f20fa_041515.htm
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 20-F/A
 
(Amendment No.1)
 
 (Mark One)
 
o
  
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR
 
þ
  
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the fiscal year ended December 31, 2013
 
OR
 
o
  
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
 
OR
 
o
  
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report

 
Commission file number: 000-50975
 
CHINA FINANCE ONLINE CO. LIMITED
 
(Exact name of Registrant as specified in its charter)
 
Not Applicable
(Translation of Registrant's name into English)
 
Hong Kong
(Jurisdiction of incorporation or organization)
 
9th Floor of Tower C, Corporate Square
NO.35 Financial Street, Xicheng District
Beijing 100033, China
(Address of principal executive offices)
 
Jun Wang, Chief Financial Officer
Telephone: + (86 10) 58325288
Email: ir@jrj.com
Facsimile: + (86 10)58325200
9/F, Tower C, Corporate Square
No.35 Financial Street, Xicheng District
Beijing 100033, China

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
 
 
1
 
Securities registered or to be registered pursuant to Section 12(b) of the Act.
 
 
Title of each class
Name of each exchange on which registered
  
 
None
None
  
 
Securities registered or to be registered pursuant to Section 12(g) of the Act.
 
American Depositary Shares, each representing 5 ordinary shares,
 
par value HK$0.001 per share*
_________________________________________
(Title of Class)
 
*Not for trading, but only in connection with the listing on the NASDAQ Global Market of American Depository Shares each
representing 5 ordinary shares pursuant to the requirements of the Securities and Exchange Commission
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
 
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 111,145,633 ordinary shares.
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
oYes                      þ No
 
If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
o Yes                      þ No
 
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
þ Yes                      o No
 
Indicate by check mark whether the registration 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).
 
þ Yes                      o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
 
Large accelerated filer o Accelerated filer o Non-accelerated filer þ  
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in the filing:
 
U.S. GAAP þInternational Financial Reporting Standards as issued by the International Accounting Standards Board o Other o
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 
 Item 17 o               Item 18 o
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
oYes                                                                                     þ No
 
 
2
 
CHINA FINANCE ONLINE CO. LIMITED
 
TABLE OF CONTENTS
 
 

 


 
3
 
EXPLANATORY NOTE

 
This Amendment No. 1 on Form 20-F/A (this “Amendment No. 1”) to our annual report on Form 20-F for the year ended December 31, 2013, filed with the Securities and Exchange Commission on May 6, 2014 (the “2013 Form 20-F”), is filed solely for the purposes of supplementing and revising ITEM 4, 5, 6 and 7 and correcting a clerical error in ITEM 15 in the 2013 Form 20-F. 
 
This Amendment No. 1 speaks as of the filing date of the 2013 Form 20-F on May 6, 2014. Other than as set forth above, this Amendment No. 1 does not, and does not purport to, amend, update or restate any other information or disclosure included in the 2013 Form 20-F or reflect any events that have occurred since May 6, 2014.

 
PART I
 
ITEM 4. INFORMATION ON THE COMPANY
 
Item 4 of the 2013 Form 20-F, “B. Business Overview – Regulation – Foreign ownership restriction on Internet content provision businesses” is hereby amended and restated in its entirety as follows:

B. Business overview.

Regulation

Foreign ownership restriction on Internet content provision businesses
 
According to the Provisions on Administration of Foreign Invested Telecommunications Enterprises, or the FITE Provisions, promulgated by the State Council in December 2001 and amended in September 2008, foreign ownership in the companies that provide Internet content services, including our business of providing financial information and data to Internet users, must not exceed 50%. In order to comply with this foreign ownership restriction, we operate our website in China through CFO Fuhua, which is wholly owned by Zhiwei Zhao, our chief executive officer, and Jun Wang, our chief financial officer, both of whom are PRC citizens. Under FITE Provisions and other related regulations, we cannot directly hold the licenses and approvals necessary to operate our website because those licenses and approvals cannot be held by foreign entities or majority foreign-owned entities. We, as a company incorporated in Hong Kong, are a foreign entity for this purpose.
 
There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, we cannot assure investors that the PRC regulatory authorities will not ultimately take a view that is contrary to the opinion of Jincheng Tongda & Neal Law Firm, our PRC legal counsel. If the PRC government finds that the agreements that establish the structure of our operations in China do not comply with PRC government restrictions on foreign investment in our industry, we could be subject to severe penalties.

 
4
 
Item 4 of the 2013 Form 20-F, “C. Organizational structure” is hereby amended and restated in its entirety as follows:

C. Organizational structure.
 
The following table sets forth the details of our principal subsidiaries and significant PRC-incorporated affiliates as of December 31, 2013:
 
 
 
Jurisdiction
of
Legal
Ownership
Name
 
Incorporation
Interest
Fortune Software (Beijing) Co., Ltd.
 
PRC
100%
China Finance Online (Beijing) Co., Ltd.
 
PRC
100%
Beijing Fuhua Innovation Technology Development Co., Ltd. *
 
PRC
Nil
Fortune (Beijing) Success Technology Co., Ltd.
  
PRC
100%
Beijing Chuangying Advisory and Investment Co., Ltd.*
  
PRC
Nil
Shanghai Meining Computer Software Co., Ltd.*
  
PRC
Nil
Zhengning Information & Technology (Shanghai) Co., Ltd.
  
PRC
100%
Zhengyong Information & Technology (Shanghai) Co., Ltd.
  
PRC
100%
Zhengtong Information & Technology (Shanghai) Co., Ltd.
  
PRC
100%
Shanghai Chongzhi Co., Ltd.*
  
PRC
Nil
Fortune (Beijing) Qicheng Technology Co., Ltd.*
  
PRC
Nil
Shanghai Stockstar Securities Advisory and Investment Co., Ltd. *
  
PRC
Nil
Jujin Software (Shenzhen) Co., Ltd.
  
PRC
100%
Fortune (Beijing) Huiying Investment Consulting Co., Ltd.*
  
PRC
Nil
Shanghai Stockstar Wealth Management Co., Ltd.*
  
PRC
Nil
Shenzhen Genius Information Technology Co., Ltd.
  
PRC
100%
Shenzhen Shangtong Software Co., Ltd. *
  
PRC
Nil
Shenzhen Newrand Securities Advisory and Investment Co., Ltd.*
  
PRC
Nil
Zhengjin (Fujian) Precious Metals Investment Co., Ltd.*
  
PRC
Nil
Henghui (Tianjin) Precious Metals Management Co., Ltd. *
  
PRC
Nil
Zhengjin (Tianjin) Precious Metals Management Co., Ltd. *
  
PRC
Nil
Zhengjin (Shanghai) Precious Metals Management Co., Ltd. *
  
PRC
Nil
East Win Investment Consulting Co., Ltd.*
  
PRC
Nil
Shenzhen Tahoe Investment and Development Co., Ltd.*
  
PRC
Nil
Netinfo (Beijing) Technology Co., Ltd.*
  
PRC
Nil
Sinoinfo (Dalian) Investment Consulting Co., Ltd.*
  
PRC
Nil
iSTAR Financial Holdings Limited
  
BVI
85%
iSTAR International Securities Co. Limited
  
Hong Kong
85%
iSTAR International Futures Co. Limited
  
Hong Kong
85%
iSTAR International Wealth Management Co. Limited
  
Hong Kong
85%
iSTAR International Investment Services Co. Limited
  
Hong Kong
85%
iSTAR International Credit Co. Limited
  
Hong Kong
85%
________________
*Denotes variable interest entities or subsidiaries of variable interest entities
 
 
5
 
PRC regulations currently limit foreign ownership of companies that provide ICP services, which include our business of providing financial information and data to Internet users, not to exceed 50%. We are a Hong Kong company and we conduct our operations solely in China through our wholly owned subsidiaries. We are a foreign enterprise and the wholly owned subsidiaries are all foreign invested enterprises under PRC law and, accordingly, neither we nor our wholly owned subsidiaries are eligible for a license to operate ICP services or provide online advertising services in China. In order to comply with foreign ownership restrictions, we operate our online business in China through CFO Fuhua. We have entered into a series of contractual arrangements with CFO Fuhua and its shareholders, including contracts relating to the leasing of equipment, the licensing of our domain name, the provision of technical support services and strategic consulting and certain shareholder rights and corporate government matters in 2004. CFO Fuhua is a PRC domestic company controlled by Zhiwei Zhao, our chairman and chief executive officer and Jun Wang, our chief financial officer.
 
In addition, to provide the Company with effective control over and the ability to receive substantially all of the economic benefits of its VIEs, the Company’s wholly owned subsidiaries including CFO Beijing, CFO Software, CFO Zhengyong and CFO Success (collectively, the “WFOEs” and each a “WFOE”) have entered into a series of contractual arrangements with the VIEs, which include CFO Fuhua, CFO Chongzhi, CFO Qicheng and CFO Newrand. Specifically, these contractual arrangements enable us to:
 
·
have the power to direct the activities that most significantly affect the economic performance of the VIEs and their subsidiaries;

·
receive substantially all of the economic benefits from the VIEs and their subsidiaries in consideration for the services provided by our WFOEs; and

·
have an exclusive option to purchase from each of the shareholders of the VIEs all or part of the VIEs’ equity interest, when and to the extent permitted by PRC law, or request any existing shareholder of VIEs to transfer all or part of the equity interest in the VIEs to another PRC person or entity designated by us at any time in our discretion.
 
These contractual arrangements are summarized in the following paragraphs.

Exclusive technology consulting and management service agreement. Pursuant to a series of technology support and service agreements, the WFOEs retain the exclusive right to provide the VIEs and their subsidiaries technology support and consulting services and exclusive management consulting service. As a result of these services, the WFOEs are entitled to charge the VIEs and their subsidiaries annual service fees. The principal services agreements that the WFOEs have entered into with the VIEs include:

·
strategic consulting services agreement, pursuant to which the amount of fees to be charged is 30% of each VIE’s income before tax;

·
technical support services agreement, pursuant to which the amount of fees to be charged is 30% of each VIE’s income before tax; and

·
operating support services agreement, pursuant to which the amount of fees to be charged is 40% of each VIE’s income before tax.
 
Power of Attorney. Pursuant to the power of attorney, each of the shareholders of the VIEs has executed an irrevocable power of attorney assigning the WFOEs or individuals designated by the WFOEs as their attorney-in-fact to vote on their behalf on all matters of the VIEs requiring shareholder approval under PRC laws and regulations and the articles of association of VIEs. The articles of incorporation of the VIEs state that the major rights of the shareholders include the right to appoint directors, the general manager and other senior management members.

 
6
 
Loan Agreement. We entered into a loan agreement with Zhiwei Zhao effective November 20, 2006 to extend to Mr. Zhao a loan in the amount of $163,000, for the sole purpose of financing his acquisition of the equity interests of CFO Fuhua from one of its two former shareholders (the “Zhao Loan”). The initial term of the foregoing loan is 10 years which may be extended upon the parties' agreement. Zhiwei Zhao can only repay the loan by transferring all of his interest in CFO Fuhua to us or a third party designated by us. If and when Zhiwei Zhao transfers his interest in CFO Fuhua to us or our designee, if the actual transfer price is higher than the principal amount of the loan, the amount exceeding the principal amount of the loan will be deemed as interest accrued on such loan and repaid by Zhiwei Zhao to us. While Hong Kong law limits maximum interest payment payable to 60% of the outstanding principal amount per annum, this limitation would be relevant only if, the actual value of CFO Fuhua were to have increased at an average annual rate greater than 60% at the time Zhiwei Zhao transfers to us his interest in CFO Fuhua.

CFO Fuhua's assets currently consist primarily of registered capital and licenses to provide Internet content and advertising related services, and its operations are primarily limited to operating our free website and providing advertising related services on behalf of CFO Beijing. Accordingly, we do not believe this limitation will have a material effect on our business and operations, or will result in a material amount being paid to the shareholders of CFO Fuhua if and when they are permitted to transfer their interest in CFO Fuhua to us.

We entered into a loan agreement with Jun Wang in October 2007 to extend to Mr. Wang a loan in the amount of $199,000 for the sole purpose of financing his acquisition of the equity interests of CFO Fuhua from its other former shareholder (together with the Zhao Loan, the “VIE Loans”). Such loan is subject to the same terms and conditions as the loan agreement we entered into with Zhiwei Zhao as discussed above.

Purchase Option Agreement.  A purchase option agreement was entered into by us, CFO Beijing, CFO Fuhua and the two former shareholders of CFO Fuhua on May 27, 2004. After the two former shareholders of CFO Fuhua completed the transfer of all of their equity interests in CFO Fuhua to Zhiwei Zhao and Jun Wang in 2006 and 2007, respectively, each of Zhiwei Zhao and Jun Wang executed a new purchase option agreement with us, CFO Beijing and CFO Fuhua, replacing the previous purchase option agreement. Pursuant to the current purchase option agreement, each of Zhiwei Zhao and Jun Wang is obligated to sell to us, and we have an exclusive option to or designate another party to purchase from each of them, all or any portion of their equity interest in CFO Fuhua when and to the extent that applicable PRC law permits us to own part or all of the equity interest in CFO Fuhua. In addition, we have an exclusive option to require CFO Fuhua to transfer all of its assets to us or our designee if and when Zhiwei Zhao and/or Jun Wang ceases to be a director or employee of CFO Fuhua, or either Zhiwei Zhao or Jun Wang desires to transfer his equity interest in CFO Fuhua to a party other than the existing shareholders of CFO Fuhua, to the extent permitted by PRC law.

The exercise price of the option will equal (i) the total principal amount under the VIE Loans, or (ii) the price required by relevant PRC law or government approval authority if such required price is higher than the total principal amount under the VIE Loans. We may choose to pay the purchase price by canceling our loans to Zhiwei Zhao and Jun Wang.

Following any exercise of the option, the parties will enter into a definitive share or asset purchase agreement and other related transfer documents within 30 days after written notice of exercise is delivered by us. Pursuant to the purchase option agreement, at all times before we or any party designated by us acquire 100% of CFO Fuhua’s equity interest or assets, CFO Fuhua may not (1) sell, transfer, assign, dispose of in any manner or create any encumbrance in any form on any of its assets unless such sale, transfer, assignment, disposal or encumbrance is related to the daily operation of CFO Fuhua or has been disclosed to and consented to in writing by us; (2) enter into any transaction which may have a material effect on CFO Fuhua’s assets, liabilities, operations, equity or other legal interest unless such transaction relates to the daily operation of CFO Fuhua or has been disclosed to and consented to in writing by us; or (3) distribute any dividends to its shareholders in any manner,. In addition, Zhiwei Zhao and Jun Wang may not cause CFO Fuhua to amend its articles of association to the extent such amendment may have a material effect on CFO Fuhua’s assets, liabilities, operations, equity or other legal interest except for pro rata increases of registered capital required by law.

 
7
 
Voting arrangement. Upon Zhiwei Zhao's receipt of Jun Ning's holdings in CFO Fuhua on November 20, 2006, and Jun Wang's receipt of Wu Chen's holdings in CFO Fuhua on October 18, 2007, each of Zhiwei Zhao and Jun Wang delivered to us an executed proxy substantially identical to the proxy executed by Jun Ning and Wu Chen, respectively, with respect to their voting rights as shareholders of CFO Fuhua. The foregoing proxy grants us the power to exercise the rights of the shareholders as shareholders of CFO Fuhua, including the right to appoint all of the directors and senior management of CFO Fuhua. In addition, we are entitled to all other voting rights provided to the shareholders of CFO Fuhua, as set forth in its articles of association, to vote on their behalf on all matters, such as matters related to the transfer of their respective equity interests in CFO Fuhua and the distribution of dividends or other proceeds from CFO Fuhua.

Share Pledge Agreement.  The share pledge agreement is an agreement which collateralizes equity interests in our VIEs as security interest. Pursuant to a share pledge agreement, dated May 27, 2004, the two former shareholders of CFO Fuhua pledged all of their equity interest in CFO Fuhua to CFO Beijing to secure the payment and the performance of all other obligations of CFO Fuhua under the equipment leasing agreement, the technical support agreement and the amended and restated strategic consulting agreement between CFO Beijing and CFO Fuhua.

In November 2006 and October 2007, the two former shareholders of CFO Fuhua completed the transfer of all of their equity interests in CFO Fuhua to Zhiwei Zhao and Jun Wang, respectively. Under the new share pledge agreement entered into by and among Zhiwei Zhao, Jun Wang and CFO Beijing, each of Zhiwei Zhao and Jun Wang has agreed not to transfer, assign, pledge or in any other manner dispose of his interest in CFO Fuhua or create any other encumbrance on his interest in CFO Fuhua which may have a material effect on CFO Beijing’s interest without the written consent of CFO Beijing, except for the transfer of their interest in CFO Fuhua to us or a third-party assignee designated by us according to the purchase option agreement.

We entered into contractual arrangements with our affiliates including significant affiliates such as Shenzhen Newrand Securities Advisory and Investment Co., Ltd. (“CFO Newrand”), Shanghai Chongzhi Co., Ltd. (“CFO Chongzhi”), Beijing Chuangying Advisory and Investment Co., Ltd. (“CFO Chuangying”) and Fortune (Beijing) Qicheng Technology Co., Ltd. (“CFO Qicheng”) and their shareholders similar agreements we had entered into with CFO Fuhua and its shareholders. As a result of these contractual arrangements we obtained substantial control and became the primary beneficiary of our PRC-incorporated affiliates and, accordingly, we consolidate the results of operations of our PRC-incorporated affiliates in our financial statements. Samples of the complete set of form VIE agreement are listed as exhibits.

In the opinion of Jincheng Tongda & Neal Law Firm, our PRC legal counsel:

·
the corporate structure of the Company and its subsidiaries and our PRC-incorporated affiliates are in compliance with existing PRC laws and regulations; and

·
the contractual arrangements governing each of our VIE relationships are valid, binding and enforceable under, and do not violate PRC laws or regulations currently in effect.
 
There are, however, substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities will not in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC legal counsel that if the PRC government finds that the agreements that establish the structure for our operations in China do not comply with PRC regulatory restrictions on foreign investment in our industry, we could be subject to severe penalties. The imposition of any of these penalties could result in a material adverse effect on our ability to conduct our business.

 
8
 
Business sector operated through each VIE

Variable interest entities
Business sector
Beijing Fuhua Innovation Technology Development Co., Ltd.
Web portal and advertising services
Shanghai Chongzhi Co., Ltd.
Subscription services and other related services
Fortune (Beijing) Qicheng Technology Co., Ltd.
Subscription services and other related services
Shenzhen Newrand Securities Advisory and Investment Co., Ltd.
Subscription services and other related services
Shanghai Stockstar Wealth Management Co., Ltd
Precious metals trading services

Item 5 of the 2013 Form 20-F, “A. Operating Results- Net Revenues” is hereby amended and restated in its entirety as follows:
 
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
A. Operating Results
 
Net revenues
 
Our net revenues reflect a deduction from our gross revenues for business taxes and related surcharges incurred in connection with our China operations. The gross revenues of PRC entities from sales that are not subject to VAT are subject to a business tax at a rate ranging from 3% to 5%. We pay business tax in the PRC on revenues from mobile value-added services. We pay VAT or business tax on revenues from precious metals trading services, depending on the judgments of difference taxation authorities.

Before January 1, 2012, our advertising-related revenues in Shanghai were subject to business tax. Effective as of January 1, 2012, the PRC Ministry of Finance and the State Administration of Taxation launched a Business Tax to VAT Transformation Pilot Program (the "Pilot Program") for certain industries in Shanghai.  On September 1, 2012, the PRC Ministry of Finance and the State Administration of Taxation extended the Pilot Program to certain industries in other eight regions, including Beijing and Shenzhen. With the adoption of Pilot Program, our advertising-related revenues and certain subscription revenues started to be subject to VAT tax. Our advertising- related revenues and certain subscription revenues are recognized after deducting VAT and other related surcharges.
 
We derive revenues from external customers for each of the following services during the years presented:
 
   
Years ended December 31, 2013
  
   
PRC
    
Hong Kong
    
Total
  
Precious metals trading services revenues
     30,124,245       -       30,124,245  
Hong Kong brokerage services revenues
     -       3,404,767       3,404,767  
Subscription services and other related services revenues
     19,209,065       -       19,209,065  
Total revenues from external customers
     49,333,310       3,404,767       52,738,077  

 
   
Years ended December 31, 2012
  
   
PRC
    
Hong Kong
    
Total
  
Hong Kong brokerage services revenues
     -       3,817,762       3,817,762  
Subscription services and other related services revenues
     25,781,724       -       25,781,724  
Total revenues from external customers
     25,781,724       3,817,762       29,599,486  
 
 
9
 
 
   
Years ended December 31, 2011
  
   
PRC
    
Hong Kong
    
Total
  
Hong Kong brokerage services revenues
     -       3,539,664       3,539,664  
Subscription services and other related services revenues
     49,468,401       -       49,468,401  
Total revenues from external customers
     49,468,401       3,539,664       53,008,065  
 
Item 5 of the 2013 Form 20-F, “B. Liquidity and capital resources – Restrictions on Renminbi conversion” is hereby amended and restated in its entirety as follows:

B. Liquidity and capital resources.

Restrictions on Renminbi conversion

The majority of our revenues and operating expenses are denominated in Renminbi.  The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China.  Pursuant to the Foreign Currency Administration Rules promulgated on January 29, 1996 and amended on January 14, 1997 and various regulations issued by the SAFE and other relevant PRC government authorities, Renminbi is freely convertible only to the extent of current account items, such as trade-related receipts and payments, interest and dividends.  Capital account items, such as direct equity investments, loans and repatriation of investment, require the prior approval from the SAFE or its local branch for conversion of Renminbi into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC.  Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy its foreign currency-denominated obligations. Currently, each of our PRC subsidiaries and affiliates may purchase foreign exchange for settlement of "current account transactions", including payment of dividends to us and payment of license fees and service fees to foreign licensors and service providers, without the approval of SAFE.  However, approval from the SAFE or its local branch is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
  
Each of our PRC subsidiaries and affiliates may also retain foreign exchange in their current accounts to satisfy foreign exchange liabilities or to pay dividends.  However, we cannot assure investors that the relevant PRC governmental authorities will not limit or eliminate our ability to purchase and retain foreign currencies in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders. Since a significant amount of our future revenues will be in the form of Renminbi, the existing and any future restrictions on currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in foreign currencies.

A summary table, by respective denomination, is set forth below, including: (1) cash, cash equivalents and restricted cash held inside of the PRC and subject to restrictions; (2) cash, cash equivalents and restricted cash held outside of the PRC; and (3) for entities within the PRC, cash, cash equivalents and restricted cash held by VIEs and VIEs’ subsidiaries, as of December 31, 2012 and 2013, respectively:

 
10
 
 
   
For the year ended December 31,
  
   
2012
    
2013
  
Cash, cash equivalents and restricted cash held inside of the PRC and subject to restrictions
            
Denomination in RMB
   $ 55,629,246     $ 26,912,31  
Denomination in foreign currencies
   $ 424     $ 480  
                 
Cash, cash equivalents and restricted cash held by VIEs and VIEs’ subsidiaries in the PRC
                
Denomination in RMB
   $ 6,815,785     $ 19,412,207  
Denomination in foreign currencies
     -       -  
                 
Cash, cash equivalents and restricted cash held outside of the PRC
                
Denomination in RMB
   $ 67,570     $ 66,294  
Denomination in foreign currencies
   $ 14,083,040     $ 9,395,807  
 
Item 6 of the 2013 Form 20-F, “C. Term of directors and executive officers” is hereby amended and restated in its entirety as follows:
 
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

C. Terms of directors and executive officers

We have a staggered board, which means a subset of our directors (excluding our chief executive officer), retire at every annual general meeting and the vacancies created by such retirement stand for election. Our chief executive officer will at all times be a director, and will not retire as a director, so long as he remains our chief executive officer. Accordingly, our directors, excluding our chief executive officer, hold office until the second annual meeting of shareholders following their election, or until their successors have been duly elected and qualified. Our board has adopted a policy providing that no director may be nominated for re-election or re-appointment to our board after reaching 70 years of age, unless our board concludes that such person’s continued service as our director is in our best interest. Officers are elected by and serve at the discretion of the board of directors. As of the date on which the statements are made in this annual report, the date of expiration for each director’s current term of office is set forth below:

Name
Age
Position
Expiration of Term
Zhiwei Zhao
50
Chairman of the Board of Directors and Chief Executive Officer
-
Kheng Nam Lee
66
Director
Date of 2015 annual general meeting
Rongquan Leng
65
Director
Date of 2014 annual general meeting
Neo Chee Beng
53
Director
Date of 2015 annual general meeting
Jun (Jeff) Wang
43
Director and Chief Financial Officer
Date of 2014 annual general meeting
 
 
11
 
Item 7 of the 2013 Form 20-F, “A. Major shareholders” is hereby amended and restated in its entirety as follows:
 
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  
Major shareholders.

As of December 31, 2013, we had 111,145,633 ordinary shares issued and outstanding, and JP Morgan Chase Bank N.A., as the depository of our ADS facility, was the only record holder of our ordinary shares in the United States, holding approximately 92.48% of our total outstanding ordinary shares. The number of beneficial owners of our ADSs in the United States is likely much larger than the one record holder of our ordinary shares in the United States.

Please refer to Item 6. "Directors, Senior Management and Employees — Share Ownership".

Item 15 of the 2013 Form 20-F, is hereby amended and restated in its entirety as follows:
 
ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2013. Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures as of December 31, 2013 were not effective due to the material weakness in internal control described below.
 
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our management and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. GAAP. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
 
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatement. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with our policies and procedures may deteriorate.
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in the 1992 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that our internal control over financial reporting was not effective as of December 31, 2013 due to the material weakness described below.
 
 
12
 
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
 
The Company’s management determined that Company’s oversight of complex transactions is not effective. Specifically, management lacks the expertise to evaluate the accounting requirement of certain non-routine and complex transactions. From time to time the Company will encounter non-routine accounting transactions that require a high level of technical accounting expertise. Non-routine accounting transactions will likely increase in frequency as the Company continues to grow and expand its operations.
 
As of the date of this report, we are undertaking steps to correct the aforementioned material weakness by providing relevant US GAAP trainings to the current corporate accounting team, engaging an external consulting company to review our key operational processes and related internal controls for improvement in internal control system, strengthening the information-sharing process between us and our external accounting advisory consultants and implementation of more formal review procedures and documentation standards for the accounting and monitoring of non-routine and complex transactions.
 
Notwithstanding this material weakness, management has concluded that the consolidated financial statements included in this annual report are fairly stated in all material respects for each period presented herein.
 
This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 19 of the 2013 Form 20-F, is hereby amended and restated in its entirety as follows:
 
ITEM 19. EXHIBITS
Index to exhibits
 
Exhibit
Number
  
Description
1.1
  
Amended and Restated Memorandum and Articles of Association of China Finance Online Co. Limited (incorporated by reference to Exhibit 3.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on October 4, 2004)
     
2.1
  
Specimen ordinary share certificate (incorporated by reference to Exhibit 4.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
     
2.2
  
Specimen American depositary receipt of China Finance Online Co. Limited (Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-119530) filed with the Securities and Exchange Commission with respect to American depositary shares representing ordinary shares on October 5, 2004
 
 
13
 
     
4.1
  
2004 Incentive Stock Option Plan and form of option agreement (incorporated by reference to Exhibit 4.1 from our 2006 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 29, 2007)
     
4.2
  
Restricted Stock Issuance and Allocation Agreement-2007 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 on Form 6-K (File No. 000-50975) filed with the Securities and Exchange Commission on August 24, 2007)
     
4.3
  
Amended Restricted Stock Issuance and Allocation Agreement 2007 Equity Incentive Plan dated May 20, 2009(incorporated by reference to Exhibit 4.3 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.4
  
Translation of Purchase Option and Cooperation Agreement dated May 27, 2004 among China Finance Online Co. Limited, Jun Ning, Wu Chen and CFO Fuhua (incorporated by reference to Exhibit 10.3 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
     
4.5
  
Translation of Share Pledge Agreement dated May 27, 2004 among Jun Ning, Wu Chen and CFO Beijing (incorporated by reference to Exhibit 10.4 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
     
4.6
  
Translation of Framework Agreement on Exercising Purchase Option dated November 20, 2006 by and among Jun Ning, Wu Chen, Zhiwei Zhao, CFO Fuhua and CFO Beijing(incorporated by reference to Exhibit 4.7 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
     
4.7
  
Translation of Purchase Option and Cooperation Agreement dated November 20, 2006 among China Finance Online Co. Limited, Zhiwei Zhao, Wu Chen, CFO Fuhua and CFO Beijing (incorporated by reference to Exhibit 4.10 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
     
4.8
  
Translation of Share Pledge Agreement dated November 20, 2006 among Zhiwei Zhao, Wu Chen, CFO Fuhua and CFO Beijing(incorporated by reference to Exhibit 4.11 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
     
4.9
  
Translation of Equipment Lease Agreement between CFO Beijing and CFO Fuhua dated May 27, 2004 (incorporated by reference to Exhibit 10.7 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
     
4.10
  
Translation of Technical Support Agreement between CFO Beijing and CFO Fuhua dated May 27, 2004 (incorporated by reference to Exhibit 10.8 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
     
4.11
  
Translation of Amended and Restated Strategic Consulting Agreement between CFO Beijing and CFO Fuhua dated May 27, 2004 (incorporated by reference to Exhibit 10.9 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
     
4.12
  
Translation of Framework Agreement on Exercising Purchase Option dated October 18, 2007 by and among China Finance Online Co. Limited, Wu Chen, Zhiwei Zhao, Jun Wang, CFO Fuhua and CFO Beijing (incorporated by reference to Exhibit 4.15 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.13
  
Translation of Share Transfer Contract (related to shares of CFO Fuhua) dated October 18, 2007 by and between Wu Chen and Jun Wang (incorporated by reference to Exhibit 4.17 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
 
 
14
 
     
4.14
  
Translation of Share Pledge Agreement dated October 18, 2007 among Zhiwei Zhao, Jun Wang, CFO Fuhua and CFO Beijing (incorporated by reference to Exhibit 4.18 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.15
  
Translation of Purchase Option and Cooperation Agreement dated October 18, 2007 among China Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua (incorporated by reference to Exhibit 4.19 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.16
  
Translation of Purchase Option and Cooperation Agreement dated March 3, 2008 among China Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua (incorporated by reference to Exhibit 4.20 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.17
  
Translation of Translation of Share Pledge Agreement dated March 3,2008 among Zhiwei Zhao, Jun Wang, CFO Fuhua and CFO Beijing (incorporated by reference to Exhibit 4.23 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.18
  
Translation of Loan Agreement dated November 20, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.51 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.19
  
Translation of Share Pledge Agreement dated November 20, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.52 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.20
  
Translation of Purchase Option Agreement dated November 20, 2009 among CFO Chuangying, CFO Qicheng, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.53 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.21
  
Translation of Operation Agreement dated November 20, 2009 between CFO Chuangying and CFO Qicheng (incorporated by reference to Exhibit 4.54 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.22
  
Translation of Technical Support Agreement dated November 20, 2009 between CFO Chuangying and CFO Qicheng (incorporated by reference to Exhibit 4.55 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.23
  
Translation of Strategic Consulting and Service Agreement dated November 20, 2009 between CFO Chuangying and CFO Qicheng (incorporated by reference to Exhibit 4.56 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.24
  
Translation of Loan Agreement dated September 1, 2007 among Fortune Software (Beijing) Co., Ltd., Wu Chen and Zhiwei Zhao (incorporated by reference to Exhibit 4.30 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.25
  
Translation of Framework Agreement among Fortune Software (Beijing) Co., Ltd., Wu Chen, Jun Wang and Beijing Glory Co., Ltd. dated September 10, 2007 (incorporated by reference to Exhibit 4.29 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.26
  
Translation of Share Transfer Contract (related to shares of Beijing Glory Co., Ltd.) dated September 10, 2007 by and between Wu Chen and Jun Wang (incorporated by reference to Exhibit 4.31 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.27
  
Translation of Purchase Option Agreement dated September 10, 2007 among China Finance Online Co. Limited, Jun Wang, Zhiwei Zhao and Beijing Glory Co., Ltd. (incorporated by reference to Exhibit 4.3 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
 
 
15
 
     
4.28
  
Translation of Operation Agreement dated September 10, 2007 by and between Fortune Software (Beijing) Co., Ltd. and Beijing Glory Co., Ltd. (incorporated by reference to Exhibit 4.32 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.29
  
Translation of Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Glory Co., Ltd. dated September 10, 2007 (incorporated by reference to Exhibit 4.33 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.30
  
Translation of Strategic Consulting and Service Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing Glory Co., Ltd. dated September 10, 2007 (incorporated by reference to Exhibit 4.34 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.31
  
Translation of Framework Agreement for Exercise of Purchase Option dated June 2, 2009 among Wei Xiong, Zhenfei Fan, Zhiwei Zhao, Jun Wang, CFO Software and CFO Premium (incorporated by reference to Exhibit 4.35 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.32
  
Translation of Purchase Option Agreement dated June 2, 2009 among CFO Software, CFO Premium, Zhiwei Zhao and Jun Wang (incorporated by reference to Exhibit 4.36 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.33
  
Translation of Share Pledge Agreement dated June 2, 2009 among CFO Software, Zhiwei Zhao and Jun Wang (incorporated by reference to Exhibit 4.37 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.34
  
Translation of Operation Agreement among dated August 21, 2007 by and between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd.(incorporated by reference to Exhibit 4.25 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.35
  
Translation of Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd. dated August 21, 2007 (incorporated by reference to Exhibit 4.26 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.36
  
Translation of Strategic Consulting and Service Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing Premium Technology Co., Ltd. dated August 21, 2007 (incorporated by reference to Exhibit 4.27 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008)
     
4.37
  
Translation of Loan Agreement dated November 25, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.57 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.38***
  
Translation of Framework Agreement of Exercising Purchase Option dated November 1, 2012 among Yang Yang, Ying Zhu, CFO Chuangying and CFO Yingchuang
     
4.39***
  
Translation of Share Pledge Agreement dated November 1, 2012 among CFO Chuangying, Ying Zhu and Lin Yang
     
4.40
  
Translation of Operation Agreement dated November 25, 2009 between CFO Chuangying and CFO Yingchuang (incorporated by reference to Exhibit 4.60 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.41
  
Translation of Technical Support Agreement dated November 25, 2009 between CFO Chuangying and CFO Yingchuang (incorporated by reference to Exhibit 4.61 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
 
 
16
 
     
4.42
  
Translation of Strategic Consulting and Service Agreement dated November 25, 2009 between CFO Chuangying and CFO Yingchuang (incorporated by reference to Exhibit 4.62 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.43***
  
Translation of Loan Agreement dated May 8,2008 among CFO Software, Zhenfei Fan and Xun Zhao
     
4.44***
  
Translation of Framework Agreement of Exercising Purchase Option dated January 8, 2010 among Zhenfei Fan, Xun Zhao, Zhengyan Wu, CFO Chongzhi and CFO Software
     
4.45***
  
Translation of Purchase Option and Cooperation Agreement dated January 8, 2010 among Xun Zhao, Zhengyan Wu and CFO Software
     
4.46***
  
Translation of Share Pledge Agreement dated January 8, 2010 among Xun Zhao, Zhengyan Wu and CFO Software
     
4.47***
  
Translation of Operation Agreement dated June 8, 2008 between CFO Chongzhi and CFO Software
     
4.48***
  
Translation of Technical Support Agreement dated June 8, 2008 between CFO Chongzhi and CFO Software
     
4.49***
  
Translation of Strategic Consulting and Service Agreement dated June 8, 2008 between CFO Chongzhi and CFO Software
     
4.50
  
Translation of Loan Agreement dated November 25,2009 among CFO Chongzhi, Zhihong Wang and Ran Yuan (incorporated by reference to Exhibit 4.63 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.51
  
Purchase Option Agreement dated November 30, 2009 among CFO Chongzhi, Shanghai Stockstar Information & Technology Co., Ltd., Ran Yuan and Zhihong Wang (incorporated by reference to Exhibit 4.65 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.52***
  
Translation of Framework Agreement of Exercising Purchase Option dated April 6, 2010 among Zhihong Wang, Na Zhang, CFO Chongzhi and Shanghai Stockstar Information & Technology Co., Ltd.
     
4.53***
  
Translation of Framework Agreement of Exercising Purchase Option dated November 8, 2010 among Ran Yuan, Xun Zhao, CFO Chongzhi and Shanghai Stockstar Information & Technology Co., Ltd.
     
4.54***
  
Translation of Share Pledge Agreement dated January 15, 2012 among Na Zhang, Xun Zhao and CFO Chongzhi
     
4.55
  
Translation of Operation Agreement dated November 30, 2009 between CFO Chongzhi and Shanghai Stockstar Information & Technology Co., Ltd. (incorporated by reference to Exhibit 4.66 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.56
  
Translation of Technical Support Agreement dated November 30, 2009 between CFO Chongzhi and Shanghai Stockstar Information & Technology Co., Ltd. (incorporated by reference to Exhibit 4.67 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.57
  
Translation of Strategic Consulting and Service Agreement dated November 30, 2009 between CFO Chongzhi and Shanghai Stockstar Information & Technology Co., Ltd. (incorporated by reference to Exhibit 4.68 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.58***
  
Translation of Loan Agreement dated March 29, 2011 among CFO Zhengtong, Zhiwei Zhao and Jun Wang 
 
 
17
 
     
4.59***
  
Translation of Purchase Option and Cooperation Agreement dated March 29, 2011 among Zhiwei Zhao, Jun Wang, Stockstar Wealth Management and CFO Zhengtong
     
4.60***
  
Translation of Share Pledge Agreement dated March 29, 2011 among Zhiwei Zhao, Jun Wang and CFO Zhengtong
     
4.61***
  
Translation of Operation Agreement dated March 29, 2011 between Stockstar Wealth Management and CFO Zhengtong
     
4.62***
  
Translation of Technical Support Agreement dated March 29, 2011 between Stockstar Wealth Management and CFO Zhengtong
     
4.63***
  
Translation of Strategic Consulting and Service Agreement dated March 29, 2011 between Stockstar Wealth Management and CFO Zhengtong
     
4.64***
  
Translation of Framework Agreement of Exercising Purchase Option dated November 15, 2012 among Zhiwei Zhao, Jun Wang, Xiaowei Wang, Na Zhang, CFO Chuangying and CFO Software
     
4.65***
  
Translation of Purchase Option and Cooperation Agreement dated December 11, 2012 among Xiaowei Wang, Na Zhang, CFO Chuangying and CFO Software
     
4.66***
  
Translation of Share Pledge Agreement dated November 15, 2012 among Xiaowei Wang, Na Zhang and CFO Software
     
4.67
  
Translation of Operation Agreement dated February 12, 2009 between CFO Software and CFO Chuangying (incorporated by reference to Exhibit 4.40 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.68
  
Translation of Technical Support Agreement dated February 12, 2009 between CFO Software and CFO Chuangying (incorporated by reference to Exhibit 4.41 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.69
  
Translation of Strategic Consulting and Service Agreement dated February 12, 2009 between CFO Software and CFO Chuangying (incorporated by reference to Exhibit 4.42 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010)
     
4.70***
  
Translation of Loan Agreement dated April 30, 2013 among Lin Yang, Ying Zhu and CFO Software
     
4.71***
  
Translation of Purchase Option and Cooperation Agreement dated April 30, 2013 among Lin Yang, Ying Zhu, Aishang (Beijing) Fortune Technology Co., Ltd. and CFO Software
     
4.72***
  
Translation of Share Pledge Agreement dated April 30, 2013 among Lin Yang, Ying Zhu  and CFO Software
     
4.73***
  
Translation of Operation Agreement dated April 30, 2013 between CFO Software and Aishang (Beijing) Fortune Technology Co., Ltd.
     
4.74***
  
Translation of Technical Support Agreement dated April 30, 2013 between CFO Software and Aishang (Beijing) Fortune Technology Co., Ltd.
     
4.75***
  
Translation of Strategic Consulting and Service Agreement dated April 30, 2013 between CFO Software and Aishang (Beijing) Fortune Technology Co., Ltd.
     
4.76***
  
Translation of Loan Agreement dated January 2, 2012 among Shiyuan Lu, Ming Li and CFO Software
     
4.77***
  
Translation of Purchase Option and Cooperation Agreement dated January 2, 2012 among Shiyuan Li, Ming Li, Shanghai Maibu Investment Management Co., Ltd. and CFO Software
     
4.78***
  
Translation of Operation Agreement dated January 2, 2012 between CFO Software and Shanghai Maibu Investment Management Co., Ltd.
     
4.79***
  
Translation of Technical Support Agreement dated January 2, 2012 between CFO Software and Shanghai Maibu Investment Management Co., Ltd.
 
 
18
 
     
4.80***
  
Translation of Strategic Consulting and Service Agreement dated January 2, 2012 between CFO Software and Shanghai Maibu Investment Management Co., Ltd.
     
4.81***
  
Translation of Loan Agreement dated July 1, 2013 among Na Zhang, Ran Tao and CFO Zhengyong
     
4.82***
  
Translation of Purchase Option and Cooperation Agreement dated July 1, 2013 among Na Zhang, Ran Tao, CFO East Win and CFO Zhengyong
     
4.83***
  
Translation of Operation Agreement dated July 1, 2013 between CFO Zhengyong and CFO East Win
     
4.84***
  
Translation of Technical Support Agreement dated January 2, 2012 between CFO Zhengyong and CFO East Win
     
4.85***
  
Translation of Strategic Consulting and Service Agreement dated January 2, 2012 between CFO Zhengyong and CFO East Win
     
4.86***
  
Translation of Loan Agreement dated July 26, 2013 among Lin Yang, Cao Chen and CFO Zhengyong
     
4.87***
  
Translation of Purchase Option and Cooperation Agreement dated July 26, 2013 among Lin Yang, Cao Chen CFO Newrand and CFO Zhengyong
     
4.88***
  
Translation of Operation Agreement dated July 26, 2013 between CFO Zhengyong and CFO Newrand
     
4.89***
  
Translation of Technical Support Agreement dated January 2, 2012 between CFO Zhengyong and CFO Newrand
     
4.90***
  
Translation of Strategic Consulting and Service Agreement dated January 2, 2012 between CFO Zhengyong and CFO Newrand
     
4.91***
  
Translation of Loan Agreement dated July 1, 2013 among Wei Cui, Haibin Wang and CFO Zhengyong
     
4.92***
  
Translation of Purchase Option and Cooperation Agreement dated July 1, 2013 among Wei Cui, Haibin Wang, CFO Netinfo and CFO Zhengyong
     
4.93***
  
Translation of Operation Agreement dated July 1, 2013 between CFO Zhengyong and CFO Netinfo
     
4.94***
  
Translation of Technical Support Agreement dated July 1, 2013 between CFO Zhengyong and CFO Netinfo
     
4.95***
  
Translation of Strategic Consulting and Service Agreement dated July 1, 2013 between CFO Zhengyong and CFO Netinfo
     
4.96
  
Translation of Labor Contract of Zhao Zhiwei dated June 21, 2010 (incorporated by reference to Exhibit 4.103 from our 2010 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 31, 2011)
     
4.97
  
Translation of Labor Contract of Jeff Wang dated May 24, 2011(incorporated by reference to Exhibit 4.104 from our 2010 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 31, 2011)
     
4.98
  
Translation of Shenzhen Stock Exchange Proprietary Information License Agreement dated March, 2012 between CFO Fuhua and Shenzhen Securities Information Co., Ltd. (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.; filed as Exhibit 4.61 to the Company's Report on Form 20-F (File No.000-50975) filed on April 30, 2012, and incorporated herein by reference)
 
 
19
 
     
4.99
  
Translation of Securities Information License Contract dated December 26, 2011 between SSE Infonet Ltd. and CFO Fuhua (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission., which request is pending; filed as Exhibit 4.62 to the Company's Report on Form 20-F (File No.000-50975) filed on April 30, 2012, and incorporated herein by reference)
     
4.100
  
Market Data Vendor License Agreement dated March 31, 2011 between HKEx Information Services Limited and CFO Software (filed as Exhibit 4.63 to the Company's Report on Form 20-F (File No.000-50975) filed on April 30, 2012, and incorporated herein by reference)
     
4.101
  
Translation of China Financial Futures Exchange Futures Information License Agreement dated April 8, 2009 between CFO Software and China Financial Futures Exchange (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.) (incorporated by reference to Exhibit 4.75 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010); Supplemental Agreement dated April 16, 2011 (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.) (incorporated by reference to Exhibit 4.78 from our 2010 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 31, 2011)
     
4.102
  
Translation of Agreement for Supply of Real-time Hang Seng Family of Indexes by and between the Company and Hang Seng Indexes Company Limited dated February 27, 2009 (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.)
     
4.103
  
Translation of Agreement for Supply of Real-time Hang Seng Family of Indexes by and between CFO Fuhua and Hang Seng Indexes Company Limited dated December 11, 2012 (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.)
     
4.104
  
Renewal of Shanghai Stock Exchange Securities Information Operation License Agreement by and between CFO Fuhua and Shanghai Stock Exchange Information Network Co., Ltd. dated December 25, 2012 (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.)
     
4.105
  
Renewal of Shenzhen Stock Exchange Proprietary Information License Agreement by and between CFO Fuhua and Shenzhen Securities Information Network Co., Ltd. dated March 15, 2013 (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.)
     
4.106
  
Renewal of Shenzhen Stock Exchange Proprietary Information License Agreement by and between CFO Meining and Shenzhen Securities Information Network Co., Ltd. dated March 1, 2013 (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.)
     
4.107
  
English Summary of the real estate investment contract and the shareholder agreement by and among CFO Yingchuang, Langfang Shengshi Real Estate Development Co., Ltd. and its original shareholders dated March 19, 2013. (Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 83 (17 C.F.R. Section 200.83). The omitted materials have been filed separately with the Securities and Exchange Commission.)
 
 
20
 
     
4.108*
  
Translation of Assets Purchase Agreement among Shenzhen Newrand and Shenzhen Champion Connection
     
4.109*
  
Translation of Purchase Agreement between Giant Bright and Champion Connection Network H.K. Limited
     
4.110*
  
Translation of Agreement for Change of Parties to the Contract
     
4.111*
  
Translation of Purchase Agreement between Giant Bright and Hadevan
     
4.112*
  
Translation of Assets Purchase Agreement among Shenzhen Genius and Shenzhen Champion Connection
     
4.113*
  
Translation of Purchase Agreement between Mainfame and Champion Connection Network H.K. Limited
     
4.114*
  
Translation of Cooperation Framework Agreement among Shanghai Stockstar Wealth Management, Golden Pioneer Network Technologies and Shanghai Excellence Advertising
     
4.115*
  
Translation of Capital Increase and Shareholders’ Agreement of Shenzhen Tahoe Investment and Development Co, Ltd.
     
4.116***
  
Translation of Equity Transfer Agreement among Fortune (Beijing) Huiying Investment Consulting Co., Ltd. and Beijing Bluestone Investment Management Co., Ltd, Langfang Great Sky Investment Co., Ltd.
     
8.1*
  
List of principal subsidiaries and significant PRC-incorporated affiliates
     
12.1*
  
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
12.2*
  
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
13.1*
  
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
13.2*
  
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
15.1*
  
Consent of Grant Thornton China
     
15.2*
  
Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP
     
101.INS***
  
XBRL Instance Document
     
101.SCH***
  
XBRL Taxonomy Extension Schema Document
     
101.CAL***
  
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF***
  
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB***
  
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE***
  
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
21
 
     
*
  
  Filed with 2013 annual report on Form 20-F which was filed with Securities Exchange Commission on May 6, 2014.
     
**
  
XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
     
***
  
Filed with this Amendment 1 to 2013 annual report on Form 20-F/A

 
 
 
 
 
22
 
Note 1 of “Notes to consolidated financial statements for the years ended December 31, 2011, 2012 and 2013” in the 2013 Form 20-F, is hereby amended and restated in its entirety as follows:
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(In U.S. dollars)

1.  
ORGANIZATION AND PRINCIPAL ACTIVITIES

China Finance Online Co. Limited ("China Finance Online" or the "Company") was incorporated in Hong Kong on November 2, 1998. China Finance Online, its subsidiaries, its variable interest entities ("VIEs") and its VIEs' subsidiaries (collectively, the "Group") is a technology-driven, user-focused market leader in China in providing vertically integrated financial information and services.

The Company's two prominent flagship portal sites, www.jrj.com and www.stockstar.com, have attracted a large population of individual investors. The Company offers basic software, information services and securities investment advisory services to individual investors. Through its subsidiary, CFO Genius, the Company provides financial database and analytics to institutional customers including domestic financial, research, academic and regulatory institutions. The Company is developing comprehensive financial services including securities and futures brokerage services in Hong Kong and precious metals trading services in China.

Details of China Finance Online's significant subsidiaries, VIEs and VIEs' subsidiaries as of December 31, 2013 were as follows:
 
 
Place of
Date of
legal
  
 
incorporation or
incorporation or
ownership
Principal
Company name
establishment
acquisition
interest
activity
         
Subsidiaries:
        
China Finance Online (Beijing) Co., Ltd. (“CFO Beijing”)
Beijing, PRC
Jul. 9, 1998
100%
N/A
Fortune Software (Beijing) Co., Ltd. (“CFO Software”)
Beijing, PRC
Dec. 7, 2004
100%
N/A
Fortune (Beijing) Success Technology Co., Ltd. (“CFO Success”)
Beijing, PRC
Oct. 16, 2007
100%
N/A
JujinSoftware (Shenzhen) Co., Ltd. (“CFO Jujin”)
Shenzhen, PRC
Mar. 9, 2007
100%
N/A
Shenzhen Genius Information Technology Co., Ltd. (“CFO Genius”)
Shenzhen, PRC
Sep. 21, 2006
100%
Subscription service
Stockstar Information Technology (Shanghai) Co., Ltd. (“CFO Stockstar”)
Shanghai, PRC
Oct. 1, 2006
100%
N/A
Zhengning Information & Technology (Shanghai) Co., Ltd.
Shanghai, PRC
Jan. 31, 2007
100%
N/A
(“CFO Zhengning”)
        
Zhengyong Information & Technology (Shanghai) Co., Ltd.
      
(“CFO Zhengyong”)
Shanghai, PRC
Aug. 17, 2008
100%
N/A
Zhengtong Information & Technology (Shanghai) Co., Ltd.
        
(“CFO Zhentong”)
Shanghai, PRC
Jun. 26, 2008
100%
N/A
iSTAR Financial Holdings Limited(“iSTAR Financial Holdings”)
BVI
Jul. 16, 2007
85%
Investment holdings
iSTAR International Securities Co. Limited(“iSTAR Securities”)
Hong Kong, PRC
Nov. 23, 2007
85%
Brokerage service
iSTAR International Futures Co. Limited(“iSTAR Futures”)
Hong Kong, PRC
Apr. 16, 2008
85%
Brokerage service
iSTAR International Wealth Management Co. Limited
Hong Kong, PRC
Oct. 8, 2008
85%
Securities advising
(“iSTAR Wealth Management”)
        
iSTAR International Credit Co. Limited (“iSTARCredit”)
Hong Kong, PRC
Feb. 10, 2012
85%
N/A
Variable interest entities:
        
Beijing Fuhua Innovation Technology Development Co., Ltd. (“CFO Fuhua”)
Beijing, PRC
Dec. 31, 2000
Nil
Web portal and advertising service
Shanghai Chongzhi Co., Ltd. (“CFO Chongzhi”)
Shanghai, PRC
Jun. 6, 2008
Nil
Subscription service
Beijing Chuangying Securities Advisory and Investment Co., Ltd.
        
(“CFO Chuanying”)
Beijing, PRC
Jan. 9, 2009
Nil
N/A
Fortune (Beijing) Qicheng Technology Co., Ltd. (“CFO Qicheng”)
Beijing, PRC
Dec. 18, 2009
Nil
N/A
Shenzhen Newrand Securities Advisory and Investment Co., Ltd.
Shenzhen, PRC
Oct. 17, 2008
Nil
Securities investment advising
(“CFO Newrand”)
        
Shanghai Stockstar Wealth Management Co., Ltd.
        
(“Stockstar Wealth Management”)
Shanghai, PRC
Apr. 12, 2011
Nil
N/A
Fortune (Beijing) Huiying Investment Consulting Co., Ltd. (“CFO Huiying”)
Beijing, PRC
Dec. 18, 2009
Nil
N/A
Subsidiaries of variable interest entities:
        
Shanghai Meining Computer Software Co., Ltd. (“CFO Meining”)
Shanghai, PRC
Oct. 1, 2006
Nil
Web portal, advertising, subscription,
       
and SMS
Shenzhen Newrand Securities Training Center (“CFO Newrand Training”)
Shenzhen, PRC
Oct. 17, 2008
Nil
Securities investment training
Shanghai Stockstar Securities Advisory and Investment Co., Ltd.
Shanghai, PRC
Nov. 5, 2009
Nil
Securities investment advising
(“CFO Securities Consulting”)
        
Shenzhen Tahoe Investment and Development Co., Ltd (“CFO Tahoe”)
Shenzhen, PRC
Sep. 30, 2013
Nil
N/A
Sinoinfo (Dalian) Investment Consulting Co., Ltd. (“CFO Sinoinfo”)
Dalian, PRC
Jul. 1, 2013
Nil
Securities investment advising
Shenzhen Shangtong Software Co., Ltd. (“CFO Shenzhen Shangtong”)
Shenzhen, PRC
Sep. 23, 2009
Nil
N/A
Zhengjin (Fujian) Precious Metals Investment Co., Ltd.
Fujian, PRC
Jan. 6, 2013
Nil
Precious metals brokerage
(“CFO Zhengjin Fujian”)
        
Zhengjin (Shanghai) Precious Metals Investment Co., Ltd.
Shanghai, PRC
Dec. 12, 2013
Nil
Precious metals brokerage
(“CFO Zhengjin Shanghai”)
        
Zhengjin (Tianjin) Precious Metals Investment Co., Ltd.
Tianjin, PRC
Jul. 23, 2013
Nil
Precious metals brokerage
(“CFO Zhengjin Tianjin”)
        
Henghui (Tianjin) Precious Metals Investment Co., Ltd.
Tianjin, PRC
Sep. 30, 2013
Nil
Precious metals brokerage”
(“CFO Henghui”)
        
 
 
 
23
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(In U.S. dollars)

1.  
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The consolidated financial statements of the Group include the financial statements of the Company and its controlled operating entities, including the subsidiaries and the VIEs and VIEs’ subsidiaries for which the Company is the primary beneficiary. A variable interest entity is the entity in which the Company, through contractual arrangements as the primary beneficiary, bears the risks of, and enjoys the rewards normally associated with ownership of the entity.

People’s Republic of China (“PRC”) regulations prohibit or restrict direct foreign ownership of business entities providing certain services in PRC, such as internet content service and securities investment advisory service. In order to comply with these regulations, China Finance Online, through its subsidiaries, entered into contractual arrangements with the Company’s VIEs and their equity owners who are PRC citizens.
 
The Group made loans to the shareholders of the VIEs solely for the purposes of capitalizing the VIEs.  Pursuant to the loan agreements, these loans can only be repaid by transferring all of their interests in the VIEs to the Group or a third party designated by the Group. The Group has entered into proxy agreements or power of attorney and exclusive equity purchase option agreements with the VIEs and nominee shareholders of the VIEs through the Company’s wholly owned significant subsidiaries including CFO Beijing, CFO Software, CFO Zhengyong and CFO Success (collectively, the “WFOEs” and each a “WFOE”). The foregoing agreements provide the WFOEs the right to direct the activities that most significantly affect the economic performance of the VIEs and to acquire the equity interests in the VIEs when permitted by the PRC laws, respectively. Certain exclusive agreements have been entered into with the VIEs through the WFOEs, which obligate the WFOEs to absorb the majority of the risk of loss from the VIEs’ activities and entitle the WFOEs to receive the majority of their residual returns. In addition, the Group has entered into share pledge agreements for the equity interests in the VIEs held by the shareholders of the VIEs.

Despite the lack of technical majority ownership, the agreements with the VIEs provide the WFOES with effective control over and the ability to receive substantially all of the economic benefits of its VIEs, resembling a parent-subsidiary relationship between the WFOEs and the VIEs. The shareholders of the VIEs effectively assigned all of their voting rights underlying their equity interest in the VIEs to the WFOEs. In addition, through the other exclusive agreements, which consist of strategic consulting services agreement, technical support services agreement and operating support services agreement, the WFOEs demonstrate their ability and intention to continue to exercise the ability to absorb substantially all of the profits and all of the expected losses of the VIEs. The VIEs are subject to operating risks, which determine the variability of the Company’s interest in those entities. Based on these contractual arrangements, the Company consolidates the VIEs as required by SEC Regulation SX-3A-02 and Accounting Standards Codification (“ASC”) Topic 810 (“ASC 810”) because the Company holds all the variable interests of the VIEs through the WFOEs.

The principal terms of the agreements entered into amongst the VIEs, their respective shareholders and the WFOEs are further described below.

Exclusive technology consulting and management service agreement

Pursuant to a series of technology support and service agreements, the WOFEs retain exclusive right to provide the VIEs and their subsidiaries technology support and consulting services and exclusive management consulting service. As a result of these services, the WOFEs are entitled to charge the VIEs and their subsidiaries annual service fees. The terms of the strategic consulting services agreement, the technical support services agreement and the operating support services agreement are twenty, ten and ten years, respectively, and these agreements will be automatically renewed on applicable expiration dates, unless the contracting WOFE informs the corresponding VIE its intention to terminate such contract one month prior to the applicable expiration date. Notwithstanding the foregoing, none of the parties has a right to terminate the service contracts. The principal services agreements that the WOFEs have entered into with VIEs include:
 
 
24
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(In U.S. dollars)

1.  
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
 
 
·
strategic consulting services agreement, pursuant to which the amount of the fee to be charged is 30% of each VIE's income before tax;
 
·
technical support services agreement, pursuant to which the amount of the fee to be charged is 30% of each VIE's income before tax; and
 
·
operating support services agreement, pursuant to which the amount of the fee to be charged is 40% of each VIE's income before tax.
 
Exclusive purchase right agreement on the equity interest of the VIEs

Pursuant to the purchase option agreement, the WOFEs have the unconditional right to purchase the entire equity interest in, or all the assets of the VIEs at a price equal to the total principal amount of the loan lent by the WOFEs to the shareholders of the VIEs when and if such purchase is permitted by the PRC law or the current shareholders of the VIEs cease to be directors or employees of the VIEs. The term of the exclusive purchase right agreement is perpetual and can be terminated at the discretion of the WOFEs.

Power of attorney

Pursuant to the power of attorney, each of the shareholders of the VIEs have executed an irrevocable power of attorney assigning the WOFEs or individuals designated by the WOFEs as their attorney-in-fact to vote on their behalf on all matters of the VIEs requiring shareholder approval under PRC laws and regulations and the articles of association of VIEs.

The Articles of Incorporation of the VIE state that the major rights of the shareholders include the right to appoint directors, the general manager and other senior management. Therefore, through the irrevocable power of attorney arrangement, the WOFEs have the ability to exercise effective control over the VIEs through shareholder votes and, through such votes, to also control the composition of the board of directors.  In addition, the senior management team of the VIEs is the same as that of the WOFEs. The term of the power of attorney is twenty years and will be automatically renewed on the expiration date. The contract can be terminated at the discretion of the WOFEs.

Pledge agreement

Pursuant to the equity pledge agreement between the WOFEs and the shareholders of the VIEs, the shareholders of the VIEs pledged all of their equity interests in the VIEs to the WOFEs to guarantee the VIEs' performance of its obligations under the exclusive technology consulting and service agreement.  If the VIEs breach their contractual obligations under that agreement, the WOFEs, as the pledge, will be entitled to certain rights, including the rights to sell the pledged equity interests.  The shareholders of the VIEs agree that, without prior written consent of the WOFEs, they will not transfer, sell, and dispose of or create any encumbrance on their equity interest in the VIEs.  The term of the pledge agreement is twenty years and will be automatically renewed on the expiration date, unless the WOFEs inform the VIEs of their intention to terminate the agreement one month prior to the expiration date.
 
 
25
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(In U.S. dollars)

1.  
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

Through these contractual agreements, the WOFEs have the ability to effectively control the VIEs and are also able to receive substantially all the economic benefits of the VIEs.

Details of significant VIEs and their counterparts which substantially control the VIEs as of December 31, 2014 were as follows:
 
  VIE name Contractual arrangement Date counterpart
  CFO Fuhua  May 27, 2004 CFO Beijing
  CFO Chongzhi June 8, 2008 CFO Software
  CFO Newrand October 17, 2008 CFO Zhengyong
  CFO Qicheng November 20, 2009 CFO Chuangying
  Stockstar Wealth Management April 12, 2011 CFO Zhengtong
                                                                                           
Risks in relation to the VIE structure

The Company's ability to control the VIEs also depends on the power of attorney the WOFEs have to vote on all matters requiring shareholder approval in the VIEs. As noted above, the Company believes this power of attorney is legally enforceable but may not be as effective as direct equity ownership.

In addition, if the legal structure and contractual arrangements were found to be in violation of any existing PRC laws and regulations, the regulatory authorities may exercise their discretion and

 
·
revoke the business and operating licenses of our PRC subsidiaries or VIEs;
 
·
restrict the rights to collect revenues from any of our PRC subsidiaries;
 
·
discontinue or restrict the operations of any related-party transactions among our PRC subsidiaries or VIEs;
 
·
require our PRC subsidiaries or VIEs to restructure the relevant ownership structure or operations;
 
·
take other regulatory or enforcement actions, including levying fines that could be harmful to our business; or
 
·
impose additional conditions or requirements with which we may not be able to comply.
 
The imposition of any of these penalties may result in a material adverse effect on the Company's ability to conduct its business. In addition, if the imposition of any of these penalties causes the Company to lose the rights to direct the activities of the VIEs and their subsidiaries or the right to receive their economic benefits, the Company would no longer be able to consolidate the VIEs. The Company does not believe that any penalties imposed or actions taken by the PRC Government would result in the liquidation of the Company, its subsidiaries, or the VIEs.
 
The Company has consolidated its VIEs because it was the primary beneficiary of those entities. Through the contractual agreements discussed above, the Company, through its wholly owned subsidiaries, has (1) the power to direct the activities of the VIEs that most significantly affect the entities' economic performance and (2) the right to receive benefits from the VIEs, therefore it consolidates the VIEs.

 
26
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(In U.S. dollars)

1.  
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The consolidated VIEs operate securities investment advisory business and precious metals trading business, and therefore their most important revenue-producing assets are the securities consulting license of US$5,012,884 to operate securities investment advisory business, the precious metals trading right of US$1,295,740, completed technology of US$47,608 and customer relationship of US$1,188,530 to operate the precious metals business, each of which was recognized in the Company’s consolidated financial statements.

The VIEs also hold important unrecognized revenue-producing assets, such as our domain names and Internet Content Provider Licenses with respect to www.jrj.com and www.stockstar.com and certain value-added technologies, which were also considered revenue-producing assets. However, none of such assets were recorded on the Company’s consolidated balance sheets as such assets were all acquired or internally developed with insignificant costs and expenses incurred.

The following financial statement amounts and balances of the VIEs for which the Company is the primary beneficiary and their subsidiaries were before intercompany elimination as of and for the years ended:

   
Years ended December 31,
  
   
2012
    
2013
  
Assets
            
Current assets
            
Cash and cash equivalents
     6,885,845       18,760,701  
Consideration receivable
     -       13,449,458  
Account receivable -others, net
     1,175,980       19,406,559  
Loan receivable
     -       10,333,120  
Others
     5,258,507       4,477,360  
    $ 13,320,332     $ 66,427,198  
Non-current assets
                
Property and equipment, net
     2,076,428       1,843,201  
Acquired intangible assets, net
     4,675,237       7,544,762  
Cost method investment
     -       829,201  
Rental deposits
     297,919       676,280  
Guarantee fund deposits
     -       6,601,095  
Investment in subsidiaries
     19,188,802       29,143,486  
Deferred tax assets, non-current
     33,812       26,171  
Total
     39,592,530     $ 113,091,394  
                 
Third-party liabilities
                
Current liabilities
                
Accounts payable
     140,641       16,667,516  
Accrued expenses and other current liabilities
     6,682,192       12,704,555  
    $ 6,822,833     $ 29,372,071  
                 
Non-current liabilities
   $ 2,231,127     $ 2,519,019  
                 
Total
   $ 9,053,960     $ 31,891,091  
Inter-company liabilities
   $ 8,087,893     $ 39,822,918  

 
 
27
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(In U.S. dollars)

1.  
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

   
Year ended December 31,
  
   
2011
    
2012
    
2013
  
                   
Net revenues
   $ 27,837,567     $ 17,271,563     $ 58,549,393  
Net loss
   $ (7,573,823 )   $ (6,948,118 )   $ (5,469,402 )
 
     
Year ended December 31,
  
      2011       2012       2013  
 
                        
Net cash used in operating activities
   $ (11,948,507 )   $ (13,860,354 )   $ (14,469,067 )
Net cash (used in) provided by investing activities
     (7,726,567 )      3,449,449       (9,440,165 ) 
Net cash (used in) provided by financing activities
     (37,146,641 )      6,461,007       35,830,988  
Effect of exchange rate changes
   $ 895,082     $ 52,740     $ (46,900 )

There are no consolidated VIE’s assets that are collateral for the VIE’s obligations and can only be used to settle VIE’s obligations.
 
 
 
28
 
CHINA FINANCE ONLINE CO. LIMITED
 
SIGNATURE
 
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Amendment No.1 to Form 20-F on its behalf.
 
Date: April 21, 2015
CHINA FINANCE ONLINE CO. LIMITED
 
 
/s/ Jeff Wang
 
 
Name:
Jeff Wang
 
 
Title:
Chief Financial Officer

 
 
 
 
 
 
 
29