on May 19, 2008).4.49
    
    
    English Translation of Equity Call Option Agreement, dated as of December 10, 2008,
between Shanghai Wai Gao Qiao (Group) Co., Ltd and Jia Luo Business Consulting (Shanghai)
Co., Ltd.4.50
    
    
    Agreement relating to the sale and purchase of 85% of the issued share capital of Xinhua
Finance Media (Convey) Limited, dated as of December 31, 2008, between the Registrant and
Pariya Holdings Limited (incorporated by reference to Exhibit 4.50 from our annual report
on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on
April 30, 2009).4.51
    
    
    Escrow Agreement, dated as of December 31, 2008, among the Registrant, Pariya Holdings
Limited and K&L Gates (incorporated by reference to Exhibit 4.51 from our annual report
on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on
April 30, 2009).4.52
    
    
    Sale and Purchase Agreement, dated as of March 13, 2009, among the Registrant, Beijing
Taide Advertising Co., Ltd., INTAGE Inc. and INTAGE Marketing Consulting (Shanghai) Co.,
Ltd. (incorporated by reference to Exhibit 4.52 from our annual report on Form 20-F (File
No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).4.53
    
    
    Credit Agreement among the Registrant, Patriarch Partners Agency Services, LLC and the
Lenders party thereto, dated as of October 21, 2008 (incorporated by reference to Exhibit
4.53 from our annual report on Form 20-F (File No. 001-33328), as amended, originally
filed with the Commission on April 30, 2009).4.54
    
    
    Investor and Registration Rights Agreement among the Registrant, Xinhua Finance Media
Limited and the Investors party thereto, dated as of October 21, 2008 (incorporated by
reference to Exhibit 4.54 from our annual report on Form 20-F (File No. 001-33328), as
amended, originally filed with the Commission on April 30, 2009).4.55
    
    
    Security Agreement between the Registrant and Patriarch Partners Agency Services, LLC,
dated as of October 21, 2008 (incorporated by reference to Exhibit 4.55 from our annual
report on Form 20-F (File No. 001-33328), as amended, originally filed with the
Commission on April 30, 2009).4.56
    
    
    Consent, Waiver and First Amendment to Credit Agreement, dated as of February 20, 2009,
among the Registrant, Patriarch Partners Agency Services, LLC and the Lenders party
thereto (incorporated by reference to Exhibit 4.56 from our annual report on Form 20-F
(File No. 001-33328), as amended, originally filed with the Commission on April 30,
2009).4.57
    
    
    Purchase Agreement in respect of shares in the capital of Starease Limited and other
assets set out therein, dated as of October 9, 2008, among the Registrant, Prime Day
Management Limited, Starease Limited and Ge Zhijun (incorporated by reference to Exhibit
4.57 from our annual report on Form 20-F (File No. 001-33328), as amended, originally
filed with the Commission on April 30, 2009).
  126




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Exhibit
 Number
    
    Description of Document4.58
    
    
    Master Agreement in respect of Certain Advertising Business, dated as of September 30,
2008, between Registrant and Chung Cheng Co., Ltd. (incorporated by reference to Exhibit
4.58 from our annual report on Form 20-F (File No. 001-33328), as amended, originally
filed with the Commission on April 30, 2009).4.59
    
    
    Purchase Agreement, dated as of March 6, 2009, among the Registrant, Parkwood Asia
Limited and Everfame Development Limited (incorporated by reference to Exhibit 4.59 from
our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with
the Commission on April 30, 2009).4.60
    
    
    English Translation of Cooperation Agreement, dated as of March 12, 2009, between Shaanxi
TV Station and Beijing Hantang Yueyi Culture & Media Co., Ltd. (incorporated by reference
to Exhibit 4.60 from our annual report on Form 20-F (File No. 001-33328), as amended,
originally filed with the Commission on April 30, 2009).4.61
    
    
    English Translation of Strategic Cooperation Agreement, dated as of March 12, 2009, among
Beijing Keying & CCTV Culture Development Co., Ltd., Beijing Linghang Dongli Advertising
Co., Ltd. and Beijing Science & Education Film Studio (incorporated by reference to
Exhibit 4.61 from our annual report on Form 20-F (File No. 001-33328), as amended,
originally filed with the Commission on April 30, 2009).4.62
    
    
    Form of Executive Service Agreement between the Registrant and Officers of the Registrant.4.63
    
    
    Bridge Loan between the Registrant and Dragon Era Group Limited, dated March 2, 2010.4.64
    
    
    English Translation of Purchase Agreement, dated as of May 12, 2010, among China Oceanwide Holdings Group Co.,
Ltd., Century Effort Limited, EO Publications Development Limited and Beijing Taide
Advertising Co., Ltd.4.65
    
    
    Amendment No. 2 and Waiver to Credit Agreement, dated as of July 12, 2010, among the
Registrant, the Guarantors, as defined therein, the financial institutions and other
investors from time to time party thereto as Lenders and Patriarch Partners Agency
Services, LLC as administrative agent for such Lenders.4.66
    
    
    Series C Convertible Preferred Shares Purchase Agreement, dated as of July 12, 2010,
among the Registrant and ZOHAR CDO 2003-1, LIMITED and ZOHAR II 2005-1, LIMITED, as
investors.4.67
    
    
    Registration Rights Agreement, dated as of July 12, 2010, among the Registrant and ZOHAR
CDO 2003-1, LIMITED and ZOHAR II 2005-1, LIMITED, as investors.8.1
    
    
    List of subsidiaries.11.1
    
    
    Code of Business Conduct and Ethics of the Registrant (incorporated by reference to
Exhibit 99.1 from our F-1 registration statement (File No. 333-140808), as amended,
initially filed with the Commission on February 21, 2007).12.1
    
    
    CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.12.2
    
    
    CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.13.1
    
    
    CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2
    
    
    CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1
    
    
    Consent of Deloitte Touche Tohmatsu.
 
 
    
    Filed with this Annual Report on Form 20-F  127




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##### Table of Contents



SIGNATURES
  XINHUA SPORTS & ENTERTAINMENT LIMITEDBy:
    /s/ Fredy BushName:
    Fredy BushTitle:
    Chief Executive Officer   128




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##### Table of Contents



Xinhua Sports & Entertainment Limited
(formerly Xinhua Finance Media Limited)
 Index to consolidated financial statements
 PageReport of independent registered public accounting firm
    
    
    F-2Consolidated balance sheets as of December 31, 2008 and 2009
    
    
    F-3Consolidated statements of operations for the years ended December 31, 2007, 2008 and 2009
    
    
    F-5Consolidated statements of change in equity for the years ended December 31, 2007, 2008 and 2009
    
    
    F-7Consolidated statements of cash flows for the years ended December 31, 2007, 2008 and 2009
    
    
    F-10Notes to consolidated financial statements
    
    
    F-13
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
  F-2




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 
 Consolidated balance sheets
 December 31,
    
    
    December 31,2008
    
    
    2009(In U.S. dollars,except for share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    54,088,842
    
    
    $
    13,229,958Short term deposits
    
    
    2,940,051
    
    
    
    29,075Restricted cash
    
    
    37,510,000
    
    
    
    40,430,000Accounts receivable, net of allowance for doubtful
debts of $9,169,667 in 2008 and $8,095,013 in 2009
    
    
    44,762,902
    
    
    
    18,319,101Deposits for program advertising right
    
    
    2,125,330
    
    
    
    1,239,987Prepaid expenses
    
    
    3,252,022
    
    
    
    4,828,534Amounts due from related parties, current portion
    
    
    6,547,636
    
    
    
    6,033,114Consideration receivable from disposal of subsidiaries
    
    
    36,970,590
    
    
    
    20,000,000Deferred tax assets, current portion
    
    
    1,042,379
    
    
    
    Other current assets
    
    
    4,259,056
    
    
    
    4,018,128Assets held for sale
    
    
    
    
    
    
    42,737,129Total current assets
    
    
    193,498,808
    
    
    
    150,865,026Goodwill
    
    
    46,992,724
    
    
    
    7,238,016Television program and film rights, net
    
    
    
    
    
    
    4,359,421Intangible assets, netLicense agreements, net
    
    
    99,148,017
    
    
    
    19,298,292Exclusive advertising agreement, net
    
    
    74,267,216
    
    
    
    Other intangible assets, net
    
    
    27,113,350
    
    
    
    Property and equipment, net
    
    
    6,590,790
    
    
    
    1,997,068Cost method investment
    
    
    13,508,239
    
    
    
    11,508,239Deposit for investment
    
    
    14,174,566
    
    
    
    16,372,089Consideration receivable from disposal of subsidiaries
    
    
    28,285,035
    
    
    
    27,319,579Amount due from a related party, non-current portion
    
    
    1,506,137
    
    
    
    Other long term assets
    
    
    3,165,454
    
    
    
    3,601,271Total assets
    
    $
    508,250,336
    
    
    $
    242,559,001
   F-3




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Consolidated balance sheets (continued)
 December 31,
    
    
    December 31,2008
    
    
    2009(In U.S. dollars,except for share data)LIABILITIES, MEZZANINE EQUITY AND EQUITYCurrent liabilities:Accounts payable
    
    $
    5,375,281
    
    
    $
    16,876,116Accrued expenses and other payables
    
    
    20,405,644
    
    
    
    18,345,214Consideration payable
    
    
    21,837,635
    
    
    
    28,984,974Amounts due to related parties
    
    
    3,346,172
    
    
    
    7,029,383Long term obligation under licensing agreements, current portion
    
    
    10,363,762
    
    
    
    9,923,802Bank borrowings, current portion
    
    
    36,374,198
    
    
    
    31,261,643Income taxes payable
    
    
    8,571,848
    
    
    
    6,622,660Warrants
    
    
    
    
    
    
    1,249,000Convertible loan
    
    
    
    
    
    
    59,379,289Liabilities held for sale
    
    
    
    
    
    
    22,083,374Total current liabilities
    
    
    106,274,540
    
    
    
    201,755,455Deferred tax liabilities
    
    
    31,679,491
    
    
    
    Convertible loan
    
    
    33,200,000
    
    
    
    Payables for television program and film rights
    
    
    
    
    
    
    2,910,768Long term obligation under licensing agreements, non-current portion
    
    
    68,305,496
    
    
    
    64,062,756Total liabilities
    
    
    239,459,527
    
    
    
    268,728,979Commitments and contingency (Note 29)Series B redeemable convertible preferred shares (stated value $100;
320,000 as of December 31, 2008 and 345,600 as of December 31, 2009 shares
authorized; 314,000 as of December 31, 2008 and 345,600 as of December 31,
2009 shares issued and outstanding; liquidation value of $63,400,000 as of
December 31, 2008 and 69,120,000 as of December 31, 2009)
    
    
    30,605,591
    
    
    
    33,765,591Equity:Xinhua Sports and Entertainment Limited Shareholders EquityClass A common shares (par value $0.001; 343,822,874 as of December 31,
2008 and 343,822,874 as of December 31, 2009 shares authorized;
146,914,667 as of December 31, 2008 and 176,466,050 as of December 31,
2009 shares issued and outstanding)
    
    
    104,302
    
    
    
    133,854Treasury stock (1,310,000 and 488,222 shares as of December 31, 2008 and
2009, respectively)
    
    
    (1,310
    )
    
    
    (488
    )Additional paid-in capital
    
    
    481,319,655
    
    
    
    498,957,081Accumulated deficit
    
    
    (252,968,439
    )
    
    
    (567,103,780
    )Accumulated other comprehensive income
    
    
    7,165,833
    
    
    
    6,635,783Total Xinhua Sports and Entertainment Limited shareholders equity (deficit)
    
    
    235,620,041
    
    
    
    (61,377,550
    )Non-controlling interests
    
    
    2,565,177
    
    
    
    1,441,981Total equity (deficit)
    
    
    238,185,218
    
    
    
    (59,935,569
    )Total liabilities, mezzanine equity and equity
    
    $
    508,250,336
    
    
    $
    242,559,001
   F-4




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 
 Consolidated statements of operations
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars, except for share data)Net revenues:Advertising services
    
    $
    75,337,392
    
    
    $
    99,574,984
    
    
    $
    78,015,908Advertising sales
    
    
    8,140,718
    
    
    
    21,911,519
    
    
    
    21,214,830Total net revenues
    
    
    83,478,110
    
    
    
    121,486,503
    
    
    
    99,230,738Cost of revenues:Advertising services
    
    
    54,255,443
    
    
    
    71,229,714
    
    
    
    61,887,919Advertising sales
    
    
    3,804,831
    
    
    
    9,482,952
    
    
    
    23,554,486Total cost of revenues
    
    
    58,060,274
    
    
    
    80,712,666
    
    
    
    85,442,405Operating expenses:Selling and distribution
    
    
    5,662,277
    
    
    
    10,683,499
    
    
    
    7,707,793General and administrative
    
    
    17,890,193
    
    
    
    45,604,488
    
    
    
    27,761,489Write-down on prepayments
    
    
    
    
    
    
    
    
    
    
    1,478,264Write-down on amounts due from related parties
    
    
    
    
    
    
    
    
    
    
    410,806Impairment loss on goodwill
    
    
    
    
    
    
    137,343,265
    
    
    
    71,472,061Impairment loss on television program and
film rights
    
    
    
    
    
    
    
    
    
    
    14,192,291Impairment loss on intangible assets
    
    
    
    
    
    
    11,884,680
    
    
    
    84,226,010Impairment loss on promissory note
    
    
    
    
    
    
    8,521,483
    
    
    
    Impairment loss on property and equipment
    
    
    
    
    
    
    2,188,071
    
    
    
    468,428Impairment loss on other non-current assets
    
    
    
    
    
    
    
    
    
    
    4,524,803Loss on disposal of Convey
    
    
    
    
    
    
    4,720,705
    
    
    
    25,640,000Total operating expenses
    
    
    23,552,470
    
    
    
    220,946,191
    
    
    
    237,881,945Other operating income
    
    
    2,261,788
    
    
    
    1,251,405
    
    
    
    2,065,434Income (loss) from operations
    
    
    4,127,154
    
    
    
    (178,920,949
    )
    
    
    (222,028,178
    )Other income (expense):Interest expense
    
    
    (1,593,634
    )
    
    
    (2,528,140
    )
    
    
    (12,263,448
    )Interest income
    
    
    5,858,372
    
    
    
    1,463,651
    
    
    
    3,145,175Gain on settlement of UBS liability, net
    
    
    
    
    
    
    
    
    
    
    13,516,679Impairment loss on principal protected note
    
    
    
    
    
    
    (24,909,929
    )
    
    
    Impairment loss on cost method investments
    
    
    
    
    
    
    (1,333,066
    )
    
    
    (2,000,000
    )Other income, net
    
    
    1,480,450
    
    
    
    
    
    
    
    2,252,353Income (loss) from continuing operations before
provision for income taxes
    
    
    9,872,342
    
    
    
    (206,228,433
    )
    
    
    (217,377,419
    )Income tax provision (benefit)
    
    
    670,604
    
    
    
    1,728,361
    
    
    
    (4,057,045
    )Net income (loss) from continuing operations
    
    
    9,201,738
    
    
    
    (207,956,794
    )
    
    
    (213,320,374
    )Discontinued operations:Income (loss) from discontinued operations
(including net gain on disposal of
subsidiaries of $3,872,583 for 2009)
    
    
    7,243,647
    
    
    
    (65,648,657
    )
    
    
    (122,430,930
    )Income tax (benefit) provision
    
    
    (12,896,254
    )
    
    
    626,080
    
    
    
    (22,135,390
    )Income (loss) from discontinued operations, net
of taxes
    
    
    20,139,901
    
    
    
    (66,274,737
    )
    
    
    (100,295,540
    )Net income (loss)
    
    
    29,341,639
    
    
    
    (274,231,531
    )
    
    
    (313,615,914
    )Less: net income (loss) attributable to
non-controlling interest
    
    
    1,302,634
    
    
    
    640,468
    
    
    
    (2,040,573
    )
  F-5




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars, except for share data)Net income (loss) attributable to XSEL
    
    $
    28,039,005
    
    
    $
    (274,871,999
    )
    
    $
    (311,575,341
    )Dividends declared on redeemable convertible
preferred shares
    
    
    (1,338,333
    )
    
    
    
    
    
    
    Dividends declared on series B redeemable
convertible preferred shares
    
    
    
    
    
    
    (2,000,000
    )
    
    
    (2,560,000
    )Net income (loss) attributable to holders of
common shares
    
    $
    26,700,672
    
    
    $
    (276,871,999
    )
    
    $
    (314,135,341
    )Earnings per share- basic and dilutedNet income (loss) from continuing operations per
share:Basic  Class A common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Basic  Class B common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Diluted  Class A common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Diluted  Class B common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Net income (loss) from discontinued operations
per share:Basic  Class A common share
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Basic  Class B common share
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    Diluted  Class A common share
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Diluted  Class B common share
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    Net income (loss) per share:Basic  Class A common share
    
    $
    0.23
    
    
    $
    (2.04
    )
    
    $
    (1.99
    )Basic  Class B common share
    
    $
    0.23
    
    
    $
    (2.04
    )
    
    $
    Diluted  Class A common share
    
    $
    0.21
    
    
    $
    (2.04
    )
    
    $
    (1.99
    )Diluted  Class B common share
    
    $
    0.21
    
    
    $
    (2.04
    )
    
    $
    Weighted average number of common shares used in
computation:Basic  Class A common share
    
    
    66,165,765
    
    
    
    85,926,895
    
    
    
    157,729,635Basic  Class B common share
    
    
    50,054,618
    
    
    
    49,917,482
    
    
    
    Diluted  Class A common share
    
    
    86,314,773
    
    
    
    85,926,895
    
    
    
    157,729,635Diluted  Class B common share
    
    
    50,054,618
    
    
    
    49,917,482
    
    
    
    
 See notes to consolidated financial statements
  F-6




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##### Table of Contents



Consolidated statements of changes in equity
  Xinhua Sports & Entertainment Limited ShareholdersClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    Accumulatedcommon shares
    
    
    common shares
    
    
    Nonvested shares
    
    
    preferred shares
    
    
    Additional
    
    
    
    
    
    
    PRC
    
    
    earnings
    
    
    other
    
    
    Total XSEL
    
    
    Non-Number of
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    paid-in
    
    
    Treasury
    
    
    statutory
    
    
    (accumulated
    
    
    comprehensive
    
    
    shareholders
    
    
    controlling
    
    
    
    
    
    
    Comprehensiveshares
    
    
    Amount
    
    
    of shares
    
    
    Amount
    
    
    shares
    
    
    Amount
    
    
    shares
    
    
    Amount
    
    
    capital
    
    
    stock
    
    
    reserve
    
    
    deficit)
    
    
    income
    
    
    equity (deficit)
    
    
    interest
    
    
    Total Equity
    
    
    income(In U.S. dollars, except for share data)Balance, December 31, 2006
    
    
    20,961,154
    
    
    $
    20,961
    
    
    
    50,054,618
    
    
    $
    7,442
    
    
    
    11,050,000
    
    
    $
    11,050
    
    
    
    15,585,254
    
    
    $
    15,585
    
    
    $
    103,155,391
    
    
    $
    
    
    
    $
    1,802,084
    
    
    $
    (4,599,196
    )
    
    $
    836,405
    
    
    $
    101,249,722
    
    
    $
    3,010,407
    
    
    $
    104,260,129Issuance of common shares arising from acquisitions of subsidiaries
    
    
    2,639,595
    
    
    
    2,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,230,881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,233,521
    
    
    
    
    
    
    
    10,233,521Issuance of shares for future exercises of share options
    
    
    2,000,000
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common shares for share option plan
    
    
    1,587,019
    
    
    
    1,587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,171,088
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,173,875
    
    
    
    
    
    
    
    2,173,875Issuance of common shares upon initial public offering, net of
issuance cost of $24,740,470
    
    
    34,615,846
    
    
    
    34,616
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,227,913
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,262,529
    
    
    
    
    
    
    
    200,262,529Conversion of preferred shares into common shares
    
    
    15,585,254
    
    
    
    15,585
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,585,254
    )
    
    
    (15,585
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of convertible loan into common shares
    
    
    3,554,401
    
    
    
    3,554
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,281,197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,284,751
    
    
    
    
    
    
    
    14,284,751Transfer of Nonvested shares into common shares
    
    
    1,500,000
    
    
    
    1,500
    
    
    
    
    
    
    
    
    
    
    
    (1,500,000
    )
    
    
    (1,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,071,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,071,573
    
    
    
    
    
    
    
    3,071,573Repurchase and cancellation of common shares
    
    
    (1,932,000
    )
    
    
    (1,932
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,628,054
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,629,986
    )
    
    
    
    
    
    
    (8,629,986
    )Waiver of amounts due to Parent and its affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,007,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,007,785
    
    
    
    
    
    
    
    115,007,785Dividends declared on redeemable
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,338,333
    )
    
    
    
    
    
    
    (1,338,333
    )
    
    
    
    
    
    
    (1,338,333
    )Foreign currency translation gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,281,126
    
    
    
    2,281,126
    
    
    
    82,278
    
    
    
    2,363,404
    
    
    $
    2,363,404Purchase of non-controlling interest of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,334,574
    )
    
    
    (2,334,574
    )
    
    
    Transfer to PRC reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,608,452
    
    
    
    (1,608,452
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,039,005
    
    
    
    
    
    
    
    28,039,005
    
    
    
    1,302,634
    
    
    
    29,341,639
    
    
    $
    29,341,639Balance, December 31, 2007
    
    
    80,511,269
    
    
    $
    80,511
    
    
    
    50,054,618
    
    
    $
    7,442
    
    
    
    9,550,000
    
    
    $
    9,550
    
    
    
    
    
    
    $
    
    
    
    $
    439,517,774
    
    
    $
    (800
    )
    
    $
    3,410,536
    
    
    $
    20,493,024
    
    
    $
    3,117,531
    
    
    $
    466,635,568
    
    
    $
    2,060,745
    
    
    $
    468,696,313
    
    
    $
    31,705,043
  F-7




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 Consolidated statements of changes in equity
  Xinhua Sports & Entertainment Limited ShareholdersClass A
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    Accumulatedcommon shares
    
    
    common shares
    
    
    Nonvested shares
    
    
    preferred shares
    
    
    Additional
    
    
    
    
    
    
    PRC
    
    
    earnings
    
    
    other
    
    
    Total XSEL
    
    
    Non-Number of
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    paid-in
    
    
    Treasury
    
    
    statutory
    
    
    (accumulated
    
    
    comprehensive
    
    
    shareholders
    
    
    controlling
    
    
    
    
    
    
    Comprehensiveshares
    
    
    Amount
    
    
    of shares
    
    
    Amount
    
    
    shares
    
    
    Amount
    
    
    shares
    
    
    Amount
    
    
    capital
    
    
    stock
    
    
    reserve
    
    
    deficit)
    
    
    income
    
    
    equity (deficit)
    
    
    interest
    
    
    Total Equity
    
    
    loss(In U.S. dollars, except for share data)Balance, December 31, 2007
    
    
    80,511,269
    
    
    $
    80,511
    
    
    
    50,054,618
    
    
    $
    7,442
    
    
    
    9,550,000
    
    
    $
    9,550
    
    
    
    
    
    
    $
    
    
    
    $
    439,517,774
    
    
    $
    (800
    )
    
    $
    3,410,536
    
    
    $
    20,493,024
    
    
    $
    3,117,531
    
    
    $
    466,635,568
    
    
    $
    2,060,745
    
    
    $
    468,696,313Issuance of common shares
arising from acquisitions of
subsidiaries
    
    
    3,311,670
    
    
    
    3,312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,933,068
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,936,380
    
    
    
    
    
    
    
    4,936,380Issuance of shares for
future exercise of share
options
    
    
    2,000,000
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common shares
for share option plan
    
    
    604,000
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177,749
    
    
    
    1,490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179,843
    
    
    
    
    
    
    
    179,843Issuance of common shares for
acquiring intangible assets
    
    
    4,000,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,656,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,660,000
    
    
    
    
    
    
    
    2,660,000Issuance of common shares
for professional services
    
    
    300,000
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369,000
    
    
    
    
    
    
    
    369,000Transfer of Nonvested shares
into common shares
    
    
    9,550,000
    
    
    
    9,550
    
    
    
    
    
    
    
    
    
    
    
    (9,550,000
    )
    
    
    (9,550
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,323,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,323,144
    
    
    
    
    
    
    
    12,323,144Repurchase and cancellation
of common shares
    
    
    (3,416,890
    )
    
    
    (3,417
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,959,721
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,963,138
    )
    
    
    
    
    
    
    (4,963,138
    )Transfer from Class B common
shares to Class A common
shares
    
    
    50,054,618
    
    
    
    7,442
    
    
    
    (50,054,618
    )
    
    
    (7,442
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Waiver of amounts due to
Parent and its affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,302,941
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,302,941
    
    
    
    
    
    
    
    26,302,941Dividends declared on
redeemable
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000,000
    )
    
    
    
    
    
    
    (2,000,000
    )
    
    
    
    
    
    
    (2,000,000
    )Foreign currency translation
gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,048,302
    
    
    
    4,048,302
    
    
    
    119,788
    
    
    
    4,168,090
    
    
    $
    4,168,090Decrease in non-controlling
interest due to disposal of
subsidiaries Foreign
currency translation gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (386,179
    )
    
    
    (386,179
    )
    
    
    Contribution from
non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,355
    
    
    
    130,355
    
    
    
    Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (274,871,999
    )
    
    
    
    
    
    
    (274,871,999
    )
    
    
    640,468
    
    
    
    (274,231,531
    )
    
    
    (274,231,531
    )Balance, December 31, 2008
    
    
    146,914,667
    
    
    $
    104,302
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    481,319,655
    
    
    $
    (1,310
    )
    
    $
    3,410,536
    
    
    $
    (256,378,975
    )
    
    $
    7,165,833
    
    
    
    235,620,041
    
    
    $
    2,565,177
    
    
    $
    238,185,218
    
    
    $
    (270,063,441
    )
  F-8




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 Consolidated
statements of changes in equity
 Xinhua Sports & Entertainment Limited ShareholdersClass A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulatedcommon shares
    
    
    Additional
    
    
    
    
    
    
    PRC
    
    
    
    
    
    
    other
    
    
    Total XSEL
    
    
    Non-Number of
    
    
    
    
    
    
    paid-in
    
    
    Treasury
    
    
    statutory
    
    
    Accumulated
    
    
    comprehensive
    
    
    shareholders
    
    
    controlling
    
    
    Total Equity
    
    
    Comprehensiveshares
    
    
    Amount
    
    
    capital
    
    
    stock
    
    
    reserve
    
    
    deficit
    
    
    income
    
    
    equity (deficit)
    
    
    interest
    
    
    (deficit)
    
    
    loss(In U.S. dollars, except for share data)Balance, December 31, 2008
    
    
    146,914,667
    
    
    $
    104,302
    
    
    $
    481,319,655
    
    
    $
    (1,310
    )
    
    $
    3,410,536
    
    
    $
    (256,378,975
    )
    
    $
    7,165,833
    
    
    $
    235,620,041
    
    
    $
    2,565,177
    
    
    $
    238,185,218Issuance of common shares arising from
acquisitions of subsidiaries
    
    
    11,917,973
    
    
    
    11,918
    
    
    
    9,868,082
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,880,000
    
    
    
    
    
    
    
    9,880,000Issuance of common shares to employees and
directors
    
    
    2,344,000
    
    
    
    2,344
    
    
    
    (3,166
    )
    
    
    822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common shares for
acquiring intangible assets
    
    
    4,000,000
    
    
    
    4,000
    
    
    
    2,656,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,660,000
    
    
    
    
    
    
    
    2,660,000Issuance of common shares for professional
services
    
    
    260,000
    
    
    
    260
    
    
    
    76,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,500
    
    
    
    
    
    
    
    76,500Issuance of common shares upon direct
offering, net of issuance cost of
1,048,583
    
    
    11,029,410
    
    
    
    11,030
    
    
    
    2,626,387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,637,417
    
    
    
    
    
    
    
    2,637,417Share-based compensation
    
    
    
    
    
    
    
    
    
    
    2,413,883
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,413,883
    
    
    
    
    
    
    
    2,413,883Dividends declared on redeemable
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,560,000
    )
    
    
    
    
    
    
    (2,560,000
    )
    
    
    
    
    
    
    (2,560,000
    )Foreign currency translation gain (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (530,050
    )
    
    
    (530,050
    )
    
    
    16,667
    
    
    
    (513,383
    )
    
    $
    (513,383
    )Decrease in non-controlling interest due
to disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,704
    )
    
    
    (3,704
    )Contribution from non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,425,836
    
    
    
    1,425,836Dividend paid to non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (521,422
    )
    
    
    (521,422
    )Provision of PRC statutory reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,837
    
    
    
    (124,837
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (311,575,341
    )
    
    
    
    
    
    
    (311,575,341
    )
    
    
    (2,040,573
    )
    
    
    (313,615,914
    )
    
    $
    (313,615,914
    )Balance, December 31, 2009
    
    
    176,466,050
    
    
    $
    133,854
    
    
    $
    498,957,081
    
    
    $
    (488
    )
    
    $
    3,535,373
    
    
    $
    (570,639,153
    )
    
    $
    6,635,783
    
    
    $
    (61,377,550
    )
    
    $
    1,441,981
    
    
    $
    (59,935,569
    )
    
    $
    (314,129,297
    )
 See notes to consolidated financial statements
  F-9




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 
 Consolidated statements of cash flows
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars)Cash flows from operating activities:Net income (loss)
    
    $
    28,563,574
    
    
    $
    (274,231,531
    )
    
    $
    (313,615,914
    )Adjustments to reconcile net income to net cash (used in) provided
by operating activities:Share-based compensation
    
    
    3,071,573
    
    
    
    12,476,894
    
    
    
    2,413,883Amortization
of discount on convertible loan which was later converted to common shares upon IPO
    
    
    267,462
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    20,185,864
    
    
    
    26,631,650
    
    
    
    26,914,026Impairment loss on intangible assets
    
    
    
    
    
    
    25,562,095
    
    
    
    170,416,378Impairment loss on goodwill
    
    
    
    
    
    
    180,841,091
    
    
    
    83,161,478Impairment loss on capitalized content production costs
    
    
    
    
    
    
    3,085,850
    
    
    
    Impairment loss on cost method investment
    
    
    
    
    
    
    1,333,066
    
    
    
    2,000,000Impairment loss on promissory note
    
    
    
    
    
    
    8,521,483
    
    
    
    Impairment loss on property and equipment
    
    
    
    
    
    
    2,438,818
    
    
    
    2,196,580Impairment loss on television program and film costs
    
    
    
    
    
    
    
    
    
    
    14,192,291Impairment loss on advance to a third party
    
    
    
    
    
    
    
    
    
    
    2,471,848Impairment loss on capitalized film cost
    
    
    
    
    
    
    
    
    
    
    2,052,955Write-down on other prepayments
    
    
    
    
    
    
    
    
    
    
    5,556,116Release of lease liability upon early termination of lease agreement
    
    
    
    
    
    
    (844,388
    )
    
    
    Write-down on amounts due from related parties
    
    
    
    
    
    
    1,721,306
    
    
    
    9,915,650Allowance for doubtful debts
    
    
    
    
    
    
    10,427,114
    
    
    
    11,235,937Gain on settlement of UBS case
    
    
    
    
    
    
    
    
    
    
    (13,516,679
    )Impairment loss on principal protected note
    
    
    90,076
    
    
    
    24,909,929
    
    
    
    Loss on disposal of subsidiaries
    
    
    
    
    
    
    4,720,705
    
    
    
    20,682,879Loss due to termination of an exclusive license agreement
    
    
    
    
    
    
    
    
    
    
    4,462,614Amortized issuance cost of convertible loan
    
    
    
    
    
    
    199,471
    
    
    
    729,598Imputed interest on long term obligations
    
    
    4,496,020
    
    
    
    5,045,122
    
    
    
    9,032,773Imputed interest on convertible loan
    
    
    
    
    
    
    
    
    
    
    1,266,644Interest income from consideration receivables
    
    
    
    
    
    
    
    
    
    
    (2,063,953
    )Change in fair value of conversion feature embedded in convertible
loan
    
    
    
    
    
    
    
    
    
    
    312,646Change in fair value of warrants
    
    
    
    
    
    
    
    
    
    
    (2,565,000
    )Loss (gain) on disposal of property and equipment
    
    
    49,410
    
    
    
    (63,290
    )
    
    
    140,781Deferred income taxes
    
    
    (15,518,106
    )
    
    
    (4,365,037
    )
    
    
    (28,300,180
    )Realized gain on currency linked note
    
    
    (668,280
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities (net of effects of
acquisitions and disposal):Accounts receivable
    
    
    (18,163,199
    )
    
    
    (23,612,506
    )
    
    
    7,951,218Capitalized content production costs
    
    
    (4,503,725
    )
    
    
    1,880,989
    
    
    
    Television program and film rights
    
    
    
    
    
    
    
    
    
    
    (6,036,385
    )Prepaid advertising program space and airtime
    
    
    (1,962,891
    )
    
    
    4,746,733
    
    
    
    (159,687
    )Prepaid expenses and other current assets
    
    
    (6,167,982
    )
    
    
    (4,069,364
    )
    
    
    (2,336,531
    )Amounts due from related parties
    
    
    11,616
    
    
    
    (2,773,886
    )
    
    
    (2,381,019
    )Accounts payable
    
    
    473,450
    
    
    
    (1,011,631
    )
    
    
    4,928,030Accrued expenses and other payables
    
    
    8,266,160
    
    
    
    7,469,106
    
    
    
    (7,712,987
    )Interest income from promissory note receivable
    
    
    (722,038
    )
    
    
    
    
    
    
    Income taxes payable
    
    
    2,524,239
    
    
    
    3,941,808
    
    
    
    (1,370,724
    )Net cash provided by operating activities
    
    
    20,293,223
    
    
    
    14,981,597
    
    
    
    1,975,266Cash flows from investing activities:Purchases of property and equipment
    
    
    (4,504,811
    )
    
    
    (3,200,409
    )
    
    
    (1,398,264
    )
  F-10




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars)Purchase and deposit for acquisition of intangible assets
    
    
    
    
    
    
    (3,888,741
    )
    
    
    (4,519,933
    )Repayment from (Advance to) third parties
    
    
    4,603,493
    
    
    
    
    
    
    
    (4,935,502
    )Loans to related parties
    
    
    (3,263,687
    )
    
    
    (192,657
    )
    
    
    Amount paid for cost method investment
    
    
    
    
    
    
    (2,000,000
    )
    
    
    Proceeds from disposal of property and equipment
    
    
    456,781
    
    
    
    435,418
    
    
    
    125,243Net proceeds from disposal of subsidiaries
    
    
    
    
    
    
    (2,483,619
    )
    
    
    6,109,110(Decrease) increase in short term deposits and restricted cash
    
    
    (34,672,369
    )
    
    
    6,802,140
    
    
    
    (9,024
    )Cash paid for acquisition of subsidiaries, net of cash received
    
    
    (103,209,310
    )
    
    
    (35,763,784
    )
    
    
    (22,528,086
    )Cash paid for deposit for investment
    
    
    
    
    
    
    (14,174,566
    )
    
    
    (2,197,523
    )Other investments
    
    
    
    
    
    
    
    
    
    
    (77,115
    )Investment in currency linked note
    
    
    (40,000,000
    )
    
    
    
    
    
    
    Investment in principal protected note
    
    
    (25,000,005
    )
    
    
    
    
    
    
    Proceeds from disposal of currency linked note
    
    
    40,668,280
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (164,921,628
    )
    
    
    (54,466,218
    )
    
    
    (29,431,094
    )Cash flows from financing activities:Advance and loan from related parties
    
    
    9,822,237
    
    
    
    2,068,744
    
    
    
    12,437,737Repayment to related parties
    
    
    (58,204,939
    )
    
    
    
    
    
    
    (12,663,916
    )Proceeds from issuance of convertible loan
    
    
    
    
    
    
    33,200,000
    
    
    
    24,600,000Transaction cost of issuance of convertible loan
    
    
    
    
    
    
    (2,542,457
    )
    
    
    (813,695
    )Proceeds from issuance of redeemable convertible preferred shares
    
    
    
    
    
    
    30,000,000
    
    
    
    Transaction cost of issuance of redeemable convertible preferred share
    
    
    
    
    
    
    (794,409
    )
    
    
    Contribution from non-controlling interests
    
    
    
    
    
    
    130,355
    
    
    
    1,425,836Dividend paid to non-controlling interests
    
    
    
    
    
    
    
    
    
    
    (463,782
    )Issuance of shares for share option plan
    
    
    2,170,288
    
    
    
    179,843
    
    
    
    Repurchase of common shares
    
    
    (8,629,986
    )
    
    
    (4,963,138
    )
    
    
    Proceeds from public offering
    
    
    225,002,999
    
    
    
    
    
    
    
    7,500,000Expenses on public offering
    
    
    (22,360,852
    )
    
    
    (116,000
    )
    
    
    (623,585
    )Bank borrowings and overdraft raised
    
    
    48,743,861
    
    
    
    40,333,520
    
    
    
    33,872,761Bank borrowings and overdraft repaid
    
    
    (25,772,569
    )
    
    
    (35,541,106
    )
    
    
    (24,977,286
    )Payment of long term payables
    
    
    (16,487,283
    )
    
    
    (15,433,903
    )
    
    
    (26,346,666
    )Cash paid for prior acquisition-deferred and contingent consideration
    
    
    
    
    
    
    
    
    
    
    (26,297,740
    )Loss of bank balance due to settlement of UBS case
    
    
    
    
    
    
    
    
    
    
    (655,673
    )Dividends paid on redeemable convertible preferred shares
    
    
    (3,025,000
    )
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    151,258,756
    
    
    
    46,521,449
    
    
    
    (13,006,009
    )
  F-11




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars)Effect of exchange rate changes
    
    
    1,452,189
    
    
    
    2,615,927
    
    
    
    (8,928
    )Net increase (decrease) in cash and cash equivalents
    
    
    8,082,540
    
    
    
    9,652,755
    
    
    
    (40,470,765
    )Cash and cash equivalents, beginning of the year
    
    
    36,353,547
    
    
    
    44,436,087
    
    
    
    54,088,842Less: Cash and cash equivalents at end of period included in assets held
for sale
    
    
    
    
    
    
    
    
    
    
    (388,119
    )Cash and cash equivalents, end of the year
    
    $
    44,436,087
    
    
    $
    54,088,842
    
    
    $
    13,229,958Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    768,216
    
    
    $
    3,708,284
    
    
    $
    3,574,702Interest paid
    
    $
    1,864,203
    
    
    $
    2,776,738
    
    
    $
    7,177,502Supplemental schedule of non-cash investing and financing activities:Issuance of common shares for acquisitions of subsidiaries
    
    $
    10,233,521
    
    
    $
    4,936,380
    
    
    $
    9,880,000Issuance of common shares for acquisitions of intangible assets
    
    
    
    
    
    
    2,660,000
    
    
    
    2,660,000Issuance of preferred shares for settlement of dividends on redeemable
convertible preferred shares
    
    
    
    
    
    
    1,400,000
    
    
    
    3,160,000Consideration payable for acquisition of subsidiaries
    
    
    2,607,715
    
    
    
    21,837,635
    
    
    
    8,984,974Conversion of preferred shares into common shares
    
    
    15,585
    
    
    
    
    
    
    
    Conversion of convertible loan into common shares
    
    
    14,284,751
    
    
    
    
    
    
    
    Waiver of amount due to a shareholder
    
    
    1,500,000
    
    
    
    
    
    
    
    Consideration paid by Xinhua Finance Limited (XFL) and its
affiliates on behalf of the Company and subsequently waived by XFL and
its affiliates
    
    
    113,507,785
    
    
    
    26,302,941
    
    
    
    
  F-12




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 
 Notes to consolidated financial statements
 (In U.S. dollars)
 1. Organization and principal activities
     The VIE arrangements
   F-13




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##### Table of Contents



Xinhua Sports & Entertainment Limited
   2007
    
    
    2008
    
    
    2009Total assets
    
    $
    300,356,736
    
    
    $
    318,273,081
    
    
    $
    139,246,402Total liabilities
    
    
    153,983,859
    
    
    
    179,924,080
    
    
    
    179,124,554Total net revenues  Continuing operations
    
    
    65,958,072
    
    
    
    91,753,648
    
    
    
    96,116,978Total operating expenses  Continuing operations
    
    
    8,351,556
    
    
    
    30,710,774
    
    
    
    134,497,227Net income (loss)  Continuing operations
    
    
    24,102,346
    
    
    
    (8,962,273
    )
    
    
    (117,430,251
    )Net income (loss)  Discontinued
operations
    
    
    11,595,073
    
    
    
    (13,471,135
    )
    
    
    (78,195,113
    )
 2. Summary of principal accounting policies
 (a) Basis of presentation
       F-14




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  1)
    
    The restructuring of the secured convertible loan facility:
  (a)
    
    an amendment which waives the breach of financial covenants for the quarters
ended December 31, 2009 and subsequent periods up to the date of the amendment.
 (b)
    
    an amendment that lowers the financial covenant requirements on a prospective
basis. The previous covenants of minimum consolidated EBITDA and maximum leverage
ratio for each future quarter until repayment ranged from $16.8 million to $52.1
million and 1.88 to 5.03, have been changed to $0.8 million to $3.8 million and 11.75
to 57.23, respectively. The covenant of maximum capital expenditure is added in the
amendment which ranged from $0.5 million to $1.3 million for the fiscal years 2010 to
2012.
 (c)
    
    the issuance of 78,295 Series C redeemable convertible preferred shares to the
convertible loan holder for no additional consideration. See Note 34, Subsequent
Events, for more details.
    F-15




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 2)
    
    A program of disposal of non-core businesses:
 a)
    
    In June, 2010, the Company closed its disposal of the printing business for a
cash consideration of $24 million (Note 6, Discontinued Operations) and used part of
the proceeds to repay a portion of the convertible loan.
 b)
    
    The Company now plans to dispose two non-core subsidiaries by the end of 2010.
This decision was made after December 31, 2009. These two subsidiaries had net assets
of $9.2 million as of December 31, 2009.
 c)
    
    In June 2010, the Company reached an agreement with the original selling
shareholders of a subsidiary. The outstanding consideration payable to the original
selling shareholders as of December 31, 2009 was $5.7 million. According to the
agreement, the Company and the original selling shareholders agreed to settle the
outstanding consideration payable of approximately $2.4 million as of the date of the agreement by
issuing a certain number of class A common shares of the Company. See Note 34,
Subsequent Events, for more details.
 3)
    
    The Companys advertising agency agreement with Shaanxi Television Station was
terminated effective June 30, 2010. As of December 31, 2009, there was approximately
$68.8 million long-term liabilities related to the advertising agency agreement recorded
in the consolidated balance sheet. Due to the termination, the Companys commitment to
Shaanxi Television Station was reduced by $64.2 million.
 4)
    
    The Company is adopting various cost-saving strategies.
  (b) Basis of consolidation
  Non-controlling interests
   F-16




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Use of estimates
  (c) Revenue recognition
        F-17




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (d) Restricted cash
  (e) Deposits for program advertising right
  (f) Other current assets
  (g) Cost method investment
  (h) Property and equipment, net
  Leasehold improvements
    
    Lesser of 5 years or lease termFurniture, fixtures and equipment
    
    4-5 yearsMotor vehicles
    
    5 years
  F-18




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (i) Television program and film right, net
  (j) License agreements
  (k) Fair value of financial instruments
  Fair value hierarchy
      F-19




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (l) Long-lived assets with definite lives
      F-20




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 (m) Goodwill and intangible assets with indefinite lives
      (n) Other income
   F-21




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (o) Income taxes
   (p) For eign currency translation
     F-22




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 (q) Net income (loss) per share
  (r) Share-based compensation
    (s) Business combinations
   F-23




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  (t) Recent accounting pronouncements
   F-24




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##### Table of Contents



Xinhua Sports & Entertainment Limited
     F-25




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 3. Concentration of risk
 Concentration of credit risk
     Concentration of location
  4. Acquisitions
 I. 2009 acquisition
   F-26




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##### Table of Contents



Xinhua Sports & Entertainment Limited
    Assets acquired:Cash
    
    $
    61,556Prepaid expenses and other current assets
    
    
    265,883Deposits
    
    
    1,453,398Television program and film rights
    
    
    13,838,579License agreement
    
    
    77,111,642Property and equipment
    
    
    1,664Total
    
    
    92,732,722Liabilities assumed:Accounts payable
    
    
    6,306,460Accrued expenses and other payables
    
    
    13,642,949Lease liabilities
    
    
    74,144,168Deferred tax liability
    
    
    4,056,955Total
    
    
    98,150,532Intangible assets
    
    
    16,227,819Net assets acquired
    
    
    10,810,009Cash consideration
    
    $
    22,589,642Goodwill
    
    $
    11,779,633
 AmortizationPeriod(Years)Intangible assets comprised of:Exclusive advertising agreement
    
    $
    77,111,642
    
    
    
    5.75Exclusive advertising agreement resulting from acquisition
    
    
    16,227,819
    
    
    
    9.75
  F-27




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)Pro forma net revenues
    
    $
    186,030,952
    
    
    $
    140,659,771Pro forma (loss) income from operations
    
    
    (239,295,147
    )
    
    
    (339,461,802
    )Pro forma net loss
    
    
    (274,231,531
    )
    
    
    (313,662,124
    )Pro forma net loss per shareBasic and diluted from continuing operations  Class A Common share
    
    $
    (1.55
    )
    
    $
    (1.36
    )Basic and diluted from continuing operations  Class B Common share
    
    
    (1.55
    )
    
    
    N/ABasic and diluted from discontinued operations  Class A Common share
    
    
    (0.49
    )
    
    
    (0.64
    )Basic and diluted from discontinued operations  Class B Common share
    
    
    (0.49
    )
    
    
    N/A
   II. Prior year acquisitions
 (a) East Alliance Limited
    F-28




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Assets acquired:Cash
    
    $
    1,087,862Accounts receivable
    
    
    2,318,995Prepaid expenses and other current assets
    
    
    321,849Property and equipment
    
    
    234,966Total
    
    
    3,963,672Liabilities assumed:Accounts payable
    
    
    600,932Accrued expenses and other payables
    
    
    344,036Amounts due to related parties
    
    
    789,876Contingent consideration payable
    
    
    452,265Deferred tax liability
    
    
    1,148,951Income taxes payable
    
    
    65,339Total
    
    
    3,401,399Intangible assets
    
    
    9,592,000Net assets acquired
    
    
    10,154,273Cash consideration in 2007
    
    $
    10,154,273
 AmortizationPeriod(Years)Intangible assets comprised of:License rights
    
    $
    9,372,000
    
    
    
    3.5Noncompete agreement
    
    
    220,000
    
    
    
    1
    (b) Singshine (Holdings) Hongkong Ltd.
    F-29




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Assets acquired:Cash
    
    $
    1,140,230Accounts receivable
    
    
    1,567,372Prepaid expenses and other current assets
    
    
    306,557Property and equipment
    
    
    364,782Other long term assets
    
    
    131,456Total
    
    
    3,510,397Liabilities assumed:Accounts payable
    
    
    97,905Accrued expenses and other payables
    
    
    589,048Amounts due to related parties
    
    
    424,197Income taxes payable
    
    
    94,941Amounts due to former shareholders
    
    
    125,722Deferred tax liabilities
    
    
    567,827Total
    
    
    1,899,640Intangible assets
    
    
    3,767,000Net assets acquired
    
    
    5,377,757Initial cash consideration
    
    
    6,637,325Goodwill
    
    $
    1,259,568
 AmortizationPeriod(Years)Intangible assets comprised of:Indefinite life trademark
    
    $
    1,584,000
    
    
    IndefiniteCustomer base
    
    
    1,588,000
    
    
    
    4.5Noncompete agreement
    
    
    595,000
    
    
    
    3.8
     F-30




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (c) Shanghai Paxi Advertising Co., Ltd.
    Assets acquired:Cash
    
    $
    947,777Accounts receivable
    
    
    4,609,190Prepaid expenses and other current assets
    
    
    784,533Amounts due from related parties
    
    
    133,141Property and equipment
    
    
    143,616Total
    
    
    6,618,257Liabilities assumed:Accounts payable
    
    
    2,279,020Accrued expenses and other payables
    
    
    534,984Amounts due to related parties
    
    
    91,821Income taxes payable
    
    
    1,038,571Deferred tax liabilities
    
    
    2,761,298Total
    
    
    6,705,694Intangible assets
    
    
    10,951,764Net assets acquired
    
    
    10,864,327Initial purchase consideration
    
    
    41,627,662Goodwill
    
    $
    30,763,335
 AmortizationPeriod(Years)Intangible assets comprised of:Customer base
    
    $
    8,824,516
    
    
    
    5Exclusive advertising agreement
    
    
    75,350
    
    
    
    1Noncompete agreement
    
    
    1,655,221
    
    
    
    5Backlog order
    
    
    35,940
    
    
    
    1Distribution network
    
    
    360,737
    
    
    
    5
   F-31




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##### Table of Contents



Xinhua Sports & Entertainment Limited
    (d) Profitown Development Limited
    Assets acquired:Cash
    
    $
    66,689Accounts receivable
    
    
    48,143Prepaid expenses and other current assets
    
    
    9,873Amounts due from related parties
    
    
    217,115Property and equipment
    
    
    24,064Total
    
    
    365,884Liabilities assumed:Accounts payable
    
    
    33,519Accrued expenses and other payables
    
    
    12,690Income tax payables
    
    
    48,114Bank overdraft
    
    
    22,768Capital lease obligations
    
    
    13,034Deferred tax liabilities
    
    
    271,650Total
    
    
    401,775Intangible assets
    
    
    1,552,285Net assets acquired
    
    
    1,516,394Initial purchase consideration
    
    
    2,319,189Goodwill
    
    $
    802,795
  F-32




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 AmortizationPeriod(Years)Intangible assets comprised of:Customer base
    
    $
    1,339,657
    
    
    
    5Noncompete agreement
    
    
    191,319
    
    
    
    5Backlog order
    
    
    21,309
    
    
    
    1
    III. The prior years acquisitions subsequently discontinued or disposed
 (a) Guangzhou Singshine Communication Co., Ltd.
     F-33




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (b) Small World Television Ltd.
    (c) Xinhua Finance Media (Convey) Limited
    Assets acquired:Accounts receivable
    
    $
    1,536,045Prepaid expenses and other current assets
    
    
    771,307Property and equipment
    
    
    495,722Other assets
    
    
    64,263Total
    
    
    2,867,337Liabilities assumed:Accounts payable
    
    
    527,558Accrued expenses and other payables
    
    
    1,237,539Bank overdraft
    
    
    319,050Bank loans
    
    
    125,580Capital lease obligations
    
    
    496,494Amounts due to related parties
    
    
    79,073Income taxes payable
    
    
    17,263Deferred tax liabilities
    
    
    3,130,977Total
    
    
    5,933,534Intangible assets
    
    
    17,415,579Net assets acquired
    
    
    14,349,382Cash consideration
    
    
    33,257,411Goodwill
    
    $
    18,908,029
  F-34




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 AmortizationPeriod(Years)Intangible assets comprised of:Indefinite life trademark
    
    $
    8,059,482
    
    
    IndefiniteDistribution network
    
    
    5,402,375
    
    
    
    9Customer base
    
    
    3,702,354
    
    
    
    15Backlog order
    
    
    251,368
    
    
    
    1
     F-35




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 5. Impairments
  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars)Continuing operationsImpairment loss on goodwill (a)
    
    
    
    
    
    
    137,343,265
    
    
    
    71,472,061Impairment loss on intangible assets (a)
    
    
    
    
    
    
    11,884,680
    
    
    
    84,226,010Impairment loss of television program and film rights (a)
    
    
    
    
    
    
    
    
    
    
    14,192,291Impairment loss on other non-current assets (b)
    
    
    
    
    
    
    
    
    
    
    4,524,803Impairment loss on property and equipment (a)
    
    
    
    
    
    
    2,188,071
    
    
    
    468,428Impairment loss on promissory note (c)
    
    
    
    
    
    
    8,521,483
    
    
    
    Discontinued operationsImpairment loss on goodwill (a)
    
    
    
    
    
    
    43,497,826
    
    
    
    11,689,417Impairment loss on intangible assets (a)
    
    
    
    
    
    
    13,677,415
    
    
    
    86,190,368Impairment loss on other non-current assets (b)
    
    
    
    
    
    
    3,085,850
    
    
    
    Impairment loss on property and equipment (a)
    
    
    
    
    
    
    250,747
    
    
    
    1,728,152
 (a)
    
    In 2008, impairment losses on goodwill, intangible assets and property and equipment were
driven mainly by the Companys repositioning in the sports and entertainment fields and the
global economic downturn in 2008. In 2009, the impairment losses on goodwill, intangible
assets, television program and film costs and property and equipment were mainly due to (1)
the release of Rule 61 (Rule 61) in October 2009 by the State Administration of Radio, Film
and Television, which substantially cuts the time allowed for brand advertisements in each
hour and the amount of time allotted for infomercials and (2) the loss of major customers to
competitors in the Advertising Group. For details of goodwill and intangible assets, please
refer to Note 14, License agreements, Exclusive Advertising Agreement and Other Intangible
Assets, and Note 15, Goodwill.(b)
    
    The impairments on non-current assets mainly consist of impairment of capitalized content
production cost, capitalized film cost, and advance to third parties due to the same reason as
stated above for 2009 goodwill impairment.(c)
    
    This represented impairment on promissory note issued to a related party, 50% of which was
owned by the Companys former senior management officer. Impacted by challenging economic
conditions, the related party was unable to repay the principal and accrued interest.
Therefore, the Company recorded a provision of $8,521,483 for the remaining amount of the note
and accrued interest as of December 31, 2008.   F-36




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 6. Discontinued operations
 Subsidiary to be sold
   Cash
    
    
    388,119Other current assets
    
    
    4,253,942Non-current assets
    
    
    38,095,068Total assets held for sale
    
    $
    42,737,129Current liability
    
    $
    10,633,290Other current liabilities
    
    
    11,450,084Total liabilities held for sale
    
    $
    22,083,374Net assets held for sale
    
    $
    20,653,755
  Subsidiaries disposed
  Loss on disposal of Century Media Advertising
    
    
    (1,939,757
    )Gain on disposal of Singshine Communication
    
    
    4,746,971Gain on disposal of Hyperlink
    
    
    1,065,369Net gain on disposals
    
    $
    3,872,583
 (a) Century Media Advertising and Singshine Communication
   F-37




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Total assets
    
    $
    2,595,018Total liabilities
    
    $
    1,038,391Net assets disposed
    
    $
    1,556,627
  Net revenue
    
    $
    5,128,878Net income
    
    $
    1,184,704
   Total assets
    
    $
    475,768Total liabilities
    
    $
    5,242,057Net liabilities disposed
    
    $
    4,766,289
  Net revenue
    
    $
    3,907,330Net loss
    
    $
    295,969
 (b) Hyperlink
    F-38




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Total assets
    
    $
    8,057,955Total liabilities
    
    $
    1,127,136Net assets disposed
    
    $
    6,930,819
  Net revenue
    
    $
    4,514,411Net income
    
    $
    256,483
 Subsidiaries terminated
   Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009(In U.S. dollars, except for share data)Net revenues
    
    
    51,360,580
    
    
    
    64,544,449
    
    
    
    41,429,034Income (loss) from discontinued
operations before current income
tax expense (1)
    
    
    7,243,647
    
    
    
    (65,648,657
    )
    
    
    (122,430,930
    )(Benefit) provision for income tax
    
    
    (12,896,254
    )
    
    
    626,080
    
    
    
    (22,135,390
    )Income (loss) from discontinued
operations, net of taxes
    
    
    20,139,901
    
    
    
    (66,274,737
    )
    
    
    (100,295,540
    )
 (1)
    
    Included in 2009 loss from discontinued operations was a net gain on disposal of subsidiaries
of $3,872,583. 7. Loss on disposal of Convey
   F-39




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Total assets
    
    $
    91,147,876Total liabilities
    
    $
    (8,872,513
    )Net assets
    
    $
    82,275,363Other investment (15% interests retained)
    
    
    (12,341,305
    )Net assets disposed (85% equity interest)
    
    $
    69,934,058
  Net revenue
    
    $
    21,598,870Net income
    
    $
    6,462,136
       F-40




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 8. Accounts receivable, net of allowance for doubtful debts
 At December 31, 2008
    
    
    At December 31, 2009Accounts receivable
    
    $
    53,932,569
    
    
    $
    26,414,114Less: Allowance for doubtful debts
    
    
    (9,169,667
    )
    
    
    (8,095,013
    )Total
    
    $
    44,762,902
    
    
    $
    18,319,101
 2007
    
    
    2008
    
    
    2009Movements in allowance for doubtful debtsBalance at the beginning of the year
    
    $
    
    
    
    $
    301,217
    
    
    $
    9,169,667Add: Amount charged to expenses
    
    
    301,217
    
    
    
    10,427,114
    
    
    
    11,235,937Exchange rate difference
    
    
    
    
    
    
    97,244
    
    
    
    (12,484
    )Less: Write-off of allowance for doubtful debts
    
    
    
    
    
    
    (601,054
    )
    
    
    (8,974,631
    )Recovery of the provision
    
    
    
    
    
    
    
    
    
    
    (3,282,163
    )Reclassified to assets held for sale
    
    
    
    
    
    
    
    
    
    
    (41,313
    )Disposal of subsidiaries
    
    
    
    
    
    
    (1,054,854
    )
    
    
    Balance at the end of the year
    
    $
    301,217
    
    
    $
    9,169,667
    
    
    $
    8,095,013
 9. Cost method investment
   At December 31, 2008
    
    
    At December 31, 2009Investment in Convey
    
    $
    11,508,239
    
    
    $
    11,508,239Investment in ASN
    
    
    2,000,000
    
    
    
    Total
    
    $
    13,508,239
    
    
    $
    11,508,239
    F-41




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##### Table of Contents



Xinhua Sports & Entertainment Limited
      10. Television program and film right, net
  At December 31, 2008
    
    
    At December 31, 2009Television program and film right
    
    
    
    
    
    $
    19,874,965Less: Accumulated amortization
    
    
    
    
    
    
    1,323,253Less: Impairment loss
    
    
    
    
    
    
    14,192,291Television program and film right, net
    
    
    
    
    
    $
    4,359,421
   F-42




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 11. Other current assets
  At December 31, 2008
    
    
    At December 31, 2009Advances to employees
    
    $
    1,225,066
    
    
    $
    347,826Rent deposits
    
    
    471,978
    
    
    
    542,561Interest income receivable
    
    
    245,784
    
    
    
    183,677Advance to third party
    
    
    
    
    
    
    1,900,000Others
    
    
    2,316,228
    
    
    
    1,044,064Total
    
    $
    4,259,056
    
    
    $
    4,018,128
  12. Deposit for investment
  13. Property and equipment, net
  At December 31, 2008
    
    
    At December 31, 2009Leasehold improvements
    
    $
    2,003,777
    
    
    $
    1,538,264Billboards and lampposts
    
    
    2,749,421
    
    
    
    3,133,391Furniture, fixtures and equipment
    
    
    7,925,794
    
    
    
    6,581,671Motor vehicles
    
    
    696,387
    
    
    
    465,754Total
    
    
    13,375,379
    
    
    
    11,719,080Less: Impairment loss
    
    
    2,438,818
    
    
    
    4,635,398Accumulated depreciation and amortization
    
    
    4,499,074
    
    
    
    5,195,798Total
    
    
    6,437,487
    
    
    
    1,887,884Construction in progress
    
    
    153,303
    
    
    
    109,184Property and equipment, net
    
    $
    6,590,790
    
    
    $
    1,997,068
  F-43




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  14. License Agreements, Exclusive Advertising Agreement, and Other Intangible Assets
 (a) License agreement in Upper Step
 At December 31, 2008
    
    
    At December 31, 2009 License agreement
    
    $
    38,834,305
    
    
    $
    38,834,305 Television advertising services contract
    
    
    71,926,980
    
    
    
    71,915,965110,761,285
    
    
    
    110,750,270Less: Accumulated amortizationLicense agreements in Upper Step License agreement
    
    
    2,970,461
    
    
    
    4,359,541 Television advertising services contract
    
    
    8,642,807
    
    
    
    13,017,07511,613,268
    
    
    
    17,376,616Less: Impairment lossLicense agreements in Upper Step License agreement
    
    
    
    
    
    
    34,474,764 Television advertising services contract
    
    
    
    
    
    
    12,461,652
    
    
    
    46,936,416Less: license rights under Television advertising
service contract due to early termination of
contract (1)
    
    
    
    
    
    
    46,437,238License agreements in Upper Step, net
    
    $
    99,148,017
    
    
    $
    
 (1)
    
    As of December 31, 2009, due to the impact of the release of Rule61 in October 2009 by the
State Administration of Radio, Film and Television, which substantially cuts the time allowed for
brand advertisements in each hour and the amount of time allotted for infomercials, Upper step
terminated its advertising services contract with Inner Mongolia Television Station. Both the
license rights under the Television advertising services contracts and associated liabilities
were reduced, which resulted in a loss of $4.5 million due to the termination of the license
contract. The loss was recorded as part of the net gain (loss) on disposal of subsidiaries in
discontinued operations.  F-44




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (b) License agreement in Everfame
 License agreement in Everfame
    
    $
    
    
    
    $
    93,444,842Less: Accumulated amortization
    
    
    
    
    
    
    11,320,080Less: Impairment loss
    
    
    
    
    
    
    62,826,470License agreement in Everfame, net
    
    $
    
    
    
    $
    19,298,292
  (c) Exclusive advertising agreement in
Economic observer advertising
 Exclusive advertising agreement in Economic Observer
Advertising
    
    $
    77,922,407
    
    
    $
    77,967,856Less: Accumulated amortization
    
    
    3,655,191
    
    
    
    5,202,247Less: Impairment loss
    
    
    
    
    
    
    35,369,044Less: Relass to assets held for sale(2)
    
    
    
    
    
    
    37,396,565$
    74,267,216
    
    
    $
    
 (2)
    
    As of December 31, 2009, as a result of the planned sale of Economic Observer Advertising, the exclusive
advertising agreement of Economic Observer was reclassified as part of assets held for sale. (d) Other intangible assets
  Advertising agency right
    
    $
    8,590,721
    
    
    $
    4,333,110Backlog order
    
    
    340,089
    
    
    
    340,089Customer base
    
    
    16,663,921
    
    
    
    10,577,092Distribution network
    
    
    203,769
    
    
    
    196,069Exclusive advertising agreement
    
    
    11,845,287
    
    
    
    10,420,260License rights (3)
    
    
    9,373,959
    
    
    
    5,985,456Noncompete agreements
    
    
    5,619,660
    
    
    
    4,171,154Publishing title
    
    
    189,354
    
    
    
    80,270Radio advertising agency rights
    
    
    11,920,134
    
    
    
    Research customer relationship
    
    
    405,548
    
    
    
    Trademark
    
    
    4,220,142
    
    
    
    3,761,732Others (4)
    
    
    4,907,042
    
    
    
    7,066,731Total cost of other intangible assets
    
    
    74,279,626
    
    
    
    46,931,963Less: Accumulated amortizationAdvertising agency right
    
    $
    2,366,251
    
    
    $
    2,337,920Backlog order
    
    
    340,089
    
    
    
    340,089Customer base
    
    
    6,367,502
    
    
    
    7,433,138Distribution network
    
    
    45,311
    
    
    
    83,802Exclusive advertising agreement
    
    
    641,394
    
    
    
    966,434License rights
    
    
    4,240,604
    
    
    
    5,150,962Noncompete agreements
    
    
    2,709,330
    
    
    
    2,895,032Publishing title
    
    
    80,270
    
    
    
    80,270Radio advertising agency rights
    
    
    3,171,750
    
    
    
    Research customer relationship
    
    
    241,673
    
    
    
    Trademark
    
    
    528,154
    
    
    
    840,231Others
    
    
    871,853
    
    
    
    1,519,637Total accumulated amortization
    
    
    21,604,181
    
    
    
    21,647,515Less: Impairment loss
    
    
    25,562,095
    
    
    
    25,284,448Other intangible assets, net
    
    $
    27,113,350
    
    
    $
    
  F-45




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (3)
    
    Included in the license rights were 4,000,000 common shares issued in 2009 in relation
to the acquisition of China Youth Net license rights.(4)
    
    Included in the balance of other intangible assets as of December 31, 2008 and 2009 are
trademarks of $1,584,000 and $0, respectively, with indefinite life and not subject to
amortization. Impairment loss of $457,000 and $1,584,000 is recognized for these
intangible assets for the year ended December 31, 2008 and 2009, respectively. Refer to
Note 5, Impairments, for more details.   15. Goodwill
  2009
    
    Print
    
    
    Advertising
    
    
    Broadcasting
    
    
    TotalGross amountBeginning balance
    
    $
    6,566,376
    
    
    $
    163,416,551
    
    
    $
    57,850,888
    
    
    $
    227,833,815Finalization
of earnout consideration (1)
    
    
    
    
    
    
    30,740,543
    
    
    
    6,933,094
    
    
    
    37,673,637Goodwill acquired during acquisition
    
    
    
    
    
    
    
    
    
    
    11,779,633
    
    
    
    11,779,633Modification due to finalization of
purchase price allocation
    
    
    
    
    
    
    
    
    
    
    (1,742,676
    )
    
    
    (1,742,676
    )Write-off related to disposal of
subsidiaries
    
    
    
    
    
    
    (4,303,824
    )
    
    
    
    
    
    
    (4,303,824
    )Ending balance
    
    
    6,566,376
    
    
    
    189,853,270
    
    
    
    74,820,939
    
    
    
    271,240,585Accumulated impairment loss(2):Beginning balance
    
    
    (6,566,376
    )
    
    
    (128,113,244
    )
    
    
    (46,161,471
    )
    
    
    (180,841,091
    )Charge for the year
    
    
    
    
    
    
    (61,435,104
    )
    
    
    (21,726,374
    )
    
    
    (83,161,478
    )Ending balance
    
    
    (6,566,376
    )
    
    
    (189,548,348
    )
    
    
    (67,887,845
    )
    
    
    (264,002,569
    )Goodwill, net
    
    $
    
    
    
    $
    304,922
    
    
    $
    6,933,094
    
    
    $
    7,238,016
  F-46




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 2008
    
    Print
    
    
    Advertising
    
    
    Broadcasting
    
    
    TotalGross amountBeginning balance
    
    $
    6,566,376
    
    
    $
    135,531,566
    
    
    $
    38,027,546
    
    
    $
    180,125,488Finalization of earnout
consideration (1)
    
    
    
    
    
    
    86,751,419
    
    
    
    20,562,708
    
    
    
    107,314,127Modification due to
finalization of purchase price
allocation
    
    
    
    
    
    
    (148,332
    )
    
    
    (739,366
    )
    
    
    (887,698
    )Write-off related to disposal
of subsidiaries
    
    
    
    
    
    
    (58,718,102
    )
    
    
    
    
    
    
    (58,718,102
    )Ending balance
    
    
    6,566,376
    
    
    
    163,416,551
    
    
    
    57,850,888
    
    
    
    227,833,815Accumulated impairment loss(2):Beginning balance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Charge for the year
    
    
    (6,566,376
    )
    
    
    (128,113,244
    )
    
    
    (46,161,471
    )
    
    
    (180,841,091
    )Ending balance
    
    
    (6,566,376
    )
    
    
    (128,113,244
    )
    
    
    (46,161,471
    )
    
    
    (180,841,091
    )Goodwill, net
    
    $
    
    
    
    $
    35,303,307
    
    
    $
    11,689,417
    
    
    $
    46,992,724
 (1)
    
    The amount represents the contingent consideration (earn-out) recognized during the year
when the contingency was resolved. For details of contingent consideration finalized during
2008 and 2009, please refer to Note 18, Consideration payable.(2)
    
    Refer to Note 5, Impairments, for more details. 16. Principal protected note
   F-47




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
  17. Accrued expenses and other payables
  At December 31, 2008
    
    
    At December 31, 2009Accrued salary and welfare
    
    $
    2,771,726
    
    
    $
    2,944,700Other taxes payable
    
    
    4,397,486
    
    
    
    2,874,997Payables for television program and film right
    
    
    
    
    
    
    2,910,768Receipt in advance
    
    
    3,357,461
    
    
    
    714,956Deferred revenue
    
    
    595,871
    
    
    
    148,361Audit and audit related fees
    
    
    1,789,117
    
    
    
    1,404,149Short term loan payables
    
    
    
    
    
    
    1,887,684Other
    
    
    7,493,983
    
    
    
    5,459,599Total
    
    $
    20,405,644
    
    
    $
    18,345,214
 18. Consideration payable
 JCBN
    
    
    Profitown(U.S. dollars in millions)
    
    SSMS
    
    
    XFA(1)
    
    
    China
    
    
    Group
    
    
    Convey
    
    
    M-in Group
    
    
    Others(2)
    
    
    TotalBalance as at January 1,
2008
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    1.2
    
    
    
    2.6Contingent consideration
recognized for the year
    
    
    5.4
    
    
    
    35.4
    
    
    
    0.1
    
    
    
    1.4
    
    
    
    40.0
    
    
    
    11.8
    
    
    
    11.5
    
    
    
    105.6Finalization of purchase
price allocation
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3Cash payment for the year
    
    
    (6.7
    )
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (20.0
    )
    
    
    (7.1
    )
    
    
    (0.9
    )
    
    
    (35.7
    )Share issuance for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.7
    )
    
    
    (0.2
    )
    
    
    (4.9
    )Cash payment by XFL
    
    
    
    
    
    
    (17.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.1
    )
    
    
    (23.8
    )Share issuance by XFL
    
    
    
    
    
    
    (17.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.5
    )
    
    
    (23.2
    )Balance as at January 1,
2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4
    
    
    
    20.0
    
    
    
    0.5
    
    
    
    
    
    
    
    21.9Contingent consideration
recognized for the year
    
    
    7.4
    
    
    
    
    
    
    
    23.0
    
    
    
    0.3
    
    
    
    5.6
    
    
    
    6.9
    
    
    
    
    
    
    
    43.2Payment for the year
    
    
    (5.4
    )
    
    
    
    
    
    
    (9.1
    )
    
    
    
    
    
    
    (5.6
    )
    
    
    (6.2
    )
    
    
    
    
    
    
    (26.3
    )Share issuance for the year
    
    
    
    
    
    
    
    
    
    
    (9.2
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.9
    )Balance as at December 31,
2009
    
    
    2.0
    
    
    
    
    
    
    
    4.7
    
    
    
    1.0
    
    
    
    20.0
    
    
    
    1.2
    
    
    
    
    
    
    
    28.9
 (1)
    
    XSEL Advertising Ltd, its subsidiaries and VIEs are collectively referred to as XFA. (2)
    
    Others include Hyperlink, Singshine Communication, Century Media Advertising and
Beijing Perspective. Hyperlink, Singshine Communication and Century Media Advertising were
disposed in 2009 and Beijing Perspective was reclassified to discontinued operation as of
December 31, 2009. Refer to Note 6, Discontinued operations, for more details.  F-48




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 19. Long term obligations under licensing agreements
 At December 31, 2008
    
    
    At December 31, 2009Long term obligations, current portion
    
    $
    10,363,762
    
    
    $
    9,923,802Long term obligations, non-current portion
    
    
    68,305,496
    
    
    
    64,062,756Total
    
    $
    78,669,258
    
    
    $
    73,986,558
    2010
    
    $
    9,923,8022011
    
    
    12,506,8922012
    
    
    15,180,3692013
    
    
    17,527,3852014
    
    
    17,405,131After 2014
    
    
    1,442,979Total
    
    $
    73,986,558Less: current portion
    
    
    9,923,802Non-current portion
    
    $
    64,062,756
  F-49




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 20. Bank borrowings
   21. Convertible securities
 (a) Redeemable convertible preferred shares
   The key terms of the Convertible Redeemable Preferred Shares are as follows:
 Dividends.
  F-50




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Conversion.
 Realization events.
 Redemption.
  F-51




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Voting rights.
 Liquidation preference.
  (b) Convertible loan
  The key terms of the Convertible Loan are as follows:
 Maturity date.
 Interest.
  F-52




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Conversion.
 Optional prepayment.
 Mandatory prepayment.
 Financial covenant
 MinimumConsolidatedEBITDA
    
    
    
    
    
    
    Maximum(Dollars in
    
    
    Minimum Interest
    
    
    LeverageFiscal quarter ending
    
    millions)
    
    
    Coverage Ratio
    
    
    Ratio4th Fiscal
Quarter ending in Fiscal
Year 2008
    
    $
    25.5
    
    
    
    3.23
    
    
    
    5.031st Fiscal
Quarter ending in Fiscal
Year 2009
    
    $
    20.4
    
    
    
    3.19
    
    
    
    4.792nd Fiscal
Quarter ending in Fiscal
Year 2009
    
    $
    20.4
    
    
    
    2.48
    
    
    
    4.813rd Fiscal
Quarter ending in Fiscal
Year 2009
    
    $
    20.5
    
    
    
    2.24
    
    
    
    4.764th Fiscal
Quarter ending in Fiscal
Year 2009
    
    $
    21.1
    
    
    
    2.09
    
    
    
    4.641st Fiscal
Quarter ending in Fiscal
Year 2010
    
    $
    16.8
    
    
    
    1.66
    
    
    
    5.822nd Fiscal
Quarter ending in Fiscal
Year 2010
    
    $
    21.9
    
    
    
    2.17
    
    
    
    4.463rd Fiscal
Quarter ending in Fiscal
Year 2010
    
    $
    27.7
    
    
    
    2.74
    
    
    
    3.534th Fiscal
Quarter ending in Fiscal
Year 2010
    
    $
    34.3
    
    
    
    3.40
    
    
    
    2.851st Fiscal
Quarter ending in Fiscal
Year 2011
    
    $
    22.6
    
    
    
    2.24
    
    
    
    4.332nd Fiscal
Quarter ending in Fiscal
Year 2011
    
    $
    32.0
    
    
    
    3.16
    
    
    
    3.063rd Fiscal
Quarter ending in Fiscal
Year 2011
    
    $
    42.3
    
    
    
    4.19
    
    
    
    2.314th Fiscal
Quarter ending in Fiscal
Year 2011
    
    $
    52.1
    
    
    
    5.16
    
    
    
    1.881st Fiscal
Quarter ending in Fiscal
Year 2012
    
    $
    52.1
    
    
    
    5.16
    
    
    
    1.882nd Fiscal
Quarter ending in Fiscal
Year 2012
    
    $
    52.1
    
    
    
    5.16
    
    
    
    1.883rd Fiscal
Quarter ending in Fiscal
Year 2012
    
    $
    52.1
    
    
    
    5.16
    
    
    
    1.88
  F-53




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##### Table of Contents



Xinhua Sports & Entertainment Limited
    22. Warrants
  The key terms of Series A Warrants are as follows:
   Initial exercise date:
 Termination date:
  F-54




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Cashless exercise:
 Exercise limitations:
 The key terms of Series B Warrants are as follows:
   Initial exercise date:
 Termination date:
 Cashless exercise:
  F-55




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Exercise limitations:
   As of October 26, 2009
    
    
    As of December 31, 2009Series A Warrant
    
    
    Series B Warrant
    
    
    Series A Warrant
    
    
    Series B WarrantExpected price volatility
    
    
    104.54
    %
    
    
    122.10
    %
    
    
    102.25
    %
    
    
    77.57
    %Risk-free interest rate
    
    
    2.62
    %
    
    
    0.18
    %
    
    
    2.76
    %
    
    
    0.06
    %Contractual life of the warrant
    
    5.51 years
    
    
    0.51 years
    
    
    5.33 years
    
    
    0.33 yearsExpected dividends
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Trigger price multiple
    
    2 times
    
    
    2 times
    
    
    2 times
    
    
    2 times
   F-56




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
  23. Share based compensation
 Share options
    F-57




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
  Date of grant
    
    April 25, 2007
    
    
    September 26, 2007
    
    
    April 1, 2008
    
    
    April 30, 2008
    
    
    June 13, 2008
    
    
    January 8, 2009
    
    
    December 31, 2009Number of options granted
    
   90,000
    
    
   120,000
    
    
   400,000
    
    
   60,000
    
    
   120,000
    
    
   1,000,000
    
    
   160,000Grantees
    
    3 independent directors
    
    
    4 independent directors
    
    
    An executive
    
    
    2 independent directors
    
    
    6 independent directors
    
    
    2 executives
    
    
    8 independent directorsWeighted average fair value of the options at date of grant
    
    $
    1.85
    
    
    $
    1.85
    
    
    $
    0.97
    
    
    $
    1.39
    
    
    $
    0.77
    
    
    $
    0.18
    
    
    $
    0.24Exercise price
    
    $
    6.5
    
    
    $
    4.39
    
    
    $
    1.325
    
    
    $
    1.64
    
    
    $
    1.265
    
    
    $
    0.305
    
    
    $
    0.425Term of options
    
    May not exceed 10 years from the date of grant
    
    
    May not exceed 10 years from the date of grant
    
    
    May not exceed 3.75 years from the date of grant
    
    
    May not exceed 10 years from the date of grant
    
    
    May not exceed 10 years from the date of grant
    
    
    May not exceed 5 years from the date of grant
    
    
    May not exceed 10 years from the date of grantVesting period  one third of total number of options will vest upon each of:
    
    March 8, 2008
    
    
    September 26, 2008
    
    
    December 31, 2008
    
    
    April 30, 2009
    
    
    June 13, 2008
    
    
    December 31, 2009
    
    
    December 31, 2009March 8, 2009
    
    
    September 26, 2009
    
    
    December 31, 2009
    
    
    April 30, 2010
    
    
    June 13, 2009
    
    
    December 31, 2010
    
    
    December 31, 2010March 8, 2010
    
    
    September 26, 2010
    
    
    December 31, 2010
    
    
    April 30, 2011
    
    
    June 13, 2010
    
    
    December 31, 2011
    
    
    December 31, 2011Expiration date of options
    
    April 24, 2017
    
    
    September 25, 2017
    
    
    December 31, 2011
    
    
    April 29, 2018
    
    
    June 12, 2018
    
    
    January 7, 2014
    
    
    December 30, 2019
   April 25,
    
    
    September 26,
    
    
    April 1,
    
    
    April 30,
    
    
    June 13,
    
    
    January 8,
    
    
    December 31,Date of Grant
    
    2007
    
    
    2007
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2009
    
    
    2009Exercise price
    
    $
    6.5
    
    
    $
    4.39
    
    
    $
    1.325
    
    
    $
    1.64
    
    
    $
    1.265
    
    
    $
    0.305
    
    
    $
    0.425Expected price
volatility
    
    
    44
    %
    
    
    44
    %
    
    
    89
    %
    
    
    88
    %
    
    
    93
    %
    
    
    74
    %
    
    
    74
    %Contractual life
    
    10 years
    
    
    10 years
    
    
    3.75 years
    
    
    10 years
    
    
    10 years
    
    
    5 years
    
    
    10 yearsRisk-free interest rate
    
    
    4.66
    %
    
    
    4.63
    %
    
    
    2.295
    %
    
    
    3.770
    %
    
    
    4.270
    %
    
    
    1.57
    %
    
    
    3.84
    %Expected dividends
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Trigger price multiple
    
    1.5 times
    
    
    1.5 times
    
    
    2 times
    
    
    2 times
    
    
    2 times
    
    
    2 times
    
    
    2 times
   F-58




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
  Weighted AverageNumber of Share
    
    
    Weighted-Average
    
    
    Grant-Date FairOption
    
    
    Exercise Price
    
    
    ValueOutstanding as of January 1, 2007
    
    
    10,698,141
    
    
    $
    0.78
    
    
    $
    0.14Granted during year 2007
    
    
    210,000
    
    
    $
    5.29
    
    
    $
    1.85Forfeited during the year 2007
    
    
    (351,480
    )
    
    $
    0.78
    
    
    $
    0.14Exercised during the year 2007
    
    
    (2,877,934
    )
    
    $
    0.78
    
    
    $
    0.14Outstanding as of December 31, 2007
    
    
    7,678,727
    
    
    $
    0.90
    
    
    $
    0.19Exercisable as of December 31, 2007
    
    
    2,467,556
    
    
    $
    0.78
    
    
    $
    0.14Outstanding as of January 1, 2008
    
    
    7,678,727
    
    
    $
    0.90
    
    
    $
    0.19Granted during year 2008
    
    
    580,000
    
    
    $
    1.35
    
    
    $
    0.97Forfeited during the year 2008
    
    
    (774,402
    )
    
    $
    0.78
    
    
    $
    0.14Exercised during the year
    
    
    (194,662
    )
    
    $
    0.78
    
    
    $
    0.14Outstanding as of December 31, 2008
    
    
    7,289,663
    
    
    $
    0.96
    
    
    $
    0.26Exercisable as of December 31, 2008
    
    
    5,986,160
    
    
    $
    0.85
    
    
    $
    0.18Outstanding as of January 1, 2009
    
    
    7,289,663
    
    
    $
    0.96
    
    
    $
    0.26Granted during year 2009
    
    
    1,160,000
    
    
    $
    0.32
    
    
    $
    0.19Cancelled during year 2009
    
    
    (1,362,000
    )
    
    $
    0.84
    
    
    $
    0.16Exercised during year 2009
    
    
    
    
    
    $
    
    
    
    $
    Outstanding as of December 31, 2009
    
    
    7,087,663
    
    
    $
    0.87
    
    
    $
    0.26Vested and expected to be vested
as of December 31, 2009
    
    
    7,086,736
    
    
    $
    0.87
    
    
    $
    0.26Exercisable as of December 31, 2009
    
    
    6,057,659
    
    
    $
    0.89
    
    
    $
    0.23
  Options Outstanding
    
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-Weighted-
    
    
    Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    Average
    
    
    Weighted-Average
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Remaining
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsic
    
    
    Number of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOutstanding
    
    
    Price
    
    
    Life
    
    
    Value
    
    
    Exercisable
    
    
    Price
    
    
    Life
    
    
    ValueDate of grant:July 11, 2006
    
    
    5,164,329
    
    
    $
    0.78
    
    
    
    1.5
    
    
    $
    
    
    
    
    5,164,329
    
    
    $
    0.78
    
    
    
    1.5
    
    
    $
    April 25, 2007
    
    
    90,000
    
    
    $
    6.50
    
    
    
    7.3
    
    
    $
    
    
    
    
    60,000
    
    
    $
    6.50
    
    
    
    7.3
    
    
    $
    September 26, 2007
    
    
    100,000
    
    
    $
    4.39
    
    
    
    7.7
    
    
    $
    
    
    
    
    80,000
    
    
    $
    4.39
    
    
    
    7.7
    
    
    $
    April 1, 2008
    
    
    400,000
    
    
    $
    1.33
    
    
    
    2.0
    
    
    $
    
    
    
    
    266,666
    
    
    $
    1.33
    
    
    
    2.0
    
    
    $
    April 30, 2008
    
    
    60,000
    
    
    $
    1.64
    
    
    
    8.3
    
    
    $
    
    
    
    
    20,000
    
    
    $
    1.64
    
    
    
    8.3
    
    
    $
    June 13, 2008
    
    
    113,334
    
    
    $
    1.27
    
    
    
    8.5
    
    
    $
    
    
    
    
    80,004
    
    
    $
    1.27
    
    
    
    8.5
    
    
    $
    January 8, 2009
    
    
    1,000,000
    
    
    $
    0.31
    
    
    
    4.0
    
    
    $
    
    
    
    
    333,332
    
    
    $
    0.31
    
    
    
    4.0
    
    
    $
    December 31, 2009
    
    
    160,000
    
    
    $
    0.43
    
    
    
    10.0
    
    
    $
    
    
    
    
    53,328
    
    
    $
    0.43
    
    
    
    10.0
    
    
    $
    7,087,663
    
    
    $
    0.87
    
    
    
    2.4
    
    
    $
    
    
    
    
    6,057,659
    
    
    $
    0.89
    
    
    
    2.0
    
    
    $
    
   F-59




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Restricted share units
      Weighted-AverageGrant-DateNumber of Shares
    
    
    Fair ValueOutstanding as of January 1, 2008
    
    
    
    
    
    
    Granted during year 2008
    
    
    5,536,000
    
    
    
    2.24Vested during year 2008
    
    
    (2,946,400
    )
    
    
    2.24Forfeited during year 2008
    
    
    (578,800
    )
    
    
    2.24Outstanding as of December 31, 2008
    
    
    2,010,800
    
    
    
    2.24Granted during year 2009
    
    
    1,230,000
    
    
    
    0.49Vested during year 2009
    
    
    (2,207,800
    )
    
    
    1.27Cancelled during year 2009
    
    
    (247,200
    )
    
    
    2.24Outstanding as of December 31, 2009
    
    
    785,800
    
    
    
    2.24
   F-60




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Nonvested shares
    Number of NonvestedSharesOutstanding as of January 1, 2007
    
    
    11,050,000Vested during year 2007
    
    
    (1,500,000
    )Outstanding as of December 31, 2007
    
    
    9,550,000Vested during year 2008
    
    
    (9,550,000
    )Outstanding as of December 31, 2008
    
    
    Vested during year 2009
    
    
    Outstanding as of December 31, 2009
    
    
    
  Warrants
   F-61




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  Exercise price
    
    $
    5.00Expected price volatility
    
    
    44
    %Risk-free interest rate
    
    
    5.06
    %Contractual life of the warrant
    
    1 yearExpected dividends
    
    
    0
    %
 24. Capital Structure
       F-62




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Xinhua Sports & Entertainment Limited
         F-63




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##### Table of Contents



Xinhua Sports & Entertainment Limited
                F-64




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
              F-65




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 25. Provision for income taxes
       F-66




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##### Table of Contents



Xinhua Sports & Entertainment Limited
       F-67




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009Current tax
    
    $
    2,247,566
    
    
    $
    6,431,464
    
    
    $
    1,422,977Deferred tax
    
    
    (1,576,962
    )
    
    
    (4,703,103
    )
    
    
    (5,480,022
    )Total
    
    $
    670,604
    
    
    $
    1,728,361
    
    
    $
    (4,057,045
    )
  For the Year Ended
    
    
    For the Year Ended
    
    
    For the Year EndedDecember 31, 2007
    
    
    December 31, 2008
    
    
    December 31, 2009Net income (loss) before provision for income
taxes
    
    $
    9,872,342
    
    
    $
    (206,228,433
    )
    
    $
    (217,377,419
    )PRC statutory tax rate
    
    
    33
    %
    
    
    25
    %
    
    
    25
    %Income tax at statutory tax rate
    
    
    3,257,873
    
    
    
    (51,557,108
    )
    
    
    (54,344,355
    )Expenses not deductible for tax purposes:Entertainment
    
    
    43,893
    
    
    
    56,263
    
    
    
    93,128Accrued salaries and employees benefits
    
    
    380,664
    
    
    
    3,119,224
    
    
    
    Impairment loss on goodwill
    
    
    
    
    
    
    34,335,817
    
    
    
    17,868,015Impairment loss on Principle Protected Note
    
    
    
    
    
    
    6,227,482
    
    
    
    Impairment loss on promissory note receivable
and accrued interest income
    
    
    
    
    
    
    2,130,371
    
    
    
    Loss on disposal of subsidiaries
    
    
    
    
    
    
    1,180,176
    
    
    
    Impairment loss on intangible and other assets
    
    
    48,720
    
    
    
    127,344
    
    
    
    16,971,393Non-taxable income
    
    
    (345,134
    )
    
    
    (61,146
    )
    
    
    (3,731,543
    )Effect of income tax rate differences in other
jurisdictions
    
    
    (152,575
    )
    
    
    2,744,553
    
    
    
    362,327Changes in valuation allowances
    
    
    1,006,146
    
    
    
    3,352,633
    
    
    
    5,851,317Effect of tax exemptions
    
    
    (3,407,436
    )
    
    
    (571,421
    )
    
    
    12,674,369Effect of change in tax rate
    
    
    (133,181
    )
    
    
    (184,975
    )
    
    
    (273,119
    )Inter-companies transaction with discontinued
overprovision in prior years operations
    
    
    83,738
    
    
    
    474,417
    
    
    
    (85,428
    )Others
    
    
    (112,104
    )
    
    
    354,731
    
    
    
    556,851Provision for income taxes
    
    $
    670,604
    
    
    $
    1,728,361
    
    
    $
    (4,057,045
    )
   F-68




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  At December 31,
    
    
    At December 31,2008
    
    
    2009Deferred tax assets:Capitalized content production cost
    
    $
    
    
    
    $
    Property and equipment
    
    
    547,018
    
    
    
    661,921Accrued payroll and benefit
    
    
    
    
    
    
    355,295Provision for amount due from a related party
    
    
    430,327
    
    
    
    43,662Allowance for doubtful debts
    
    
    1,761,113
    
    
    
    2,388,059Net operating losses
    
    
    11,636,501
    
    
    
    9,854,861Other intangible assets
    
    
    50,299
    
    
    
    1,232,780Total
    
    
    14,425,258
    
    
    
    14,536,578Less: Valuation allowance, current portion
    
    
    (769,033
    )
    
    
    (2,874,932
    )Valuation allowance, non-current portion
    
    
    (12,613,846
    )
    
    
    (11,661,646
    )Deferred tax assets, net
    
    
    1,042,379
    
    
    
    Deferred tax liability:Intangible assets
    
    $
    31,679,491
    
    
    $
    Total
    
    $
    (30,637,112
    )
    
    $
    Reported as:Deferred tax assets, current portion
    
    $
    1,042,379
    
    
    $
    Deferred tax assets, non-current portion
    
    $
    
    
    
    $
    Deferred tax liabilities, non-current portion
    
    $
    (31,679,491
    )
    
    $
    Total
    
    $
    (30,637,112
    )
    
    $
    
    F-69




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 26. Related party transactions
   At December 31,
    
    
    At December 31,2008
    
    
    2009Due from related parties:Due from affiliates(b)
    
    $
    1,048,108
    
    
    $
    Due from directors
    
    
    119,092
    
    
    
    Due from minority shareholders of subsidiaries
    
    
    55,646
    
    
    
    Due from XFL and its affiliates(a)
    
    
    
    
    
    
    6,033,114Due from related companies(c)
    
    
    5,324,790
    
    
    
    Total
    
    $
    6,547,636
    
    
    $
    6,033,114Due to related parties:Due to affiliates(d)
    
    
    1,583,229
    
    
    
    239,111Due to XFL and its affiliates(a)
    
    
    1,131,050
    
    
    
    6,790,272Due to related companies
    
    
    24,615
    
    
    
    Due to directors
    
    
    7,278
    
    
    
    Due to a shareholder(e)
    
    
    600,000
    
    
    
    Total
    
    $
    3,346,172
    
    
    $
    7,029,383
 (a)
    
    On March 5, 2009, Xinhua Sports & Entertainment (Shanghai) Co., Ltd. (XSEL SH), a
subsidiary of the Company, Xinhua Financial Network Limited (XFN), a subsidiary of XFL, and
Shanghai Huacai Investment Advisory Co., Ltd. (Huacai), a subsidiary of XFL, entered into an
agreement. Pursuant to this agreement, Huacai advanced RMB 42,780,000 (around $6.6 million)
to XSEL SH which was secured by U.S. dollar deposits of $6.23 million lent by XSEL to XFN. 4%
interest per annum was charged on the loan and deposit, respectively. The agreement was to
facilitate the conversion of U.S. dollars into RMB for working capital purpose. On April 7,
2009, XSEL SH repaid the loan and Huacai advanced another RMB42,780,000 (around US$6.6
million) to XSEL SH on April 21, 2009 which was secured by U.S. dollar deposits of $6.23
million lent by XSEL to XFN and the interest rate on the loan and deposit increase to 4.77%
per annum. Interest expense of approximately $208,000 was recognized for the year ended
December 31, 2009.The amounts due to XFL and its affiliates as of December 31, 2009 principally represented
loan due to Huacai. The amounts from XFL and its affiliates as of December 31, 2009 principally
represented $6.23 million lent to XFN as security deposits for the loan from Huacai.The Company shared costs for premises under a lease held by a subsidiary of the Parent.
The amount paid or payable by the Company for 2008 and 2009 were approximately $340,000 and
$310,000, respectively.(b)
    
    Amounts due from affiliates as of December 31, 2008 principally represented advance to former
shareholders of subsidiaries. The amounts are non-interest bearing and repayable on demand.
As of December 31, 2009, full provision was recognized for the amount advanced to this former
shareholder.(c)
    
    The balance as of December 31, 2008 included an entrusted loan of $2,256,344 and advances to
a related party. The entrusted loan is unsecured, non-interest bearing and repayable on
demand. As of December 31, 2009, full provision was recognized for the amount due from this
related party.  F-70




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (d)
    
    The amounts as of December 31, 2008 and 2009 principally represented advance from former
shareholders of subsidiaries and are non-interest bearing and repayable on demand.(e)
    
    Amount due to a shareholder represented accrued dividends on Series B Preferred Shares issued
in February 2008. In 2009, the Company has issued 6,000 Series B Preferred Share to settle
this accrued dividend. 27. Financial instruments
    28. Fair value measurement
     F-71




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 Assets and liabilities measured at fair value on a recurring basis
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalLiabilitiesDerivative component of convertible loan
    
    $
    
    
    
    $
    4,851,928
    
    
    $
    
    
    
    $
    4,851,928Series A Warrants
    
    
    
    
    
    
    1,066,000
    
    
    
    
    
    
    
    1,066,000Series B Warrants
    
    
    
    
    
    
    183,000
    
    
    
    
    
    
    
    183,000$
    
    
    
    $
    6,100,928
    
    
    $
    
    
    
    $
    6,100,928
 Assets and liabilities measured at fair value on a nonrecurring basis
   29. Commitments and contingency
 (a) Operating leases
   2010
    
    $
    2,003,7132011
    
    
    894,4822012
    
    
    683,6562013
    
    
    683,6562014
    
    
    683,656After 2014
    
    
    965Total
    
    $
    4,950,128
  F-72




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 (b) Other commitment
      (c) Contingency
   F-73




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
   30. Segment information
     F-74




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
 Discontinued operation
     F-75




---



##### Table of Contents



Xinhua Sports & Entertainment Limited
  XSELPrint
    
    
    Advertising
    
    
    Broadcasting
    
    
    Corporate
    
    
    TotalNet revenues:Content production
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Advertising sales
    
    
    
    
    
    
    8,140,718
    
    
    
    
    
    
    
    
    
    
    
    8,140,718Advertising services
    
    
    
    
    
    
    66,000,705
    
    
    
    9,336,687
    
    
    
    
    
    
    
    75,337,392Publishing services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total net revenues
    
    $
    
    
    
    $
    74,141,423
    
    
    $
    9,336,687
    
    
    $
    
    
    
    $
    83,478,110Depreciation and amortization
    
    
    
    
    
    
    3,683,868
    
    
    
    1,740,436
    
    
    
    138,186
    
    
    
    5,562,490Cost of revenues and operating
expenses excluding depreciation
and amortization
    
    
    
    
    
    
    57,154,102
    
    
    
    6,139,583
    
    
    
    12,756,569
    
    
    
    76,050,254Other operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,261,788
    
    
    
    2,261,788Operating income (loss)
    
    
    
    
    
    
    13,303,453
    
    
    
    1,456,668
    
    
    
    (10,632,967
    )
    
    
    4,127,154Other incomes, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,745,188Income from continuing
operations before provision for
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,872,342Tax expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    670,604Net income from continuing
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,201,738Income from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,139,901Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,341,639Net income attributable to
non-controlling interests
    
    
    
    
    
    
    919,957
    
    
    
    382,677
    
    
    
    
    
    
    
    1,302,634Net income attributable to XSEL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    28,039,005Total assets, excluding goodwill
    
    $
    87,188,203
    
    
    $
    116,976,266
    
    
    $
    171,427,721
    
    
    $
    95,084,535
    
    
    $
    470,676,725Goodwill
    
    $
    6,566,376
    
    
    $
    135,531,566
    
    
    $
    38,027,546
    
    
    $
    
    
    
    $
    180,125,488Capital expenditure
    
    $
    391,137
    
    
    $
    2,474,168
    
    
    $
    1,505,332
    
    
    $
    839,075
    
    
    $
    5,209,712
  F-76




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  XSELPrint
    
    
    Advertising
    
    
    Broadcasting
    
    
    Corporate
    
    
    TotalNet revenues:Content production
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Advertising sales
    
    
    
    
    
    
    21,911,519
    
    
    
    
    
    
    
    
    
    
    
    21,911,519Advertising services
    
    
    
    
    
    
    86,413,787
    
    
    
    13,161,197
    
    
    
    
    
    
    
    99,574,984Publishing services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total net revenues
    
    $
    
    
    
    $
    108,325,306
    
    
    $
    13,161,197
    
    
    $
    
    
    
    $
    121,486,503Depreciation and amortization
    
    
    
    
    
    
    7,642,294
    
    
    
    2,804,520
    
    
    
    323,232
    
    
    
    10,770,046Cost of revenues and operating
expenses excluding depreciation
and amortization
    
    
    
    
    
    
    226,071,843
    
    
    
    25,660,516
    
    
    
    39,156,452
    
    
    
    290,888,811Other operating income
    
    
    
    
    
    
    781,264
    
    
    
    467,966
    
    
    
    2,175
    
    
    
    1,251,405Operating income (loss) from
operations
    
    
    
    
    
    
    (124,607,567
    )
    
    
    (14,835,873
    )
    
    
    (39,477,509
    )
    
    
    (178,920,949
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,307,484
    )Income from continuing
operations before provision for
income taxes and minority
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (206,228,433
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,728,361Net loss from continuing
operation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (207,956,794
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66,274,737
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (274,231,531
    )Net (loss) income attributable
to non-controlling interests
    
    
    (131,089
    )
    
    
    582,057
    
    
    
    189,500
    
    
    
    
    
    
    
    640,468Net loss attributable to XSEL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (274,871,999
    )Total assets, excluding goodwill
    
    $
    83,200,125
    
    
    $
    129,209,336
    
    
    $
    175,175,442
    
    
    $
    73,672,709
    
    
    $
    461,257,612Goodwill
    
    $
    
    
    
    $
    35,303,307
    
    
    $
    11,689,417
    
    
    $
    
    
    
    $
    46,992,724Capital expenditure
    
    $
    665,751
    
    
    $
    4,911,259
    
    
    $
    989,726
    
    
    $
    369,111
    
    
    $
    6,935,847
  F-77




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##### Table of Contents



Xinhua Sports & Entertainment Limited
  XSELPrint
    
    
    Advertising
    
    
    Broadcasting
    
    
    Corporate
    
    
    TotalNet revenues:Content production
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Advertising sales
    
    
    
    
    
    
    404,462
    
    
    
    20,810,368
    
    
    
    
    
    
    
    21,214,830Advertising services
    
    
    
    
    
    
    61,698,283
    
    
    
    16,317,625
    
    
    
    
    
    
    
    78,015,908Publishing services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total net revenues
    
    $
    
    
    
    $
    62,102,745
    
    
    $
    37,127,993
    
    
    $
    
    
    
    $
    99,230,738Depreciation and amortization
    
    
    
    
    
    
    3,382,526
    
    
    
    13,674,790
    
    
    
    937,776
    
    
    
    17,995,092Cost of revenues and operating
expenses excluding depreciation
and amortization
    
    
    
    
    
    
    133,554,092
    
    
    
    115,999,502
    
    
    
    55,775,664
    
    
    
    305,329,258Other operating income
    
    
    
    
    
    
    1,835,701
    
    
    
    95,376
    
    
    
    134,357
    
    
    
    2,065,434Operating income (loss) from
operations
    
    
    
    
    
    
    (72,998,172
    )
    
    
    (92,450,923
    )
    
    
    (56,579,083
    )
    
    
    (222,028,178
    )Other incomes, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,650,759Income from continuing
operations before provision for
income taxes and minority
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (217,377,419
    )Provision for income tax benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,057,045Net loss from continuing
operation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213,320,374
    )Loss from discontinued
operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,295,540
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (313,615,914
    )Net (loss) income attributable
to non-controlling interests
    
    
    3,805
    
    
    
    (1,509,653
    )
    
    
    (534,725
    )
    
    
    
    
    
    
    (2,040,573
    )Net loss attributable to XSEL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (311,575,341
    )Total assets, excluding goodwill
    
    $
    53,594,254
    
    
    $
    93,634,021
    
    
    $
    63,833,236
    
    
    $
    24,259,474
    
    
    $
    235,320,985Goodwill
    
    $
    
    
    
    $
    304,922
    
    
    $
    6,933,094
    
    
    $
    
    
    
    $
    7,238,016Capital expenditure
    
    $
    103,817
    
    
    $
    2,160,804
    
    
    $
    3,404,254
    
    
    $
    210,591
    
    
    $
    5,879,466
    F-78




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 31. Net income (loss) per share
  For the Year
    
    
    For the Year
    
    
    For the YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2008
    
    
    2009Numerator for continuing operations used for net income (loss) and diluted net income (loss) per
Class A and Class B common shares::Net income (loss) from continuing operations
    
    $
    9,201,738
    
    
    $
    (207,956,794
    )
    
    $
    (213,320,374
    )Less: net income attributable to non-controlling interest
    
    
    (1,273,174
    )
    
    
    (582,057
    )
    
    
    2,015,262Less: dividends declared on redeemable convertible preferred shares
    
    
    (1,338,333
    )
    
    
    
    
    
    
    Less: dividends declared on series B redeemable convertible preferred
shares
    
    
    
    
    
    
    (2,000,000
    )
    
    
    (2,560,000
    )Net income (loss) from continuing operations attributable to holders of
common shares-basic
    
    $
    6,590,231
    
    
    $
    (210,538,851
    )
    
    $
    (213,865,112
    )Add: dividends declared on redeemable
convertible preferred shares
    
    
    1,338,333
    
    
    
    
    
    
    
    Add: interest expense for convertible loan
    
    
    267,464
    
    
    
    
    
    
    
    Net income (loss) from continuing operations
attributable to holders of common
shares-diluted
    
    $
    8,196,028
    
    
    $
    (210,538,851
    )
    
    $
    (213,865,112
    )Numerator for discontinued operations used for
net income (loss) and diluted net income (loss)
per Class A and Class B common shares:Net (loss) income from discontinued operations
    
    $
    20,139,901
    
    
    $
    (66,274,737
    )
    
    $
    (100,295,540
    )Less: net income from discontinued operations
attributable to non-controlling interest
    
    
    (29,460
    )
    
    
    (58,411
    )
    
    
    25,311Net income (loss) from discontinued operations
attributable to holders of common shares-basic
and diluted
    
    $
    20,110,441
    
    
    $
    (66,333,148
    )
    
    $
    (100,270,229
    )Denominator:Weighted average of issued shares outstanding
    
    
    116,220,383
    
    
    
    135,844,377
    
    
    
    157,729,635Effect of dilutive securities:Employee share options
    
    
    7,290,608
    
    
    
    
    
    
    
    Nonvested Shares
    
    
    8,748,080
    
    
    
    
    
    
    
    Warrants
    
    
    282,390
    
    
    
    
    
    
    
    Convertible loan
    
    
    710,880
    
    
    
    
    
    
    
    Redeemable convertible preferred shares
    
    
    3,117,051
    
    
    
    
    
    
    
    Total effect of dilutive securities
    
    
    20,149,009
    
    
    
    
    
    
    
    Denominator used for diluted net (loss) income per Class A and Class B common shares
    
    
    136,369,392
    
    
    
    135,844,377
    
    
    
    157,729,635Net income (loss) from continuing operations per share:Basic net income (loss) per Class A common shares
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Basic net income (loss) per Class B common shares
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Diluted net income (loss) per Class A common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    (1.35
    )Diluted net income (loss) per Class B common share
    
    $
    0.06
    
    
    $
    (1.55
    )
    
    $
    Net income (loss) from discontinued operations per share:Basic net income (loss) per Class A common shares
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Basic net income (loss) per Class B common shares
    
    $
    0.17
    
    
    $
    (0.49
    )
    
    $
    Diluted net income (loss) per Class A common share
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    (0.64
    )Diluted net income (loss) per Class B common share
    
    $
    0.15
    
    
    $
    (0.49
    )
    
    $
    Net income (loss) per share:Basic net income (loss) per Class A common shares
    
    $
    0.23
    
    
    $
    (2.04
    )
    
    $
    (1.99
    )Basic net income (loss) per Class B common shares
    
    $
    0.23
    
    
    $
    (2.04
    )
    
    $
    Diluted net income (loss) per Class A common share
    
    $
    0.21
    
    
    $
    (2.04
    )
    
    $
    (1.99
    )Diluted net income (loss) per Class B common share
    
    $
    0.21
    
    
    $
    (2.04
    )
    
    $
    
  F-79




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##### Table of Contents



Xinhua Sports & Entertainment Limited
   32. Employee benefit plans
     F-80




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 33. Statutory reserves
  34. Subsequent events
    F-81




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##### Table of Contents



Xinhua Sports & Entertainment Limited
      (a)
    
    Any Change of Control of the Company;(b)
    
    Any Substantial Asset Sale;
  F-82




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##### Table of Contents



Xinhua Sports & Entertainment Limited
 (c)
    
    Any consolidation or merger or acquisition or sale of voting securities of the
Company resulting in the holders of the issued and outstanding voting securities of the
Company immediately prior to
such transaction less than a majority of the voting securities of the continuing or
surviving entity immediately following such transaction; or(d)
    
    Any tender offer, exchange offer or repurchase offer for more than 50% of the
outstanding Common Shares.
      F-83