Wave Sync Corp. - Annual Report: 2009 (Form 10-K)

Unassociated Document

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

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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:

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·	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.

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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 of www.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.

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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.

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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.

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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 to 52 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 5 technology development contracts in place with 5 customers.

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.

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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 $74,446 on 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.

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The Company has also developed a motor vehicle premium calculation system which 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 of www.soobao.cn, The Company is in the process of constructing a comprehensive insurance supermarket entity, which will serve as the social entity version of the www.soobao.cn platform. 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 to www.soobao.cn and enjoy the network value-added services which are not offered through more traditional insurance consumption.

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Market Share

Presently, the Company has provided services to over 7,340 insurance 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 to www.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 to www.ins.com in 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.cn is 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.

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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.

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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 on www.soobao.cn that 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.

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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$1.20 million in banks in China, which constitutes about 99.2% 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.

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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.

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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.

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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.

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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 through www.soobao.cn and any future e-commerce services we may offer.

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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:

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·	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.

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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.

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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.

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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’s Common 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		Low
Calendar Year Ending December 31, 2009
1st Quarter (excluding January 16th):	$	1.3600	$	0.3000
2nd Quarter:	$	1.9200	$	0.4300
3rd Quarter:	$	1.7200	$	0.9000

Calendar Year Ended December 31, 2008
1st Quarter:	$	5.7500	$	4.4000
2nd Quarter:	$	4.9000	$	4.2000
3rd Quarter (excluding September 29th)	$	4.3500	$	2.5000
4th Quarter:	$	3.3000	$	1.1500

Calendar Year Ended December 31, 2007
1st Quarter:	$	0.1400	$	0.0005
2nd Quarter (pre 1-for-500 reverse split- April 2 through April 24):	$	0.0900	$	0.0215
2nd Quarter (post 1-for-500 reverse split- April 25 through June 29):	$	2.3000	$	1.7000
3rd Quarter:	$	1.7000	$	1.7000
4th 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.

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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.

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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.

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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.

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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.

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.

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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.

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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.

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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 Using
	Carrying 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.

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(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.

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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, 2008
Years end RMB: US$ exchange rate		6.8319		6.8591
Years average RMB: US$ exchange rate		6.8072		7.2753
Years end HKD: US$ exchange rate		7.7501		7.7973
Years 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.

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(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 $1,055,584 and $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.

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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.

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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				Variance

REVENUES	$	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	%

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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				Variance

Software 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				Variance

Business 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	%

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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				Variance

Salaries 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				Variance

Salaries 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				Variance

Revenues, 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				Variance

Salaries 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	%

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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				Variance

Revenues, 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				Variance

Business 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					Variance

Revenues	$	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	%

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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				Variance

Business 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					Variance

Revenue	$	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,		Amount
2010		$	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:

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Payment Due Dates	Amount

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

Expected Product Delivery Dates	Units

October 20, 2009		20,000
December 20, 2009		10,000
March 20, 2010		10,000
		40,000

(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 $1,207,171 in 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			Variance
Net 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	)%

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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.

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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.

Quantitative and Qualitative Disclosures 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 $1,207,171 and $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-27 comprising a portion of this Annual Report on Form 10-K.

ITEM 9.

Changes in and Disagreements with 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.

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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.

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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.

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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 Board
Junjun Xu	28	Chief Executive Officer and Director
Mingfei Yang	25	Chief Financial Officer
Hon Man Yun	41	Chief Operating Officer
Yuefeng Wang	39	Director
Yinan Zhang	28	Director
Xiaoshuang Chen	45	Director
Renbin Yu	46	Director
Chunsheng 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.

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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.

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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.

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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-		37,554
	2008		19,476		-0-		-0-		-0-		-0-		-0-		-0-		19,476

Mingfei Yang, Chief Financial Officer	2009		15,263		-0-		-0-		-0-		-0-		-0-		-0-		15,263
	2008		8,288		-0-		-0-		-0-		-0-		-0-		-0-		8,288

Hon Man Yun, Chief Operating Officer	2009		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-
	2008		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-

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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 COMPENSATION
Name	Fees Earned or Paid in Cash		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
	($)		($)		($)		($)		($)		($)		($)
EXISTING:
Zhenyu Wang
2009		14,641		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		14,641
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Chunsheng Zhou
2009		14,641		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		14,641
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Yuefeng Wang
2009		14,641		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		14,641
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Yinan Zhang
2009		14,641		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		14,641
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Junjun Xu, CEO
2009		14,641		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		14,641
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Xiaoshuang Chen
2009		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Renbin Yu
2009		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

RESIGNED:
Edith Kam Ying Ho
2009		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

Xueyuan Han
2009		14,641		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		14,641
2008		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -		- 0 -

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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	%

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(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	LOCATION
3.1	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, 2007

3.2	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, 2008

3.4	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, 2007

3.5	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, 2007

3.6	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, 2007

10.1	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, 2007

10.2	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, 2007

10.3	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, 2007

10.4	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, 2007

10.6	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, 2007

10.7	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, 2007

10.8	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, 2007

10.9	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

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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, 2008

16.1	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, 2008

16.2	Auditor Letter of K.P. Cheng & Co.	Provided herewith

31.1	Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith

31.2	Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith

32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Provided herewith

32.2	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Provided herewith

99.1	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, 2008

99.2	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, 2008

99.3	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, 2008

99.4	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, 2009

99.5	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, 2009

99.6	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, 2009

99.7	Resignation Letter of Ms. Edith Kam Ying Ho, dated July 16 2009	Provided herewith

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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, 2009

	By:	/s/ Junjun Xu
		Junjun Xu
		Chief Executive Officer, Principal Executive Officer and Director

		/s/ Mingfei Yang
		Mingfei Yang
		Chief 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, 2009
Junjun Xu	Executive Officer and Director

/s/ Mingfei Yang	Chief Financial Officer, Principal	October 13, 2009
Mingfei Yang	Financial and Accounting Officer

/s/ Zhenyu Wang	Chairman of the Board	October 13, 2009
Zhenyu Wang

/s/ Yuefeng Wang	Director	October 13, 2009
Yuefeng Wang

/s/ Yinan Zhang	Director	October 13, 2009
Yinan Zhang

/s/ Renbin Yu	Director	October 13, 2009
Renbin Yu

/s/ Chunsheng Zhou	Director	October 13, 2009
Chunsheng Zhou

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-3

CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2009 AND 2008		F-4

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED JUNE 30, 2009 AND 2008		F-5

CONSOLIDIATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED JUNE 30, 2009 AND 2008		F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2009 AND 2008		F-7

NOTES 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, 2008
ASSETS
Cash and cash equivalents	$	1,217,085	$	4,567,853
Accounts receivable, net of allowance of $26,302 and $0 at June 30, 2009 and 2008, respectively		7,764,537		6,387,502
Prepayments and deposits		5,428,848		1,207,159
Other receivables		2,385		7,440
Deferred taxes		466,828		243,676
Total Current Assets		14,879,683		12,413,630

Fixed assets, net		212,591		257,199
Software, net		2,963,136		2,671,286
Prepayments for software		6,981,952		-
Goodwill		4,473,787		-
Deposits		78,093		77,804
Deferred taxes		65,447		37,216
Total Long-Term Assets		14,775,006		3,043,505
TOTAL ASSETS	$	29,654,689	$	15,457,135

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	150,514	$	2,642
Other payables and accrued liabilities		2,735,625		1,304,805
Amount due to director		253,506		153,069
Taxes payable		6,260,070		2,902,587
Deferred taxes		90,644		11,530
Deferred revenue		-		63,583
Total Current Liabilities		9,490,359		4,438,216

Deferred taxes		-		18,792
Total Long-Term Liabilities		-		18,792

TOTAL LIABILITIES		9,490,359		4,457,008

COMMITMENTS

SHAREHOLDERS’ EQUITY
Common 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		40,000
Additional paid-in capital		86,360		86,360
Retained earnings (restricted portion of $1,055,584 and $315,584 at June 30, 2009 and 2008, respectively)		19,291,210		10,113,609
Accumulated other comprehensive income		746,760		760,158
Total Shareholders’ Equity		20,164,330		11,000,127

TOTAL 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, 2008

REVENUES, NET	$	17,976,529		$	13,735,376

COST OF SALES		2,133,169			1,313,582
GROSS PROFIT		15,843,360			12,421,794

Selling expenses		281,540			167,903
Advertising expenses		1,912,725			962,160
General and administrative expenses		1,311,384			808,432

INCOME FROM OPERATIONS		12,337,711			10,483,299

Interest income, net		24,718			19,904

INCOME FROM OPERATIONS BEFORE INCOME TAXES		12,362,429			10,503,203

Income taxes		3,184,828			2,166,846

NET INCOME		9,177,601			8,336,357

OTHER COMPREHENSIVE INCOME
Foreign currency translation (loss) gain		(13,398	)		725,006

COMPREHENSIVE INCOME	$	9,164,203		$	9,061,363

NET INCOME PER SHARE

- BASIC AND DILUTED	$	0.23		$	0.25

WEIGHTED 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 Comprehensive
	Share			Par Value			Capital			Earnings			Income			Total
BALANCE, JUNE 30, 2007		26,400,000		$	26,400		$	99,960		$	1,778,251		$	35,152		$	1,939,763

Recapitalization		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			725,006

Net income		-			-			-			8,336,357			-			8,336,357

BALANCE, JUNE 30, 2008		40,000,000			40,000			86,360			10,113,609			760,158			11,000,127

Foreign currency translation loss		-			-			-			-			(13,398	)		(13,398	)

Net income		-			-			-			9,177,601			-			9,177,601

BALANCE, 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, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,177,601		$	8,336,357
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization		440,011			134,342
Depreciation		106,992			61,148
Gain 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			3,065
Prepayments and deposits		(4,213,071	)		(1,280,072	)
Accounts payable		138,353			2,642
Other payables and accrued liabilities		1,345,465			1,284,078
Taxes payable		3,351,193			2,538,156
Deferred revenue		(63,583	)		63,583
Net cash provided by operating activities		8,990,006			6,731,373

CASH 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			153,069
Net cash provided by financing activities		71,455			153,069

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(3,336,301	)		3,788,203
Effect of exchange rate changes on cash		(14,467	)		731,993
Cash and cash equivalents, at beginning of the year		4,567,853			47,657
CASH AND CASH EQUIVALENTS, END OF THE YEAR	$	1,217,085		$	4,567,853

SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid	$	-		$	-
Income taxes paid	$	-		$	631

Also 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”):

Rise & Grow – 100% subsidiary of CHIO

ZBDT – 100% subsidiary of Rise & Grow

ZYTX – a VIE of ZBDT

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

(b) Use of Estimates

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)

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

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 Using
	Carrying 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		-		-

(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

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

(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

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

(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, 2008

Years end RMB: US$ exchange rate		6.8319		6.8591

Years average RMB: US$ exchange rate		6.8072		7.2753

Years end HKD: US$ exchange rate		7.7501		7.7973

Years 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

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

(p) Goodwill

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.

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 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.

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, 2008

Electronic products	$	5,386,497	$	-
Advertising and promotional campaign		-		1,166,334
Renovations		-		24,090
Financial 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, 2008
At cost:
Leasehold improvement	$	88,528	$	135,003
Furniture and fixtures		3,450		13,339
Computers and equipment		121,266		83,004
Motor vehicles		129,094		94,438
		342,338		325,784
Less: Accumulated depreciation
Leasehold improvement		64,254		44,972
Furniture and fixtures		672		1,032
Computers and equipment		35,381		15,456
Motor vehicles		29,440		7,125
		129,747		68,585
Fixed 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, 2008

Cost	$	3,545,641	$	2,813,780
Less: Accumulated amortization		582,505		142,494
Software, 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,	Amount
2010	$	509,964
2011		509,964
2012		509,964
2013		509,964
2014		509,964
Thereafter		413,316
Total	$	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%.

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 as ZYTX 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		2008

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

Current	$	3,294,421		$	2,401,192
Deferred		(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, 2008
Deferred tax assets:
Social welfare expenses	$	39,693	$	19,231
Consumable expenses		6,271		4,607
Advertising		-		43,738
Discounts allowed		1,490		2,591
Business tax		358,915		170,953
Allowance for doubtful accounts		3,945		-
Tax loss		56,500		-
Other		14		2,556
Total current deferred tax assets		466,828		243,676

Amortization		56,727		32,373
Depreciation		8,720		4,843
Total long-term deferred tax assets		65,447		37,216

Total deferred tax assets		532,275		280,892

Deferred tax liabilities:
Commission income		5,449		7,776
Software income		-		1,194
Rental income		21,053		-
Disposal income		38,786		-
Rent		-		2,480
Consultancy fee		4,509		-
Amortization		18,997		-
Depreciation		1,764		80
Other		86		-
Total current deferred tax liabilities		90,644		11,530

Amortization		-		18,089
Depreciation		-		703
Total long-term deferred tax liabilities		-		18,792

Total deferred tax liabilities		90,644		30,322

Net 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		2008

Tax holiday and incentive effect	$	1,361,133	$	2,101,224
Basic 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

Year Ending June 30,	Amount

2010	$	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	Amount

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

Expected Product Delivery Dates	Units

October 20, 2009		20,000
December 20, 2009		10,000
March 20, 2010		10,000
		40,000

Also see Note 5.

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.

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 Receivable
	2009			2008			2009			2008
Software Development
Company 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			Total
Year Ended June 30, 2009
Revenue, net	$	6,511,545	$	11,244,559	$	11,752		$	208,673		$	17,976,529
Cost of sales		115,509		918,088		236,800			862,772			2,133,169
Gross profit (loss)	$	6,396,036	$	10,326,471	$	(225,048	)	$	(654,099	)	$	15,843,360
June 30, 2009
Long-lived assets	$	53,592	$	1,817,578	$	12,648,168		$	255,668		$	14,775,006
Current assets	$	1,214,889	$	6,528,069	$	92,470		$	7,044,255		$	14,879,683

Year Ended June 30, 2008
Revenue, net	$	4,298,739	$	9,432,393	$	4,244		$	-		$	13,735,376
Cost of sales		94,502		556,683		17,298			645,099			1,313,582
Gross profit (loss)	$	4,204,237	$	8,875,710	$	(13,054	)	$	(645,099	)	$	12,421,794
June 30, 2008
Long-lived assets	$	30,849	$	1,954	$	2,674,724		$	335,978		$	3,043,505
Current 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	$	130,325
Fixed assets		815
Accounts receivable		318,409
Other receivable and prepayments		8,907
Due from shareholder		1,019,759
Deferred tax assets		25,007
Total assets purchased	$	1,503,222

Accounts payable	$	9,519
Other payables and accrued expenses		85,355
Taxes payable		6,290
Deferred tax liabilities		619
Amount due to shareholder		28,982
Total liabilities assumed	$	130,765

Total net assets	$	1,372,457

Share percentage		100	%

Net assets acquired	$	1,372,457

Total consideration paid	$	5,846,244

Intangible 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	$	18,016,437
Cost of sales	$	2,133,169
Income from operations	$	12,290,787
Net income	$	9,124,012
Earnings 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