UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





ANNUAL
REPORT


ON
FORM 10-K





ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the Fiscal Year Ended June 30, 2009





Commission
File Number 0-20532





CHINA
INSONLINE CORP.


(Exact
name of registrant as specified in its charter)





Delaware
            
            74-2559866(State
      or other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)





Flat/Room
42, 4F, New Henry House, 10 Ice House Street, Central, Hong Kong





(Address,
including zip code, of principal executive offices)





(011)
00852-25232986


(Registrants’
telephone number, including area code)





Securities
Registered Under Section 12(b) of the Exchange Act: Common Stock, par value
$0.001 per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  ̈    No
x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act.    Yes  ̈    No
x




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.    Yes x     No
 ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈No  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
accelerated filer  ̈    Accelerated
filer  ̈     
Non-accelerated filer  ̈Smaller Reporting
Company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes  ̈    No
x




Aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the registrant computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
June 30, 2009, was approximately $20,425,600.




The
number of outstanding shares of the registrant’s Common Stock on September 28,
2009 was 40,000,000.







CHINA
INSONLINE CORP.


ANNUAL
REPORT ON FORM 10-K


FOR
THE YEAR ENDED JUNE 30, 2009





Index





TABLE OF
CONTENTS





PART
      I
              
              
              3ITEM
      1.
              
              Business
              3ITEM
      1A.
              
              Risk
      Factors
              14ITEM
      1B.
              
              Unresolved
      Staff Comments
              26ITEM
      2.
              
              Properties
              26ITEM
      3.
              
              Legal
      Proceedings
              27ITEM
      4.
              
              Submission
      of Matters to a Vote of Security Holders
              27PART
      II
              
              
              27ITEM
      5.
              
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              27ITEM
      6.
              
              Selected
      Financial Data
              29ITEM
      7.
              
              Management‘s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              29ITEM
      7A.
              
              Quantitative
      and Qualitative Disclosures about Market Risk
              47ITEM
      8.
              
              Financial
      Statements and Supplementary Data
              47ITEM
      9.
              
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosures
              47ITEM 9A(T).
              
              Controls
      and Procedures
              48ITEM
      9B.
              
              Other
      Information
              49PART
      III
              
              
              50ITEM
      10.
              
              Directors,
      Executive Officers, and Corporate Governance
              50ITEM
      11.
              
              Executive
      Compensation
              53ITEM
      12.
              
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              55ITEM
      13.
              
              Certain
      Relationships and Related Transactions, and Director
      Independence
              56ITEM
      14.
              
              Principal
      Accountant Fees and Services
              56PART
      IV
              
              
              57ITEM
      15.
              
              Exhibits
      and Financial Statement Schedules
              57





- 2
-




PART I




ITEM
      1.
            Business




Forward
Looking Statements




Statements
contained in this Annual Report on Form 10-K of China INSOnline Corp. (the
“Company” or
“CHIO”) that
are not purely historical are forward-looking statements and are being provided
in reliance upon the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. Words such as “anticipates”, “expects”,
“intends”, “plans”, "believes", "seeks", "estimates" or similar expressions
identify forward-looking statements. These forward-looking statements include
but are not limited to statements regarding the Company’s expectations of our
future liquidity needs, our expectations regarding our future operating results
including our planned increase in our revenue levels and the actions we expect
to take in order to maintain our existing customers and expand our operations
and customer base. All forward-looking statements are made as of the date hereof
and are based on current management expectations and information available to us
as of such date. We assume no obligation to update any forward-looking
statement. It is important to note that actual results could differ materially
from historical results or those contemplated in the forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties, and
include risks associated with our target markets and risks pertaining to
competition, other trend information and our ability to successfully enhance our
operations. Factors that could cause actual results to differ materially
include, but are not limited to, those identified in “Item 1A-Risk Factors” and
in other of our filings with the U.S. Securities and Exchange Commission (the
“SEC”). All
references to “China INSOnline Corp.”, “us”, “we” or the “Company” in this
Annual Report mean China INSOnline Corp., a Delaware corporation, and all
entities owned or controlled by China INSOnline Corp., except where it is made
clear that the term means only the parent company. All tabular amounts are
stated in US dollars.




Prior
Operations of the Company




Dexterity
Surgical, Inc. (now known as China INSOnline Corp. and sometimes referred herein
as “DEXT”) was
incorporated on December 23, 1988 as a Delaware corporation and commenced
operations on January 1, 1989. In August 1992, we completed our initial public
offering of our common stock, par value $0.001 per share (“Common Stock”). The
business that we previously engaged in was the distribution of instruments,
equipment and surgical supplies used in hand-assisted laparoscopic
surgery (“HALS”).




We
acquired Dexterity Incorporated, a Delaware corporation (“Dexterity”), in March
1999. Dexterity was located in the Philadelphia, Pennsylvania metropolitan area
and had the exclusive rights of the Dexterity Pneumo Sleeve and Dexterity
Protractor proprietary instruments, equipments and supplies used in HALS.
Effective with such acquisition, we changed our name from LifeQuest Medical,
Inc. to Dexterity Surgical, Inc.




On April
19, 2004, DEXT filed a voluntary petition for relief for reorganization (the
“Reorganization”)
under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in
the United States Bankruptcy Court for the Southern District of Texas Houston
Division. The Company underwent numerous operating changes and operated its
business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy
Court.  On March 2, 2005, the Bankruptcy Court entered an Order confirming
its First Amended Plan of Liquidation.  In connection with that Plan,
DEXT’s assets were scheduled to be auctioned, which auction culminated in the
sale of substantially all of DEXT’s assets as approved by the Bankruptcy Court
on March 17, 2006.




The First
Amended Plan of Liquidation was subsequently amended on March 2, 2006, by an
order titled “Order Approving Modification of the First Amended Plan” (the
“Order”). The
amendments provided for in the Order included the Bankruptcy Court’s
authorization of a $50,000 Debtor-In-Possession Loan (the “DIP Loan”) for
payment of administrative expenses of the bankruptcy, which converted into
6,000,000 shares of Common Stock (the “Section 1145 Shares”)
and 3,000,000 warrants (the “Section 1145
Warrants”) under Section 1145 of the U.S. Bankruptcy Code at the option
of the holder(s) of the DIP Loan. Immediately prior to the Exchange (as defined
and discussed in detail herein below), the Section 1145 Warrants were cancelled.
For an additional $125,000, the Bankruptcy Court authorized the sale of
25,000,000 restricted shares of Common Stock to an investor for the payment of
both administrative claims and creditor claims. The Bankruptcy Court also
provided as follows:




- 3
-





·
            All of the old shares of the
      Company’s preferred stock, stock options and warrants shall be (and have
      been) cancelled;




·
            The Company shall issue (and did
      issue) 29,800 new shares of Common Stock under Section 1145 of the U.S.
      Bankruptcy Code;




·
            The Company shall issue up to
      25,000 shares of Common Stock under Section 1145 of the U.S. Bankruptcy
      Code to those persons deemed appropriate by the Directors (it was not
      necessary to issue these shares and therefore they have been cancelled);
      and




·
            Appoint new Board members, amend
      the Certificate of Incorporation to increase the authorized shares of
      Common Stock to 100,000,000, amend the Bylaws, change the fiscal year,
      execute a share exchange agreement and issue shares in which effective
      control or majority ownership is given, all without stockholder
      approval.




Pursuant
to the Bankruptcy Court Order, by filing a Certificate of Amendment to the
Certificate of Incorporation, the Company increased its authorized Common Stock,
and effected a 1-for-500 reverse split of all issued and outstanding Common
Stock. Immediately following the Exchange, there were 35,706,250 shares of
Common Stock issued and outstanding and 4,293,750 Section 1145 Shares issuable
pursuant to the Reorganization. As of the date of this Annual Report, all of the
4,293,750 Section 1145 Shares have been issued and 40,000,000 shares are now
issued and outstanding.




Share
Exchange/Reverse Merger Transaction




On
December 18, 2007 (the “Closing Date”), the
Company entered into a Share Exchange Agreement (the “Exchange Agreement”)
with Rise and Grow Limited, a Hong Kong limited company (“Rise & Grow”) and
Newise Century Inc., a British Virgin Islands company and sole stockholder of
Rise & Grow (the “Stockholder”). As a
result of the share exchange, DEXT acquired all of the issued and outstanding
securities of Rise & Grow, an inactive holding company, from the Stockholder
in exchange for Twenty-Six Million Four Hundred Thousand (26,400,000)
newly-issued shares of Common Stock, representing 73.94% of DEXT’s issued and
outstanding Common Stock (the “Exchange”) as of the
Closing Date and sixty-six percent (66%) of the total number of issued and
outstanding shares of Common Stock after the issuance of the remaining 4,293,750
“Section 1145” shares. As a result of the Exchange, Rise & Grow became our
wholly-owned and chief operating subsidiary. We have no other business
operations other than those of Rise & Grow.




The
following is disclosure with respect to the business of China INSOnline Corp.,
Rise & Grow and the wholly-owned operating subsidiary of Rise & Grow,
Zhi Bao Da Tong (Beijing) Technology Co. Ltd. (“ZBDT”), a company
formed under the laws of the People’s Republic of China (the “PRC”) and doing
business in the PRC. From and after the Closing Date, the operations of Rise
& Grow, through its operating subsidiary, ZBDT, are the only operations of
the Company.  On April 2, 2009, Zhi Bao Da Tong (Beijing) Technology
Co., Ltd (“ZBDT”) changed its
name into New Fortune Associate (Beijing) Information Technology Co
Ltd.




Current
Operations of the Company




Organizational
Structure of Rise & Grow, ZBDT and ZYTX




Rise
& Grow was formed on February 10, 2006 as a Hong Kong limited company. ZBDT
was established and incorporated by Rise & Grow and commenced business on
September 6, 2007. Rise & Grow’s sole business is to act as a holding
company for ZBDT. Rise & Grow contributed One Hundred Fifty Thousand United
States Dollars ($150,000) in registered capital of ZBDT. ZBDT has no Board of
Directors, however it has one (1) Executive Director designated by Rise &
Grow that serves as the legal representative of ZBDT and appoints a General
Manager to lead the routine operation of ZBDT. ZBDT is located at Room 210, #25
Office Building, #15 East An Ning Zhuang Road, Qinghe, Haidian District,
Beijing, the PRC. Rise & Grow is located in Flat/Room 42, 4/F, New Henry
House, 10 Ice House Street, Central, Hong Kong.




- 4
-


ZBDT was
formed by Rise & Grow for the purpose of developing computer and network
software and related products and to promote the development of high-tech
industries in the field of Chinese information technology. It does this by
controlling, through an Exclusive Technical Consulting and Service Agreement and
related transaction documents dated as of September 28, 2007 (collectively, the
“Service
Agreements”), Beijing Zhi Yuan Tian Xia Technology Co., Ltd., a limited
liability company duly established on October 8, 2006 and validly existing under
the PRC (“ZYTX”). In compliance
with the PRC’s foreign investment restrictions on Internet information services
and other laws and regulations, we conduct all of our Internet information and
media services and advertising in China through ZYTX, a domestic Variable
Interest Entity (“VIE”), as its primary
beneficiary. In accordance with FASB Interpretation No. 46R “Consolidation of
Variable Interest Entities” (“FIN 46R”), an
Interpretation of Accounting Research Bulletin No. 51, a VIE is to be
consolidated by a company if that company is subject to a majority of the risk
of loss for the VIE or is entitled to receive a majority of the VIE’s residual
returns. Upon executing the Service Agreements, ZYTX is now considered a VIE and
ZBDT its primary beneficiary.




Pursuant
to the Services Agreements, ZBDT shall provide on-going technical services and
other services to ZYTX in exchange for substantially all net income of ZYTX. In
addition, Mr. Zhenyu Wang and Ms. Junjun Xu have pledged all of their shares in
ZYTX to ZBDT, representing one hundred percent (100%) of the total issued and
outstanding capital stock of ZYTX, as collateral for non-payment under the
Service Agreements or for fees on technical and other services due to us
thereunder. We have the power to appoint all directors and senior management
personnel of ZYTX. Currently, ZYTX is sixty percent (60%) owned by Mr. Zhenyu
Wang, our Chairman of the Board, and forty percent (40%) owned by Junjun
Xu, our Chief Executive Officer and a director. The registered capital of ZYTX
is RMB 1 million (US$126,360 upon inception, US$133,883 as of the Closing Date),
of which Mr. Zhenyu Wang has (or will pursuant to installment obligations)
contributed RMB 600,000 and Ms. Junjun Xu has (or will pursuant to installment
obligations) contributed RMB 400,000.




ZYTX has
one (1) operating offices located at Room 502, HuaTeng Edifice, Chaoyang JinSong
3 District, No. 302, Beijing, the PRC.




Current
Business




We are an Internet services and media
company focusing on the PRC insurance industry. With localized websites
targeting Greater China, the Company primarily provides, through ZYTX, a network
portal through its industry website,www.soobao.cn(hereinafter also referred to as
“Soobao”), to insurance companies, agents and
consumers for advertising, online inquiry, news circulation, online
transactions, statistic analysis and software development. The Company is also a
licensed online motor vehicle, property and life insurance agent generating
revenues through sales commissions from customers in the
PRC.




ZYTX was originally founded with the
goal of raising the national insurance consciousness and reducing the cost on
national security in China by constructing and maintaining its network portal
(www.soobao.cn) in order to integrate and optimize
business flow during the course of insurance sales and related client services.
From inception through the end of 2006, ZYTX was primarily engaged in
institutional preparation and prior-period business
development.




Thereafter, through trial
implementation ofwww.soobao.cn, ZYTX strengthened its technical
research and development and expanded its product line. From October 8, 2006
(inception) through June 30, 2007, ZYTX’s fiscal year end, ZYTX realized net
revenue of RMB 17.2 million (US$2.2 million) and net profits of RMB 13.8 million
(US$1.8 million).




Today,
the Company offers online insurance products and services in China including (a)
a network portal for the Chinese insurance industry (www.soobao.cn),
offering industry professionals a forum for the advertising and promotion of
products and services, (b) website construction for marketing teams and others
in the insurance industry, (c) software development, (d) insurance agency
services whereby the Company generates sales commissions on motor vehicle
insurance, property insurance and life insurance and (e) accompanying client
support services. The following sets forth more detailed descriptions of our
core business segments.


- 5
-





On
September 28, 2007, ZBDT signed the following Service Agreements with ZYTX and
its stockholders:




·
            Exclusive Technology Consultation
      Service Agreement, by and between ZYTX and ZBDT, through which ZBDT will
      provide, exclusively for both parties, technology consultation services to
      the Company and receive payments
  periodically;




·
            Exclusive
      Equity Interest Purchase Agreements, by and between each of ZYTX’s
      stockholders and ZBDT, through which ZBDT is entitled to exclusively
      purchase all of the outstanding shares of capital stock of ZYTX from its
      current stockholders upon certain terms and conditions, especially upon it
      is allowable under the PRC laws and
regulations;




·
            Equity
      Interest Pledge Agreements, by and between each of ZYTX’s stockholders and
      ZBDT, through which the current stockholders of ZYTX have pledged all
      their respective shares in ZYTX to ZBDT. These Equity Interest Pledge
      Agreements guarantee the cash-flow payments under the Exclusive Technology
      Consultation Service Agreement; and




·
            Powers
      of Attorney, executed by each of the ZYTX’s stockholders, through which
      ZBDT is entitled to perform the equity right of ZYTX’s
      stockholders.




Powers of
Attorney were also executed by the two (2) owners of ZYTX empowering ZBDT to act
on their behalf, and ZBDT has the full authority to perform all of the rights
bestowed upon them as a shareholder of ZYTX and control over said equity
interests in ZYTX.  These rights include: (i) the right to attend
shareholder meetings, (ii) signatory authority for shareholder resolutions,
(iii) the performance of all rights as a shareholder, including voting rights
and the right to partially or wholly transfer, assign or pledge the equity
interest in ZYTX, (v) a right to appoint legal representatives, board members,
executive directors and other senior management officers, (vi) the right to
execute and perform the obligations of a certain Transfer Agreement referenced
in the Equity Purchase Agreements, (vii) the right to transfer, allocate, or use
the dividends-in-cash and other non cash income as directed by ZYTX, (viii) the
right to perform all the necessary rights incurred from ZYTX’s equity interest
and (ix) the right to re-consign all the matters and rights under the Powers of
Attorney to any other individual(s) or other legal person(s).





In
accordance with Financial Accounting Standards Board (“FASB”) Interpretation
No. 46R “Consolidation of Variable Interest Entities” (“FIN 46R”), an
Interpretation of Accounting Research Bulletin No. 51, a Variable Interest
Entity (a “VIE”) is to be
consolidated by a company if that company is subject to a majority of the risk
of loss for the VIE or is entitled to receive a majority of the VIE’s residual
returns. After executing the above agreements, ZYTX is now considered a VIE and
ZBDT its primary beneficiary.





On
October 28, 2008, Rise & Grow and ZYTX entered into a Share Purchase
Agreement which Rise & Grow acquired 100% ownership of Guang Hua Insurance
Agency Company Limited (“GHIA”), a limited
liability company organized under the laws of the PRC, through ZYTX to act as
legal owner in China.  GHIA is an insurance agent company which
operates in the PRC.  The consideration was US$5,846,244
(RMB40,000,000) in cash.  This share purchase transaction resulted in
Rise & Grow obtaining 100% of the voting and beneficial interest in
GHIA.





Network
Portal for Chinese Insurance Industry (www.soobao.cn)




Prior to
launching www.soobao.cn, China
had no insurance website platform. The Company was formed with the belief that
those who need insurance in China desire a network carrier which can provide
immediate inquiry services with insurance information and knowledge and
insurance companies require a media network for concentrated advertising to the
potential insurance consumer. The Company has created a real-time communication
portal for each link in the value chain of the insurance industry. Soobao
provides real-time information, functional practicability and interactivity and
media function for the Chinese insurance industry. In the past year, the Company
has accumulated as members many insurance companies and over 3,000 insurance
agents and other member customers of www.soobao.cn. The Company
has become a leading professional service provider, and enjoys a good reputation
and credibility in the industry.




- 6
-




Soobao
has the following attributes:





·
            Advertising
      Media: Soobao
      features a high concentration of industry-specific information on the
      Chinese insurance industry that is not offered by the traditional media
      which we believe makes it an ideal media for insurance companies and the
      related trade professionals to advertise their products and services to
      consumers. As of the date of this Report, the Company itself has not been
      engaged in Internet advertising however the Company plans to engage in
      such business in the future;




·
            Channel
      Arrangement: The
      website is currently comprised of two (2) channels, motor vehicle
      insurance and life insurance, and we are currently in the process of
      setting up a third channel for property insurance. Each channel provides
      visitors with professional information combined with product-specific
      characteristics;




·
            News
      Releases: News
      releases are classified and organized along sub-industry lines in order to
      facilitate searches by a client-users and the website also offers and open
      review function for visitors to post their individual viewpoints on such
      releases;




·
            Production
      Introduction: The
      website provides a classification of insurance companies according to the
      type and products for the convenience of the consumer and also provides a
      comparison of insurance
products;




·
            Online
      Consultation: The
      website provides a forum for insurance experts to reply to online
      inquiries which may offer professional consultation to the consumers in
      real time;




·
            Online
      Insurance:
      Client-users may obtain a customized insurance plan by inputting their
      desired insurance type to be purchased and the insurance company to be
      selected, together with personal information, which allows the client-user
      to control the purchase flow and to avoid unnecessary and/or inefficient
      contact with insurance
agents;




·
            Insurance
      College: The website
      aims to educate professionals and the layperson consumer with professional
      knowledge of insurance products in light of the particularity and
      specialty of such products, including, without limitation, trade
      terminology, interpretation of concepts and terms and information on the
      settlement of claims via voice, video, cartoon and flash methods;
      and




·
            Marketing
      Dictionary: The
      website also offers a marketing dictionary which provides agents with
      information on marketing skills, team management and professional training
      in order for agents to provide better services to their clients while
      improving their marketing
skills.




The
Company’s plan is to increase its publicity and brand popularity in the
industry, to seek regional channel agents for advertisement and to gradually
introduce Soobao to first and second-level cities across China with an aim
towards a national distribution of direct-marketing of insurance. Currently, our
main advertising clients are insurance agents, for many of whom we have
constructed websites, however we plan to increase our client-base to attract
insurance companies and other advertising vendors. As of June 30, 2009, we have
contracts with 89 insurance agents from 86 insurance agents at June 30, 2008 for
the promotion of their services on www.soobao.cn. From
October 8, 2006 (ZYTX’s inception) through June 30, 2007, online insurance
advertising revenues accounted for approximately 34% of our total revenue,
approximately 67% of our total revenue for the year ended June 30, 2008 and
approximately 61% of our total revenue for the year ended June 30,
2009.





Website
Construction Services




Our
website construction services target marketing teams in the Chinese insurance
industry, and our clients typically originate from referrals made by the
Company’s insurance agents engaged in the insurance marketing business. Our
marketing strategy allows prospective clients to enter a trial use period
followed by a payment scheme to be mutually agreed upon between us and the
marketing team leader of such client.


- 7
-




With
respect to website construction, we generate revenues through the construction
of websites and from the maintenance of such websites. We also cooperate with
the client to conduct direct promotion to the client’s target groups. The final
product typically offers the following, all of which are specifically tailored
to the insurance industry and the specific client:




·
            Words
      On Line:
      Client-users have the ability to leave “words on line” directly through
      the website for interactive communications with other industry players who
      may receive such messages through the network at any time and any
      place;




·
            Online
      Insurance:
      Client-users may create customized insurance plans directly through the
      website;




·
            Online
      Employment:
      Client-users may submit and post their resumes directly through the
      website for review by prospective employers in the
      industry;




·
            Client
      Management: Websites
      facilitate file management for agents and provide individualized services
      for clients with customized packet transmission functions of short message
      and e-mail, save time for client maintenance and financial cost and
      improve service quality;




·
            Short
      Messaging:
      Value-added short message services, through cooperation with wireless
      operators, effectively combine the rapidness of packet transmission of
      short messaging with the individualization of its content with the support
      of intelligent system
configuration.




·
            Insurance
      Classification Management: A strong insurance
      classification management system enables clients to update and maintain
      their product information;
and




·
            News
      Management: Article
      management and release systems allow the client to issue the latest
      messages at their discretion or directly call in the materials or database
      provided by the system.




As of the
date of this Annual Report, the Company has provided website construction
services to52 marketing teams in the insurance
industry.




Software
Development




We
develop software for clients using technology that we own and information
obtained through our R&D efforts in the field of operating system
applications, professional statistics analysis and other business application
systems. We generate revenues from technology development contracts and as of
June 30, 2009, we have 5technology development
contracts in place with 5customers.




From
October 8, 2006 (ZYTX’s inception) through June 30, 2007 (ZYTX’s fiscal year
end), software development revenues accounted for approximately 66% of our total
revenue and approximately 31% of our total revenue for the year ended June 30,
2008 and 35% of our total revenue for the year ended June 30, 2009.




Insurance
Agency Services




The
Company obtained qualification to do business as an insurance agent in entire
the nation of China as a result of the acquisition of GHIA on October 28, 2008
and extended the scope of the insurance business.  Although we have
generated only a small fraction of our total revenues through these services
(approximately 1% and 2% for the years ended June 30, 2009 and 2008,
respectively), we anticipate insurance sales commissions to be a vital business
for profit and growth. The Company plans to cooperate with insurance companies
with a good reputation and high production competitiveness to sell their
products and services. Through www.soobao.cn, and in
reliance on its brand credit with the public, the Company plans to fairly and
objectively recommend appropriate products to consumers through a professional
financial consultant service. The Company plans to make use of preferential
premiums and abundant value-added member services to provide guidance to the
consumer with respect to their prospective purchases. The Company expects to
enlarge its market share through the direct selling in the current network and
to establish a national marketing network system through developing businesses
in first and second-level cities in China.




- 8
-





Research
and Development




The
Company has an experienced team engaged in the development of Internet
application software. The core members have a sustained sense of innovation in
the new technology of the Internet application areas, and have practical
experience and keen market-oriented insights, especially on e-commerce
applications, Internet website operation and other aspects. The Company’s core
members are experienced both in the Internet and in the insurance industry, and
have many business relationships. They have a deep understanding of the
development history and respective characteristics of these industries in China,
and therefore we believe we have advantages in the development for our insurance
industry network application platform. The core members of the team have also
established project-based cooperation and good human resource partnerships with
The China Insurance Regulatory Commission, The Insurance Association of Beijing
and The Development Research Center of the State Council, which we believe will
provide strong support for the development of the Company.




The
Company’s core research and development (R&D) team consists of five (5)
technicians, each of which have work experience on system development in the
field of Internet application and understand the insurance industry and its
business flow. Aimed at the functions and applied range of each service system
and based on guaranteed access speed and program expansibility, Net 2.0 and ASP
language are used together with the SQL Server 2005 database. With this, the
Company has its own core technology in the aspects of development and
application of www.soobao.cn aimed
at insurance companies.




The
Company’s investment in R&D centers on three (3) aspects: (a) personnel,
whereby the Company implements a senior talent strategy for the employment of
R&D personnel with a development incentive program which is competitive in
the industry, (b) operating equipment, which the Company plans to make
investments in web servers, network bandwidth leases and network installation
and protection and (c) software development tools, whereby the Company purchased
a Windows Server 2003, SQL Server 2005 and Visual Studio 2005, and hardware
equipment such as brand laptop and desktop computers.




At
present, the Company has been engaged in preliminary market researching and core
technology buildings. The Company estimates that it has spent $0 on R&D
during the fiscal year ended June 30, 2009 and $74,446on R&D during the
fiscal year ended June 30, 2008. In our next phase of development, the Company
intends to focus its R&D on (i) integral solution to online application of
insurance industry, (ii) Web-based extended applications of the network portal
system, (iii) a comprehensive life insurance comparison and timely quotation
system, which shall put life insurance products under a scientific and
quantitative calculating index and (iv) a data statistical and analytical system
for the insurance industry. Based on a great deal of effective clicks on the
network portal, we believe that this system will make statistics and analysis of
the consumer group’s points of interest regarding the present and future
insurance products. We believe this statistic data will have a high commercial
value with respect to the insurance companies’ release of new products and
establishment of rates.




The
Company has achieved an integral solution of network integration and promotion
for its marketing teams for the insurance industry. This system was developed
and aimed at the important links in the marketing flow of insurance agents
including business expansion, personnel, team construction and client
maintenance; integrates the application of multisystem modules such as
interactive transmission of online information, product release, intelligent
CRM, member display, insurance policy management and SMS packet transmission via
Web-based wireless access. The system also reduces the time and costs of
promotion, marketing and client maintenance for the completion of a client’s
group business.


- 9
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The
Company has also developed a motor vehicle premium calculation systemwhich provides different
rates of motor vehicle insurance and the different insured amounts for about
1,000 vehicle types of over 100 vehicle series, and is capable of generating a
detailed statement with respect to the expenses of electronic insurance policies
and various insurance products through the online input of vehicle information,
independent selection of insured risks and the selected insurance
company.




Market
Overview




The
Company intends to focus on the following three (3) business segments, (a)
software development, (b) online insurance advertising and (c) insurance agency.
Key elements are briefly described below.




Online
Insurance Advertising




In recent
years, an increasing number of enterprises and individuals have engaged in
e-commerce activities, and China’s e-commerce market has maintained rapid and
sustained growth. The “2006-2007 China’s E-commerce Market Research Report”
released by Saidi Adviser revealed that China’s e-commerce market transactions
achieved a total RMB 1.1 trillion in 2006 (US$0.14 trillion), an increase of
48.6% as compared to the same period in 2005 and more than 80% of Internet users
had tried or were willing to try online shopping in 2006.  According
to the data from CCID Consulting, insurance premiums through e-commerce
significantly increased by 150% to US$1,062 million (RMB 7.26 billion) in 2008
from US$397 million (RMB 2.9 billion) in 2007.  The market research
company IDC has published a white paper about China’s e-commerce industry, and
it states that the trade volume of China’s e-commerce increased by about 20% in
the year 2008. The total trade scale of China’s e-commerce industry reached
US$284 billion (RMB 1.951 trillion) in 2008, increasing over 20% compared with
the US$220 billion (RMB1.608 trillion) in 2007. Of this revenue, e-commerce that
targeted individual consumers increased by about 30%. The report further points
out that China’s e-commerce industry will maintain a rapid growth in the next
five (5) years and by 2010 its total trade is expected to reach US$471 billion
(RMB 3.22 trillion). Consistent with the expansion of e-commerce, the number of
e-commerce merchants in China has also been growing. According to a 2008 Chinese
Internet Merchant Report, the number of frequent users of e-commerce in China
increased from 4 million in 2004 to 35.5 million in 2007.




As it has
advantages on cost saving, efficiency, interactive communication transcending
time and space, information, and the rapid increase in popularity, network
marketing is becoming an important marketing tool for the Chinese insurance
industry. In addition to the development of China’s social-economy, the use of
cold visit by insurance agents, questionnaire surveys, telephone sales, and
other traditional marketing models are no longer well-suited in the fast-paced,
highly efficient patterns of life and purchasing habits of customers. Because
consumer groups tend to be more rational, we believe that they will likely make
purchase decisions according to their own needs. When they have the intent to
make a purchase, they will obtain comprehensive, objective information through
various channels. Network marketing via www.soobao.cn can
meet these needs. The potential customer group can make inquiries through the
network and obtain information on each company and their insurance products and
consumers will be able to obtain a fuller understanding of such products prior
to the purchase.





Insurance
Agency




To carry out insurance sales more
effectively and to supplement the function and effect ofwww.soobao.cn,  The Company is in the
process of constructing a comprehensive insurance supermarket entity, which will
serve as the social entity version of thewww.soobao.cnplatform. Such supermarket entity
shall set up for insurance transaction market in fixed locations of key cities
in China will provide prospective clients with a series of services such as
one-to-one advisory on different products offered by different insurance
companies, examination of life insurance, insurance site-sales, compensation and
appreciation and claims settlement. As there will be many specialized clients in
the transaction market, the Company plans to organize professional lectures on
insurance, create an industry salon and release new products and services. It is
our goal through such entity to (a) educate consumers with respect to insurance
and insurance products, (b) provide objective and impartial information of each
company’s product, (c) offer personalized insurance programs to consumers, (d)
offer after-sale one-stop compensation services including improved efficiency
with claims settlements and (e) offer exposure towww.soobao.cnand enjoy the network value-added
services which are not offered through more traditional insurance
consumption.


- 10
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Market
Share




Presently,
the Company has provided services to over 7,340insurance agents, which
accounts for over 45% of the market share of website construction business in
the Beijing area for insurance-related sales commissions. This figure is based
on an estimated number of over 15,000 insurance agents that own independent
websites found through major search engine searches (Baidu, Yahoo and
Google).




Based on
the planning concept and the realized functions of www.soobao.cn, there
currently is no similar service provider in the same industry across China. The
ability of www.soobao.cn to
sustain its leading position in the same trade will depend on whether or not the
Company can rapidly build its good brand image both in the industry and in the
society.





Competition




In terms of our insurance sales
business, our competitors are insurance sales agencies. However, most of our
competitors still adopt the traditional insurance sales model and their scope of
business is limited to local markets. Our model, however, combines an industry
Internet portal (www.soobao.cn) and a nationwide insurance
supermarket.




In the
field of claims settlement, up to now, we know of no other company that combines
auto, property and life insurance. If we take advantage of the amiable business
relationships already existing between the Company and insurance companies, we
can offer our clients with one-stop, highly efficient and high compensation
services.




In terms
of professional website construction to insurance agents (and their teams), we
know of no rivals in the Beijing area and there are no professional website
construction companies that serve specifically the insurance industry in other
areas of China.




With respect to our insurance industry
website portal (www.soobao.cn), we know of no rivals in Beijing.
However, in Shenzhen and Shanghai, there is one company in each city that has a
similar business model towww.soobao.cn. If the Company expands its nationwide
business, they are likely to become our potential rivals. The first company is
Shenzhen Insurance Network Technology Co., Ltd. (www.ins.com); this website focuses on providing
classifications of insurance and insurance related information. They have
established a shop for insurance agents with sub-domains and there is no
insurance business conducted via Internet in real-time. Instead, its main
function is to provide consulting services and information, and they charge a
membership fee from agents. This company’s main business area is Shenzhen. It
has not obtained the qualification permit for Internet operation and insurance
agent qualification. The second company is Shanghai Ebao Technology Co., Ltd.,
and this company is similar towww.ins.comin that it also provides information
related to insurance to the public and workshop in the network to agents.
However, the number of insurance agents registered as members with this website
as members are less than fifty (50), which is significantly less than
ours.




In terms of insurance company oriented
advertising and promotion,www.soobao.cnis the only insurance professional
website media to our knowledge in China. Most insurance companies instead
advertise via more traditional media and domestic comprehensive Internet
portals.




With
regard to technological services to insurance companies, most management systems
of domestic insurance companies have been self-developed by each company, and we
know of no other professional technological provider that focuses on business
management systems in the insurance industry.


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Employees




The
Company attaches great importance to the cultivation of professional managerial
persons and pursues a talent policy of retaining professionals by undertaking an
enterprise culture. Through continuously improving its corporate governance
structure, management system and talent introduction and incentive system, the
Company has created an excellent working atmosphere and development opportunity,
which integrates the individual occupational plan with the Company’s development
and reduces the turnover flow of the employees, especially the core technicians,
thus forming a relatively stable and high-quality employee team.




As of the
date of this Annual Report, the Company has 58 full-time employees, of which
only Junjun Xu, as Chief Executive Officer of CHIO and General Manager of ZYTX,
Mingfei Yang, as Chief Financial Officer of CHIO and Finance Manager of ZYTX,
and Zhenyu Wang, as Chairman of CHIO and Executive Director of ZYTX is a part of
the Company’s management. None of our employees are covered by a collective
bargaining agreement. We believe we have good relations with
our employees.





Intellectual
Property




We
currently do not own any trademarks or patents however the Company filed for its
website (www.soobao.cn) with
the Beijing Industrial Commercial Bureau on April 28, 2007.





Government
Regulation




The
following description of PRC laws and regulations is based upon the opinions of
our PRC counsel in Beijing. For a description of legal risks relating to our
ownership structure and business, see “Item 1A-Risk Factors”.




The
Chinese government has enacted an extensive regulatory scheme governing the
operation of business with respect to the Internet, such as telecommunications,
Internet information services, international connections to computer information
networks, information security and censorship and administrative protection of
copyright. Among the regulations, the Telecommunications Regulations of the
People’s Republic of China, or Telecom Regulations, promulgated on
September 25, 2000, is the primary governing law. Telecom Regulations set
out the general framework under which domestic Chinese companies such as ZBDT
and ZYTX may engage in various types of telecommunications services in the PRC.
They reiterate the long-standing principle that telecommunications service
providers need to obtain operating licenses as a mandatory precondition to begin
operation. The Telecom Regulations differentiate the telecommunications services
into basic telecommunications services and value-added telecommunications
services. Value-added telecommunications services are defined as
telecommunications and information services provided through public networks.
The “Catalogue of Telecommunications Business”, an attachment to the Telecom
Regulations and updated by the Ministry of Information Industry’s Notice on
Adjusting the Catalogue of Telecommunications Business of April 1, 2003,
categorizes various types of telecommunications and telecommunications-related
activities into basic or value-added services.




On
December 20, 2001, after China’s formal entry into the WTO, the PRC State
Council promulgated the “Regulations for the Administration of Foreign-Invested
Telecommunications Enterprises” or the FITE Regulations, which became effective
on January 1, 2002. The FITE Regulations stipulate that foreign-invested
telecommunications enterprises, or FITEs, may undertake operations in basic
telecom services and value-added telecom services. Currently, the foreign party
to a value-added FITE may hold up to fifty percent (50%) of the equity,
with no geographic restrictions on its operations. Prior to that, foreign
investors were prohibited from investing in Internet content services. The PRC
government has not made any further commitment to loosen the regulation on
FITEs.




According
to the Measures for the Administration of Internet Information Services
described below, an enterprise must obtain a Value-added Telecommunication
Services Operating License in the first place to conduct Internet content
service businesses. When the Internet content involves areas such as news,
education, medicine, health, pharmaceuticals and medical equipment, the
enterprise must also obtain permission from responsible national
authorities.


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-





ZYTX’s
Business Qualification and Licenses




On
December 8, 2006, ZYTX obtained a Telecommunications and Information Services
Business License from Beijing Communications Administration, enabling the
Company to engage in the internet information services business excluding
services relating to news, publication, education, medical care, medicine and
medical devices. On April 28, 2007, ZYTX received its High and New Technology
Enterprise Approval Certificate from the Beijing Science and Technology
Committee whereby ZYTX was approved as a hi-tech enterprise. On June 29, 2007,
ZYTX was received qualification to conduct business as an insurance agent in the
Beijing area, including insurance on motor vehicles, insurance on enterprise
property, insurance on family property and traditional life
insurance.





On
October 28, 2008, the Company acquired GHIA, which possessed the qualification
to engage the insurance agent business in the entire nation of China on the
business services including, insurance advisory and consultation, reinsurance,
insurance claim and insurance planning.





Internet
Information Services




The
Measures for the Administration of Internet Information Services, or the ICP
Measures, went into effect on September 25, 2000. Under the ICP Measures,
any entity that provides information to online Internet users must obtain an
operating license from the Ministry of Information Industry (“MII”) or its local
branch at the provincial level in accordance with the Telecom Regulations
described above. The ICP Measures further stipulate that entities providing
online information services in areas of news, publishing, education, medicine,
health, pharmaceuticals and medical equipment must obtain permission from
responsible national authorities prior to applying for an operating license from
MII or its local branch at the provincial or municipal level. Moreover, ICPs
must display their operating license numbers in a conspicuous location on their
web sites. ICPs must police their web sites to remove categories of harmful
content that are broadly defined. This obligation reiterates Internet content
restrictions set by other ministries over the past few years. On December 8,
2006, ZYTX obtained an ICP license from Beijing Telecommunications
Administration (the Beijing municipal branch of MII).




Online
Advertising




The State
Administration of Industry and Commerce in China (“SAIC”) promulgated
the Notice on Registration Issues for Enterprises Specialized in Advertising
Business (the “Ad
Notice”) on July 19, 2004. Upon the issuance of the Ad Notice, an
enterprise specialized in advertising business as specified in its business
scope need not apply for the Advertising Operation License. As to placing
advertisements on the Internet, such enterprise must apply for a business scope
of Placing Online Advertisements on the name of the web site. SAIC and its local
departments will not issue an Advertising Operation License to enterprises
specialized in online advertising business.




As of the
date of this Report, the Company has not been engaged in Internet advertising in
the traditional sense however the Company plans to engage in such business in
the future. The Company’s business scope includes advertisement designed and
made (internet technical services), however it does not include advertisement
agency and issuance (traditional advertising). The Company has not obtained an
Advertising Operation License issued by the State Administration for Industry
and Commerce and is not required to do so.





Administrative
Protection of Internet Copyright




According
to the Measures for the Administrative Protection of Internet Copyright
implemented on May 30, 2005, acts of automatically providing such functions
as uploading, storing, linking or searching works, audio or video products, or
other contents through Internet based on the instruction of an Internet content
provider, without editing, amending or selecting any stored or transmitted
content, and other acts of providing Internet information services shall be
governed by the Copyright Law. A copyright administration department shall, when
imposing administrative penalties upon the act infringing upon the right of
communication through information network, apply the Measures for Imposing
Copyright Administrative Penalties.




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-


Where a
copyright holder (individual or entity) finds any content communicated through
the Internet infringes upon its copyright and sends a notice of claim to the
Internet information service provider, the Internet information service provider
shall immediately take measures to remove the relevant contents, and preserve
the copyright holder’s notice of claim for six (6) months. An Internet
information service provider shall, after receipt of the copyright holder’s
notice, record the contents of the provided information, the publishing time,
and the Internet address or domain name. Where an Internet information service
provider removes relevant content of an Internet content provider according to
the notice of a copyright holder, the Internet content provider may deliver a
counter-notice to both the Internet information service provider and the
copyright holder, stating that the removed contents do not infringe upon the
copyright. After the delivery of such counter-notice, the Internet information
service provider may immediately reinstate the removed contents and shall not
bear legal liability for such reinstatement.




Where an
Internet information service provider clearly knows an Internet content provider
infringes other’s copyright through Internet, or, although it does not clearly
know such activity but fails to take measures to remove relevant contents upon
receipt of the copyright owner’s notice, and as a result, it damages public
interests, the copyright administration department may, in accordance with the
Copyright Law, order it to stop the tortious act, and impose administrative
penalties. Where there is no evidence to indicate that an Internet information
service provider clearly knows the facts of tort, or the Internet information
service provider has taken measures to remove relevant contents upon receipt of
the copyright owner’s notice, the Internet information service provider shall
not bear the relevant liabilities.




The
Company has taken measures to protect Internet copyright in pursuance of the
specified procedures and in compliance with relevant laws and regulations
mentioned above.





Environmental
Laws




The
Company did not incur any expenses in connection with compliance with
environmental laws (federal, state, local and foreign) during the fiscal year
ended June 30, 2009. There is no significant effect of compliance with the
environmental laws.





ITEM
      1A.
            Risk
      Factors




The
financial condition, business, operations, and prospects of the Company involve
a high degree of risk. You should carefully consider the risks and uncertainties
described below, which constitute the material risks relating to the Company,
and the other information in this report. If any of the following risks are
realized, the Company’s business, operating results and financial condition
could be harmed and the value of the Company’s stock could suffer. This means
that investors and stockholders of the Company could lose all or a part of their
investment.




RISKS
RELATING TO THE PEOPLE’S REPUBLIC OF CHINA




Certain
Political and Economic Considerations Relating to China Could Adversely Affect
Our Company.




The PRC
is transitioning from a planned economy to a market economy. While the PRC
government has pursued economic reforms since its adoption of the open-door
policy in 1978, a large portion of the PRC economy is still operating under
five-year plans and annual state plans. Through these plans and other economic
measures, such as control on foreign exchange, taxation and restrictions on
foreign participation in the domestic market of various industries, the PRC
government exerts considerable direct and indirect influence on the economy.
Many of the economic reforms carried out by the PRC government are unprecedented
or experimental, and are expected to be refined and improved.




Other
political, economic and social factors can also lead to further readjustment of
such reforms. This refining and readjustment process may not necessarily have a
positive effect on our operations or future business development. Our operating
results may be adversely affected by changes in the PRC’s economic and social
conditions as well as by changes in the policies of the PRC government, such as
changes in laws and regulations (or the official interpretation thereof),
measures which may be introduced to control inflation, changes in the interest
rate or method of taxation and the imposition of additional restrictions on
currency conversion.


- 14
-





Our
Business May Be Affected By Unexpected Changes In Regulatory Requirements In The
Jurisdictions In Which We Operate.




We are
subject to many general regulations governing business entities and their
behavior in China and in other jurisdictions in which we have operations. Such
regulations typically deal with licensing, approvals and permits. Any change in
product licensing may make our products more or less available on the market.
Such changes may have a positive or negative impact on the sale of our products
and may directly impact the associated costs in compliance and our operational
and financial viability.




The
Chinese Government Exerts Substantial Influence Over The Manner In Which We Must
Conduct Our Business Activities Which Could Adversely Affect Our
Company.




China
only recently has permitted provincial and local economic autonomy and private
economic activities. Chinese government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy through
regulation and state ownership. Our ability to operate in China may be harmed by
changes in its laws and regulations, including those relating to taxation,
import and export tariffs, environmental regulations, land use rights, property
and other matters. We believe that our operations in China are in material
compliance with all applicable legal and regulatory requirements. However, the
central or local governments of these jurisdictions may impose new, stricter
regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with
such regulations or interpretations.




Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof, and could require us to divest ourselves of any
interest we then hold in Chinese properties or joint ventures.




The
Chinese Legal System Has Inherent Uncertainties That Could Limit The Legal
Protections Available To You.




Our
contractual arrangements with our VIEs in China (ZYTX and GHIA) are governed by
the laws of the People’s Republic of China. China’s legal system is based upon
written statutes. Prior court decisions may be cited for reference but are not
binding on subsequent cases and have limited value as precedents. Since 1979,
the Chinese legislative bodies have promulgated laws and regulations dealing
with economic matters such as foreign investment, corporate organization and
governance, commerce, taxation and trade. However, because these laws and
regulations are relatively new, and because of the limited volume of published
decisions and their non-binding nature, the interpretation and enforcement of
these laws and regulations involve uncertainties, and therefore you may not have
legal protections for certain matters in China.




Even
If We Are In Compliance With Chinese Governmental Regulations Relating To
Foreign Investment Prohibitions, The Chinese Government May Prevent Us From
Advertising Or Distributing Content That It Believes Is Inappropriate And We May
Be Liable For Such Content Or We May Have To Stop Profiting From Such
Content..




China has
enacted regulations governing Internet access and the distribution of news and
other information. In the past, the Chinese government has stopped the
distribution of information over the Internet that it believes to violate
Chinese law, including content that it believes is obscene, incites violence,
endangers national security, is contrary to the national interest or is
defamatory. In addition, we may not publish certain news items without
permission from the Chinese government. Furthermore, the Ministry of Public
Security has the authority to cause any local Internet service provider to block
any web site maintained outside China at its sole discretion. Even if we comply
with Chinese governmental regulations relating to foreign investment
prohibitions, if the Chinese government were to take any action to limit or
prohibit the distribution of information through our network or to limit or
regulate any current or future content or services available to users on our
network, our business could be significantly harmed.


- 15
-





Because
the definition and interpretation of prohibited content is in many cases vague
and subjective, it is not always possible to determine or predict what and how
content might be prohibited under existing restrictions or restrictions that
might be imposed in the future.




We are also subject to potential
liability for content onwww.soobao.cnthat is deemed inappropriate and for
any unlawful actions of our subscribers and other users of our systems.
Furthermore, we are required to delete content that clearly violates the laws of
China and report content that we suspect may violate Chinese law. It is
difficult to determine the type of content that may result in liability for us,
and if we are wrong, we may be prevented from operating our web
sites.




All
Of Our Assets Are Located In China, Any Dividends Of Proceeds From Liquidation
Is Subject To The Approval Of The Relevant Chinese Government
Agencies.




Our
assets are located inside China. Under the laws governing foreign invested
enterprises in China, dividend distribution and liquidation are allowed but
subject to special procedures under the relevant laws and rules. Any dividend
payment will be subject to the decision of the board of directors and subject to
foreign exchange rules governing such repatriation. Any liquidation is subject
to both the relevant government agency’s approval and supervision as well as
foreign exchange controls. This may generate additional risk for our investors
in case of dividend payment and liquidation.




Future
Inflation In China May Inhibit Our Activity To Conduct Business In
China.




In recent
years, the Chinese economy has experienced periods of rapid expansion and high
rates of inflation. These factors have led to the adoption by Chinese
government, from time to time, of various corrective measures designed to
restrict the availability of credit or regulate growth and contain inflation.
While inflation has been more moderate since 1995, high inflation may in the
future cause Chinese government to impose controls on credit and/or prices, or
to take other action, which could inhibit economic activity in China and thereby
harm the our business operations.




Currency
Conversion And Exchange Rate Volatility Could Adversely Affect Our Financial
Condition.




The PRC
government imposes control over the conversion of Renminbi into foreign
currencies. Under the current unified floating exchange rate system, the
People’s Bank of China publishes an exchange rate, which we refer to as the PBOC
exchange rate, based on the previous day’s dealings in the inter-bank foreign
exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an
authorized range above or below the PBOC exchange rate according to market
conditions.





Pursuant
to the Foreign Exchange Control Regulations of the PRC issued by the State
Council which came into effect on April 1, 1996, and the Regulations on the
Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which
came into effect on July 1, 1996, regarding foreign exchange control, conversion
of Renminbi into foreign exchange by Foreign Investment Enterprises (“FIEs”), for use on
current account items, including the distribution of dividends and profits to
foreign investors, is permissible. FIEs are permitted to convert their after-tax
dividends and profits to foreign exchange and remit such foreign exchange to
their foreign exchange bank accounts in the PRC. Conversion of Renminbi into
foreign currencies for capital account items, including direct investment,
loans, and security investment, is still under certain restrictions. On January
14, 1997, the State Council amended the Foreign Exchange Control Regulations and
added, among other things, an important provision, which provides that the PRC
government shall not impose restrictions on recurring international payments and
transfers under current account items.




Enterprises
in the PRC (including FIEs) which require foreign exchange for transactions
relating to current account items, may, without approval of the State
Administration of Foreign Exchange, or SAFE, effect payment from their foreign
exchange account or convert and pay at the designated foreign exchange banks by
providing valid receipts and proofs.


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-





Convertibility
of foreign exchange in respect of capital account items, such as direct
investment and capital contribution, is still subject to certain restrictions,
and prior approval from the SAFE or its relevant branches must be
sought.




Since
1994, the exchange rate for Renminbi against the United States dollars has
remained relatively stable. However, in 2005, the Chinese government announced
that would begin pegging the exchange rate of the Chinese Renminbi against a
number of currencies, rather than just the U.S. Dollar. As our operations are
primarily in China, any significant revaluation of the Chinese Renminbi may
materially and adversely affect our cash flows, revenues and financial
condition. For example, to the extent that we need to convert United States
dollars into Chinese Renminbi for our operations, appreciation of this currency
against the United States dollar could have a material adverse effect on our
business, financial condition and results of operations. Conversely, if we
decide to convert Chinese Renminbi into United States dollars for other business
purposes and the United States dollar appreciates against this currency, the
United States dollar equivalent of the Chinese Renminbi we convert would be
reduced.




The
Value Of Our Securities Will Be Affected By The Foreign Exchange Rate Between
U.S. Dollars And Renminbi.




The value
of CHIO’s Common Stock will be affected by the foreign exchange rate between
U.S. dollars and Renminbi, and between those currencies and other currencies in
which our sales may be denominated. For example, to the extent that we need to
convert U.S. dollars into Renminbi for our operational needs and should the
Renminbi appreciate against the U.S. dollar at that time, our financial
position, the business of the Company, and the price of our Common Stock may be
harmed. Conversely, if we decide to convert our Renminbi into U.S. dollars for
the purpose of declaring dividends on our Common Stock or for other business
purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar
equivalent of our earnings from our China operations would be
reduced.




You
May Experience Difficulties In Effecting Service Of Legal Process, Enforcing
Foreign Judgments Or Bringing Original Actions In China Based On United States
Or Other Foreign Laws Against Us.




We
conduct our operations in China and a significant portion of our assets is
located in China. In addition, our directors and executive officers reside
within China, and substantially all of the assets of these persons are located
within China. As a result, it may not be possible to effect service of process
within the United States or elsewhere outside China upon those directors or
executive officers, including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Moreover, our Chinese
counsel has advised us that China does not have treaties with the U.S. and many
other countries that provide for the reciprocal recognition and enforcement of
judgment of courts. As a result, recognition and enforcement in China of
judgments of a court of the U.S. or any other jurisdiction in relation to any
matter may be difficult or impossible.




Underdeveloped
Telecommunications Infrastructure Has Limited, And May Continue To Limit, The
Growth Of The Internet Market In China Which, In Turn, Could Limit Our Ability
To Grow Our Business.




The
telecommunications infrastructure in China is not well developed. Although
private sector ISPs do exist in China, almost all access to the Internet is
accomplished through ChinaNet, China’s primary commercial network, which is
owned and operated by China Telecom and China Netcom under the administrative
control and regulatory supervision of MII. The underdeveloped Internet
infrastructure in China has limited the growth of Internet usage in China. If
the necessary Internet infrastructure is not developed, or is not developed on a
timely basis, future growth of the Internet in China could be limited and our
business could be harmed.


- 17
-





Our
Significant Amount Of Deposits In Certain Banks In China May Be At Risk If These
Banks Go Bankrupt During Our Deposit Period.




As of
June 30, 2009, we had approximately US$1.20million in banks in
China, which constitutes about99.2% of our total cash. The terms of these deposits are, in general, up
to twelve (12) months. Historically, deposits in Chinese banks are secure due to
the state policy on protecting depositors’ interests. However, China promulgated
a new Bankruptcy Law in August 2006, which has come into effect on
June 1, 2007, which contains a separate article expressly stating that the
State Council may promulgate implementation measures for the bankruptcy of
Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a
Chinese bank may go bankrupt. In addition, since China’s concession to WTO,
foreign banks have been gradually permitted to operate in China and have been
severe competitors against Chinese banks in many aspects, especially since the
opening of Renminbi business to foreign banks in late 2006. Therefore, the risk
of bankruptcy of those banks in which we have deposits has increased. In the
event of bankruptcy of one of the banks which holds our deposits, we are
unlikely to claim our deposits back in full since we are unlikely to be
classified as a secured creditor based on PRC laws.




RISKS
RELATING TO OUR BUSINESS





Because
Our Operating History Is Limited And The Revenue And Income Potential Of Our
Business And Markets Are Unproven, We Cannot Predict Whether We Will Meet
Internal or External Expectations Of Future Performance.




We
believe that our future success depends on our ability to significantly increase
revenue from our operations, of which we have a limited history. Accordingly,
our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies with a limited operating
history. These risks include our ability to:




·
            offer new and innovative
      services;





·
            attract clients for our
      services;





·
            attract
      advertisers;





·
            attract a larger audience to our
      network;





·
            derive revenue from our users
      from fee-based Internet
services;





·
            respond effectively to
      competitive pressures and address the effects of strategic relationships
      or corporate combinations among our
  competitors;





·
            maintain our current, and develop
      new, strategic
relationships;





·
            increase awareness of our brand
      and continue to build user
loyalty;





·
            attract and retain qualified
      management and employees;





·
            upgrade our technology to support
      increased traffic and expanded services;
  and





·
            expand the content and services
      on our network or secure premium
content.




In
Order To Comply With PRC Regulatory Requirements, We Operate Our Main Business
Through A Company With Which We Have A Contractual Relationship (ZYTX) But In
Which We Do Not Have Controlling Ownership. If The PRC Government Determines
That Our Agreements With ZYTX Are Not In Compliance With Applicable Regulations,
Our Business In The PRC Could Be Adversely Affected.




The
Chinese government restricts foreign investment in Internet-related and
advertising businesses, including Internet access, distribution of content over
the Internet and advertising via the Internet. Accordingly, we operate our
Internet-related businesses in China through ZYTX, a VIE, which is owned by our
Chairman of the Board (60%) and our Chief Executive Officer (40%). We control
ZYTX and operate its business through contractual arrangements and these
individual owners, but we have no equity control over ZYTX. Accordingly, we
cannot be sure that the PRC government would view our operating arrangements to
be in compliance with PRC licensing, registration or other regulatory
requirements, with existing policies or with requirements or policies that may
be adopted in the future. If we are determined not to be in compliance, the PRC
government could revoke our business and operating licenses, require us to
discontinue or restrict our operations, restrict our right to collect revenues,
block our web site, require us to restructure our business, corporate structure
or operations, impose additional conditions or requirements with which we may
not be able to comply, impose restrictions on our business operations or on our
customers, or take other regulatory or enforcement actions against us that could
be harmful to our business. We may also encounter difficulties in obtaining
performance under or enforcement of related contracts.


- 18
-





We
Rely on Contractual Arrangements With ZYTX For Our Operations, Which May Not Be
As Effective In Providing Control Over This Entity As Direct
Ownership.




Because
PRC regulations restrict our ability to provide Internet content, MVAS and
advertising services directly in China, we are dependent on our VIEs in which we
have little or no equity ownership interest and must rely on contractual
arrangements to control and operate these businesses. These contractual
arrangements may not be as effective in providing control over these entities as
direct ownership. For example, the VIEs could fail to take actions required for
our business or fail to maintain our China web sites despite their contractual
obligation to do so. These companies are able to transact business with parties
not affiliated with us. If these companies fail to perform under their
agreements with us, we may have to rely on legal remedies under Chinese law,
which we cannot be sure would be effective. In addition, we cannot be certain
that the individual equity owners of the VIEs would always act in the best
interests of ZYTX, especially if they leave ZYTX.




Substantially
all profits generated from our VIEs are paid to the subsidiaries of ours in
China through related party transactions under contractual agreements. We
believe that the terms of these contractual agreements are in compliance with
the laws in China. The tax authorities in China have examined some of these
contractual agreements in the past and have not raised any comment. However, due
to the uncertainties surrounding the interpretation of the transfer pricing
rules relating to related party transactions in China, it is possible that in
the future tax authorities in China may challenge the transfer prices that we
have used for related party transactions among our entities in China. In the
event the tax authorities challenge our VIE structure, we may be forced to
restructure our business operation, which could have a material adverse effect
on our business.




We
Cannot Assure You That Our Organic Growth Strategy Will Be
Successful.




One of
our growth strategies is to grow organically through increasing our services by
increasing our market share and entering new markets in the PRC. However, many
obstacles to increasing our market share and entering such new markets exist,
including, but not limited to, costs associated with increasing market share and
entering into such markets and attendant marketing efforts. We cannot,
therefore, assure you that we will be able to successfully overcome such
obstacles and establish our services in any additional markets. Our inability to
implement this organic growth strategy successfully may have a negative impact
on our ability to grow and on our future financial condition, results of
operations or cash flows.




Our
Business And Growth Could Suffer If We Are Unable To Hire And Retain Key
Personnel That Are In High Demand.




We depend
upon the continued contributions of our senior management and other key
personnel, including Junjun Xu, Mingfei Yang and Zhenyu Wang. The loss of the
services of any of our executive officers or other key employees could have a
material adverse effect on our business, operations, revenues or prospects. We
do not maintain key man insurance on the lives of these individuals at present.
As we plan to expand, we will have to attract managerial staff. We may not be
able to identify and retain qualified personnel due to our lack of understanding
of different cultures and lack of local contacts. This may impede any potential
expansion. Our future success will also depend on our ability to attract and
retain highly skilled and qualified technical, managerial, editorial, finance,
marketing, sales and customer service personnel in China. Qualified individuals
are in high demand, and we may not be able to successfully attract, assimilate
or retain the personnel we need to succeed.


- 19
-





We
May Not Be Able To Manage Our Expanding Operations Effectively, Which Could Harm
Our Business.




We
anticipate expansion in our business as discussed in the “Plan of Operation”
section herein, as we address growth in our customer base and market
opportunities. In addition, the geographic dispersion of our operations as a
result of overall internal growth requires significant management resources that
our locally-based competitors do not need to devote to their operations. In
order to manage the expected growth of our operations and personnel, we will be
required to improve and implement operational and financial systems, procedures
and controls, and expand, train and manage our growing employee base. Further,
our management will be required to maintain and expand our relationships with
various other websites, Internet and other online service providers and other
third parties necessary to our business. We cannot assure you that our current
and planned personnel, systems, procedures and controls will be adequate to
support our future operations. If we are not successful in establishing,
maintaining and managing our personnel, systems, procedures and controls, our
business will be materially and adversely affected.




If
We Need Additional Capital To Fund Our Growing Operations, We May Not Be Able To
Obtain Sufficient Capital And May Be Forced To Limit The Scope Of Our
Operations.




As we
implement our growth strategies, we may experience increased capital needs and
we may not have enough capital to fund our future operations without additional
capital investments. Our capital needs will depend on numerous factors,
including (i) our profitability; (ii) the release of competitive products by our
competition; (iii) the level of our investment in R&D; and (iv) the amount
of our capital expenditures. We cannot assure you that we will be able to obtain
capital in the future to meet our needs.




If we
cannot obtain additional funding, we may be required to:




·
            reduce our investments in
      research and development;





·
            limit our marketing efforts;
      and





·
            decrease or eliminate capital
      expenditures.




Such
reductions could materially adversely affect our business and our ability to
compete. Even if we do find a source of additional capital, we may not be able
to negotiate terms and conditions for receiving the additional capital that are
acceptable to us. Any future capital investments could dilute or otherwise
materially and adversely affect the holdings or rights of our existing
stockholders. We cannot give you any assurance that any additional financing
will be available to us, or if available, will be on terms favorable to
us.




If
We Are Unable To Keep Up With The Rapid Technological Changes Of The Internet
Industry, Our Business May Suffer.




The
Internet industry is experiencing rapid technological changes. For example, with
the advances of search engines, Internet users may choose to access information
through search engines instead of web portals. With the advent of Web 2.0, the
interests and preferences of Internet users may shift to user-generated content,
such as blogs. As broadband becomes more accessible, Internet users may demand
contents in audio- and video-rich format. With the development of 2.5G (such as
GPRS) and soon 3G (such as Universal Mobile Telecommunication Service) in China,
mobile users may shift from the current predominant text messaging services to
newer applications, such as multimedia messaging services, mobile commerce,
music and video downloads and mobile games. Our future success will depend on
our ability to anticipate, adapt and support new technologies and industry
standards. If we fail to anticipate and adapt to these and other technological
changes, our market share and our profitability could suffer.


- 20
-





If
We Fail To Successfully Develop And Introduce New Products And Services, Our
Competitive Position And Ability To Generate Revenues Could be
Harmed.




We are
developing new products and services, as set forth in our “Plan of Operation”
section herein. The planned timing or introduction of new products and services
is subject to risks and uncertainties. Actual timing may differ materially from
original plans. Unexpected technical, operational, distribution or other
problems could delay or prevent the introduction of one or more of our new
products or services. Moreover, we cannot be sure that any of our new products
and services will achieve widespread market acceptance or generate incremental
revenue. If our efforts to develop, market and sell new products and services to
the market are not successful, our financial position, results of operations and
cash flows could be materially adversely affected, the price of our Common Stock
could decline and you could lose part or all of your investment.




Concerns
About The Security Of Electronic Commerce Transactions And Confidentiality Of
Information On The Internet May Reduce Use Of Our Network And Impede
Growth.




A
significant barrier to electronic commerce and communications over the Internet
in general has been a public concern over security and privacy, especially the
transmission of confidential information. If these concerns are not adequately
addressed, they may inhibit the growth of the Internet and other online services
generally, especially as a means of conducting commercial transactions. If a
well-publicized Internet breach of security were to occur, general Internet
usage could decline, which could reduce traffic to our destination sites and
impede our growth.




We
May Not Be Able To Adequately Protect Our Intellectual Property, Which Could
Cause Us To Be Less Competitive.




We rely
on a combination of copyright, trademark and trade secret laws and restrictions
on disclosure to protect our intellectual property rights. Despite our efforts
to protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our technology. Monitoring unauthorized use of our
products is difficult and costly, and we cannot be certain that the steps we
have taken will prevent misappropriations of our technology, particularly in
foreign countries where the laws may not protect our proprietary rights as fully
as in the United States. From time to time, we may have to resort to litigation
to enforce our intellectual property rights, which could result in substantial
costs and diversion of our resources.




We
May Be Exposed To Infringement Claims By Third Parties, Which, If Successful,
Could Cause Us To Pay Significant Damage Awards.




Third
parties may initiate litigation against us alleging infringement of their
proprietary rights. In the event of a successful claim of infringement and our
failure or inability to develop non-infringing technology or license the
infringed or similar technology on a timely basis, our business could be harmed.
In addition, even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of
operations.





The
Law Of The Internet Remains Largely Unsettled, Which Subjects Our Business To
Legal Uncertainties That Could Harm Our Business.




Due to
the increasing popularity and use of the Internet and other online services, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution, antitrust and characteristics and
quality of products and services. Furthermore, the growth and development of the
market for electronic commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on companies conducting
business online. The adoption of any additional laws or regulations may decrease
the growth of the Internet or other online services, which could, in turn,
decrease the demand for our products and services and increase our cost of doing
business.




Moreover,
the applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. For example, new tax regulations may subject us or our customers to
additional sales and income taxes. Any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could significantly
disrupt our operations.


- 21
-




We
Are Relying On Advertising Sales As A Part Of Our Revenue, But The Online
Advertising Market Is Subject To Many Uncertainties, Which Could Cause Our
Advertising Revenues To Decline.




Our
advertising revenue growth is dependent on increased revenue from the sale of
advertising space on our network. The growth of online advertising in China is
subject to many uncertainties and many of our current and potential advertisers
have limited experience with the Internet as an advertising medium, have not
traditionally devoted a significant portion of their advertising expenditures or
other available funds to web-based advertising, and may not find the Internet to
be effective for promoting their products and services relative to traditional
print and broadcast media. Our ability to generate and maintain significant
advertising revenue will depend on a number of factors, many of which are beyond
our control, including but not limited to:




·
            the development and retention of
      a large base of users possessing demographic characteristics attractive to
      advertisers;





·
            the maintenance and enhancement
      of our brands in a cost effective
manner;





·
            increased competition and
      potential downward pressure on online advertising prices and limitations
      on web page space;





·
            the change in government policy
      that would curtail or restrict our online advertising
      services;





·
            the acceptance of online
      advertising as an effective way for advertisers to market their
      businesses;





·
            the development of independent
      and reliable means of verifying levels of online advertising and traffic;
      and





·
            the effectiveness of our
      advertising delivery, tracking and reporting
    systems.




If the
Internet does not become more widely accepted as a medium for advertising, our
ability to generate increased revenue could be negatively affected.





Our
growth in advertising revenues, to a certain extent, will also depend on our
ability to increase the advertising space on our network. If we fail to increase
our advertising space at a sufficient rate, our growth in advertising revenues
could be hampered. Further, the increasing usage of Internet advertising
blocking software may result in a decrease of our advertising revenues as the
advertisers may choose not to advertise on the Internet if Internet advertising
blocking software is widely used.




We
May Be Subject To Claims Based On The Content We Provide Over Our Network and
the Products And Services Sold On Our Network, Which, If Successful, Could Cause
Us To Pay Significant Damage Awards.




As a publisher and distributor of
content and a provider of services over the Internet, we face potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute; the selection of listings that are accessible
through our services and media properties, or through content and materials that
may be posted by users on our website; losses incurred in reliance on any
erroneous information published by us; unsolicited email, lost or misdirected
messages, illegal or fraudulent use of email or interruptions or delays in email
service; and product liability, warranty and similar claims to be asserted
against us by end users who purchase goods and services throughwww.soobao.cnand any future e-commerce services we
may offer.


- 22
-





We may
incur significant costs in investigating and defending any potential claims,
even if they do not result in liability. Although we carry general liability
insurance, our insurance may not cover potential claims of this type and may not
be adequate to indemnify us against all potential liabilities.




Our
Operations Could Be Disrupted By Unexpected Network Interruptions Caused By
System Failures, Natural Disasters Or Unauthorized Tampering With Our
Systems.




The
continual accessibility of our website and the performance and reliability of
our network infrastructure are critical to our reputation and our ability to
attract and retain users, advertisers and merchants. Any system failure or
performance inadequacy that causes interruptions in the availability of our
services or increases the response time of our services could reduce our appeal
to advertisers and consumers. Factors that could significantly disrupt our
operations include: system failures and outages caused by fire, floods,
earthquakes, power loss, telecommunications failures and similar events;
software errors; computer viruses, break-ins and similar disruptions from
unauthorized tampering with our computer systems; and security breaches related
to the storage and transmission of proprietary information, such as credit card
numbers or other personal information.




We have
limited backup systems and redundancy. In the past, we experienced an
unauthorized tampering of the mail server of our China website which briefly
disrupted our operations. Future disruptions or any of the foregoing factors
could damage our reputation, require us to expend significant capital and other
resources and expose us to a risk of loss or litigation and possible liability.
We do not carry sufficient business interruption insurance to compensate for
losses that may occur as a result of any of these events. Accordingly, our
revenues and results of operations may be adversely affected if any of the above
disruptions should occur.





We
May Be Classified As A Passive Foreign Investment Company, Which Could Result In
Adverse U.S. Tax Consequences To U.S. Investors.




Based
upon the nature of our income and assets, we may be classified as a passive
foreign investment company (or “PFIC”), by the United
States Internal Revenue Service for U.S. federal income tax purposes. This
characterization could result in adverse U.S. tax consequences to you. For
example, if we are a PFIC, our U.S. investors will become subject to increased
tax liabilities under U.S. tax laws and regulations and will become subject to
more burdensome reporting requirements. The determination of whether or not we
are a PFIC is made on an annual basis, and those determinations depend on the
composition of our income and assets, including goodwill, from time to time. We
intend to operate our business so as to minimize the risk of PFIC treatment,
however you should be aware that certain factors that could affect our
classification as PFIC are out of our control. For example, the calculation of
assets for purposes of the PFIC rules depends in large part upon the amount of
our goodwill, which in turn is based, in part, on the then market value of our
shares, which is subject to change. Similarly, the composition of our income and
assets is affected by the extent to which we spend the cash we have raised on
acquisitions and capital expenditures. In addition, the relevant authorities in
this area are not clear and so we operate with less than clear guidance in our
effort to minimize the risk of PFIC treatment. Therefore, we cannot be sure
whether we are not and will not be a PFIC for the current or any future taxable
year. In the event we are determined to be a PFIC, our stock may become less
attractive to U.S. investors, thus negatively impacting the price of our
stock.




RISKS
RELATING TO OUR COMMON STOCK




Our
Common Stock Price Is Volatile And Could Decline In The Future.




The stock
market, in general, and the market price for shares of internet service and
media companies in particular, have experienced extreme stock price
fluctuations. In some cases, these fluctuations have been unrelated to the
operating performance of the affected companies. Many companies in the internet
service and media industry have experienced dramatic volatility in the market
prices of their common stock. We believe that a number of factors, both within
and outside of our control, could cause the price of our Common Stock to
fluctuate, perhaps substantially. Factors such as the following could have a
significant adverse impact on the market price of our Common
Stock:


- 23
-





·
            announcements of technological
      innovations or new products by us or our
    competitors;





·
            developments concerning our
      proprietary rights or our competitors’ rights (including
      litigation);





·
            our ability to obtain additional
      financing and, if available, the terms and conditions of the
      financing;





·
            our financial position and
      results of operations;





·
            litigation;





·
            period-to-period fluctuations in
      our operating results;





·
            changes in estimates of our
      performance by any securities
analysts;





·
            new regulatory requirements and
      changes in the existing regulatory
  environment;





·
            the issuance of new equity
      securities in a future
offering;





·
            changes in interest
      rates;





·
            market conditions of securities
      traded on the NASDAQ Capital
Market;





·
            investor perceptions of us and
      the insurance industry generally;
and





·
            general economic and other
      national conditions.




We
May Have Difficulty Raising Necessary Capital To Fund Operations As A Result Of
Market Price Volatility For Our Shares Of Common Stock.




In recent
years, the securities markets in the United States have experienced a high level
of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations that have not necessarily been
related to the operations, performances, underlying asset values or prospects of
such companies. For these reasons, our shares of Common Stock can also be
expected to be subject to volatility resulting from purely market forces over
which we will have no control. If our business development plans are successful,
we may require additional financing to continue to develop and exploit existing
and new technologies and to expand into new markets. The exploitation of our
technologies may, therefore, be dependent upon our ability to obtain financing
through debt and equity or other means.




Our
Common Stock Is Considered A “Penny Stock” And As A Result, Related
Broker-Dealer Requirements Affect Its Trading And Liquidity.




Our
common stock is deemed to be “penny stock” as that term is defined in Rule
3a51-1 promulgated under the Exchange Act. Penny stocks are stocks:





·
            With a price of less than $5.00
      per share;





·
            That are not traded on a
      “recognized” national exchange;
or





·
            In issuers with net tangible
      assets less than $2.0 million (if the issuer has been in continuous
      operation for at least three years) or $5.0 million (if in continuous
      operation for less than three years), or with average revenues of less
      than $6.0 million for the last three (3)
  years.


- 24
-





Broker/dealers
dealing in penny stocks are required to provide potential investors with a
document disclosing the risks of penny stocks. Moreover, broker/dealers are
required to determine whether an investment in a penny stock is a suitable
investment for a prospective investor. These requirements may reduce the
potential market for our common stock by reducing the number of potential
investors. This may make it more difficult for investors in our common stock to
resell shares to third parties or to otherwise dispose of them. This could cause
our stock price to decline.





Shares
Eligible For Future Sale May Adversely Affect The Market Price Of Our Common
Stock.




From time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of Common Stock by means of ordinary brokerage transactions in the
open market pursuant to Rule 144, promulgated under the Securities Act of
1933, as amended, subject to certain limitations. In general, pursuant to
Rule 144, a stockholder (or stockholders whose shares are aggregated) who
has satisfied a six (6) months holding period may, under certain circumstances,
sell within any three-month period a number of securities which does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume for the four weeks preceding a sale. Rule 144 also
permits, under certain circumstances, the sale of securities, without any
limitations, by a non-affiliate of our Company that has satisfied a one (1) year
holding period. Any substantial sale of common stock pursuant to Rule 144
may have an adverse effect on the market price of our Common Stock.




Our
Chairman Of The Board And Our CEO Together Exercise Significant Control Over
Matters Requiring Stockholder Approval.




After
giving effect to the issuance of all the shares of Common Stock, our Chairman
Zhenyu Wang and our CEO Junjun Xu together have voting power equal to 53.22% of
our voting securities as of the date of this Annual Report. As a result, these
holders through such stock ownership, exercise control over all matters
requiring majority stockholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of us
that may be otherwise viewed as beneficial by stockholders other than these
holders.




We
May Incur Significant Costs To Ensure Compliance With U.S. Corporate Governance
And Accounting Requirements.




We may
incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the SEC. We expect all of these applicable rules and
regulations to increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. We also expect that these
applicable rules and regulations may make it more difficult and more expensive
for us to obtain director and officer liability insurance and we may be required
to accept reduced policy limits and coverage or incur substantially higher costs
to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified individuals to serve on our board of
directors or as executive officers. We cannot predict or estimate the amount of
additional costs we may incur or the timing of such costs.




We
May Be Required To Raise Additional Financing By Issuing New Securities With
Terms Or Rights Superior To Those Of Our Shares Of Common Stock, Which Could
Adversely Affect The Market Price Of Our Shares Of Common Stock.




We may
require additional financing to fund future operations, including expansion in
current and new markets, programming development and acquisition, capital costs
and the costs of any necessary implementation of technological innovations or
alternative technologies. We may not be able to obtain financing on favorable
terms, if at all. If we raise additional funds by issuing equity securities, the
percentage ownership of our current stockholders will be reduced, and the
holders of the new equity securities may have rights superior to those of the
holders of shares of Common Stock, which could adversely affect the market price
and the voting power of shares of our Common Stock. If we raise additional funds
by issuing debt securities, the holders of these debt securities would similarly
have some rights senior to those of the holders of shares of Common Stock, and
the terms of these debt securities could impose restrictions on operations and
create a significant interest expense for us.


- 25
-





Standards
For Compliance With Section 404 Of The Sarbanes-Oxley Act Of 2002 Are Uncertain,
And If We Fail To Comply In A Timely Manner, Our Business Could Be Harmed And
Our Stock Price Could Decline.




Rules
adopted by the SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
require annual assessment of our internal control over financial reporting, and
attestation of our assessment by our independent registered public accountants.
The standards that must be met for management to assess the internal control
over financial reporting as effective are new and complex, and require
significant documentation, testing and possible remediation to meet the detailed
standards and will impose significant additional expenses on us. We may
encounter problems or delays in completing activities necessary to make an
assessment of our internal control over financial reporting. In addition, the
attestation process by our independent registered public accountants is new and
we may encounter problems or delays in completing the implementation of any
requested improvements and receiving an attestation of our assessment by our
independent registered public accountants. If we cannot assess our internal
control over financial reporting as effective, or our independent registered
public accountants are unable to provide an unqualified attestation report on
such assessment, investor confidence and share value may be negatively
impacted.




We
Do Not Foresee Paying Cash Dividends In The Foreseeable Future.




We have
not paid cash dividends on our stock and we do not plan to pay cash dividends on
our stock in the foreseeable future.




ITEM
      1B.
            Unresolved
      Staff Comments




Not
applicable for smaller reporting companies.




ITEM
      2.
            Properties




All land
in China is owned by the State. Individuals and companies are permitted to
acquire rights to use land or land use rights for specific purposes. In the case
of land used for industrial purposes, the land use rights are granted for a
period of fifty (50) years. This period may be renewed at the expiration of the
initial and any subsequent terms. Granted land use rights are transferable and
may be used as security for borrowings and other obligations.




ZBDT has
one (1) office at Room 102, North Mansion, No. 11 ShiXing East Street,
ShiJingShan District, Beijing, China.  This is ZBDT’s registered
office, which consists of approximately forty (40) square meters, and is rent
free. The term of this occupancy period expires on October 22,
2010.


ZYTX has two (2) offices which are
listed below.




(a)
            Room 305, Building 1, No. 11
      ShiXing East Street, ShiJingShan District, Beijing, China.  This
      is ZYTX’s registered office, which consists of approximately forty-two
      (42) square meters and ZYTX pays RMB 6,132 (US$897) per calendar quarter
      to lease this office. The term of this lease expires on November 4,
      2009.





(b)
            Rooms 502 and 503, HuaTeng
      Edifice, No. 302 JinSong 3 District, Chaoyang District, Beijing,
      China.  This is ZYTX’s operating office, which consists of
      approximately four hundred eighty (480) square meters and ZYTX pays RMB
      51,804 (US$7,583) per month. The term of the lease expires on November 30,
      2009.




GHIA had
one (1) office during the year ended June 30, 2009 at Room 404, 4th Floor,
No.36, West Walnut Garden Street, XuanWu District, Beijing,
China.  This was GHIA’s operating office, which consisted of
approximately two hundred and thirty (230) square meters and GHIA had paid RMB
13,992 (US$2,048) per month to lease this office. This lease terminated on July
2009.


- 26
-





We believe that all our properties and
equipment have been adequately maintained, are generally in good condition, and
are suitable and adequate for our business.




ITEM
      3.
            Legal
      Proceedings




In the
normal course of business, we are named as defendant in lawsuits in which claims
are asserted against us. In our opinion, the liabilities, if any, which may
ultimately result from such lawsuits, are not expected to have a material
adverse effect on our financial position, results of operations or cash flows.
As of the date hereof, there is no outstanding litigation.




ITEM
      4.
            Submission
      of Matters to a Vote of Security
Holders




None.





PART
II




ITEM
5.   
Market
for Registrant’sCommon
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities




Our
Common Stock is quoted on the NASDAQ Capital Market under the symbol “CHIO”. The
following table sets forth on a per share basis for the periods shown, the high
and low closing bid prices of our Common Stock. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.




Closing Bid Prices
                                  
                                  High
                                  
                                  
                                  LowCalendar Year Ending December 31,
      20091st
      Quarter (excluding January 16th):
                                  
                                  $
                                  1.3600
                                  
                                  
                                  $
                                  0.30002nd
      Quarter:
                                  
                                  $
                                  1.9200
                                  
                                  
                                  $
                                  0.43003rd
      Quarter:
                                  
                                  $
                                  1.7200
                                  
                                  
                                  $
                                  0.9000Calendar Year Ended December 31,
      20081st
      Quarter:
                                  
                                  $
                                  5.7500
                                  
                                  
                                  $
                                  4.40002nd
      Quarter:
                                  
                                  $
                                  4.9000
                                  
                                  
                                  $
                                  4.20003rd
      Quarter (excluding September 29th)
                                  
                                  $
                                  4.3500
                                  
                                  
                                  $
                                  2.50004th
      Quarter:
                                  
                                  $
                                  3.3000
                                  
                                  
                                  $
                                  1.1500Calendar Year Ended December 31,
      20071st
      Quarter:
                                  
                                  $
                                  0.1400
                                  
                                  
                                  $
                                  0.00052nd
      Quarter (pre 1-for-500 reverse split- April 2 through April
      24):
                                  
                                  $
                                  0.0900
                                  
                                  
                                  $
                                  0.02152nd
      Quarter (post 1-for-500 reverse split- April 25 through June
      29):
                                  
                                  $
                                  2.3000
                                  
                                  
                                  $
                                  1.70003rd
      Quarter:
                                  
                                  $
                                  1.7000
                                  
                                  
                                  $
                                  1.70004th
      Quarter:
                                  
                                  $
                                  4.7500
                                  
                                  
                                  $
                                  1.7000





When the
trading price of our Common Stock is below $5.00 per share, the Common Stock is
considered to be a “penny stock” that is subject to rules promulgated by the SEC
(Rule 15-1 through 15g-9) under the Exchange Act. These rules impose significant
requirements on brokers under these circumstances, including:
(a) delivering to customers the SEC’s standardized risk disclosure
document; (b) providing customers with current bid and ask prices;
(c) disclosing to customers the brokers-dealer’s and sales representatives
compensation; and (d) providing to customers monthly account
statements.


- 27
-





Holders
of Common Equity




As of
October 8, 2009, we have an aggregate of 40,000,000 shares of our Common Stock
issued and outstanding and 254 stockholders of record.




Dividends




We have
never declared or paid any cash dividends or distributions on our Common Stock.
We currently intend to retain our future earnings to support operations and to
finance future growth and expansion and, therefore, do not anticipate paying any
cash dividends on our Common Stock in the foreseeable future.




Securities
Authorized for Issuance under Equity Compensation Plans




The
following table discloses information as of June 30, 2009 with respect to
compensation plans (including individual compensation arrangements) under
which our equity securities are authorized for issuance.




(a)
                    
                    
                    (b)
                    
                    
                    (c)Plan Category
                    
                    Number of securities to
                      be issued upon exercise of
                      outstanding options,
                      warrants and rights
                    
                    
                    Weighted-average
                      exercise price of
                      outstanding options,
                      warrants and rights
                    
                    
                    Number of securities
                      remaining available for
                      future issuance under
                      equity compensation
                      plans (excluding
                      securities reflected in
                      column (a)N/A
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-Total
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-





Options
and Warrants




As of
June 30, 2009 and as of the date of this Report, we have no outstanding options
or warrants.


- 28
-


Transfer
Agent and Registrar




Our
transfer agent is Corporate Stock Transfer, located at 3200 Cherry Creek Drive
South, Suite 430, Denver, Colorado 80209. Their telephone number is (303)
282-4800.




Performance
Graph




Not
required for a smaller reporting company.




Recent
Sales of Unregistered Securities




None.




ITEM 6.Selected
Financial Data




Not
required for a smaller reporting company.





ITEM
7.Management‘s
Discussion and Analysis of Financial Condition and Results of
Operations




Forward
Looking Statements




The
following is management’s discussion and analysis of certain significant factors
which have affected our financial position and operating results during the
periods included in the accompanying consolidated financial statements, as well
as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words “ believes ” “
anticipates ”, “ may ”, “ will ”, “ should ”, “ expect ”, “ intend ”, “ estimate
”, “ continue ” and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the SEC from time to
time, which could cause actual results or outcomes to differ materially from
those projected. Undue reliance should not be place on these forward-looking
statements which speak only as of the date hereof. We undertake no obligation to
update these forward-looking statements.




The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Report.





Acquisition
of Rise & Grow




On
December 18, 2007 (the “Closing Date”), China
INSOnline Corp., formerly known as Dexterity Surgical, Inc. (“Dexterity Surgical”)
and hereinafter, “CHIO” and together
with its subsidiaries, the “Company”, entered
into a Share Exchange Agreement (the “Exchange Agreement”)
with Rise and Grow Limited, an inactive Hong Kong limited holding company
(“Rise &
Grow”) and Newise Century Inc., a British Virgin Islands company and the
sole stockholder of Rise & Grow (the “Stockholder”). As a
result of the share exchange, CHIO acquired all of the issued and outstanding
securities of Rise & Grow from the Stockholder in exchange for Twenty-Six
Million Four Hundred Thousand (26,400,000) newly-issued shares of CHIO’s common
stock, par value $0.001 per share (“Common Stock”). As a result of the exchange,
Rise & Grow became our wholly-owned and chief operating subsidiary. We
currently have no other business operations other than those of Rise &
Grow.




The
following is disclosure regarding CHIO, Rise & Grow and the wholly-owned
operating subsidiary of Rise & Grow, Zhi Bao Da Tong (Beijing) Technology
Co. Ltd. (“ZBDT”), a company
formed under the laws of the People’s Republic of China (the “PRC”) and doing
business in the PRC.  Since the Closing Date, the operations of Rise
& Grow, through its operating subsidiary, ZBDT, are the only operations of
CHIO.


- 29
-


Effective
March 17, 2008, the Common Stock of CHIO began trading under a new ticker
symbol, “CHIO.OB” on the Over-The-Counter Bulletin Board. CHIO changed its
ticker symbol from “DEXT.OB” to “CHIO.OB” as a result of the Company’s name
change from “Dexterity Surgical, Inc.” to “China INSOnline Corp.”, which such
name change became effective as of February 26, 2008.




Effective
July 1, 2008, the Common Stock of CHIO began trading under the same ticker
symbol “CHIO” on the NASDAQ Capital Market.




Organizational
Structure of Rise & Grow, ZBDT, ZYTX and GHIA




Rise
& Grow was formed on February 10, 2006 as a Hong Kong limited company. ZBDT
was established and incorporated by Rise & Grow and commenced business on
September 6, 2007. Rise & Grow’s sole business is to act as a holding
company for ZBDT. ZBDT was formed by Rise & Grow for the purpose of
developing computer and network software and related products and to promote the
development of high-tech industries in the field of Chinese information
technology. It does this by controlling, through an Exclusive Technical
Consulting and Service Agreement and related transaction documents dated as of
September 28, 2007 (collectively, the “Service Agreements”),
Beijing Zhi Yuan Tian Xia Technology Co., Ltd. (“ZYTX”), a limited
liability company duly established on October 8, 2006 and validly existing under
the PRC.




Pursuant
to the Service Agreements, ZBDT shall provide on-going technical services and
other services to ZYTX in exchange for substantially all net income of ZYTX. In
addition, Mr. Zhenyu Wang and Ms. Junjun Xu have pledged all of their shares in
ZYTX to ZBDT, representing one hundred percent (100%) of the total issued and
outstanding capital stock of ZYTX, as collateral for non-payment under the
Service Agreements or for fees on technical and other services due to us
thereunder. We have the power to appoint all directors and senior management
personnel of ZYTX. Currently, ZYTX is sixty percent (60%) owned by Mr. Zhenyu
Wang, CHIO’s Chairman of the Board, and forty percent (40%) owned by Junjun
Xu, CHIO’s Chief Executive Officer and a director.





On
October 28, 2008, Rise & Grow and ZYTX entered into a Share Purchase
Agreement which Rise & Grow acquired 100% ownership of Guang Hua Insurance
Agency Company Limited (“GHIA”), a limited liability company organized under the
laws of the PRC, through ZYTX to act as legal owner in China.  GHIA is
an insurance agent company which operates in the PRC.  The
consideration was US$5,846,244 (RMB$40,000,000) in cash.  This share
purchase transaction resulted in Rise & Grow obtaining 100% of the voting
and beneficial interest in GHIA.





Business
of the Company




We are an
Internet service and media company focusing on the PRC insurance industry. With
localized websites targeting Greater China, the Company primarily provides,
through ZYTX, a network portal through its industry website, www.soobao.cn
(hereinafter also referred to as “Soobao”), to
insurance companies, agents and consumers for advertising, online inquiry, news
circulation, online transactions, statistic analysis and software development.
The Company is also a licensed online motor vehicle, property and life insurance
agent generating revenues through sales commissions from customers in the
PRC.





ZYTX was
originally founded with goal of raising the national insurance consciousness and
reducing the cost on national security in China by constructing and maintaining
its network portal (www.soobao.cn) in order to integrate and optimize business
flow during the course of insurance sales and related client services. From
incorporation through the end of June 30, 2009, ZYTX was primarily engaged in
institutional preparation and prior-period business development. Thereafter,
through trial implementation of www.soobao.cn, ZYTX’s products and services
received favorable reviews and recognition in the Chinese insurance industry.
ZYTX strengthened its technical research and development and expanded its
product line after collecting suggestions from clients. In April 2007, www.soobao.cn was
formally put into use. For the years ended June 30, 2009 and 2008, the Company
generated net revenues of $17,976,529 and $13,735,376,
respectively.





Today,
the Company offers online insurance products and services in China including (a)
a network portal for the Chinese insurance industry (www.soobao.cn),
offering industry players a forum for advertising products and services, (b)
website construction and software development services for marketing teams in
the insurance industry, (c) insurance agency services (whereby the Company
generates sales commissions on motor vehicle insurance, property insurance and
life insurance) and (d) accompanying client support services.


- 30
-




On
September 28, 2007, ZBDT signed the following Service Agreements with ZYTX and
its stockholders:




·
              Exclusive Technology Consultation
      Service Agreement, by and between ZYTX and ZBDT, through which ZBDT will
      provide, exclusively for both parties, technology consultation services to
      the Company and receive payments periodically;


·
              Exclusive Equity Interest
      Purchase Agreements, by and between each of ZYTX’s stockholders and ZBDT,
      through which ZBDT is entitled to exclusively purchase all of the
      outstanding shares of capital stock of ZYTX from its current stockholders
      upon certain terms and conditions, especially upon it is allowable under
      the PRC laws and regulations;


·
              Equity
      Interest Pledge Agreements, by and between each of ZYTX’s stockholders and
      ZBDT, through which the current stockholders of ZYTX have pledged all
      their respective shares in ZYTX to ZBDT. These Equity Interest Pledge
      Agreements guarantee the cash-flow payments under the Exclusive Technology
      Consultation Service Agreement; and


·
            Powers
      of Attorney, executed by each of the ZYTX’s stockholders, through which
      ZBDT is entitled to perform the equity right of ZYTX’s
      stockholders.




Powers of
Attorney were also executed by the two (2) owners of ZYTX empowering ZBDT to act
on their behalf, and ZBDT has the full authority to perform all of the rights
bestowed upon them as a shareholder of ZYTX and control over said equity
interests in ZYTX.  These rights include: (i) the right to attend
shareholder meetings, (ii) signatory authority for shareholder resolutions,
(iii) the performance of all rights as a shareholder, including voting rights
and the right to partially or wholly transfer, assign or pledge the equity
interest in ZYTX, (v) a right to appoint legal representatives, board members,
executive directors and other senior management officers, (vi) the right to
execute and perform the obligations of a certain Transfer Agreement referenced
in the Equity Purchase Agreements, (vii) the right to transfer, allocate, or use
the dividends-in-cash and other non cash income as directed by ZYTX, (viii) the
right to perform all the necessary rights incurred from ZYTX’s equity interest
and (ix) the right to re-consign all the matters and rights under the Powers of
Attorney to any other individual(s) or other legal person(s).





In
accordance with Financial Accounting Standards Board (“FASB”) Interpretation
No. 46R “Consolidation of Variable Interest Entities” (“FIN 46R”), an
Interpretation of Accounting Research Bulletin No. 51, a Variable Interest
Entity (a “VIE”) is to be
consolidated by a company if that company is subject to a majority of the risk
of loss for the VIE or is entitled to receive a majority of the VIE’s residual
returns. After executing the above agreements, ZYTX is now considered a VIE and
ZBDT its primary beneficiary.





On
October 28, 2008, Rise & Grow and ZYTX entered into a Share Purchase
Agreement which Rise & Grow acquired 100% ownership of Guang Hua Insurance
Agency Company Limited (“GHIA”), a limited
liability company organized under the laws of the PRC, through ZYTX to act as
legal owner in China.  GHIA is an insurance agent company which
operates in the entire nation of the PRC.  The consideration was
US$5,846,244 (RMB40,000,000) in cash.  This share purchase transaction
resulted in Rise & Grow obtaining 100% of the voting and beneficial interest
in GHIA.




Plan
of Operation




Publicity
and Promotion of Soobao




Since its
inception, ZYTX has been making business preparations and development mainly in
the Beijing area, with a sales mode focusing on marketing. The Company plans to
continue to popularize www.soobao.cn and its insurance sales commission
businesses in first and second-level cities across China. The Company plans to
attempt to develop www.soobao.cn so that it is the largest network portal in
China’s insurance industry and the first choice of network media for insurance
companies to advertise and to promote their products and services. We are also
planning to organize an insurance agency marketing program.




- 31
-





With
respect to network promotion, we plan to set “hot-spot” key words for price
competition of the relevant industries in popular search engines and release
advertisements in the relevant columns of large portal websites. With respect to
traditional media, we plan to launch an integrated vertical promotion by means
of LCD televisions installed in office buildings, elevator advertisements,
public buses, radio stations and airplane media so as to popularize the www.soobao.cn
 brand.




Technical
Development Plan




Our
technical development plan consists of (a) developing applications of new
technologies aimed at the network portal to meet the clients’ demand in online
transactions, member score accumulation and other new functions, (b) building a
two-way bridge for insurance providers and customers based on development and
application of insurance portal website (www.soobao.cn) while taking
advantage of the Internet platform to connect traditional sales and marketing
with e-commerce, (c) technical development aimed at comprehensive solutions in
the Internet application field for insurance companies and insurance agencies,
(d) the introduction of and continued R&D of a comprehensive life insurance
real-time quotation system whereby all life insurance products may be thoroughly
compared under certain scientific and quantifiable factors and (e) the
introduction and continued R&D of an insurance statistical and data analysis
system that can analyze a present and prospective customer’s “hot-points” of
insurance through analyzing a large number of effective clicks.




Products
and Services Plan




The
Company intends to focus on its products and services in the following
areas:




·
              With respect to the Company’s
      motor vehicle insurance sales business, the Company plans to provide motor
      vehicle-owners with more value-added services following the purchase of
      motor vehicle insurance and the Company plans to improve its membership
      club programs in the area of motor vehicle
    insurance;


·
            The Company plans to gradually
      grow its property insurance and life insurance business as insurance agent
      by utilizing third-party insurance brokers and by choosing cost-effective
      products. With online product optimization and the ability to compare
      products online in real-time, the Company will be able to choose more
      suitable insurance, enhance customer insurance purchasing efficiency and
      reduce costs.




Nationwide
Marketing Network Construction Plan




To carry
out insurance sales more effectively and to supplement the function and effect
of www.soobao.cn, the
Company is in the process of constructing a comprehensive chain insurance
supermarket entity whereby the Company intends to establish branch sales agency
locations in key cities throughout China in the form of a purchase or
franchisee, and strive to establish a nationwide insurance marketing network
system. The Company plans to set up subsidiaries and branches in every province
and major city across China, provide prospective clients with a series of
services such as one-to-one advisory on different products offered by different
insurance companies, examination of life insurance, insurance site-sales,
compensation and appreciation and claims settlement. As there will likely be
many specialized clients in the transaction market, the Company plans to
organize professional lectures on insurance, create an industry salon and
release new products and services. It is our goal through such entity to (a)
educate consumers with respect to insurance and insurance products, (b) provide
objective and impartial information on each of the company’s products, (c) offer
personalized insurance programs to consumers, (d) offer after-sale one-stop
compensation services including improved efficiency with claims settlements and
(e) offer exposure to www.soobao.cn and enjoy the network value-added services
which are not offered through more traditional insurance
consumption.


- 32
-


Purchase
of Equipment





In light
of the expanding insurance industry and in order to make web-browsing timely,
smooth and secure, the Company has continually upgraded the existing network
portal hardware environment and to strengthen its network security inputs, while
at the same time increase advertising promotions related to network portal brand
building. As a result, during the year ended June 30, 2009, we purchased
$731,433 of software and a prepayment of $6,981,952 for software will be
delivered within next twelve (12) months.




Employees




With the
anticipated business growth and nationwide business development as discussed
above, the Company plans to employ up to two hundred (200) employees in the
following two (2) to three (3) years through external introduction and internal
training.




Cash
Requirements





As of the
date of this Report, all of our capital is equity capital and we do not have any
debt financing with any bank or other financial institutions. We believe our
capital is sufficient to satisfy our cash requirements. As our business
develops, the Company may consider raising additional funds if conditions are
suitable.





Critical
Accounting Policies




(a)
            Economic
      and Political Risks




The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC economy. The Company's operations in the PRC are subject to special
considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among
others, the political, economic and legal environment and foreign currency
exchange. The Company's results may be adversely affected by changes in the
political and social conditions in the PRC, and by changes in governmental
policies with respect to laws and regulations, anti−inflationary measures,
currency conversion, remittances abroad, and rates and methods of taxation,
among other things.




(b)
            Use
      of Estimates




The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting
period.  Actual results could differ from those
estimates.




(c)
            Fair
      Value of Financial
Instruments




The
carrying value of financial instruments classified as current assets and current
liabilities, such as accounts receivables, other receivables, prepayments and
deposits, accounts payable, other payables and accrued liabilities, approximate
fair value due to the short-term nature of the instruments.





The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair
Value Measurements” (“SFAS 157”) on January
1, 2008 for all financial assets and liabilities and nonfinancial assets and
liabilities that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements.


- 33
-





SFAS 157
defines fair value as the price that would be received from selling an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at
fair value, the Company considers the principal or most advantageous market in
which it would transact and it considers assumptions that market participants
would use when pricing the asset or liability.





SFAS 157
establishes a fair value hierarchy that requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. A financial instrument’s categorization within the fair value
hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. SFAS 157 establishes three levels of inputs that may be
used to measure fair value:





Level 1
applies to assets or liabilities for which there are quoted prices in active
markets for identical assets or liabilities.





Level 2
applies to assets or liabilities for which there are inputs other than quoted
prices included within Level 1 that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived
valuations in which significant inputs are observable or can be derived
principally from, or corroborated by, observable market data.





Level 3
applies to assets or liabilities for which there are unobservable inputs to the
valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.





The
assets measured at fair value on a recurring basis subject to the disclosure
requirements of SFAS 157 as of June 30, 2009 are as follows:





Fair Value Measurements at Reporting Date UsingCarrying value as of
                  June 30, 2009
                
                
                Quoted Prices in
                  Active Markets
                  for Identical
                  Assets
                  (Level 1)
                
                
                Significant Other
                  Observable
                  Inputs
                  (Level 2)
                
                
                Significant
                  Unobservable
                  Inputs
                  (Level 3)Cash
      and cash equivalents
                
                $
                1,217,085
                
                
                $
                1,217,085
                
                
                
                -
                
                
                
                -





Cash and
cash equivalents consist primarily of highly rated money market funds at a
variety of well-known institutions with original maturities of three months or
less. The original cost of these assets approximates fair value due to their
short term maturity.




(d)
            Cash and
      Cash Equivalents




The
Company considers all highly liquid investments purchased with original maturity
of three months or less to be cash equivalents.





(e)
            Accounts
      Receivable





Accounts
receivable are recognized and carried at original invoice amount less allowance
for any uncollectible amounts.  An estimate for doubtful debts is made
when collection of the full amount is no longer probable. As of June 30, 2009
and 2008, the Company had allowance for doubtful accounts of $26,397 and $0,
respectively.




(f)
            Fixed
      Assets




Fixed
assets are carried at cost less accumulated
depreciation.  Depreciation is computed using the straight-line method
over the estimated useful lives of the assets, which are five years for motor
vehicles, furniture and fixtures, computers and equipment.  For the
leasehold improvements, deprecation is computed using the straight-line method
over the estimated useful lives or lease term, whichever is
shorter.


- 34
-




(g)
            Software




Software
is carried at cost less accumulated amortization. Amortization is computed using
the straight-line method over the estimated useful lives of the assets, which is
seven years for software. The Company acquired an online insurance enquires
system from an independent third party at a cost of $731,433. As
of June 30, 2009, the Company has total three sets of application software, an
insurance policy management system, a website streaming system and an online
insurance enquires system. Application software is used for internal operations
to enhance the Company’s online insurance agency business and advertising
business. None of the software was internally developed nor was there any
internal cost that was capitalized for the software. Based on the American
Institute of Certified Public Accountants (“AICPA”) Statement of Position
(“SOP”) 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, the Company capitalized all the external direct cost
of services in obtaining the computer software. Software is periodically
reviewed when indicators are present to assess recoverability from future
operations using undiscounted cash flows in accordance with Statement of
Financial Accounting Standards (“SFAS”) No.144, “Accounting for the Impairment
or Disposal of Long-Live Assets”. To the extent the carrying value exceeds fair
value, an impairment loss is recognized. No impairment was recorded for the
years ended June 30, 2009 and 2008.





(h)
            Deferred
      Revenue




Deferred
revenue is primarily comprised of contractual billings in excess of recognized
revenue and payments received in advance of revenue recognition.




(i)
            Revenue
      Recognition




Advertising




Advertising
revenues are derived mainly from online advertising arrangements, which allow
advertisers to place advertisements on particular areas of the Company’s web
sites, in particular formats and over particular periods of
time.  Such arrangements have generally included some combination of
the following: web site construction service, web site advertising and web site
maintenance services.  In accordance with Emerging Issues Task Force
(“EITF”) No.
00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,”
advertising arrangements involving multiple deliverables are broken down into
single-element arrangements based on their relative fair value for revenue
recognition purposes, when possible.





The
details of revenue recognition for each type of advertising revenues are
illustrated below:





·
              Web site construction service,
      which is usually included in new advertising contracts, mainly consist of
      fees for design and computer coding of new web sites.  The
      service fee is recognized when the web site is completed and wired in the
      server.


·
              Web site advertising is
      recognized ratably over the displayed period of the advertisement, which
      is typically one year.


·
            Web site maintenance service
      involves providing technical support and maintenance for customers’ web
      sites.  Such services are generally on a contract basis with a
      service period for one year.  Revenue is recognized ratably over
      the contract period.




Under the
guidance of the SOP 97-2 “Software Revenue Recognition”, as amended by SOP 98-9
“Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions”, the Company determines vendor-specific objective evidence based
on actual prices charged when the service is sold on a standalone
basis.




- 35
-




Software
Development




Software
development revenue is recognized in accordance with SOP 97-2, when the outcome
of a contract for software development can be estimated reliably, contract
revenue and costs are charged to the income statement by reference to the stage
of completion of the contract activity at the balance sheet date, as measured by
the proportion that costs incurred to date bear to estimated total costs for
each contract.  Contract revenue is recognized to the extent of
contract costs incurred that it is probable will be recoverable.  When
the outcome of a contract cannot be estimated reliably, contract costs are
recognized as an expense for the period in which they are incurred. When it is
probable that the total contract costs will exceed total contract revenue, the
expected loss is recognized as an expense immediately.





Insurance
Commissions





Insurance
revenues, net of discounts, represent commissions earned from performing
agency-related services. Insurance commissions are recognized at the later of
the date when the customer is initially billed or the insurance policy’s
effective date.





In
accordance with EITF No. 01-9, “Accounting for Consideration Given by a Vendor
to a Customer or a Reseller of the Vendor’s Product,” cash consideration given
to customers or resellers, for which the Company does not receive a separately
identifiable benefit or cannot reasonably estimate fair value, are accounted for
as a reduction of revenue rather than as an expense.





Cash
consideration includes discounts and other offers that entitle a customer to
receive a reduction in the price of a product.  For the years ended
June 30, 2009 and 2008, the Company recognized $498,579 and $304,686,
respectively, as a reduction of revenue for the discount offered to its
customers.




(j)
            Foreign
      Currency Translation




The
accompanying financial statements are presented in United States dollars. The
functional currencies of the Company are the Renminbi (“RMB”) and Hong Kong
Dollar (“HKD”).
The financial statements are translated into United States dollars (“US$” or “$”) from RMB
and US$ from HKD at year-end exchange rates as to assets and liabilities and
average exchange rates as to revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.




June 30, 2009
                  
                  
                  June 30, 2008Years
      end RMB: US$ exchange rate
                  
                  
                  6.8319
                  
                  
                  
                  6.8591Years
      average RMB: US$ exchange rate
                  
                  
                  6.8072
                  
                  
                  
                  7.2753Years
      end HKD: US$ exchange rate
                  
                  
                  7.7501
                  
                  
                  
                  7.7973Years
      average HKD: US$ exchange rate
                  
                  
                  7.7646
                  
                  
                  
                  7.8081





(k)
            Advertising
      Costs





The
Company expenses advertising costs as incurred or the first time advertising
takes place. Advertising costs were $1,912,725and $962,160 for the
years ended June 30, 2009 and 2008, respectively.





(l)
            Income
      Taxes




The
Company accounts for income tax using the asset and liability approach. Deferred
taxes are provided for the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will either expire
before the Company is able to realize their benefits, or that future utilization
is uncertain.




- 36
-




(m)
            Reserve
      Fund





In 2009
and 2008, the subsidiary of the Company in China transferred 15% of its PRC
profit after taxation to the surplus reserve fund. Subject to certain
restrictions set out in the PRC Companies Law, the surplus reserve fund may be
distributed to shareholders in the form of share bonus issues and/or cash
dividends. The Company’s retained earnings in the amount of $1,055,584and $315,584 as of June
30, 2009 and 2008, respectively, for the surplus reserve fund.





(n)
            Comprehensive
      Income




Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, all
items that are required to be recognized under current accounting standards as
components of comprehensive income should be reported in a financial statement
that is presented with the same prominence as other financial statements. The
Company’s only current components of comprehensive income are net income and the
foreign currency translation adjustment.




(o)
            Earnings
      Per Share




Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
There were no dilutive securities outstanding for the periods
presented.





(p)
            Goodwill





In
accordance with SFAS No.141, “ Business Combination” (“SFAS 141”), the total
purchase price in a business combination is allocated to their fair value of
assets acquired and liabilities assumed based on their fair values at the
acquisition date, with amounts exceeding the fair values at the acquisition
date, with amounts exceeding the fair values being recorded as goodwill. In
accordance with SFAS No.142, “Goodwill and Other Intangible Assets, goodwill is
not amortized. Instead, it is tested for impairment on an accrual basis or more
frequently whenever events or changes in circumstances indicate that goodwill
may be impaired. The Company did not record any impairment of goodwill during
2009.





Recent
Accounting Pronouncements





In
December 2007, the the Financial Accounting Standard Board (“FASB”) issued SFAS
No. 141 (R), Business Combinations. SFAS No. 141 (R) requires an
acquirer to measure the identifiable assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree at their fair values on the
acquisition date, with goodwill being the excess value over the net identifiable
assets acquired. The calculation of earnings per share will continue to be based
on income amounts attributable to the parent. SFAS No. 141 (R) is
effective for financial statements issued for fiscal years beginning after
December 15, 2008. Early adoption is prohibited. SFAS 141 (R) will
significantly affect the accounting for future business combinations and the
Company will determine the accounting as new combinations occur.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB 51, which changes the
accounting and reporting for minority interests. Minority interests will be
recharacterized as noncontrolling interests and will be reported as a component
of equity separate from the parent’s equity, and purchases or sales of equity
interests that do not result in a change in control will be accounted for as
equity transactions. In addition, net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income
statement and, upon a loss of control, the interest sold, as well as any
interest retained, will be recorded at fair value with any gain or loss
recognized in earnings. SFAS No. 160 is effective for us beginning
July 1, 2009 and will apply prospectively, except for the presentation and
disclosure requirements, which will apply retrospectively. The Company is
currently assessing the potential impact, if any, that adoption of SFAS
No. 160 would have on the Company’s financial statements.


- 37
-





In April
2009, the FASB approved FASB Staff Position (“FSP”) FAS 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly and
FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairment.





FSP FAS
157-4 provides additional guidance for estimating fair value in accordance with
Statement 157 when the volume and level of activity for the asset or liability
have significantly decreased. FSP FAS 157-4 also includes guidance on
identifying circumstances that indicate a transaction is not orderly. We are
required to adopt this FSP for our interim and annual reporting periods ending
after June 15, 2009. This FSP does not require disclosures for periods
presented for comparative purposes at initial adoption. This FSP requires
comparative disclosures only for periods ending after initial
adoption.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS No. 161”), which amends SFAS No.133 and expands
disclosures to include information about the fair value of derivatives, related
credit risks and a company’s strategies and objectives for using
derivatives.  The adoption of SFAS No. 161 did not have a material
impact on its consolidated financial statements.





In June
2008, the FASB issued Emerging Issues Task Force (“EITF”) Issue No. 07-05,
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock (“EITF 07-05”), which is effective for fiscal years beginning
after December 15, 2008. EITF 07-05 addresses the determination of whether an
instrument (or an embedded feature) is indexed to an entity's own stock, which
is the first part of the scope exception in paragraph 11(a) of FASB SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”).
If an instrument (or an embedded feature) that has the characteristics of a
derivative instrument under paragraphs 6–9 of SFAS 133 is indexed to an entity's
own stock, it is still necessary to evaluate whether it is classified in
stockholders' equity (or would be classified in stockholders' equity if it were
a freestanding instrument). Other applicable authoritative accounting
literature, including Issues EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company Own Stock, and
EITF 05-2, The Meaning of “Conventional Debt Instrument” in Issue No. 00-19,
provide guidance for determining whether an instrument (or an embedded feature)
is classified in stockholders' equity (or would be classified in stockholders'
equity if it were a freestanding instrument). EITF 07-05 does not address that
second part of the scope exception in paragraph 11(a) of SFAS 133. We are
currently evaluating the impact, if any, the adoption of EITF 07-05 will have on
our financial statements.





In April
2009, the FASB issued FSP FAS 107-1 and ABP 28-1, “Interim Disclosures about
Fair Value of Financial Instruments” (“FSP FAS 107-1 and ABP 28-1”), which
amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”,
and ABP Opinion No. 28, “Interim Financial Reporting”, to require disclosures
about fair value of financial instruments in interim and annual reporting
periods. FSP FAS 107-1 and ABP 28-1 is effective for interim reporting periods
ending after June 15, 2009, which for the Company is the first quarter of fiscal
2010.





In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”), which
amends the other-than-temporary impairment guidance in U.S. GAAP for debt
securities to make the guidance more operational and to modify the presentation
and disclosure of other-than-temporary impairments on debt and equity securities
in the financial statements.  The adoption of FSP FAS 115-2 and FAS
124-2 did not have a material impact on the Company’s consolidated financial
statements.





In May
2009, the FASB issued SFAS 165, “Subsequent Events” (“SFAS 165”), which
establishes accounting and disclosure requirements for events or transactions
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. SFAS 165 requires disclosure of the date
through which the Company has evaluated subsequent events for recognition or
disclosure. SFAS 165 also requires events that provide additional evidence about
conditions that existed at the date of the balance sheet and the related
estimates to be recognized in the financial statements. Events that provide
evidence about conditions that did not exist at the date of the balance sheet
but arose after the balance sheet date but before the financial statements are
issued or available to be issued should not be recognized, but should be
disclosed if material. The adoption of SFAS 165 did not have a material impact
on the Company’s consolidated financial statements.


- 38
-





In June
2009, the FASB issued FAS No. 167, Amendments to FASB Interpretation No. 46(R)
(“FAS 167”). FAS 167 amends FASB 46(R) to require an enterprise to perform an
analysis and ongoing reassessments to determine whether the enterprises variable
interest or interests give it a controlling financial interest in a variable
interest entity and amends certain guidance for determining whether an entity is
a variable interest entity. It also requires enhanced disclosures that will
provide users of financial statements with more transparent information about an
enterprises involvement in a variable interest entity. FAS 167 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009 and for all interim reporting periods after that
and is not anticipated to have any material impact on the Company’s consolidated
financial statements. The Company is currently evaluating the impact of the
adoption of FAS 167.





In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162. SFAS No. 168 establishes the FASB Accounting Standards
Codification as the source of authoritative accounting principles and the
framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles in the United States. This SFAS is
effective for our interim reporting period ending on September 30, 2009. This
SFAS is not expected to have a material impact on our consolidated financial
position, results of operations and cash flows.





Results
of Operations




For
the Year Ended June 30, 2009 Compared To Year Ended June 30, 2008




Our
operating results are presented on a consolidated basis for the year ended June
30, 2009, as compared to the year ended June 30, 2008.




The
following table sets forth the amounts and the percentage relationship to
revenues of certain items in our consolidated statements of income for the years
ended June 30, 2009 and 2008:




2009
                                
                                
                                2008
                                
                                
                                VarianceREVENUES
                                
                                $
                                18,475,108
                                
                                
                                
                                103
                                %
                                
                                $
                                14,040,062
                                
                                
                                
                                102
                                %
                                
                                $
                                4,435,046
                                
                                
                                
                                32
                                %DISCOUNT
      ALLOWED
                                
                                
                                498,579
                                
                                
                                
                                3
                                %
                                
                                
                                304,686
                                
                                
                                
                                2
                                %
                                
                                
                                193,893
                                
                                
                                
                                64
                                %REVENUES,
      NET
                                
                                
                                17,976,529
                                
                                
                                
                                100
                                %
                                
                                
                                13,735,376
                                
                                
                                
                                100
                                %
                                
                                
                                4,241,153
                                
                                
                                
                                31
                                %COST
      OF SALES
                                
                                
                                2,133,169
                                
                                
                                
                                12
                                %
                                
                                
                                1,313,582
                                
                                
                                
                                10
                                %
                                
                                
                                819,587
                                
                                
                                
                                62
                                %GROSS
      PROFIT
                                
                                
                                15,843,360
                                
                                
                                
                                88
                                %
                                
                                
                                12,421,794
                                
                                
                                
                                90
                                %
                                
                                
                                3,421,566
                                
                                
                                
                                28
                                %Selling
      expenses
                                
                                
                                281,540
                                
                                
                                
                                2
                                %
                                
                                
                                167,903
                                
                                
                                
                                1
                                %
                                
                                
                                113,637
                                
                                
                                
                                68
                                %Advertising
      expenses
                                
                                
                                1,912,725
                                
                                
                                
                                11
                                %
                                
                                
                                962,160
                                
                                
                                
                                7
                                %
                                
                                
                                950,565
                                
                                
                                
                                99
                                %General
      and administrative expenses
                                
                                
                                1,311,384
                                
                                
                                
                                7
                                %
                                
                                
                                808,432
                                
                                
                                
                                6
                                %
                                
                                
                                502,952
                                
                                
                                
                                62
                                %OPERATING
      INCOME
                                
                                
                                12,337,711
                                
                                
                                
                                68
                                %
                                
                                
                                10,483,299
                                
                                
                                
                                76
                                %
                                
                                
                                1,854,412
                                
                                
                                
                                18
                                %Interest
      income, net
                                
                                
                                24,718
                                
                                
                                
                                0
                                %
                                
                                
                                19,904
                                
                                
                                
                                0
                                %
                                
                                
                                4,814
                                
                                
                                
                                24
                                %INCOME
      BEFORE TAXES
                                
                                
                                12,362,429
                                
                                
                                
                                68
                                %
                                
                                
                                10,503,203
                                
                                
                                
                                76
                                %
                                
                                
                                1,859,226
                                
                                
                                
                                18
                                %Income
      tax
                                
                                
                                3,184,828
                                
                                
                                
                                18
                                %
                                
                                
                                2,166,846
                                
                                
                                
                                16
                                %
                                
                                
                                1,017,982
                                
                                
                                
                                47
                                %NET
      INCOME
                                
                                $
                                9,177,601
                                
                                
                                
                                50
                                %
                                
                                $
                                8,336,357
                                
                                
                                
                                60
                                %
                                
                                $
                                841,244
                                
                                
                                
                                10
                                %




- 39
-




Revenues




The
Company’s consolidated revenues were $18,475,108, which represents a $4,435,046
or 32% increase from $14,040,062 for the year ended June 30, 2008. This increase
was the result of the increase completion of software development projects
during the year ended June 30, 2009.





2009
                          
                          
                          2008
                          
                          
                          VarianceSoftware
      development
                          
                          $
                          6,511,545
                          
                          
                          
                          35
                          %
                          
                          $
                          4,298,739
                          
                          
                          
                          31
                          %
                          
                          $
                          2,212,806
                          
                          
                          
                          51
                          %Online
      insurance advertising
                          
                          
                          11,244,559
                          
                          
                          
                          61
                          %
                          
                          
                          9,432,393
                          
                          
                          
                          67
                          %
                          
                          
                          1,812,166
                          
                          
                          
                          19
                          %Insurance
      agency
                          
                          
                          510,332
                          
                          
                          
                          3
                          %
                          
                          
                          308,930
                          
                          
                          
                          2
                          %
                          
                          
                          201,402
                          
                          
                          
                          65
                          %Others
                          
                          
                          208,672
                          
                          
                          
                          1
                          %
                          
                          
                          -
                          
                          
                          
                          0
                          %
                          
                          
                          208,672
                          
                          
                          
                          100
                          %Total
      Revenue
                          
                          $
                          18,475,108
                          
                          
                          
                          100
                          %
                          
                          $
                          14,040,062
                          
                          
                          
                          100
                          %
                          
                          $
                          4,435,046
                          
                          
                          
                          32
                          %




The
online insurance advertising revenue slightly increased by 19% or $1,812,166 to
$11,244,559 for the year ended June 30, 2009 from $9,432,393 for the year ended
June 30, 2008.  It is a result of the number of insurance agents that
place advertisements on the Company’s website was slightly
increased.





The
significant increase in software development projects during the year ended June
30, 2009 of 51% or $2,212,806 compared to the year ended June 30, 2008 was due
to the completion of four large software development projects during the year
ended June 30, 2009.





Revenue
from our insurance agency services experienced a increase by $201,402 or 65%, to
$510,332 for the year ended June 30, 2009 from $308,930 for the same period of
2008.  This is mainly the result of the acquisition of GHIA on October
28, 2009.





Others
revenue represented the rental income and gain on disposal of fixed assets for
the office of ZBDT for the year ended June 30, 2009 to a related part, Beijing
Enterprises UniCard Co Ltd ("UniCard"), which Mr. Zhengyu Wang, the Chairman of
the Company has significant influence on UniCard.





Cost
of Sales




The
Company’s consolidated cost of sales (“COS”) increased
$819,587 or 62% to $2,133,169 or 12% of net revenues for the year ended June 30,
2009, from $1,313,582 or 10% of net revenues for the year ended June 30, 2008.
The increase in COS is attributed to the significant increase in amortization of
$440,011 or 100% for the year ended June 30, 2009.  Besides, there was
also an increase of business tax and levies of $228,360 or 19%, to $1,409,331
for the year ended June 30, 2009, from $1,180,971 for the year ended June 30,
2008.  Amortization of the software system was increased significantly
which was resulted from the  reclassification from G&A expenses in
accordance with the application of the software for revenue earning activities
for the year ended June 30, 2009.





2009
                    
                    
                    2008
                    
                    
                    VarianceBusiness
      tax and levies
                    
                    $
                    1,409,331
                    
                    
                    
                    66
                    %
                    
                    $
                    1,180,971
                    
                    
                    
                    90
                    %
                    
                    $
                    228,360
                    
                    
                    
                    19
                    %Salaries
      and allowances
                    
                    
                    141,251
                    
                    
                    
                    6
                    %
                    
                    
                    104,967
                    
                    
                    
                    8
                    %
                    
                    
                    36,284
                    
                    
                    
                    35
                    %Depreciation
                    
                    
                    12,911
                    
                    
                    
                    1
                    %
                    
                    
                    6,374
                    
                    
                    
                    0
                    %
                    
                    
                    6,537
                    
                    
                    
                    103
                    %Amortization
                    
                    
                    440,011
                    
                    
                    
                    21
                    %
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    440,011
                    
                    
                    
                    100
                    %Other
                    
                    
                    129,665
                    
                    
                    
                    6
                    %
                    
                    
                    21,270
                    
                    
                    
                    2
                    %
                    
                    
                    108,395
                    
                    
                    
                    510
                    %Total
      Cost of Sales
                    
                    $
                    2,133,169
                    
                    
                    
                    100
                    %
                    
                    $
                    1,313,582
                    
                    
                    
                    100
                    %
                    
                    $
                    819,587
                    
                    
                    
                    62
                    %




- 40
-




Gross
Profit




The
Company’s consolidated gross profit increased by $3,421,566 or 28% to
$15,843,360 for the year ended June 30, 2009 from $12,421,794 for the year ended
June 30, 2008.  The increase in gross profit is attributable to the
significant increase in revenues from software development.





Selling
Expenses





Selling
expenses were $281,540 or 2% of net revenues for the year ended June 30, 2009,
as compared to $167,903 or 1% of net revenues for the year ended June 30, 2008.
The increase is attributable to expenses in the growth of operations due to the
acquisition of the insurance agency company, GHIA, in October 2008.





2009
                    
                    
                    2008
                    
                    
                    VarianceSalaries
      and allowances
                    
                    $
                    245,852
                    
                    
                    
                    87
                    %
                    
                    $
                    130,227
                    
                    
                    
                    78
                    %
                    
                    $
                    115,625
                    
                    
                    
                    89
                    %Depreciation
                    
                    
                    2,753
                    
                    
                    
                    1
                    %
                    
                    
                    1,211
                    
                    
                    
                    1
                    %
                    
                    
                    1,542
                    
                    
                    
                    127
                    %Office
      expenses
                    
                    
                    17,142
                    
                    
                    
                    6
                    %
                    
                    
                    3,705
                    
                    
                    
                    2
                    %
                    
                    
                    13,437
                    
                    
                    
                    363
                    %Other
                    
                    
                    15,793
                    
                    
                    
                    6
                    %
                    
                    
                    32,760
                    
                    
                    
                    19
                    %
                    
                    
                    (16,967
                    )
                    
                    
                    (52
                    )%$
                    281,540
                    
                    
                    
                    100
                    %
                    
                    $
                    167,903
                    
                    
                    
                    100
                    %
                    
                    $
                    113,637
                    
                    
                    
                    67
                    %





Salaries
and allowances are a major component of selling expenses, which increased by 89%
or $115,625 for the year ended June 30, 2009 to $245,852 from $130,227 for the
year ended June 30, 2008.  The increase is attributed to the increase
in Staff members providing customer service and support in accordance with the
growth of the Company due to the acquisition of GHIA.





Advertising
Expenses





Advertising
and promotion expenses were $1,912,725 or 11% of net revenues for the year ended
June 30, 2009, as compared to $962,160 or 7% of net revenues for the year ended
June 30, 2008. The increase is $950,565 or 99%, which is attributable to
duration of the advertising and promotion, which was lasted for 6 months and 2
months for the years ended June 30, 2009 and 2008, respectively.





General
and Administrative Expenses





General
and administrative (“G&A”) expenses were $1,311,384 or 7% of our net revenue
for the year ended June 30, 2009, as compared to $808,432 or 6% of net revenues
for the year ended June 30, 2008. The increase was mainly attributable to the
increase of salaries and allowance after the acquisition of GHIA.





2009
                    
                    
                    2008
                    
                    
                    VarianceSalaries
      and allowances
                    
                    $
                    344,981
                    
                    
                    
                    26
                    %
                    
                    $
                    172,005
                    
                    
                    
                    21
                    %
                    
                    $
                    172,976
                    
                    
                    
                    101
                    %Rental
                    
                    
                    182,529
                    
                    
                    
                    14
                    %
                    
                    
                    132,739
                    
                    
                    
                    16
                    %
                    
                    
                    49,790
                    
                    
                    
                    38
                    %Building
      management fee
                    
                    
                    3,083
                    
                    
                    
                    0
                    %
                    
                    
                    19,649
                    
                    
                    
                    2
                    %
                    
                    
                    (16,566
                    )
                    
                    
                    (84
                    )%Depreciation
                    
                    
                    91,328
                    
                    
                    
                    7
                    %
                    
                    
                    53,563
                    
                    
                    
                    7
                    %
                    
                    
                    37,765
                    
                    
                    
                    71
                    %Amortization
                    
                    
                    0
                    
                    
                    
                    0
                    %
                    
                    
                    134,342
                    
                    
                    
                    17
                    %
                    
                    
                    (134,342
                    )
                    
                    
                    (100
                    )%Travel
      & accommodations
                    
                    
                    180,173
                    
                    
                    
                    14
                    %
                    
                    
                    80,395
                    
                    
                    
                    10
                    %
                    
                    
                    99,778
                    
                    
                    
                    124
                    %Legal
      & professional fees
                    
                    
                    158,002
                    
                    
                    
                    12
                    %
                    
                    
                    41,345
                    
                    
                    
                    5
                    %
                    
                    
                    116,657
                    
                    
                    
                    282
                    %Allowance
      for doubtful accounts
                    
                    
                    26,397
                    
                    
                    
                    2
                    %
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    26,397
                    
                    
                    
                    100
                    %Other
                    
                    
                    324,891
                    
                    
                    
                    25
                    %
                    
                    
                    174,394
                    
                    
                    
                    22
                    %
                    
                    
                    150,497
                    
                    
                    
                    86
                    %$
                    1,311,384
                    
                    
                    
                    100
                    %
                    
                    $
                    808,432
                    
                    
                    
                    100
                    %
                    
                    $
                    502,952
                    
                    
                    
                    62
                    %




The major
component of G&A expense is salaries and allowances, which were 26% and 21%
of total G&A expenses for the year ended June 30, 2009 and 2008,
respectively.    The salaries and allowances increased by
101% or $172,976 for the year ended June 30, 2009, which is caused by the
expansion of our operations.




- 41
-




Rental
expense also increased by 38% or $49,790, to $182,529 for the year ended June
30, 2009 from $132,739 for the same period last year.  It resulted
from the acquisition of GHIA on October 28, 2009 and there was separate office
for operation.





Amortization
of the software system was reduced significantly was due to reclassification
into COS in accordance with the application of the software for revenue earning
activities for the year ended June 30, 2009.





There was
an allowance for doubtful accounts of $26,397 and $0 for the years ended June
30, 2009 and 2008, respectively.





Interest
Income, net





Net
interest income for the year ended June 30, 2009 was $24,718, which represents a
24% or $4,814 increase from $19,904 of net interest income for the year ended
June 30, 2008. The increase was the result of the increase in average cash flow
before the completion of acquisition of GHIA.





Income
Taxes




Income
taxes increased by $1,017,982 or 47% to $3,184,828 for the year ended June 30,
2009 from $2,166,846 for the year ended June 30, 2008.  The increase
is attributed to the increase of the operating income of the subsidiary, ZBDT,
which was subject to CIT rate at 25%, and ZYTX was subject to CIT rate at 15%,
for the year ended June 30, 2009.





Net
Income




The net
income of the Company for year ended June 30, 2009 increased 10% or $841,244 to
$9,177,601 from net income of $8,336,357 for the year ended June 30, 2008. This
increase is attributed to the increase of software development revenue of
$2,212,806 during the year ended June 30, 2009.





Results
by Segment




The
Company has determined that there are three (3) reportable business segments for
the years ended June 30, 2009 and 2008, which are software development, online
insurance advertising and insurance agency within the PRC.




(a)
            Software
      Development




2009
                  
                  
                  2008
                  
                  
                  VarianceRevenues,
      net
                  
                  
                  6,511,545
                  
                  
                  
                  100
                  %
                  
                  
                  4,298,739
                  
                  
                  
                  100
                  %
                  
                  
                  2,212,806
                  
                  
                  
                  51
                  %COS
                  
                  
                  115,509
                  
                  
                  
                  2
                  %
                  
                  
                  94,502
                  
                  
                  
                  2
                  %
                  
                  
                  21,007
                  
                  
                  
                  22
                  %Gross
      profit
                  
                  
                  6,396,036
                  
                  
                  
                  98
                  %
                  
                  
                  4,204,237
                  
                  
                  
                  98
                  %
                  
                  
                  2,191,799
                  
                  
                  
                  52
                  %




Revenues
from software development increased by 51% or $2,212,806 to $6,511,545 for the
year ended June 30, 2009 from $4,298,739 for the year ended June 30,
2008.  The increase is attributable to the completion of four large
projects during the year ended June 30, 2009.





The gross
profit increase to $6,396,036 for the year ended June 30, 2009 resulted from
increase in revenue.  Details of COS are summarized as
below:





2009
                  
                  
                  2008
                  
                  
                  VarianceSalaries
      and allowances
                  
                  $
                  97,029
                  
                  
                  
                  84
                  %
                  
                  $
                  71,345
                  
                  
                  
                  76
                  %
                  
                  $
                  25,684
                  
                  
                  
                  36
                  %Depreciation
                  
                  
                  5,944
                  
                  
                  
                  5
                  %
                  
                  
                  5,694
                  
                  
                  
                  6
                  %
                  
                  
                  250
                  
                  
                  
                  4
                  %Other
                  
                  
                  12,536
                  
                  
                  
                  11
                  %
                  
                  
                  17,463
                  
                  
                  
                  18
                  %
                  
                  
                  (4,927
                  )
                  
                  
                  (28
                  )%$
                  115,509
                  
                  
                  
                  100
                  %
                  
                  $
                  94,502
                  
                  
                  
                  100
                  %
                  
                  $
                  21,007
                  
                  
                  
                  22
                  %




- 42
-




Similar
to the year ended June 30, 2008, salaries and allowances were still the major
components of COS for software development income.  The salaries and
allowances increased by $25,684 or 36%, to $97,029 for the year ended June 30,
2009 as compared to $71,345 for the year ended June 30, 2008.





The
Software Development segment is the only segment not subject to business tax and
levies under existing PRC tax law.  As a result, no business tax and
levy expenses were incurred.





(b)
            Online
      Insurance Advertising




2009
                  
                  
                  2008
                  
                  
                  VarianceRevenues,
      net
                  
                  $
                  11,244,559
                  
                  
                  
                  100
                  %
                  
                  $
                  9,432,393
                  
                  
                  
                  100
                  %
                  
                  $
                  1,812,166
                  
                  
                  
                  19
                  %COS
                  
                  
                  918,088
                  
                  
                  
                  8
                  %
                  
                  
                  556,683
                  
                  
                  
                  6
                  %
                  
                  
                  361,405
                  
                  
                  
                  65
                  %Gross
      profit
                  
                  $
                  10,326,471
                  
                  
                  
                  92
                  %
                  
                  $
                  8,875,710
                  
                  
                  
                  94
                  %
                  
                  $
                  1,450,761
                  
                  
                  
                  16
                  %





Revenues
from online insurance advertising increased by 19% or $1,812,166 to $11,244,559
for the year ended June 30, 2009 from $9,432,393 for the year ended June 30,
2008.  This increase is attributable to the numbers of existing
contracts with insurance agents renewed their contracts with the
Company.





Meanwhile,
the Company maintained stable COS and GP ratios for both fiscal years ended June
30, 2009 and 2008.





2009
                  
                  
                  2008
                  
                  
                  VarianceBusiness
      tax and levies
                  
                  $
                  614,194
                  
                  
                  
                  67
                  %
                  
                  $
                  518,782
                  
                  
                  
                  93
                  %
                  
                  $
                  95,412
                  
                  
                  
                  18
                  %Salaries
      and allowances
                  
                  
                  44,222
                  
                  
                  
                  4
                  %
                  
                  
                  33,622
                  
                  
                  
                  6
                  %
                  
                  
                  10,600
                  
                  
                  
                  32
                  %Depreciation
                  
                  
                  6,967
                  
                  
                  
                  1
                  %
                  
                  
                  472
                  
                  
                  
                  0
                  %
                  
                  
                  6,495
                  
                  
                  
                  1376
                  %Amortization
                  
                  
                  234,346
                  
                  
                  
                  26
                  %
                  
                  
                  -
                  
                  
                  
                  0
                  %
                  
                  
                  234,346
                  
                  
                  
                  100
                  %Other
                  
                  
                  18,359
                  
                  
                  
                  2
                  %
                  
                  
                  3,807
                  
                  
                  
                  1
                  %
                  
                  
                  14,552
                  
                  
                  
                  382
                  %$
                  918,088
                  
                  
                  
                  100
                  %
                  
                  $
                  556,683
                  
                  
                  
                  100
                  %
                  
                  $
                  361,405
                  
                  
                  
                  65
                  %




Similar
to the year ended June 30, 2008, business tax and levies were still the major
components of COS for online advertising income, which was 5.5% of our gross
revenue. Compared to the same period of the prior year, this increase in
business taxes and levies of 18% is attributable to the increase in revenue of
19%.





Amortization
expense increased by $234,346 or 100%, to $234,346 for the year ended June
30, 2009 as compared to $0 for the year ended June 30, 2008, as the new software
used for online advertising was amortized.




(c)
            Insurance
      Agency




2009
                  
                  
                  2008
                  
                  
                  VarianceRevenues
                  
                  $
                  510,331
                  
                  
                  
                  4343
                  %
                  
                  $
                  308,930
                  
                  
                  
                  7279
                  %
                  
                  $
                  201,401
                  
                  
                  
                  65
                  %Discount
      allowed
                  
                  
                  498,579
                  
                  
                  
                  4243
                  %
                  
                  
                  304,686
                  
                  
                  
                  7179
                  %
                  
                  
                  193,893
                  
                  
                  
                  64
                  %Revenues,
      net
                  
                  
                  11,752
                  
                  
                  
                  100
                  %
                  
                  
                  4,244
                  
                  
                  
                  100
                  %
                  
                  
                  7,508
                  
                  
                  
                  177
                  %COS
                  
                  
                  236,800
                  
                  
                  2015
                  %
                  
                  
                  17,298
                  
                  
                  
                  408
                  %
                  
                  
                  219,502
                  
                  
                  
                  1269
                  %Gross
      loss
                  
                  $
                  (225,048
                  )
                  
                  
                  (1915
                  )%
                  
                  $
                  (13,054
                  )
                  
                  
                  (308
                  )%
                  
                  $
                  211,994
                  
                  
                  
                  1624
                  %




- 43
-




Our
insurance agency revenue increased by 65% or $201,401, which is attributed to
acquisition of GHIA and the insurance agency business expansion.





Revenue
from our insurance agency business is also subject to business tax and
levies.  The COS mainly consists of business tax and levies of 5.5% of
gross revenue net of returned commissions for cancelled policies, amounting to
$31,135 for the year ended June 30, 2009.





As the
income from our insurance agency business is developing, the COS and GP ratios
for both the year ended June 30, 2009 and 2008 fluctuate.




2009
                    
                    
                    2008
                    
                    
                    VarianceBusiness
      tax and levies
                    
                    $
                    31,135
                    
                    
                    
                    13
                    %
                    
                    $
                    17,090
                    
                    
                    
                    99
                    %
                    
                    $
                    14,045
                    
                    
                    
                    82
                    %Salaries
      and allowances
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    0
                    
                    
                    
                    0
                    %Depreciation
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    208
                    
                    
                    
                    1
                    %
                    
                    
                    (208
                    )
                    
                    
                    (100
                    )%Amortization
                    
                    
                    205,665
                    
                    
                    
                    87
                    %
                    
                    
                    -
                    
                    
                    
                    0
                    %
                    
                    
                    205,665
                    
                    
                    
                    100
                    %$
                    236,800
                    
                    
                    
                    100
                    %
                    
                    $
                    17,298
                    
                    
                    
                    100
                    %
                    
                    $
                    219,502
                    
                    
                    
                    1269
                    %





Except
for the business tax and levies, amortization are a major component of COS for
year ended June 30, 2009 as the Company commenced to use the new application
software which was commenced to be amortized.





(d)
            Administration





2009
                      
                      
                      2008
                      
                      
                      VarianceRevenue
                      
                      $
                      208,673
                      
                      
                      
                      100
                      %
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      208,673
                      
                      
                      
                      100
                      %COS
                      
                      
                      862,772
                      
                      
                      
                      413
                      %
                      
                      
                      645,099
                      
                      
                      
                      100
                      %
                      
                      
                      217,673
                      
                      
                      
                      34
                      %Gross
      loss
                      
                      $
                      (654,099
                      )
                      
                      
                      (313
                      )%
                      
                      $
                      (645,099
                      )
                      
                      
                      100
                      %
                      
                      $
                      (9,000
                      )
                      
                      
                      1
                      %





Administration
revenue represented the inter-companies’ service income from ZYTX to ZBDT, which
was eliminated in consolidation.  Besides, the revenue is mainly
including the rental income and net income from disposal of fixed assets of
$131,758 and $72,711, respectively and the relevant cost for the rental income
of $113,198.  However, under the relevant PRC tax laws, service income
of ZBDT was subject to business tax and levies of 5.5% on revenue, which was
recognized as a COS of administration.





Material
Commitments




(a)
            Lease
      Commitments





The
Company occupies office spaces leased from third parties.  For the
years ended June 30, 2009 and 2008, the Company recognized $182,529 and
$132,739, respectively, as rental expense for these spaces.  As of
June 30, 2009, the Company has outstanding commitments with respect to
non-cancelable operating leases as follows:





Year Ending June 30,
                    
                    Amount2010
                    
                    $
                    39,409




(b)
            Purchase
      of Electronic Products





As of
June 30, 2009, the Company has outstanding commitments with respect to the
purchase of electronic products of $8,079,748 (Rmb55,200,000) due within one
year as follows:




- 44
-





Payment Due Dates
                  
                  AmountOn
      or before July 20, 2009
                  
                  $
                  2,810,347On
      or before October 20, 2009
                  
                  
                  2,634,700On
      or before January 20, 2010
                  
                  
                  1,902,839On
      or before April 20, 2010
                  
                  
                  731,862$
                  8,079,748




Expected Product Delivery Dates
                  
                  UnitsOctober
      20, 2009
                  
                  
                  20,000December
      20, 2009
                  
                  
                  10,000March
      20, 2010
                  
                  
                  10,00040,000





(c)
            Purchase
      of Software





As of
June 30, 2009, the Company has outstanding commitments with respect to the
purchase of software of $731,861 (Rmb5,000,000) due on July 19,
2009.  Subsequent to the year end, the Company made the outstanding
payment accordingly.  The software is expected to be installed and
fully tested in the first quarter of 2010.




Off-Balance
Sheet Arrangements





We
currently have no off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.





Liquidity
and Capital Resources




Cashflow




As of
June 30, 2009, the Company had $1,207,171in bank deposits with a
bank in China, which constituted about 99.2% of its total cash and cash
equivalent as of such date.




We
summarize our Statement of Cashflow for the years ended June 30, 2009 and 2008
as below:




2009
                            
                            
                            2008
                            
                            
                            VarianceNet
      cash provided by (used in)Operating
      activities
                            
                            $
                            8,990,006
                            
                            
                            $
                            6,731,373
                            
                            
                            $
                            2,258,633
                            
                            
                            
                            34
                            %Investing
      activities
                            
                            
                            (12,397,762
                            )
                            
                            
                            (3,096,239
                            )
                            
                            
                            (9,301,523
                            )
                            
                            
                            300
                            %Financing
      activities
                            
                            
                            71,455
                            
                            
                            
                            153,069
                            
                            
                            
                            (81,614
                            )
                            
                            
                            (53
                            )%Net
      change in cash and cash equivalents
                            
                            
                            (3,336,301
                            )
                            
                            
                            3,788,203
                            
                            
                            
                            (7,124,504
                            )
                            
                            
                            (188
                            )%Effect
      of exchange rate changes on cash and cash equivalents
                            
                            
                            (14,467
                            )
                            
                            
                            731,993
                            
                            
                            
                            (746,460
                            )
                            
                            
                            (102
                            )%Cash
      and cash equivalents at beginning of year
                            
                            
                            4,567,853
                            
                            
                            
                            47,657
                            
                            
                            
                            4,520,196
                            
                            
                            
                            9485
                            %Cash
      and cash equivalents at end of year
                            
                            $
                            1,217,085
                            
                            
                            $
                            4,567,853
                            
                            
                            $
                            (3,350,768
                            )
                            
                            
                            (73
                            )%




- 45
-





Cash
flows provided by operating activities during the year ended June 30, 2009
amounted to $8,990,006, representing an increase of $2,258,633 or 34%, as
compared with cash flows provided by operating activities of $6,731,373 during
the year ended June 30, 2008. The increase in cash flows from operating
activities was primarily due to increase of net revenues by $4,241,153 resulting
from the Company’s operating activities have been enhanced on both software
development and online insurance advertising.





Cash
flows used in investing activities was $12,397,762 during the year ended June
30, 2009, which represented an increase of $9,301,523 or 300%, as compared to
$3,096,239 at June 30, 2008. This increase is mainly attributed to
the acquisition of GHIA of $5,715,919, prepayment of software of $6,981,952
and collection of an advance to a former shareholder of GHIA of
$1,019,759.




For the
year ended June 30, 2009, the cash provided by financing activities was $71,455,
which represented an decrease of $81,614 or 53%, as compared to $153,069 for the
year ended June 30, 2008. The amount represented an advance from a director to
the Company for the operating expenses of the Company.




Liquidity




The
primary source of liquidity had been cash generated from operations, which
included cash inflows from currency translation activities. Historically, the
primary liquidity requirements were for capital expenditures, working capital
and investments. Our contractual obligations, commitments and debt service
requirements over the next 12 months are shown below.





Taxation





Of the
$6,260,070 of income taxes payable at June 30, 2009, $6,253,786 represents the
amount of income taxes payable by ZBDT.  Of the $6,253,786 of income
taxes payable, $4,508,167 was due on April 30, 2009 and $1,745,619 is due on
April 30, 2010.  The Company has been negotiating with the tax
authorities to defer the payment of CIT due on April 30, 2009 without interest
or penalties, and the Company is awaiting the final ruling from the tax
authorities.


Of the
$2,097,456 of business tax payable at June 30, 2009, $1,495,788 was due on April
30, 2009 and $601,668 is due on April 30, 2010.  The Company has been
negotiating with the tax authorities to defer the payment of business tax due on
April 30, 2009 without interest or penalties, and the Company is awaiting the
final ruling from the tax authorities.





If the
response from the tax authorities is adverse, the Company may have a shortage of
working capital and need additional fund for maintain the
operations.





Commitments





As of
June 30, 2009, the Company has outstanding commitments with respect to the
purchase of electronic products of $8,079,748 (Rmb55,200,000) due within one
year and the details are stated in Material Commitments above.





If the
Company could not fulfill this commitment on purchase of electronic products, it
would cause the loss on prepayment made.





Our
primary source of liquidity will continue to be cash generated from operations
as well as existing cash on hand. We may look for the credit facilities to
assist, if required, in meeting our working capital needs and other contractual
obligations.





Our
current cash and cash equivalents and cash generated from operations may not
satisfy our expected working capital and other requirements for the foreseeable
future based on our current business strategy and expansion plan. We believe we
will have available resources to meet our short-term liquidity
requirements.




- 46
-




As of
June 30, 2009, all of our capital is equity capital and we have not made any
debt financing with any bank or other financial institutions. We believe our
capital is sufficient to satisfy our cash requirements for the next twelve
months. As for our business development, the Company may consider raising
additional funds for the following future business plans if conditions are
suitable:




§
            To
      expand our operations in different cities in the
  PRC;




§
            To
      acquire companies which would add value to our business
      expansion;




§
            To
      expand our online insurance sales supermarket;
  and




§
            To
      acquire equipment to continually upgrade the existing network portal
      hardware environment and to strengthen its network security
      inputs.




ITEM
      7A.
            Quantitativeand
      QualitativeDisclosures
      about Market Risk




The
Company is exposed to certain market risks that in the ordinary course of
business. The Company may enter into derivative financial instrument
transactions to manage or reduce market risk. The Company does not enter into
derivative financial instrument transactions for trading purpose. Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. A discussion of the Company’s primary market risk exposure and
credit risk is presented below.




The
Company had $1,207,171and $4,562,222 in bank
deposits with a bank in China, which constituted approximately 99.2% and 99.9%
of its total cash and cash equivalents as of June 30, 2009 and 2008,
respectively. Historically, deposits in Chinese banks are secured due to the
state policy on protecting depositors’ interests. However, China promulgated a
new Bankruptcy Law in August 2006, which came into effect on June 1, 2007. The
new Bankruptcy Law contains a separate article expressly stating that the State
Council may promulgate implementation measures for the bankruptcy of Chinese
banks. Under the new Bankruptcy Law, a Chinese bank may go bankrupt. In
addition, since China’s concession to WTO, foreign banks have been gradually
permitted to operate in China and have been severe competitors against Chinese
banks in many aspects, especially since the opening of Renminbi business to
foreign banks in late 2006.





Therefore,
the risk of bankruptcy of the bank in which that the Company has deposits has
increased. In the event of bankruptcy of the bank which holds the Company’s
deposits, the Company is unlikely to recover its deposits back in full since it
is unlikely to be classified as a secured creditor based on PRC
laws.




Accounts
receivable consist primarily of software development clients and insurance
agents of online insurance advertising. As of June 30, 2009 and 2008,
approximately 15% and 35% of the accounts receivable and 36% and 31% of revenues
were derived from the software development business and online insurance
advertising, respectively. Regarding its online advertising and insurance agency
operations, no individual customer accounted for more than 10% of total net
revenues for both the years ended June 30, 2009 and 2008.





ITEM
      8.
            Financial
      Statements and Supplementary
Data




Reference
is made to pages F-1 through F-27comprising a portion of
this Annual Report on Form 10-K.




ITEM
      9.
            Changes
      in and Disagreementswith
      Accountants
      on Accounting and Financial
Disclosures




On
February 13, 2009 (the “Effective Date”), the
Board of Directors of the Registrant dismissed K.P. Cheng & Co. (“KPC”) as an
independent registered public accounting firm of the Registrant.  KPC
audited the Registrant’s VIE’s financial statements included in the Registrant’s
consolidated financial statements and Annual Report on Form 10-K for the year
ended June 30, 2007 in connection with the Registrant’s reverse merger dated
December 18, 2008 whereby the accounting acquirer, Rise and Grow Limited,
assumed the Registrant’s reporting obligations.  The effectiveness of
KPC’s dismissal is January 31, 2008, the date upon which the Registrant engaged
Weinberg & Company, P.A.




- 47
-




KPC’s
report on the Registrant’s VIE’s financial statements for the past two (2)
fiscal years, as well as the subsequent interim period through the Effective
Date, did not contain an adverse opinion or a disclaimer of opinion, and was not
qualified as to uncertainty, audit scope, or accounting principles.




The
dismissal of KPC was approved by the Registrant’s Board of Directors effective
as of the Effective Date.




During
the Registrant’s most recent two (2) fiscal years, as well as the subsequent
interim period through the Effective Date, there were no disagreements on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements if not resolved to their
satisfaction would have caused them to make reference in connection with their
opinion to the subject matter of the disagreement.




During
the Registrant’s most recent two (2) fiscal years, as well as the subsequent
interim period through the Effective Date, KPC did not advise the Registrant of
any of the matters identified in Item 304(a)(v)(A) - (D) of Regulation
S-K.




KPC
furnished a letter addressed to the SEC stating that it agreed with the
statements made by the Registrant, a copy of the letter is attached hereto as
Exhibit 16.2.





ITEM
      9A(T).
            Controls
      and Procedures




Evaluation
of Disclosure Controls and Procedures




Our
management, principally our chief financial officer and chief executive officer,
evaluated the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report.  Based on that evaluation,
our management concluded that our disclosure controls and procedures as of the
end of the period covered by this report were not effective such that the
information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and (ii) accumulated and
communicated to our management, including our Chief Eexecutive Officer and chief
financial officer, as appropriate to allow timely decisions regarding
disclosure.  In particular, we have identified the following material
weakness of our internal controls:





-
            There
      is a lack of sufficient accounting staff which results in a lack of
      effective controls necessary for a good system of internal control on
      financial reporting.





Management’s
Annual Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
and Exchange Act of 1934, as amended) for the Company.





In order
to ensure whether our internal control over financial reporting is effective,
management has assessed such controls for its financial reporting as of June 30,
2009.  This assessment was based on criteria for effective internal
control over financial reporting described in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”).





In
performing this assessment, management has identified the following material
weaknesses as of June 30, 2009:





There is
a weakness on the control of the financial statements closing
system.  This resulted primarily from the fact that certain parts of
the work of our accounting staff may not be monitored or reviewed
correctly.





As a
result of the material weakness in our internal control over financial
reporting, our management concluded that our internal control over financial
reporting as of June 30, 2009, was not effective based on the criteria set forth
by COSO in Internal Control – Integrated Framework.  A material
weakness in internal control over financial reporting is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be prevented or
detected on a timely basis.




- 48
-




Management’s
Plan for Remediation of Material Weaknesses




In light
of the conclusion that our internal control over financial reporting was not
effective, our management is in the process of implementing a plan intended to
remediate such ineffectiveness and to strengthen our internal controls over
financial reporting through the implementation of certain remedial measures,
which include:





-
            Improving
      the control and oversight of the duties relating to the systems we use in
      the evaluation and processing of certain accounts and areas in the posting
      and recording of journal entries into certain accounts (in which material
      weaknesses have been identified as described above).  This
      improvement should include reviews by management of the accounting
      processes as well as a reorganization of some of the accounting
      functions.





-
            The
      segregation of duties relating to the preparation of financial statements
      and the reviewing of financial statements in the reporting
      controls.





We will
begin implementing additional oversight and review of certain accounts and
postings, and also financial reporting.





This
annual report does not include an attestation report of our public accounting
firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.





ITEM
      9B.
            Other
      Information




Effective
October 28, 2008, Rise and Grow consummated a Share Purchase Agreement (the
“Purchase
Agreement”) with ZYTX, on the one hand (together, the “Buyer”), and Bian
Yong and Li Zhong, each individuals and each residents of The People’s Republic
of China, on the other hand (together, the “Seller”).  Pursuant
to the terms of the Purchase Agreement, the Seller sold to the Buyer, and the
Buyer purchased from the Seller, all of the issued and outstanding capital stock
of Guang Hua Insurance Agency Company Limited, a limited liability company
organized under the laws of The People’s Republic of China (the “GHIA”) for a purchase
price equal to RMB$40,000,000 (US$5,846,244) in cash, of which Rise and Grow
funded RMB$30,000,000 (US$4,384,683) and ZYTX funded RMB$10,000,000
(US$1,461,561). As a result of the transaction, GHIA became a wholly-owned
subsidiary of ZYTX. GHIA is an insurance agency and performs services similar to
those of ZYTX in China.  A copy of the Purchase Agreement is
referenced hereto as Exhibit 10.1.





On
February 13, 2009 (the “Effective Date”), the
Board of Directors of the Registrant dismissed K.P. Cheng & Co. (“KPC”) as an
independent registered public accounting firm of the Registrant.  KPC
audited the Registrant’s consolidated financial statements in the Registrant’s
Annual Report on Form 10-K for the year ended June 30, 2007 in connection with
the Registrant’s reverse merger dated December 18, 2008 whereby the accounting
acquirer, Rise and Grow Limited, a company organized under The People’s Republic
of China and now the wholly-owned subsidiary of the Registrant, assumed the
Registrant’s reporting obligations.  The effectiveness of KPC’s
dismissal is January 31, 2008, the date upon which the Registrant engaged
Weinberg & Company, P.A.  The dismissal of KPC was approved by the
Registrant’s Board of Directors effective as of the Effective
Date.  KPC furnished a letter addressed to the SEC stating that it
agreed with the statements made by the Registrant, a copy of the letter is
attached hereto as Exhibit 16.2.





On July
16, 2009, the Company’s Board accepted the amicable and voluntary resignation of
Xueyuan Han as a director of the Company.




- 49
-




On July
16, 2009, the Board also accepted the resignation of Edith Kam Ying Ho as a
director of the Company. At the time of her resignation, Ms. Ho served as a
member of the Board’s Audit Committee and as the chairperson of such committee.
Ms. Ho resigned from the Board due to her belief that, throughout her tenure as
a director, the Company had failed to communicate with her and to provide her
with information that she needed to function as an effective member of the
Board.  A copy of the resignation letter delivered by Ms. Ho to the
Company is attached hereto as Exhibit 99.1 and is
hereby incorporated by reference.




Effective
as of July 16, 2009, the Board elected Xiaoshuang Chen and Renbin Yu to serve as
members of the Board, thus filling vacancies created by the resignations of Mr.
Han and Ms. Ho. Also effective as of July 16, 2009, the Board (a) appointed
Chunsheng Zhou to replace Ms. Ho as a member of the Audit Committee and (b)
appointed Yinan Zhang to replace Ms. Ho as the chairperson of the Audit
Committee.




PART
III




ITEM
      10.
            Directors,
      Executive Officers, and Corporate
  Governance




Directors
and Executive Officers




As of
October 8, 2009, set forth below in the table as well as in the subsection
entitled “Biographies” are the names of our directors and officers, their ages,
all positions and offices that they hold with the Company, the period during
which they have served as such, and their business experience during at least
the last five (5) years. The Company has no “significant
employees”.




Name
                
                Age
                
                Position(s)Zhenyu
      Wang
                
                38
                
                Chairman
      of the BoardJunjun
      Xu
                
                28
                
                Chief
      Executive Officer and DirectorMingfei
      Yang
                
                25
                
                Chief
      Financial OfficerHon
      Man Yun
                
                41
                
                Chief
      Operating OfficerYuefeng
      Wang
                
                39
                
                DirectorYinan
      Zhang
                
                28
                
                DirectorXiaoshuang
      Chen
                
                45
                
                DirectorRenbin
      Yu
                
                46
                
                DirectorChunsheng
      Zhou
                
                42
                
                Director





Family
Relationships




There are
no family relationships between or among the members of the Board of Directors
or other executives. None of our directors and officers are directors or
executive officers of any company that files reports with the
SEC.




Biographies
(Business Experience)




Zhenyu Wang.Mr. Wang has
served as Chairman of the Board of the Company since January 4, 2008 and has
served as Executive Director and Chairman of ZYTX since July 2007. Prior to
that, Mr. Wang served as Chairman of Kaixin Jiye Investment Management Co., Ltd.
from November 1994 through July 2001. Mr. Wang also currently serves as Chairman
of Huayuan Runtong (Beijing) Science and Technology Co., Ltd. (since March
2004), General Manager of Huayuan Kaituo (Beijing) Science and Technology Co.,
Ltd. (since November 2004), Chairman of Beijing Putaika Guarding Technology Co.,
Ltd. (since April 2004) and Beijing Jinzheng Wantong Network Technology
Development Co., Ltd. (since July 2001). Mr. Wang earned a master’s degree
(EMBA) from Peking University.




- 50
-




Junjun Xu.Ms. Xu has served
as Chief Executive Officer of the Company since January 4, 2008 and has served
as a Director of DEXT since December 18, 2007. Ms. Xu has also served as General
Manager of ZYTX since October 2006. Prior to that, Ms. Xu served as Manager of
Shiji Xinxun Science and Technology (Beijing) Co., Ltd. since December 2003.
Prior to that, she was Senior Director of China Life Insurance Inc. since
November 2002 and a Partner with Yi Hu Technology (Beijing) Network Co., Ltd.
from August 2000 through November 2002. Prior to that, Ms. Xu founded Beijing
No. 9 Building Science and Technology Development Co., Ltd. in April 2000. Ms.
Xu received her Bachelors Degree in Economics and Trade at Beijing Business
College.





Mingfei Yang: Mr. Yang has
served as Chief Financial Officer of the Company since January 4, 2008 and has
served as Financial Department Manager of ZYTX since May 2007. Prior to that,
Mr. Yang worked as an accountant for Hua Yuan Run Tong (Beijing) Technology Co.,
Ltd. from June 2005 through May 2007, for Mongolia Guo Li Industries Co., Ltd.
from April 2003 through June 2005 and for Mongolia Xiao Fei Yang Food Chain Co.,
Ltd. from September 2002 through March 2003. Mr. Yang earned his Academic Degree
in Finance and Tax at Inner Mongolia Financial Institute.




Hon Man Yun. Mr. Yun
has served as Chief Operating Officer of the Company since January 8,
2008.  Mr. Yun has served and continues to serve as a Corporate
Consultant with Smart Pine Investment Limited since September 2007, a consulting
firm organized under the laws of Hong Kong. Mr. Yun also serves as a Director of
CH Lighting International Corporation (OTCBB: CHHN) since July 28, 2008 and as a
Director of Chisen Electric Corporation (OTCBB: CIEC) since November 24, 2008.
Prior to that, Mr. Yun served as Corporate Controller of Hi-Tech Wealth Inc.
(n/k/a China Mobile Media Technology, Inc.)(OTCBB: CHMO) from January 2007
through August 2007. From January 2003 through December 2006, Mr. Yun served as
Corporate Controller of General Components, Inc. (n/k/a China Mobile Media
Technology, Inc.)(OTCBB: CHMO). Mr. Yun is a chartered accountant having
memberships with the institute of chartered accountants in England and Wales. He
is also a Fellow Member of the Chartered Association of Certified Accountants.
He is a member of the Hong Kong Institute of Certified Public Accountants, the
Association of International Accountants, the Society of Registered Financial
Planners, the Institute of Financial Accountants and the Institute of Crisis and
Risk Management. Mr. Yun received his MBA at the University of Western Sydney in
2007.





Yuefeng Wang: Mr. Wang has
served as a Director of the Company since January 4, 2008 and he has served as
Chairman of Hua Yuan Run Tong (Beijing) Technology Co., Ltd. since February
2007. From March 2005 through January 2007 Mr. Wang served as Chairman,
Assistant and HR Director of Hua Yuan Run Tong (Beijing) Technology Co., Ltd.
Prior to that, Mr. Wang served as the HR Supervisor of Beijing Panasonic &
Putian Communications Equipment Co., Ltd. from August 2004 through February
2005. Prior to that, Mr. Wang served as President, Assistant and Manager of the
HR Department at BaoDing Chang An Car Manufacturing Co., Ltd. from July 1997
through August 2002. Mr. Wang earned his MBA at Tsinghua
University.




Yinan Zhang: Ms. Zhang has
served as a Director of the Company since January 4, 2008 and currently serves
as president of Nautilus Creative Co., Ltd since June 2007. Prior to that, Ms.
Zhang served as Editor of Travel & Leisure Magazine, Chinese Edition from
October, 2006 through June, 2007, Prior to that, Ms. Zhang served as Editor of
Shanghai Weekly from October,2002 through September, 2003. Ms. Zhang earned her
master degree in Arts et Sciences de l’enregistrement at Université de
Marne-la-Vallée, France.




Chunsheng Zhou: Professor Zhou
has served as a Director of the Company since January 4, 2008 and is currently a
Professor of Finance at the Guanghua School of Management of Peking University
where he has taught since 2002. Prior to that, Professor Zhou was a Planning
Commission Member for the China Securities Regulatory Commission and Director of
the Financial Department at the Guanghua School of Management from April 2001
through 2002. Prior to that, he was a Professor at The University of California
and The University of Hong Kong School of Business from 1997 through March 2001.
Professor Zhou earned a Doctorate Degree in Financial Economics at Princeton
University.





Xiaoshuang Chen: Mr. Chen
recently served as Vice President of China Information Technology Development
Ltd., a Hong Kong listed company, since August 2008.  Prior to that,
from September 2006 to July 2008, Mr. Chen served as Deputy General Manager of
the Henan Lantian Group in the Henan Province of China.  From July
2001 to August 2006, Mr. Chen was employed by the XinAo Group to work for a
number of its subsidiaries.  During this time, Mr. Chen served as
Director and Deputy General Manager of Hebei Veyong Bio-Chemical Co. Ltd., Chief
Human Resources Director of the XinAo Group, and Deputy General Manager of XinAo
Gas Holdings Limited.  Mr. Chen earned a master’s degree (EMBA) from
Peking University.




- 51
-




Renbin Yu: Mr. Yu recently
served as Chairman of the Dalian Wanshan Golf Club since October
2006.  Prior to that, from July 2005 to October 2006, Mr. Yu has
served as General Manager of Dalian Water Sports Tourism Co.  From
September 1983 to July 2005, Mr. Yu served as Deputy Director of the Urban
Construction Bureau of Dalian.  Mr. Yu is Business Administration
graduate from Tsinghua University.





Involvement
in Certain Legal Proceedings




None of
the members of the Board of Directors or other executives has been involved in
any bankruptcy proceedings, criminal proceedings, any proceeding involving any
possibility of enjoining or suspending members of our Board of Directors or
other executives from engaging in any business, securities or banking
activities, and have not been found to have violated, nor been accused of having
violated, any federal or state securities or commodities laws.




Promoters
and Control Persons




None.




Section
16(a) Beneficial Ownership Reporting Compliance




Section
16(a) of the Exchange Act requires our officers and directors, and persons who
own more than ten percent (10%) of a registered class of our equity securities,
to file reports of ownership and changes in ownership with the SEC. Officers,
directors and greater than ten percent (10%) stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they
file.




Based
solely on a review of the copies of such forms furnished to us, we believe that
during the fiscal year ended June 30, 2009 all officers, directors and ten
percent (10%) beneficial owners who were subject to the provisions of Section
16(a) complied with all of the filing requirements during the year with the
exception of (a) Yanling Chen, a non-affiliate of the Company beneficially
holding 7.5% of the Company’s Common Stock, who failed to file a Form 3 Report,
(b) Edith Kam Ying Ho, a former director who failed to file a Form 4 upon her
resignation, (c) Xueyuan Han, a former director who failed to file a Form 4 upon
his resignation, (d) Xiaoshuang Chen, a director who failed to file a Form 3
within ten (10) days of his appointment as a director and (e) Renbin Yu, a
director who failed to file a Form 3 within ten (10) days of his appointment as
a director.





Code
of Ethics




We have
adopted a Code of Ethics, as required by the rules of the SEC and NASDAQ. Our
Code of Ethics is referenced as Exhibit 14.1 hereto, and applies to all of our
directors, officers and employees. The Code of Ethics, and any amendments
to, or waivers from, the Code of Ethics, is available in print, at no charge, to
any stockholder who requests such information.




Committees
of our Board of Directors




Our Board
of Directors has an Audit Committee, a Compensation Committee and a Nominating
Committeee established in accordance with the Exchange Act and NASDAQ rules. The
Audit Committee met 3 times, the Compensation Committee met 2 times and the
Nominating Committee met 2 times during the fiscal year ended June 30, 2009. A
brief description of each committee is set forth below.




·
              Audit
      Committee – Independent directors Yinan Zhang, Yuefeng Wang,
      Edith Kam Ying Ho and Chunsheng Zhou were members of our Audit Committee
      during the fiscal year ended June 30, 2009. Edith Kam Ying Ho resigned
      effective July 16, 2009 and Chunsheng Zhou, who at the time was already a
      Board member and a member of the Compensation Committee and the Nominating
      Committee, was appointed to fill Ms. Ho’s vacancy effective as of July 16,
      2009.  The purpose of the Audit Committee is to provide
      assistance to our Board of Directors in fulfilling their oversight
      responsibilities relating to our consolidated financial statements and
      financial reporting process and internal controls in consultation with our
      independent registered public accountants and internal auditors. The Audit
      Committee is also responsible for ensuring that the independent registered
      public accountants submit a formal written statement to us regarding
      relationships and services which may affect the auditors’ objectivity and
      independence. The Audit Committee Charter, which sets forth in detail the
      purpose and the responsibilities of the Audit Committee, is referenced
      herein as Exhibit 99.1.  Our Audit Committee financial expert is
      Chunsheng Zhou.




- 52
-




·
              Compensation
      Committee –Independent
      directors Yinan Zhang, Yuefeng Wang and Chunsheng Zhou were members of our
      Compensation Committee during the fiscal year ended June 30, 2009. The
      purpose of the Compensation Committee is to review and make
      recommendations to our Board of Directors regarding all forms of
      compensation to be provided to the executive officers and directors of our
      company, including stock compensation and loans, and all bonus and stock
      compensation to all employees.  The Compensation Committee
      Charter, which sets forth in detail the purpose and the responsibilities
      of the Compensation Committee, is referenced herein as Exhibit
      99.2.





·
              Nominating
      Committee – Independent directors Yinan Zhang, Yuefeng Wang
      and Chunsheng Zhou were members of our Nominating Committee during the
      fiscal year ended June 30, 2009. The purpose of the Nominating Committee
      is to review the composition and evaluate the performance of the Board,
      recommend persons for election to the Board and evaluate director
      compensation; The Nominating Committee is also responsible for reviewing
      the composition of committees of the Board and recommending persons to be
      members of such committees, and maintaining compliance of committee
      membership with applicable regulatory requirements. The Nominating
      Committee Charter, which sets forth in detail the purpose and the
      responsibilities of the Nominating Committee, is referenced herein as
      Exhibit 99.3.  The Company has not adopted procedures by which
      security holders may recommend nominees to the Company’s Board of
      Directors.




ITEM
      11.
            Executive
      Compensation




Compensation
Discussion and Analysis




Not
required for smaller reporting companies.





Summary
Compensation Table





The
following table sets forth compensation information for services rendered by
certain of our current and former executive officers in all capacities during
the last two (2) completed fiscal years (ended June 30, 2009 and 2008). The
following information includes the U.S. dollar value of base salaries, bonus
awards, the number of stock options granted and certain other compensation, if
any, whether paid or deferred.




Summary Compensation
Table




Name
      And Principal
                                          Function
                                        
                                        Year
                                        
                                        Salary
                                        
                                        Bonus
                                        
                                        Stock
                                          Awards
                                        
                                        Option
                                          Awards
                                        
                                        Non-Equity
                                          Incentive
                                          Plan
                                          Compensation
                                        
                                        Nonqualified
                                          Deferred
                                          Compensation
                                          Earnings
                                        
                                        All
      Other
                                          Compensation
                                        
                                        Total(a)
                                        
                                        (b)
                                        
                                        ($)
                                          (c)
                                        
                                        ($)
                                          (d)
                                        
                                        ($)
                                          (e)
                                        
                                        ($)
                                          (f)
                                        
                                        ($)
                                          (g)
                                        
                                        ($)
                                          (h)
                                        
                                        ($)
                                          (i)
                                        
                                        ($)
                                          (j)Junjun
      Xu, Chief Executive Officer
                                        
                                        2009
                                        
                                        
                                        37,554
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        37,5542008
                                        
                                        
                                        19,476
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        19,476Mingfei
      Yang, Chief Financial Officer
                                        
                                        2009
                                        
                                        
                                        15,263
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        15,2632008
                                        
                                        
                                        8,288
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        8,288Hon
      Man Yun, Chief Operating Officer
                                        
                                        2009
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-2008
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-
                                        
                                        
                                        -0-





- 53
-





Grants
of Plan-Based Awards




None.




Outstanding
Equity Awards At Fiscal Year End





None.





Option
Exercises and Stock Vested




None.




Pension
Benefits




None.




Nonqualified
Deferred Compensation




None.




Potential
Payments Upon Termination or Change in Control




None.




Additional
Narrative Disclosure




None.




Compensation
of Directors




The
Registrant’s directors received compensation for their services as directors for
the years ended June 30, 2008 and June 30, 2009 are shown as table
below.  However, all directors are reimbursed for out-of-pocket
expenses in connection with attendance at Board’s and/or committee
meetings.




DIRECTOR COMPENSATIONName
                                                                                      
                                                                                      Fees
                                                                                        Earned
                                                                                        orPaidin
                                                                                        Cash
                                                                                      
                                                                                      
                                                                                      Stock
                                                                                        Awards
                                                                                      
                                                                                      
                                                                                      Option
                                                                                        Awards
                                                                                      
                                                                                      
                                                                                      Non-Equity
                                                                                        IncentivePlan
                                                                                        Compensation
                                                                                      
                                                                                      
                                                                                      Nonqualified
                                                                                        Deferred
                                                                                        Compensation
                                                                                        Earnings
                                                                                      
                                                                                      
                                                                                      AllOther
                                                                                        Compensation
                                                                                      
                                                                                      
                                                                                      Total($)
                                                                                      
                                                                                      
                                                                                      ($)
                                                                                      
                                                                                      
                                                                                      ($)
                                                                                      
                                                                                      
                                                                                      ($)
                                                                                      
                                                                                      
                                                                                      ($)
                                                                                      
                                                                                      
                                                                                      ($)
                                                                                      
                                                                                      
                                                                                      ($)EXISTING:Zhenyu
      Wang2009
                                                                                      
                                                                                      
                                                                                      14,641
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      14,6412008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Chunsheng
      Zhou2009
                                                                                      
                                                                                      
                                                                                      14,641
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      14,6412008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Yuefeng
      Wang2009
                                                                                      
                                                                                      
                                                                                      14,641
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      14,6412008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Yinan
      Zhang2009
                                                                                      
                                                                                      
                                                                                      14,641
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      14,6412008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Junjun
      Xu, CEO2009
                                                                                      
                                                                                      
                                                                                      14,641
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      14,6412008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Xiaoshuang
      Chen2009
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -2008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Renbin
      Yu2009
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -2008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -RESIGNED:Edith
      Kam Ying Ho2009
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -2008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -Xueyuan
      Han2009
                                                                                      
                                                                                      
                                                                                      14,641
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      14,6412008
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      - 0
      -




- 54
-




Employment
Agreements




There are
currently no employment agreements by and between the Company and its
employees.





ZYTX has
two (2) employment agreements with each employee, a Labor Contract and a
Confidentiality Agreement. The Labor Contract mainly includes working content,
working time, payment and other terms. The Confidentiality Agreement mainly
includes confidentiality content, responsibilities, validity and other
terms.




ITEM
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters




The
following table sets forth each person known by us to be the beneficial owner of
five (5%) percent or more of the Common Stock of the Company, all directors
individually and all directors and officers as a group as of the date hereof.
Each person named below has sole voting and investment power with respect to the
shares shown unless otherwise indicated.




Name
      and Address of
                          Beneficial
      Owner(1)
                        
                        Amount
      of
                          Direct
                          Ownership
                        
                        Amount
      of
                          Indirect
                          Ownership
                        
                        Total
                          Beneficial
                          Ownership
                        
                        Percentage of Class(2)Zhenyu
      Wang, Chairman of the Board
                        
                        
                        16,008,960
                        
                        0
                        
                        
                        16,008,960
                        
                        40.02
                        %Junjun
      Xu, Chief Executive Officer and Director
                        
                        
                        5,280,000
                        
                        0
                        
                        
                        5,280,000
                        
                        13.20
                        %Mingfei
      Yang, Chief Financial Officer
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %Hon
      Man Yun, Chief Operating Officer
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %Yuefeng
      Wang, Director
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %Yinan
      Zhang, Director
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %Chunsheng
      Zhou, Director
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %Xiaoshuang
      Chen, Director
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %Renbin
      Yu, Director
                        
                        
                        0
                        
                        0
                        
                        
                        0
                        
                        0
                        %ALL
      DIRECTORS AND OFFICERS AS A GROUP (9 PERSONS):
                        
                        
                        21,288,960
                        
                        0
                        
                        
                        21,288,960
                        
                        53.22
                        %Yanling
      Chen
                          Room
      704, Zhenxing District Yijing Street, 33# No.2, Dandong City, Liaoning
      Province, China
                        
                        
                        2,999,040
                        
                        0
                        
                        
                        2,999,040
                        
                        7.50
                        %




- 55
-




(1)  
Unless otherwise noted, each beneficial owner has the same address as the
Company.





(2)  
Applicable percentage of ownership is based on 40,000,000 shares of the
Company’s Common Stock outstanding as of the date of this Annual Report,
together with securities exercisable or convertible into shares of Common Stock
within sixty (60) days of the date of this Annual Report for each stockholder.
Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities. Shares
of Common Stock are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership of such
person, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Note that affiliates are subject to
Rule 144 and Insider trading regulations - percentage computation is for form
purposes only.





ITEM
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence




Transactions
With Related Persons





During
the years ended June 30, 2009 and 2008, the Chairman of the Company, Mr. Wang
Zhenyu, made advances amounting to the Company for operational
needs.  At June 30, 2009 and 2008, the amount outstanding was $253,506
and $153,069, respectively.  The outstanding amounts are non-interest
bearing, unsecured and have no fixed repayment terms.




During
the year ended June 30, 2009, ZYTX entered into an agreement with Beijing
Enterprises UniCard Co., Ltd. ("UniCard"), copy which Mr. Zhenyu Wang, the
Chairman of the Company, is also the Chairman.  For the year ended
June 30, 2009, the Company rented office space to UniCard for $131,758 and the
Company also sold fixed assets to UniCard for $130,563.




Promoters
and Certain Control Persons




None.




Director
Independence




The
following directors are independent pursuant to NASDAQ rules and the rules of
the SEC: Yinan Zhang, Yuefeng Wang, Chunsheng Zhou, Renbin Yu and Xiaoshuang
Chen. The following directors are not independent: Zhenyu Wang and Junjun Xu.
All of the members of our Audit Committee, Compensation Committee and Nominating
Committee are independent pursuant to the Exchange Act and NASDAQ
rules.




ITEM
      14.
            Principal
      Accountant Fees and Services




The firm
of Weinberg & Company, P.A. (“Weinberg”) has served
and continues to serve as our principal accountant, effective from January 31,
2008. The following is a summary of fees incurred for services
rendered.




Audit
Fees




During
the fiscal year ended June 30, 2009, the fees for our current principal
accountant, Weinberg, were $182,000, which was composed of $62,000 for quarterly
reviews, and $120,000 for the audit of our consolidated financial statements
included in this Annual Report on Form 10-K.





During
the fiscal year ended June 30, 2008, the fees for our current principal
accountant, Weinberg, were $185,243, which was composed of $47,900 for quarterly
reviews, and $137,343 for the audit of our consolidated financial statements
included in this Annual Report on Form 10-K.




- 56
-




During
the fiscal year ended June 30, 2008, the fees for our former principal
accountant, Akin, Doherty, Klein, P.C., were $300 for quarterly reviews for the
period ended September 30, 2007,




Audit-Related
Fees




During
the fiscal years ended June 30, 2009 and 2008, the fees for our current
principal accountant, Weinberg, were $121,571 and $0 for assurance and related
services reasonably related to the performance of the audit or review of our
financial statements.




Tax
Fees




During
the fiscal years ended June 30, 2009 and 2008, our current principal accountant,
Weinberg, did not render any tax services.




All
Other Fees




During
the fiscal year ended June 30, 2009, there were no fees billed for products and
services provided by the current principal accountant, Weinberg, other than
those set forth above.




Audit
Committee Pre-Approval




The
policy of the Audit Committee is to pre-approve all audit and non-audit services
provided by the independent accountants. These services may include audit
services, audit-related services, tax fees, and other services. Pre-approval is
generally provided for up to one year and any pre-approval is detailed as to the
particular service or category of services. The Audit Committee has delegated
pre-approval authority to certain committee members when expedition of services
is necessary. The independent accountants and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent accountants in accordance with this pre-approval
delegation, and the fees for the services performed to date. All of the services
described above in this Item 14 were approved in advance by the Audit Committee
during the fiscal year ended June 30, 2009.





PART
IV





ITEM
      15.
              Exhibits
      and Financial Statement
Schedules





(a)
            Financial
      Statements and Schedules





The
financial statements are set forth under Item 8 of this Annual Report.
Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.





(b)
            Exhibits





EXHIBIT
                  NO.
                
                DESCRIPTION
                
                LOCATION3.1
                
                Certificate
      of Incorporation (as amended) of Dexterity Surgical, Inc.
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 20073.2
                
                Certificate
      of Amendment to the Company’s Certificate of Incorporation, dated February
      26, 2008
                
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the period
      ended March 31, 2008
  - 57
-
  3.3
              
              Amended
      and Restated Bylaws of the Company
              
              Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the period
      ended March 31, 20083.4
              
              Certificate
      of Incorporation of Rise and Grow Limited
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 20073.5
              
              Certificate
      of Incorporation of ZBDT (Beijing) Technology Co., Ltd.
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 20073.6
              
              Company
      Charter of ZBDT (Beijing) Technology Co., Ltd.
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.1
              
              Share
      Exchange Agreement, dated December 17, 2007, by and among Dexterity
      Surgical, Inc., Rise and Grow Limited and Newise Century
    Inc.
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.2
              
              Exclusive
      Technology Consultation Service Agreement, dated September 28, 2007, by
      and between ZBDT and ZYTX
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.3
              
              Exclusive
      Interest Purchase Agreement, dated September 28, 2007, by and between ZBDT
      and Zhenyu Wang
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.4
              
              Exclusive
      Interest Purchase Agreement, dated September 28, 2007, by and between ZBDT
      and Junjun Xu
              
              Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 2007





10.5
                
                Equity
      Interest Pledge Agreement, dated September 28, 2007, by and between ZBDT
      and Zhenyu Wang
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.6
                
                Equity
      Interest Pledge Agreement, dated September 28, 2007, by and between ZBDT
      and Junjun Xu
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.7
                
                Power
      of Attorney, dated September 28, 2007, executed by Zhenyu Wang in favor of
      ZBDT
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.8
                
                Power
      of Attorney, dated September 28, 2007, executed by Junjun Xu in favor of
      ZBDT
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on December 20, 200710.9
                
                Share
      Purchase Agreement, effective as of October 28, 2008, by and among Rise
      and Grow Limited, ZYTX Technology Co., Ltd., Bian Yong and Li
      Zhong
                
                Incorporated
      by reference to the Company’s Current Report on Form 8-K as filed with the
      SEC on November 3, 2008
  - 58
-
  14.1
              
              Code
      of Ethics
              
              Incorporated
      by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K
      as filed with the SEC on September 29, 200816.1
              
              Auditor’s
      Letter
              
              Incorporated
      by reference to Exhibit 16.1 to the Company’s Annual Report on Form 10-K
      as filed with the SEC on September 29, 200816.2
              
              Auditor
      Letter of K.P. Cheng & Co.
              
              Provided
      herewith31.1
              
              Certifications
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
              
              Provided
      herewith31.2
              
              Certifications
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
              
              Provided
      herewith32.1
              
              Certification
      Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
      the Sarbanes-Oxley Act Of 2002
              
              Provided
      herewith32.2
              
              Certification
      Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
      the Sarbanes-Oxley Act Of 2002
              
              Provided
      herewith99.1
              
              Audit
      Committee Charter of the Company
              
              Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on February 27, 200899.2
              
              Compensation
      Committee Charter of the Company
              
              Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on February 27, 200899.3
              
              Corporate
      Governance and Nominating Committee Charter of the Company
              
              Incorporated
      by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
      as filed with the SEC on February 27, 200899.4
              
              Audited
      Financial Statements of Guang Hua Insurance Agency Company Limited for the
      Years Ended June 30, 2008 and 2007
              
              Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on January 9, 200999.5
              
              Unaudited
      Condensed Financial Statements of Guang Hua Insurance Agency Company
      Limited for the Three Months Ended September 30, 2008 and
    2007
              
              Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on January 9, 200999.6
              
              China
      INSOnline Corp. and Subsidiaries Unadudited Condensed Combined Pro Forma
      Financial Statements For The Year Ended June 30, 2008 And As Of And For
      The Three Months Ended September 30, 2008
              
              Incorporated
      by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
      as filed with the SEC on January 9, 200999.7
              
              Resignation
      Letter of Ms. Edith Kam Ying Ho, dated
    July 16 2009
              
              Provided
      herewith




- 59
-




SIGNATURES




In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on our behalf by the
undersigned, thereunto duly authorized.




CHINA
      INSONLINE CORP.Date:
      October 13, 2009By:
            /s/
      Junjun XuJunjun
      XuChief
      Executive Officer, Principal Executive Officer and
  Director/s/
      Mingfei YangMingfei
      YangChief
      Financial Officer, Principal Financial and Accounting
    Officer




In
accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the dates indicated.





Signatures
                                        
                                        Title
                                        
                                        Date/s/
      Junjun Xu
                                        
                                        Chief
      Executive Officer, Principal
                                        
                                        October 13, 2009Junjun
      Xu
                                        
                                        Executive
      Officer and Director/s/
      Mingfei Yang
                                        
                                        Chief
      Financial Officer, Principal
                                        
                                        October 13, 2009Mingfei
      Yang
                                        
                                        Financial
      and Accounting Officer/s/
      Zhenyu Wang
                                        
                                        Chairman
      of the Board
                                        
                                        October 13, 2009Zhenyu
      Wang/s/
      Yuefeng Wang
                                        
                                        Director
                                        
                                        October 13, 2009Yuefeng
      Wang/s/
      Yinan Zhang
                                        
                                        Director
                                        
                                        October 13, 2009Yinan
      Zhang/s/
      Renbin Yu
                                        
                                        Director
                                        
                                        October 13, 2009Renbin
      Yu/s/
      Chunsheng Zhou
                                        
                                        Director
                                        
                                        October 13, 2009Chunsheng
      Zhou




/s/
      Xiaoshuang Chen
              
              Director
              
              October 13, 2009Xiaoshuang
      Chen




- 60
-




CHINA
INSONLINE CORP.




AND




SUBSIDIARIES




Consolidated
Financial Statements


For
The Years Ended June 30, 2009 and 2008


F-1





CHINA
INSONLINE CORP.




AND




SUBSIDIARIES





TABLE
      OF CONTENTS
                
                PageREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                
                F-3CONSOLIDATED
      BALANCE SHEETS AS OF JUNE 30, 2009 AND 2008
                
                F-4CONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED JUNE 30,
      2009 AND 2008
                
                F-5CONSOLIDIATED
      STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED JUNE 30, 2009 AND
      2008
                
                F-6CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2009 AND
      2008
                
                F-7NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2009 AND
      2008
                
                F-8
      – F-27


F-2


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM





To the
Board of Directors and Shareholders of:


China
INSOnline Corp.





We have
audited the accompanying consolidated balance sheets of China INSOnline Corp.
and Subsidiaries (the “Company”) as of June 30, 2009 and 2008, and the related
consolidated statements of income and comprehensive income, shareholders' equity
and cash flows for the years then ended.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.





We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of China INSOnline
Corp. and Subsidiaries as of June 30, 2009 and 2008, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.




/s/ Weinberg & Company, P.A.


Weinberg
& Company, P.A.





Boca
Raton, Florida


September
28, 2009


F-3


CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS


June 30, 2009
                          
                          
                          June 30, 2008ASSETSCash
      and cash equivalents
                          
                          $
                          1,217,085
                          
                          
                          $
                          4,567,853Accounts
      receivable, net of allowance of $26,302 and $0 at June 30, 2009 and
      2008,  respectively
                          
                          
                          7,764,537
                          
                          
                          
                          6,387,502Prepayments
      and deposits
                          
                          
                          5,428,848
                          
                          
                          
                          1,207,159Other
      receivables
                          
                          
                          2,385
                          
                          
                          
                          7,440Deferred
      taxes
                          
                          
                          466,828
                          
                          
                          
                          243,676Total
      Current Assets
                          
                          
                          14,879,683
                          
                          
                          
                          12,413,630Fixed
      assets, net
                          
                          
                          212,591
                          
                          
                          
                          257,199Software,
      net
                          
                          
                          2,963,136
                          
                          
                          
                          2,671,286Prepayments
      for software
                          
                          
                          6,981,952
                          
                          
                          
                          -Goodwill
                          
                          
                          4,473,787
                          
                          
                          
                          -Deposits
                          
                          
                          78,093
                          
                          
                          
                          77,804Deferred
      taxes
                          
                          
                          65,447
                          
                          
                          
                          37,216Total
      Long-Term Assets
                          
                          
                          14,775,006
                          
                          
                          
                          3,043,505TOTAL
      ASSETS
                          
                          $
                          29,654,689
                          
                          
                          $
                          15,457,135LIABILITIES
      AND SHAREHOLDERS’ EQUITYAccounts
      payable
                          
                          $
                          150,514
                          
                          
                          $
                          2,642Other
      payables and accrued liabilities
                          
                          
                          2,735,625
                          
                          
                          
                          1,304,805Amount
      due to director
                          
                          
                          253,506
                          
                          
                          
                          153,069Taxes
      payable
                          
                          
                          6,260,070
                          
                          
                          
                          2,902,587Deferred
      taxes
                          
                          
                          90,644
                          
                          
                          
                          11,530Deferred
      revenue
                          
                          
                          -
                          
                          
                          
                          63,583Total
      Current Liabilities
                          
                          
                          9,490,359
                          
                          
                          
                          4,438,216Deferred
      taxes
                          
                          
                          -
                          
                          
                          
                          18,792Total
      Long-Term Liabilities
                          
                          
                          -
                          
                          
                          
                          18,792TOTAL
      LIABILITIES
                          
                          
                          9,490,359
                          
                          
                          
                          4,457,008COMMITMENTSSHAREHOLDERS’
      EQUITYCommon
      stock, $.001 par value; 100,000,000 shares authorized; 40,000,000 shares
      issued and outstanding as of June 30, 2009 and 2008,
      respectively
                          
                          
                          40,000
                          
                          
                          
                          40,000Additional
      paid-in capital
                          
                          
                          86,360
                          
                          
                          
                          86,360Retained
      earnings (restricted portion of $1,055,584 and $315,584 at June 30, 2009
      and 2008, respectively)
                          
                          
                          19,291,210
                          
                          
                          
                          10,113,609Accumulated
      other comprehensive income
                          
                          
                          746,760
                          
                          
                          
                          760,158Total
      Shareholders’ Equity
                          
                          
                          20,164,330
                          
                          
                          
                          11,000,127TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                          
                          $
                          29,654,689
                          
                          
                          $
                          15,457,135
  See
accompanying notes to consolidated financial statements
  F-4
  CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF INCOME
 AND
COMPREHENSIVE INCOME
 
 Year Ended
                      June 30, 2009
                    
                    
                    Year Ended
                      June 30, 2008REVENUES,
      NET
                    
                    $
                    17,976,529
                    
                    
                    $
                    13,735,376COST
      OF SALES
                    
                    
                    2,133,169
                    
                    
                    
                    1,313,582GROSS
      PROFIT
                    
                    
                    15,843,360
                    
                    
                    
                    12,421,794Selling
      expenses
                    
                    
                    281,540
                    
                    
                    
                    167,903Advertising
      expenses
                    
                    
                    1,912,725
                    
                    
                    
                    962,160General
      and administrative expenses
                    
                    
                    1,311,384
                    
                    
                    
                    808,432INCOME
      FROM OPERATIONS
                    
                    
                    12,337,711
                    
                    
                    
                    10,483,299Interest
      income, net
                    
                    
                    24,718
                    
                    
                    
                    19,904INCOME
      FROM OPERATIONS BEFORE INCOME TAXES
                    
                    
                    12,362,429
                    
                    
                    
                    10,503,203Income
      taxes
                    
                    
                    3,184,828
                    
                    
                    
                    2,166,846NET
      INCOME
                    
                    
                    9,177,601
                    
                    
                    
                    8,336,357OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation (loss) gain
                    
                    
                    (13,398
                    )
                    
                    
                    725,006COMPREHENSIVE
      INCOME
                    
                    $
                    9,164,203
                    
                    
                    $
                    9,061,363NET
      INCOME PER SHARE-
      BASIC AND DILUTED
                    
                    $
                    0.23
                    
                    
                    $
                    0.25WEIGHTED
      AVERAGE SHARES OUTSTANDING-
      BASIC AND DILUTED
                    
                    
                    40,000,000
                    
                    
                    
                    33,946,666
  See
accompanying notes to consolidated financial statements
  F-5
  CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 YEARS
ENDED JUNE 30, 2009 AND 2008
 Common
      Stock
                  
                  
                  Additional
                    Paid-in
                  
                  
                  Retained
                  
                  
                  Accumulated
                    Other
                    ComprehensiveShare
                  
                  
                  Par
      Value
                  
                  
                  Capital
                  
                  
                  Earnings
                  
                  
                  Income
                  
                  
                  TotalBALANCE,
      JUNE 30, 2007
                  
                  
                  26,400,000
                  
                  
                  $
                  26,400
                  
                  
                  $
                  99,960
                  
                  
                  $
                  1,778,251
                  
                  
                  $
                  35,152
                  
                  
                  $
                  1,939,763Recapitalization
                  
                  
                  25,079,127
                  
                  
                  
                  25,079
                  
                  
                  
                  (25,079
                  )
                  
                  
                  (999
                  )
                  
                  
                  -
                  
                  
                  
                  (999
                  )Issuance
      of common stock under Section 1145 Shares
                  
                  
                  6,000,000
                  
                  
                  
                  6,000
                  
                  
                  
                  (6,000
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Cancellation
      of common stock under Bankruptcy Court Order
                  
                  
                  (17,479,127
                  )
                  
                  
                  (17,479
                  )
                  
                  
                  17,479
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Foreign
      currency translation gain
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  725,006
                  
                  
                  
                  725,006Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8,336,357
                  
                  
                  
                  -
                  
                  
                  
                  8,336,357BALANCE,
      JUNE 30, 2008
                  
                  
                  40,000,000
                  
                  
                  
                  40,000
                  
                  
                  
                  86,360
                  
                  
                  
                  10,113,609
                  
                  
                  
                  760,158
                  
                  
                  
                  11,000,127Foreign
      currency translation loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (13,398
                  )
                  
                  
                  (13,398
                  )Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,177,601
                  
                  
                  
                  -
                  
                  
                  
                  9,177,601BALANCE,
      JUNE 30, 2009
                  
                  
                  40,000,000
                  
                  
                  $
                  40,000
                  
                  
                  $
                  86,360
                  
                  
                  $
                  19,291,210
                  
                  
                  $
                  746,760
                  
                  
                  $
                  20,164,330
  See
accompanying notes to consolidated financial statements
  F-6
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 Year Ended
                      June 30, 2009
                    
                    
                    Year Ended
                      June 30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                    
                    $
                    9,177,601
                    
                    
                    $
                    8,336,357Adjustments
      to reconcile net income to net cash provided by operating
      activities:Amortization
                    
                    
                    440,011
                    
                    
                    
                    134,342Depreciation
                    
                    
                    106,992
                    
                    
                    
                    61,148Gain
      on disposal of fixed assets
                    
                    
                    (72,711
                    )
                    
                    
                    -Deferred
      taxes
                    
                    
                    (166,673
                    )
                    
                    
                    (248,766
                    )Allowance
      for doubtful accounts
                    
                    
                    26,397
                    
                    
                    
                    -Changes
      in operating assets and liabilities, net of effects of
      acquisition:Accounts
      receivable
                    
                    
                    (1,085,023
                    )
                    
                    
                    (4,163,160
                    )Other
      receivables
                    
                    
                    5,055
                    
                    
                    
                    3,065Prepayments
      and deposits
                    
                    
                    (4,213,071
                    )
                    
                    
                    (1,280,072
                    )Accounts
      payable
                    
                    
                    138,353
                    
                    
                    
                    2,642Other
      payables and accrued liabilities
                    
                    
                    1,345,465
                    
                    
                    
                    1,284,078Taxes
      payable
                    
                    
                    3,351,193
                    
                    
                    
                    2,538,156Deferred
      revenue
                    
                    
                    (63,583
                    )
                    
                    
                    63,583Net
      cash provided by operating activities
                    
                    
                    8,990,006
                    
                    
                    
                    6,731,373CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of subsidiary, net of cash acquired
                    
                    
                    (5,715,919
                    )
                    
                    
                    -Repayment
      from a former shareholder of a newly acquired subsidiary
                    
                    
                    1,019,759
                    
                    
                    
                    -Acquisition
      of software
                    
                    
                    (731,433
                    )
                    
                    
                    (2,813,780
                    )Prepayments
      for software
                    
                    
                    (6,981,952
                    )
                    
                    
                    -Acquisition
      of fixed assets
                    
                    
                    (118,780
                    )
                    
                    
                    (282,459
                    )Proceeds
      on disposal of fixed assets
                    
                    
                    130,563
                    
                    
                    
                    -Net
      cash used in investing activities
                    
                    
                    (12,397,762
                    )
                    
                    
                    (3,096,239
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Advance
      from a director
                    
                    
                    71,455
                    
                    
                    
                    153,069Net
      cash provided by financing activities
                    
                    
                    71,455
                    
                    
                    
                    153,069NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                    
                    
                    (3,336,301
                    )
                    
                    
                    3,788,203Effect
      of exchange rate changes on cash
                    
                    
                    (14,467
                    )
                    
                    
                    731,993Cash
      and cash equivalents, at beginning of the year
                    
                    
                    4,567,853
                    
                    
                    
                    47,657CASH
      AND CASH EQUIVALENTS, END OF THE YEAR
                    
                    $
                    1,217,085
                    
                    
                    $
                    4,567,853SUPPLEMENTARY
      CASH FLOW INFORMATION:Interest
      paid
                    
                    $
                    -
                    
                    
                    $
                    -Income
      taxes paid
                    
                    $
                    -
                    
                    
                    $
                    631Also
      see Note 14.
  See
accompanying notes to consolidated financial statements
  F-7
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 1.          
Organization and Principal Activities
 
 China
INSOnline Corp. (“CHIO”), formerly known as Dexterity Surgical, Inc. (“Dexterity
Surgical”) was incorporated on December 23, 1988 as a Delaware corporation and
commenced operations on January 1, 1989. In August 1992, Dexterity Surgical
completed an initial public offering of its common stock par value $0.001 per
share (“Common Stock”), which at such time was trading on The Over-The-Counter
Bulletin Board. In March 2008, Dexterity Surgical, Inc. changed its name to
China INSOnline Corp.  On July 1, 2008, CHIO’s Common Stock was
approved by the NASDAQ to trade on the NASDAQ Capital Market under the symbol
“CHIO”.
 
 On
December 18, 2007, Dexterity Surgical, Rise and Grow Limited (“Rise & Grow”)
and Newise Century Inc., the sole stockholder of Rise & Grow (the
“Shareholder”) consummated a share exchange agreement (the “Share Exchange
Agreement”) pursuant to which the Shareholder transferred to Dexterity Surgical,
and Dexterity Surgical acquired from the Shareholder, all of the capital stock
of Rise & Grow (the “Shares”), which Shares constitute 100% of the issued
and outstanding capital stock of Rise & Grow, in exchange for 26,400,000
shares of Common Stock, which shares now constitute 66% of the fully diluted
outstanding shares of Common Stock.  This share exchange transaction
resulted in the Shareholder obtaining a majority voting interest in Dexterity
Surgical.  Generally accepted accounting principles require that a
company whose shareholders retain the majority interest in a combined business
be treated as the acquirer for accounting purposes, resulting in a reverse
acquisition.  Accordingly, the share exchange transaction has been
accounted for as a recapitalization of Dexterity Surgical.
 
 Rise
& Grow was formed on February 10, 2006 as a Hong Kong limited
company.  Zhi Bao Da Tong (Beijing) Technology Co., Ltd (“ZBDT”), a
company registered in the People’s Republic of China (the “PRC” or “China”), was
established and incorporated by Rise & Grow and commenced business on
September 6, 2007.  Rise & Grow’s sole business is to act as a
holding company for ZBDT.
 
 ZBDT was formed by Rise & Grow for
the purpose of developing computer and network software and related products and
to promote the development of high-tech industries in the field of Chinese
information technology.  In compliance with the PRC’s foreign
investment restrictions on Internet information services and other laws and
regulations, ZBDT conducts all of our Internet information and media services
and advertising in China through ZYTX, a domestic Variable Interest Entity
(“VIE”).  It does this by controlling Beijing ZYTX Technology Co., Ltd
(“ZYTX”), through an Exclusive Technical Consulting and Service Agreement (the
“Consulting Agreement”) and related transaction documents dated as of September
28, 2007 (collectively, the “Service Agreements”).
 
 According
to the Consulting Agreement, ZBDT has the exclusive right to provide technical
consulting and other services to ZYTX, effectively restricting and controlling
the operations of ZYTX.  Pursuant to Clause 1.3 of the Consulting
Agreement, ZBDT, “shall be the sole and exclusive owner of all right, title and
interests to any and all intellectual property rights arising from the
performance of this Agreement (including but not limited to, copyrights, patent,
know-how, commercial secrets and others), no matter whether it is developed by
ZBDT or by ZYTX based on ZBDT’s intellectual property rights.”  Thus,
ZBDT could substantially, solely and exclusively possess all intellectual
property of ZYTX which comprise the core value and assets of ZYTX (ultimately,
solely and exclusively possessed by the Company).
  F-8
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
  1.           Organization
and Principal Activities (Continued)
 
 According
to the Equity Purchase Agreements by and between the owners of ZYTX, on the one
hand, and ZBDT, on the other hand, ZBDT has the exclusive and irrevocable right
to acquire 100% of the equity interests of ZYTX.  Furthermore, the
Equity Purchase Agreements also state that ZBDT has the right to control the
operating activities and the shareholding structure of ZYTX.
 
 In light
of the above, ZBDT has a controlling interest in ZYTX based on the fact
that:
 
 ·
              ZBDT
      has the ability to absorb all of the expected residual return from ZYTX,
      which makes ZBDT the primary beneficiary of ZYTX.  In the event
      ZYTX fails to pay any required amounts, ZBDT could exercise its right to
      acquire certain pledged shares in ZYTX pursuant to a pledge agreement
      executed by and between ZYTX’s stockholders and ZBDT which guarantee all
      required payments;
 
 ·
              ZBDT
      has the exclusive right to purchase all of the outstanding interests in
      ZYTX, which would make ZYTX a wholly-owned subsidiary of ZBDT when it’s
      allowable under the PRC regulation;
 
 ·
              The
      Company’s CEO and the Chairman of the Board own all of the interests in
      ZYTX and also serve as ZYTX’s directors.  Furthermore, such
      individuals oversee and run the business in ZYTX.  As a result,
      the Company, through ZBDT, could exercise absolute influence over
      ZYTX.
 
 Arrangements
with these business enterprises have been evaluated, and those in which ZYTX is
determined to have controlling financial interest are consolidated. In
January 2003, the Financial Accounting Standards Board (“FASB”) issued
FASB Interpretation (“FIN”) No. 46, Consolidation of Variable Interest
Entities (“FIN 46”), and amended it by issuing FIN 46R in December 2003.
FIN 46R addresses the consolidation of business enterprises to which the usual
condition of consolidation (ownership of a majority voting interest) does not
apply.  This interpretation focuses on controlling financial interests
that may be achieved through arrangements that do not involve voting interests.
It concludes that, in the absence of clear control through voting interests, a
company’s exposure (variable interest) to the economic risks and potential
rewards from the variable interest entity’s assets and activities are the best
evidence of control. If an enterprise holds a majority of the variable interests
of an entity, it would be considered the primary beneficiary. The primary
beneficiary is required to consolidate the assets, liabilities and results of
operations of the variable interest entity in its financial
statements.  Upon executing the Consulting Agreement and Service
Agreements, ZYTX is now considered a VIE and ZBDT is its primary
beneficiary.
 
 ZYTX, an
entity consolidated into the Company under FIN 46R, a company registered in the
PRC on October 8, 2006, is an Internet e-business development, online
advertisement publishing and related online servicing company, which focuses on
the PRC insurance industry.  With localized web sites targeting
Greater China, ZYTX provides a platform through its web site, www.soobao.cn, to
consumers, agents and insurance companies for online transaction, advertising,
online inquiry, news circulation, statistic analysis and software
development.  ZYTX also provides online insurance agent services
including car, property and life insurance to customers in the PRC.
 
 On
October 28, 2008, Rise & Grow and ZYTX entered into a Share Purchase
Agreement which Rise & Grow acquired 100% ownership of Guang Hua Insurance
Agency Company Limited (“GHIA”), a limited liability company organized under the
laws of the PRC, through ZYTX to act as legal owner in China.  GHIA is
an insurance agent company which operates in the PRC.  The
consideration was US$5,846,244 (RMB$40,000,000) in cash.  This share
purchase transaction resulted in Rise & Grow obtaining 100% of the voting
and beneficial interest in GHIA.  Also see note 13.
 
 On April
2, 2009, Zhi Bao Da Tong (Beijing) Technology Co., Ltd (“ZBDT”) changed its name
into New Fortune Associate (Beijing) Information Technology Co
Ltd.
  F-9
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
  2.           Principles
of Consolidation
 
 The consolidated financial statements
included the accounts of CHIO and the following subsidiaries (collectively, the
“Company”):
 
 a)
              Rise
      & Grow – 100% subsidiary of
CHIO
 
 b)
              ZBDT
      – 100% subsidiary of Rise &
Grow
 
 c)
              ZYTX
      – a VIE of ZBDT
 
 d)
              GHIA
      – 100% subsidiary of Rise & Grow through ZYTX to act as legal owner in
      China
 
 ZYTX and
GHIA are the major components of the Company’s condensed consolidated financial
statements, representing over 99% of the assets and liabilities of the
Company.
 
 Inter-company
accounts and transactions have been eliminated in consolidation.
 
 3.           Summary
of Significant Accounting Policies
 
 (a)          Economic
and Political Risks
 
 The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC economy. The Company's operations in the PRC are subject to special
considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among
others, the political, economic and legal environment and foreign currency
exchange. The Company's results may be adversely affected by changes in the
political and social conditions in the PRC, and by changes in governmental
policies with respect to laws and regulations, anti−inflationary measures,
currency conversion, remittances abroad, and rates and methods of taxation,
among other things.
 
 (b)          Use
of Estimates
 
 The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period.  Actual results could differ from those
estimates.
 
 (c)          Fair
Value of Financial Instruments
 
 The carrying value of financial
instruments classified as current assets and current liabilities, such as
accounts receivables, other receivables, prepayments and deposits, accounts
payable, other payables and accrued liabilities, approximate fair value due to
the short-term nature of the instruments.
 
 The
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements” (“SFAS 157”) on January 1, 2008 for all financial
assets and liabilities and nonfinancial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value
measurements.
  F-10
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 3.           Summary
of Significant Accounting Policies (Continued)
 
 (c)          Fair
Value of Financial Instruments (Continued)
 
 SFAS 157
defines fair value as the price that would be received from selling an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at
fair value, the Company considers the principal or most advantageous market in
which it would transact and it considers assumptions that market participants
would use when pricing the asset or liability.
 
 SFAS 157
establishes a fair value hierarchy that requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. A financial instrument’s categorization within the fair value
hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. SFAS 157 establishes three levels of inputs that may be
used to measure fair value:
 
 Level 1
applies to assets or liabilities for which there are quoted prices in active
markets for identical assets or liabilities.
 
 Level 2
applies to assets or liabilities for which there are inputs other than quoted
prices included within Level 1 that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived
valuations in which significant inputs are observable or can be derived
principally from, or corroborated by, observable market data.
 
 Level 3
applies to assets or liabilities for which there are unobservable inputs to the
valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
 
 The
assets measured at fair value on a recurring basis subject to the disclosure
requirements of SFAS 157 as of June 30, 2009 are as follows:
 
 FairValueMeasurementsatReportingDateUsingCarryingvalueas
                    of
                    June30,2009
                  
                  
                  QuotedPricesin
                    ActiveMarkets
                    forIdentical
                    Assets
                    (Level 1)
                  
                  
                  SignificantOther
                    Observable
                    Inputs
                    (Level 2)
                  
                  
                  Significant
                    Unobservable
                    Inputs
                    (Level 3)Cash
      and cash equivalents
                  
                  $
                  1,217,085
                  
                  
                  $
                  1,217,085
                  
                  
                  
                  -
                  
                  
                  
                  -
 
 Cash and
cash equivalents consist primarily of highly rated money market funds at a
variety of well-known institutions with original maturities of three months or
less. The original cost of these assets approximates fair value due to their
short term maturity.
 
 (d)          Cash
and Cash Equivalents
 
 The
Company considers all highly liquid investments purchased with original maturity
of three months or less to be cash equivalents.
 
 (e)          Accounts
Receivable
 
 Accounts
receivable are recognized and carried at original invoice amount less allowance
for any uncollectible amounts.  An estimate for doubtful debts is made
when collection of the full amount is no longer probable. As of June 30, 2009
and 2008, the Company had allowance for doubtful accounts of $26,397 and $0,
respectively.
  F-11
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 3.           Summary
of Significant Accounting Policies (Continued)
 
 (f)        Fixed
assets
 
 Fixed
assets are carried at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, which are five years for motor vehicles, furniture and fixtures,
computers and equipment. For the leasehold improvements, deprecation is computed
using the straight-line method over the estimated useful lives or lease term,
whichever is shorter.
 
 (g)        Software
 
 Software
is carried at cost less accumulated amortization. Amortization is computed using
the straight-line method over the estimated useful lives of the assets, which is
seven years for software. The Company has acquired a set of online insurance
enquires system from independent third party and it cost $731,433. As of June
30, 2009, the Company has total three sets of application software, an insurance
policy management system, a website streaming system and an online insurance
enquires system. All sets of application software are used for internal
operations to enhance the Company’s online insurance agency business and
advertising business. None of the software was internally developed nor was
there any internal cost that was capitalized for the software. Based on the
American Institute of Certified Public Accountants (“AICPA”) Statement of
Position (“SOP”) 98-1, Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use, the Company capitalized all the external direct
cost of services in obtaining the computer software. Software is periodically
reviewed when indicators are present to assess recoverability from future
operations using undiscounted cash flows in accordance with Statement of
Financial Accounting Standards (“SFAS”) No.144, “Accounting for the Impairment
or Disposal of Long-Live Assets”. To the extent the carrying value exceeds fair
value, an impairment loss is recognized. No impairment was recorded for the
years ended June 30, 2009 and 2008.
 
 (h)        Deferred
revenue
 
 Deferred
revenue primarily comprises contractual billings in excess of recognized revenue
and payments received in advance of revenue recognition.
  F-12
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 3.           Summary
of Significant Accounting Policies (Continued)
 
 (i)           Revenue
Recognition
 
 Advertising
 
 Advertising revenues are derived mainly
from online advertising arrangements, which allow advertisers to place
advertisements on particular areas of the Company’s web sites, in particular
formats and over particular periods of time.  Such arrangements have
generally included some combination of the following: web site construction
service, web site advertising and web site maintenance services.  In
accordance with Emerging Issues Task Force (“EITF”) No. 00-21, “Accounting for
Revenue Arrangements with Multiple Deliverables,” advertising arrangements
involving multiple deliverables are broken down into single-element arrangements
based on their relative fair value for revenue recognition purposes, when
possible.
 
 The
details of revenue recognition of each type of advertising revenues are
illustrated below:
 
 ·
              Web
      site construction service, which is usually included in new advertising
      contract, mainly consist fee for design and computer coding of the new web
      site.  The service fee is recognized when the web site is
      completed and wired in the server.
 
 ·
              Web
      site advertising is recognized ratably over the displayed period of the
      advertisement, which is typically one
year.
 
 ·
              Web
      site maintenance service is providing technically support and maintenance
      for the customers’ web sites.  Such services are generally on
      contract basis with service period for one year.  Revenue is
      recognized ratably over the contact
period.
 
 Under the
guidance of the SOP 97-2 “Software Revenue Recognition”, as amended by SOP 98-9
“Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions”, the Company determines vendor-specific objective evidence
(“VOSE”) based on actual prices charged when the service is sold on a standalone
basis.
 
 Software
Development
 
 Software development revenue is
recognized in accordance with SOP 97-2, when the outcome of a contract for
software development can be estimated reliably, contract revenue and costs are
charged to the income statement by reference to the stage of completion of the
contract activity at the balance sheet date, as measured by the proportion that
costs incurred to date bear to estimated total costs for each
contract.  When the outcome of a contract cannot be estimated
reliably, contract costs are recognized as an expense in the period in which
they are incurred. Contract revenue is recognized to the extent of contract
costs incurred that it is probable will be recoverable.  Where it is
probable that the total contract costs will exceed total contract revenue, the
expected loss is recognized as an expense immediately.
  F-13
 CHINA
INSONLINE CORP.
 AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 3.           Summary
of Significant Accounting Policies (Continued)
 
 (i)           Revenue
Recognition (Continued)
 
 Insurance
Commissions
 
 Insurance revenues, net of discounts,
represent commissions earned from performing agency-related services. Insurance
commissions are recognized at the later of the date when the customer is
initially billed or the insurance policy effective date.
 
 In
accordance with EITF No. 01-9, “Accounting for Consideration Given by a Vendor
to a Customer or a Reseller of the Vendor’s Product,” cash consideration given
to customers or resellers, for which the Company does not receive a separately
identifiable benefit or cannot reasonably estimate fair value, are accounted for
as a reduction of revenue rather than as an expense.
 
 Cash
consideration includes discounts and other offers that entitle a customer to
receive a reduction in the price of a product.  For the years ended
June 30, 2009 and 2008, the Company recognized $498,579 and $304,686,
respectively, as a reduction of revenue for the discount offered to its
customers.
 
 (j)           Foreign
Currency Translation
 
 The accompanying financial statements
are presented in United States dollars.  The functional currencies of
the Company are the Renminbi (“RMB”) and Hong Kong Dollar
(“HKD”).  The financial statements are translated into United States
dollars (“US$” or “$”) from RMB and US$ from HKD at years-end exchange rates as
to assets and liabilities and average exchange rates as to revenues and
expenses.  Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.
 
 June 30, 2009
                    
                    
                    June 30, 2008Years
      end RMB: US$ exchange rate
                    
                    
                    6.8319
                    
                    
                    
                    6.8591Years
      average RMB: US$ exchange rate
                    
                    
                    6.8072
                    
                    
                    
                    7.2753Years
      end HKD: US$ exchange rate
                    
                    
                    7.7501
                    
                    
                    
                    7.7973Years
      average HKD: US$ exchange rate
                    
                    
                    7.7646
                    
                    
                    
                    7.8081
 
 (k)          Advertising
Costs
 
 The Company expenses advertising costs
as incurred or the first time advertising takes place. Advertising costs were
$1,912,725 and $962,160 for the years ended June 30, 2009 and 2008,
respectively.
 
 (l)           Income
Taxes
 
 The Company accounts for income tax
using the asset and liability approach. Deferred taxes are provided for the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. A valuation allowance is provided for deferred tax assets if it is
more likely than not these items will either expire before the Company is able
to realize their benefits, or that future utilization is
uncertain.
  F-14




CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





3.         
   Summary of Significant Accounting Policies
(Continued)





(m)          Reserve
Fund





Starting
in 2008, a subsidiary of the Company in China transferred 15% of their PRC
profit after taxation to the surplus reserve fund. Subject to certain
restrictions set out in the PRC Companies Law, the surplus reserve fund may be
distributed to shareholders in the form of share bonus issues and/or cash
dividends. The Company’s retained earnings in the amount of $1,055,584 and
$315,584 is restricted as of June 30, 2009 and 2008, respectively, for the
surplus reserve fund.





(n)       
   Comprehensive Income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, all
items that are required to be recognized under current accounting standards as
components of comprehensive income should be reported in a financial statement
that is presented with the same prominence as other financial statements. The
Company’s current components of comprehensive income are net income and the
foreign currency translation adjustment.





(o)       
   Earnings per share





Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.
There were no dilutive securities outstanding for the periods
presented.





(p)       
   Goodwill





In
accordance with SFAS No.141, “ Business Combination” (“SFAS 141”), the total
purchase price in a business combination is allocated to their fair value of
assets acquired and liabilities assumed based on their fair values at the
acquisition date, with amounts exceeding the fair values at the acquisition
date, with amounts exceeding the fair values being recorded as goodwill. In
accordance with SFAS No.142, “Goodwill and Other Intangible Assets, goodwill is
not amortized. Instead, it is tested for impairment on an accrual basis or more
frequently whenever events or changes in circumstances indicate that goodwill
may be impaired. The Company did not record any impairment of goodwill during
2009.


F-15


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





4.           Recent
Accounting Pronouncements





In
December 2007, the FASB issued SFAS No. 141 (R), Business Combinations.
SFAS No. 141 (R) requires an acquirer to measure the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired. The calculation of
earnings per share will continue to be based on income amounts attributable to
the parent. SFAS No. 141 (R) is effective for financial statements
issued for fiscal years beginning after December 15, 2008. Early adoption
is prohibited. SFAS 141 (R) will significantly affect the accounting for
future business combinations and the Company will determine the accounting as
new combinations occur.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB 51, which changes the
accounting and reporting for minority interests. Minority interests will be
recharacterized as noncontrolling interests and will be reported as a component
of equity separate from the parent’s equity, and purchases or sales of equity
interests that do not result in a change in control will be accounted for as
equity transactions. In addition, net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income
statement and, upon a loss of control, the interest sold, as well as any
interest retained, will be recorded at fair value with any gain or loss
recognized in earnings. SFAS No. 160 is effective for us beginning
July 1, 2009 and will apply prospectively, except for the presentation and
disclosure requirements, which will apply retrospectively. The Company is
currently assessing the potential impact, if any, that adoption of SFAS
No. 160 would have on the Company’s financial statements.





In April
2009, the FASB approved FASB Staff Position (“FSP”) FAS 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly and
FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairment.





FSP FAS
157-4 provides additional guidance for estimating fair value in accordance with
Statement 157 when the volume and level of activity for the asset or liability
have significantly decreased. FSP FAS 157-4 also includes guidance on
identifying circumstances that indicate a transaction is not orderly. We are
required to adopt this FSP for our interim and annual reporting periods ending
after June 15, 2009. This FSP does not require disclosures for periods
presented for comparative purposes at initial adoption. This FSP requires
comparative disclosures only for periods ending after initial
adoption.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS No. 161”), which amends SFAS No.133 and expands
disclosures to include information about the fair value of derivatives, related
credit risks and a company’s strategies and objectives for using
derivatives.  The adoption of SFAS No. 161 did not have a material
impact on its consolidated financial statements.





In June
2008, the FASB issued Emerging Issues Task Force (“EITF”) Issue No. 07-05,
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock (“EITF 07-05”), which is effective for fiscal years beginning
after December 15, 2008. EITF 07-05 addresses the determination of whether an
instrument (or an embedded feature) is indexed to an entity's own stock, which
is the first part of the scope exception in paragraph 11(a) of FASB SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”).
If an instrument (or an embedded feature) that has the characteristics of a
derivative instrument under paragraphs 6–9 of SFAS 133 is indexed to an entity's
own stock, it is still necessary to evaluate whether it is classified in
stockholders' equity (or would be classified in stockholders' equity if it were
a freestanding instrument). Other applicable authoritative accounting
literature, including Issues EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company Own Stock, and
EITF 05-2, The Meaning of “Conventional Debt Instrument” in Issue No. 00-19,
provide guidance for determining whether an instrument (or an embedded feature)
is classified in stockholders' equity (or would be classified in stockholders'
equity if it were a freestanding instrument). EITF 07-05 does not address that
second part of the scope exception in paragraph 11(a) of SFAS 133. We are
currently evaluating the impact, if any, the adoption of EITF 07-05 will have on
our financial statements.


F-16


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





4.           Recent
Accounting Pronouncements (Continued)





In April
2009, the FASB issued FSP FAS 107-1 and ABP 28-1, “Interim Disclosures about
Fair Value of Financial Instruments” (“FSP FAS 107-1 and ABP 28-1”), which
amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”,
and ABP Opinion No. 28, “Interim Financial Reporting”, to require disclosures
about fair value of financial instruments in interim and annual reporting
periods. FSP FAS 107-1 and ABP 28-1 is effective for interim reporting periods
ending after June 15, 2009, which for the Company is the first quarter of fiscal
2010.





In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of


Other-Than-Temporary
Impairments” (“FSP FAS 115-2 and FAS 124-2”), which amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to modify the presentation and disclosure
of other-than-temporary impairments on debt and equity securities in the
financial statements.  The adoption of FSP FAS 115-2 and FAS 124-2 did
not have a material impact on the Company’s consolidated financial
statements.





In May
2009, the FASB issued SFAS 165, “Subsequent Events” (“SFAS 165”), which
establishes accounting and disclosure requirements for events or transactions
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. SFAS 165 requires disclosure of the date
through which the Company has evaluated subsequent events for recognition or
disclosure. SFAS 165 also requires events that provide additional evidence about
conditions that existed at the date of the balance sheet and the related
estimates to be recognized in the financial statements. Events that provide
evidence about conditions that did not exist at the date of the balance sheet
but arose after the balance sheet date but before the financial statements are
issued or available to be issued should not be recognized, but should be
disclosed if material. The adoption of SFAS 165  did not have a
material impact on the Company’s consolidated financial statements.





In June
2009, the FASB issued FAS No. 167, Amendments to FASB Interpretation No. 46(R)
(“FAS 167”). FAS 167 amends FASB 46(R) to require an enterprise to perform an
analysis and ongoing reassessments to determine whether the enterprises variable
interest or interests give it a controlling financial interest in a variable
interest entity and amends certain guidance for determining whether an entity is
a variable interest entity. It also requires enhanced disclosures that will
provide users of financial statements with more transparent information about an
enterprises involvement in a variable interest entity. FAS 167 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009 and for all interim reporting periods after that
and is not anticipated to have any material impact on the Company’s consolidated
financial statements. The Company is currently evaluating the impact of the
adoption of FAS 167.





In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Statement No. 162. SFAS No. 168 establishes the FASB Accounting Standards
Codification as the source of authoritative accounting principles and the
framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles in the United States. This SFAS is
effective for our interim reporting period ending on September 30, 2009. This
SFAS is not expected to have a material impact on our consolidated financial
position, results of operations and cash flows.





F-17


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





5.           Prepayments
and Deposits





Prepayments
represent the followings:


June 30, 2009
                    
                    
                    June 30, 2008Electronic
      products
                    
                    $
                    5,386,497
                    
                    
                    $
                    -Advertising
      and promotional campaign
                    
                    
                    -
                    
                    
                    
                    1,166,334Renovations
                    
                    
                    -
                    
                    
                    
                    24,090Financial
      consultant
                    
                    
                    30,000
                    
                    
                    
                    -Rents
                    
                    
                    12,351
                    
                    
                    
                    16,735$
                    5,428,848
                    
                    
                    $
                    1,207,159





The
Company entered into an agreement for the purchase of electronic products for
the promotion of the insurance agency business amounting to $13,466,243
(RMB92,000,000).  For the year ended June 30, 2009, the Company made a
40% prepayment for the products of $5,386,497 (RMB36,800,000).  Also
see Note 11.





Prepaid
rents represent rents prepaid to landlords, for the period from one to eleven
months in accordance with the operating lease agreements, for the offices of the
Company.





6.           Fixed
Assets





Fixed
assets consist of the following:


June 30, 2009
                    
                    
                    June 30, 2008At
      cost:Leasehold
      improvement
                    
                    $
                    88,528
                    
                    
                    $
                    135,003Furniture
      and fixtures
                    
                    
                    3,450
                    
                    
                    
                    13,339Computers
      and equipment
                    
                    
                    121,266
                    
                    
                    
                    83,004Motor
      vehicles
                    
                    
                    129,094
                    
                    
                    
                    94,438342,338
                    
                    
                    
                    325,784Less:  Accumulated
      depreciationLeasehold
      improvement
                    
                    
                    64,254
                    
                    
                    
                    44,972Furniture
      and fixtures
                    
                    
                    672
                    
                    
                    
                    1,032Computers
      and equipment
                    
                    
                    35,381
                    
                    
                    
                    15,456Motor
      vehicles
                    
                    
                    29,440
                    
                    
                    
                    7,125129,747
                    
                    
                    
                    68,585Fixed
      assets, net
                    
                    $
                    212,591
                    
                    
                    $
                    257,199





Depreciation
expense for the years ended June 30, 2009 and 2008 was $106,992 and $61,148,
respectively.


F-18


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





7.           Software





Software consists of the
following:


June 30, 2009
                  
                  
                  June 30, 2008Cost
                  
                  $
                  3,545,641
                  
                  
                  $
                  2,813,780Less:
      Accumulated amortization
                  
                  
                  582,505
                  
                  
                  
                  142,494Software,
      net
                  
                  $
                  2,963,136
                  
                  
                  $
                  2,671,286





Amortization
expense for the years ended June 30, 2009 and 2008 were $440,011 and $134,342,
respectively.





Amortization
expense for the next five years and thereafter is as follows:





Year ending June 30,
                    
                    Amount2010
                    
                    $
                    509,9642011
                    
                    
                    509,9642012
                    
                    
                    509,9642013
                    
                    
                    509,9642014
                    
                    
                    509,964Thereafter
                    
                    
                    413,316Total
                    
                    $
                    2,963,136





8.           Prepayments
for Software





The
Company entered into an agreement to purchase a software system to facilitate
the operations of the insurance agency business amounting to $1,127,066
(RMB7,700,000).  As of June 30, 2009, the Company paid the entire
amount while the software is still being tested.  The Company expects
to receive the software and use it in the business by October 2009.





The
Company entered into another agreement for the purchase of a software system for
insurance policy flow management for the insurance agency business amounting to
$6,586,748 (RMB45,000,000).  For the year ended June 30, 2009, the
Company made a 89% prepayment of $5,854,886 (RMB40,000,000).  Also see
Note 11.





9.           Related
Parties Transactions





During
the years ended June 30, 2009 and 2008, the Chairman of the Company, Mr. Wang
Zhenyu, made advances to the Company for operational needs.  At June
30, 2009 and 2008, the amount outstanding was $253,506 and $153,069,
respectively.  The outstanding amounts are non-interest bearing,
unsecured and have no fixed repayment terms.





During
the year ended June 30, 2009, ZYTX entered into the agreement with Beijing
Enterprises UniCard Co., Ltd. ("UniCard"), which Mr. Zhenyu Wang, the Chairman
of the Company is also the Chairman of UniCard.  For the year ended
June 30, 2009, the Company rented office space to UniCard for $131,758 and the
Company also sold fixed assets to UniCard for $130,563.


F-19


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





10.         Taxes





(a)          Corporation
Income Tax (“CIT”)





The
Company has not recorded a provision for U.S. federal income taxes for the year
ended June 30, 2009 due to the net operating loss carry forward in the United
States.





On
March 16, 2007, the National People’s Congress of China approved the new
Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”),
which was effective from January 1, 2008.  Prior to
January 1, 2008, the CIT rate applicable to the Company’s subsidiary in the
PRC was 33%. As from January 1, 2008, the applicable CIT rate for ZBDT, the
wholly owned subsidiary, is 25%.





Of the
$6,260,070 of income taxes payable at June 30, 2009, $6,253,786 represents the
amount of income taxes payable by ZBDT.  Of the $6,253,786 of income
taxes payable, $4,508,167 was due on April 30, 2009 and $1,745,619 is due on
April 30, 2010.  The Company has been negotiating with the tax
authorities to defer the payment of CIT due on April 30, 2009 without interest
or penalties, and the Company is awaiting the final ruling from the tax
authorities.





ZYTX, a
VIE of the Company, enjoys a favorable tax rate of 15% as it is considered as a
high technology company by the Chinese government. ZYTX is also entitled to a
full exemption from CIT for the first two years from January 1, 2007 to December
31, 2008.  Starting from January 1, 2009, the CIT rate of ZYTX will be
15%.  ZYTX is exempted from CIT for the six months period from July 1,
2008 to December 31, 2008 and for 15% for the six months period from January 1,
2009 to June 30, 2009.  For the year ended June 30, 2009, the CIT for
ZYTX was $0 asZYTX has
transferred all its net income to its primary beneficiary, ZBDT.





The
applicable CIT rate for GHIA is 25%.  For the year ended June 30,
2009, the CIT for GHIA was $6,284, which should be payable on April 30,
2010.





Some of
the tax concession granted to eligible companies prior to the new CIT law is
grand fathered. The new CIT Law has an impact on the deferred tax assets and
liabilities of the Company. The Company adjusted deferred tax balances as of
June 30, 2009 and 2008 based on the current applicable tax rate and will
continue to assess the impact of such new law in the future. Effects arising
from the enforcement of the new CIT Law were reflected into the accounts by best
estimates.





Pursuant
to the Inland Revenue Ordinance of Hong Kong, Rise & Grow is subject to Hong
Kong Profits Tax at 16.5% and 17.5% for the years ended June 30, 2009 and 2008,
respectively. As Rise & Grow has no assessable profits for the years ended
June 30, 2009 and 2008, no provision for profits tax has been made.





Computed
“expected” expense of the Company was calculated using 25% and 15% income tax
rate for the years ended June 30, 2009 and 2008, respectively.





Income
tax expense is summarized as follows:


2009
                  
                  
                  2008Computed
      “expected” expense
                  
                  $
                  3,090,607
                  
                  
                  $
                  2,401,192Effect
      on tax rate changes on deferred taxes
                  
                  
                  1,729
                  
                  
                  
                  (245,217
                  )Permanent
      differences
                  
                  
                  92,492
                  
                  
                  
                  10,871Income
      tax expense
                  
                  $
                  3,184,828
                  
                  
                  $
                  2,166,846




F-20


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





10.          Taxes
(Continued)





(a)           Corporation
Income Tax (“CIT”) (Continued)





Provision
for income tax expense is summarized as follows:


2009
                  
                  
                  2008Current
                  
                  $
                  3,294,421
                  
                  
                  $
                  2,401,192Deferred
                  
                  
                  (109,593
                  )
                  
                  
                  (234,346
                  )Income
      tax expense
                  
                  $
                  3,184,828
                  
                  
                  $
                  2,166,846





The tax
effects of temporary differences that give rise to the Company’s deferred tax
assets and liabilities are as follows:


June30,
                            2009
                          
                          
                          June 30,
                            2008Deferred
      tax assets:Social
      welfare expenses
                          
                          $
                          39,693
                          
                          
                          $
                          19,231Consumable
      expenses
                          
                          
                          6,271
                          
                          
                          
                          4,607Advertising
                          
                          
                          -
                          
                          
                          
                          43,738Discounts
      allowed
                          
                          
                          1,490
                          
                          
                          
                          2,591Business
      tax
                          
                          
                          358,915
                          
                          
                          
                          170,953Allowance
      for doubtful accounts
                          
                          
                          3,945
                          
                          
                          
                          -Tax
      loss
                          
                          
                          56,500
                          
                          
                          
                          -Other
                          
                          
                          14
                          
                          
                          
                          2,556Total
      current deferred tax assets
                          
                          
                          466,828
                          
                          
                          
                          243,676Amortization
                          
                          
                          56,727
                          
                          
                          
                          32,373Depreciation
                          
                          
                          8,720
                          
                          
                          
                          4,843Total
      long-term deferred tax assets
                          
                          
                          65,447
                          
                          
                          
                          37,216Total
      deferred tax assets
                          
                          
                          532,275
                          
                          
                          
                          280,892Deferred
      tax liabilities:Commission
      income
                          
                          
                          5,449
                          
                          
                          
                          7,776Software
      income
                          
                          
                          -
                          
                          
                          
                          1,194Rental
      income
                          
                          
                          21,053
                          
                          
                          
                          -Disposal
      income
                          
                          
                          38,786
                          
                          
                          
                          -Rent
                          
                          
                          -
                          
                          
                          
                          2,480Consultancy
      fee
                          
                          
                          4,509
                          
                          
                          
                          -Amortization
                          
                          
                          18,997
                          
                          
                          
                          -Depreciation
                          
                          
                          1,764
                          
                          
                          
                          80Other
                          
                          
                          86
                          
                          
                          
                          -Total
      current deferred tax liabilities
                          
                          
                          90,644
                          
                          
                          
                          11,530Amortization
                          
                          
                          -
                          
                          
                          
                          18,089Depreciation
                          
                          
                          -
                          
                          
                          
                          703Total
      long-term deferred tax liabilities
                          
                          
                          -
                          
                          
                          
                          18,792Total
      deferred tax liabilities
                          
                          
                          90,644
                          
                          
                          
                          30,322Net
      deferred tax assets
                          
                          $
                          441,631
                          
                          
                          $
                          250,570





The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes—an Interpretation of FASB Statement
No. 109,” (“FIN 48”), on January 1, 2007. The Company did not
have any material unrecognized tax benefits and there was no effect on its
financial condition or results of operations as a result of implementing FIN
48.


F-21


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





10.          Taxes
(Continued)





(b)
            Business
      Tax





Pursuant
to the relevant PRC tax laws, the Company is subject to business tax at 5% of
the gross sales, excluding software development income.  For the years
ended June 30, 2009 and 2008, the Company incurred a total business tax of
$1,409,331 and $1,180,971, respectively, which is included in the cost of sales
in the accompanying condensed consolidated statement of operations and
comprehensive income.





The
business tax payable balance of $2,097,456 and $1,031,519 at June 30, 2009 and
2008, respectively, are included in other payables and accrued liabilities in
the accompanying condensed consolidated balance sheets.  Of the
$2,097,456 of business tax payable at June 30, 2009, $1,495,788 was due on April
30, 2009 and $601,668 is due on April 30, 2010.  The Company has been
negotiating with the tax authorities to defer the payment of business tax due on
April 30, 2009 without interest or penalties, and the Company is awaiting the
final ruling from the tax authorities.





(c)
            Tax
      holiday and incentive





The
Company enjoys certain tax holidays and incentives under the new CIT law. The
combined effects of the income tax expense reductions available to the Company
are as follows:





2009
                  
                  
                  2008Tax
      holiday and incentive effect
                  
                  $
                  1,361,133
                  
                  
                  $
                  2,101,224Basic
      net income per share excluding tax holidays and incentive
                  
                  $
                  0.20
                  
                  
                  $
                  0.18




F-22


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





11.        
Commitments





(a)           Lease
Commitments





The Company occupies office spaces
leased from third parties.  For the years ended June 30, 2009 and
2008, the Company recognized $182,529 and $132,739, respectively, as rental
expense for these spaces.  As of June 30, 2009, the Company has
outstanding commitments with respect to non-cancelable operating leases as
follows:





Year Ending June 30,
                    
                    Amount2010
                    
                    $
                    39,409





(b)           Purchase
of Electronic Products





As of
June 30, 2009, the Company has outstanding commitments with respect to the
purchase of electronic products of $8,079,748 (Rmb55,200,000) due within one
year as follows:





Payment Due Dates
                  
                  AmountOn
      or before July 20, 2009
                  
                  $
                  2,810,347On
      or before October 20, 2009
                  
                  
                  2,634,700On
      or before January 20, 2010
                  
                  
                  1,902,839On
      or before April 20, 2010
                  
                  
                  731,862$
                  8,079,748





Expected Product Delivery
    Dates
                  
                  UnitsOctober
      20, 2009
                  
                  
                  20,000December
      20, 2009
                  
                  
                  10,000March
      20, 2010
                  
                  
                  10,00040,000





Also
see Note 5.





(c)           Purchase
of Software





As of
June 30, 2009, the Company has outstanding commitments with respect to the
purchase of software of $731,861 (Rmb5,000,000) due on July 19,
2009.  Subsequent to the year end, the Company made the outstanding
payment accordingly.  The software is expected to be installed and
fully tested in the first quarter of 2010.  Also see Note
8.


F-23


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





12.         Certain
Risks and Concentrations





Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
primarily of cash and cash equivalents and accounts receivable.





The Company has $1,207,171 and
$4,562,222 in bank deposits in the banks in China, which constitutes about 99.2%
and 99.9% of its total cash and cash equivalents as of June 30, 2009 and 2008,
respectively.  Historically, deposits in Chinese banks are secured due
to the state policy on protecting depositors’ interests.  However,
China promulgated a new Bankruptcy Law in August 2006, which came into effect on
June 1, 2007.  The new Bankruptcy Law contains a separate article
expressly stating that the State Council may promulgate implementation measures
for the bankruptcy of Chinese banks.  Under the new Bankruptcy Law, a
Chinese bank may go bankrupt.  In addition, since China’s concession
to World Trade Organization, foreign banks have been gradually permitted to
operate in China and have been severe competitors against Chinese banks in many
aspects, especially since the opening of RMB businesses to foreign banks in late
2006.





Therefore, the risk of bankruptcy of
the bank in which that the Company has deposits has increased.  In the
event of bankruptcy of the bank which holds the Company’s deposits, the Company
is unlikely to recover its deposits back in full since it is unlikely to be
classified as a secured creditor based on PRC laws.





Accounts receivable consist primarily
of software development clients and insurance agents of online insurance
advertising. As of June 30, 2009 and 2008, approximately 15% and 35% for the
software development and 84% and 64% for online insurance advertising,
respectively.  Regarding its online advertising and insurance agency
operations, no individual customer accounted for more than 10% of total net
revenues for the years ended June 30, 2009 and 2008.





The concentration of sales for the
years ended June 30, 2009 and 2008, and accounts receivable at June 30, 2009 and
2008 are summarized as follows:





Sales
                    
                    
                    Accounts Receivable2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Software
      DevelopmentCompany
      A
                    
                    
                    -
                    
                    
                    
                    8
                    %
                    
                    
                    -
                    
                    
                    
                    -Company
      B
                    
                    
                    3
                    %
                    
                    
                    5
                    %
                    
                    
                    -
                    
                    
                    
                    13
                    %Company
      C
                    
                    
                    17
                    %
                    
                    
                    -
                    
                    
                    
                    10
                    %
                    
                    
                    -Company
      D
                    
                    
                    8
                    %
                    
                    
                    -
                    
                    
                    
                    5
                    %
                    
                    
                    -Company
      E
                    
                    
                    8
                    %
                    
                    
                    18
                    %
                    
                    
                    -
                    
                    
                    
                    22
                    %36
                    %
                    
                    
                    31
                    %
                    
                    
                    15
                    %
                    
                    
                    35
                    %Online
      Insurance Advertising
                    
                    
                    63
                    %
                    
                    
                    67
                    %
                    
                    
                    84
                    %
                    
                    
                    64
                    %Insurance
      Agency
                    
                    
                    1
                    %
                    
                    
                    2
                    %
                    
                    
                    1
                    %
                    
                    
                    1
                    %Total
                    
                    
                    100
                    %
                    
                    
                    100
                    %
                    
                    
                    100
                    %
                    
                    
                    100
                    %




F-24


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





13.         Segment
Information





Based on
criteria established by SFAS 131, “Disclosures about Segments of an Enterprise
and Related Information,” the Company operates three business segments for the
years ended June 30, 2009 and 2008, which are software development, online
insurance advertising and insurance agency within the PRC.  The
following is the summary information by segment as of and for the years ended
June 30, 2009 and 2008:





Software
                          Development
                        
                        
                        Online
                          Insurance
                          Advertising
                        
                        
                        Insurance
                          Agency
                        
                        
                        Administra-
                          tion
                        
                        
                        TotalYear
      Ended
                          June 30, 2009Revenue,
      net
                        
                        $
                        6,511,545
                        
                        
                        $
                        11,244,559
                        
                        
                        $
                        11,752
                        
                        
                        $
                        208,673
                        
                        
                        $
                        17,976,529Cost
      of sales
                        
                        
                        115,509
                        
                        
                        
                        918,088
                        
                        
                        
                        236,800
                        
                        
                        
                        862,772
                        
                        
                        
                        2,133,169Gross
      profit (loss)
                        
                        $
                        6,396,036
                        
                        
                        $
                        10,326,471
                        
                        
                        $
                        (225,048
                        )
                        
                        $
                        (654,099
                        )
                        
                        $
                        15,843,360June 30, 2009Long-lived
      assets
                        
                        $
                        53,592
                        
                        
                        $
                        1,817,578
                        
                        
                        $
                        12,648,168
                        
                        
                        $
                        255,668
                        
                        
                        $
                        14,775,006Current
      assets
                        
                        $
                        1,214,889
                        
                        
                        $
                        6,528,069
                        
                        
                        $
                        92,470
                        
                        
                        $
                        7,044,255
                        
                        
                        $
                        14,879,683Year Ended
                          June 30, 2008Revenue,
      net
                        
                        $
                        4,298,739
                        
                        
                        $
                        9,432,393
                        
                        
                        $
                        4,244
                        
                        
                        $
                        -
                        
                        
                        $
                        13,735,376Cost
      of sales
                        
                        
                        94,502
                        
                        
                        
                        556,683
                        
                        
                        
                        17,298
                        
                        
                        
                        645,099
                        
                        
                        
                        1,313,582Gross
      profit (loss)
                        
                        $
                        4,204,237
                        
                        
                        $
                        8,875,710
                        
                        
                        $
                        (13,054
                        )
                        
                        $
                        (645,099
                        )
                        
                        $
                        12,421,794June 30, 2008Long-lived
      assets
                        
                        $
                        30,849
                        
                        
                        $
                        1,954
                        
                        
                        $
                        2,674,724
                        
                        
                        $
                        335,978
                        
                        
                        $
                        3,043,505Current
      assets
                        
                        $
                        2,226,184
                        
                        
                        $
                        4,044,456
                        
                        
                        $
                        1,325,961
                        
                        
                        $
                        4,817,029
                        
                        
                        $
                        12,413,630




F-25


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





14.          Acquisition
of Company





On
October 28, 2008, Rise & Grow and ZYTX consummated a Share Purchase
Agreement (the “Purchase Agreement”). Pursuant to the terms of the Purchase
Agreement, Rise & Grow and ZYTX purchased 100% of voting interest in Guang
Hua Insurance Agency Company Limited (“GHIA”), a limited liability company
organized under the laws of the PRC for a purchase price of $5,846,244
(RMB$40,000,000) in cash. As a result of the transaction, GHIA became a
wholly-owned subsidiary of the Company. GHIA is an insurance agency company and
performs services similar to those of the Company in China.





The
following represents the fair value of the assets purchased and liabilities
assumed at the date of the acquisition:





October 28,
                    2008(Unaudited)Cash
      and cash equivalents
                  
                  $
                  130,325Fixed
      assets
                  
                  
                  815Accounts
      receivable
                  
                  
                  318,409Other
      receivable and prepayments
                  
                  
                  8,907Due
      from shareholder
                  
                  
                  1,019,759Deferred
      tax assets
                  
                  
                  25,007Total
      assets purchased
                  
                  $
                  1,503,222Accounts
      payable
                  
                  $
                  9,519Other
      payables and accrued expenses
                  
                  
                  85,355Taxes
      payable
                  
                  
                  6,290Deferred
      tax liabilities
                  
                  
                  619Amount
      due to shareholder
                  
                  
                  28,982Total
      liabilities assumed
                  
                  $
                  130,765Total
      net assets
                  
                  $
                  1,372,457Share
      percentage
                  
                  
                  100
                  %Net
      assets acquired
                  
                  $
                  1,372,457Total
      consideration paid
                  
                  $
                  5,846,244Intangible asset
      - Goodwill
                  
                  $
                  4,473,787





The
following is the unaudited pro forma net revenues, cost of sales, income from
operations, net income and basic and diluted net income per share of the Company
for the year ended June 30, 2009 assuming the acquisition of GHIA was completed
on July 1, 2008.


2009(Unaudited)Revenues,
      net
                  
                  $
                  18,016,437Cost
      of sales
                  
                  $
                  2,133,169Income
      from operations
                  
                  $
                  12,290,787Net
      income
                  
                  $
                  9,124,012Earnings
      per share-
      Basic and diluted
                  
                  $
                  0.23




F-26


CHINA
INSONLINE CORP.


AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008





15.         Subsequent
event





In
preparing the consolidated financial statements, the Company has evaluated
events and transactions for potential recognition or disclosure through October
13, 2009, the date the financial statements were issued.


F-27