BEIJING, Aug. 14 /Xinhua-PRNewswire/ -- NetEase.com, Inc. (Nasdaq: NTES), one of China’s leading Internet and online game services providers, today announced its unaudited financial results for the quarter ended June 30, 2008.
William Ding, Chief Executive Officer and Director of NetEase stated, “We experienced a strong second quarter due to solid execution in our online gaming and advertising businesses. We believe that China’s online gaming industry is in the midst of unprecedented growth and NetEase is very well positioned to benefit from this trend. During the second quarter, our flagship game, Fantasy Westward Journey, which remains among the Top 10 in downloads, still continued to perform quite well, fueled by periodic releases of new expansion packs and successful in-game marketing activities. In addition, Westward Journey II is attracting greater user interest, and Westward Journey III is progressing well. We also successfully completed the development of Tianxia II, our first 3D item-based game, and launched open beta testing in June on schedule. By focusing on a step-by-step development approach, we were able to make continuous enhancements based on player feedback.”
Mr. Ding continued, “To leverage the opportunities provided by the 2008 Beijing Olympic Games, we have been further strengthening the content on our portal, which helped drive increased traffic to our site and achieve further growth in the number of our e-mail users during the second quarter. These efforts resulted in significant sequential growth in adverting revenue this quarter as our advertisers have increasingly recognized the value of marketing their products and services on our portal.”
Second Quarter 2008 Financial Results
Revenues
Total revenues for the second quarter of 2008 were RMB715.9 million (US$104.4 million), compared to RMB651.9 million (US$95.0 million) and RMB558.0 million (US$81.3 million) for the preceding quarter and the second quarter of 2007, respectively.
Revenues from online games were RMB595.0 million (US$86.8 million) for the second quarter of 2008, compared to RMB555.9 million (US$81.0 million) and RMB475.1 million (US$69.3 million) for the preceding quarter and the second quarter of 2007, respectively.
Revenues from advertising services were RMB103.9 million (US$15.2 million) for the second quarter of 2008, compared to RMB77.1 million (US$11.2 million) and RMB65.3 million (US$9.5 million) for the preceding quarter and the second quarter of 2007, respectively.
Revenues from wireless value-added services and others (“WVAS and others”) were RMB16.9 million (US$2.5 million) for the second quarter of 2008, compared to RMB18.9 million (US$2.8 million) and RMB17.5 million (US$2.6 million) for the preceding quarter and the second quarter of 2007, respectively.
Gross Profit
Gross profit for the second quarter of 2008 was RMB722.8 million (US$105.4 million), compared to RMB532.0 million (US$77.6 million) and RMB437.8 million (US$63.8 million) for the preceding quarter and the second quarter of 2007, respectively. The quarter-over-quarter and year-over-year increases in gross profit were primarily driven by the receipt of a business tax refund of RMB146.8 million (US$21.4 million) in June 2008 for certain excess amounts paid in previous years, which was determined as a result of application of the newly approved basis by allowing the deduction of revenues shared with co-operators before applying the business tax rate. In addition, higher demand for game and advertising services in the second quarter of 2008 contributed to the higher gross profit. The revenue from Fantasy Westward Journey continued to grow as a result of new designs and features introduced since late September 2007 and certain in-game marketing activities launched during festival occasions. Higher demand for advertising services in the second quarter of 2008 was primarily driven by increased advertising activities in connection with the Beijing Olympics.
Gross Margin
Gross profit margin for the online game business for the second quarter of 2008 was 91.2%, compared to 90.2% for each of the preceding quarter and the second quarter of 2007. The quarter-over-quarter and year-over-year increases in gross profit margin were primarily due to the higher revenue and the business tax refund received in June 2008 as explained above, partially offset by higher staff-related costs as a result of an increase in headcount and increases of other cost of revenues.
Gross profit margin for the advertising business for the second quarter of 2008 was 52.6%, compared to 45.8% and 47.2% for the preceding quarter and the second quarter of 2007, respectively. The quarter-over-quarter and year-over-year increases in gross profit margin were primarily driven by increased revenue, partially offset by higher staff-related costs as a result of an increase in headcount, higher content cost caused by price increases and increases in other cost of revenues driven by greater demand associated with the Beijing Olympics.
Gross profit margin for the WVAS and others business for the second quarter of 2008 was 28.8%, compared to the gross loss margin of 6.2% and 28.1% for the preceding quarter and the second quarter of 2007, respectively. The quarter-over-quarter and the year-over-year improvements in gross margin were mainly caused by the business tax refund received in June 2008 as explained above.
Operating Expenses
Total operating expenses for the second quarter of 2008 were RMB149.7 million (US$21.8 million), compared to RMB127.6 million (US$18.6 million) and RMB142.8 million (US$20.8 million) for the preceding quarter and the second quarter of 2007, respectively. The quarter-over-quarter increase in selling and marketing expenses was primarily driven by higher marketing cost associated with the open beta testing of Tianxia II, higher marketing cost in connection with the Beijing Olympics and higher staff-related costs as a result of increased headcount. The slight quarter-over-quarter increase in general and administration expenses was mainly due to the receipt of a non-recurring local government rent subsidy of RMB1.0 million (US$0.1 million) by one of the Company’s subsidiaries which was recorded in the first quarter of 2008. The year-over-year increase in selling and marketing expenses was primarily due to higher staff-related costs resulting from increased headcount and increased incentive payments associated with the increased revenues. The year-over-year decrease in general and administrative expenses was primarily due to a reduction of professional service fees in the second quarter of 2008. The quarter-over-quarter and year-over-year increases in research and development cost were primarily due to higher staff-related costs caused by increased headcount and new incentive payments.
Net Profit
Net profit for the second quarter of 2008 totaled RMB438.2 million (US$63.9 million), compared to RMB269.4 million (US$39.3 million) and RMB312.6 million (US$45.6 million) for the preceding quarter and the second quarter of 2007, respectively. NetEase reported basic and diluted earnings per American depositary share (“ADS”) of US$0.53 and US$0.49 for the second quarter of 2008, respectively. The Company reported basic and diluted earnings per ADS of US$0.32 and US$0.30 and US$0.37 and US$0.34 for the preceding quarter and the second quarter of 2007, respectively.
Income Taxes
Effective as of January 1, 2008, the Chinese government adopted a new income tax law which unified the enterprise income tax payable by domestic and foreign-invested enterprises at 25%. Prior to the adoption of the new law, a number of the Company’s subsidiaries and variable interest entities (“VIEs”) were entitled to various preferential tax treatments. The Company’s subsidiaries and VIEs are currently in the process of applying for the New/High Technology Enterprises ("NHTEs") tax treatment pursuant to the "Working Guidelines for Assessment of New/High Technology Enterprises" issued by the Chinese tax authorities on July 8, 2008. Accordingly, NetEase followed the applicable accounting standards and adopted the statutory rate of 25% in making tax provisions for the second quarter ended June 30, 2008, except for entities still enjoying unexpired tax holidays.
The tax charge for the second quarter of 2008 was RMB140.0 million (US$20.4 million), compared to the tax charge of RMB114.8 million (US$16.7 million) and the tax charge of RMB2.0 million (US$0.3 million) for the preceding quarter and the second quarter of 2007, respectively. The quarter-over-quarter increase in tax charge was mainly as a result of an increase in revenue recognized for the second quarter of 2008. The year-over-year increase in tax charge was mainly due to the lower effective tax rate in effect under the pre-2008 tax laws and the receipt of an investment incentive tax refund of RMB24.4 million (US$3.6 million) recorded in the second quarter of 2007. Under the pre-2008 tax laws, the Company’s effective tax rate was well below 10% in the second quarter of 2007. The Company expects to reverse any excess tax provisions in subsequent periods when its subsidiaries and VIEs in China are granted the NHTE preferential tax status, which will be expected to be partially offset by the expected reduction to deferred tax assets recorded at the lower NHTE preferred tax rates in the future quarters.
Other Information
As of June 30, 2008, the Company’s total cash and time deposit balance was RMB4.96 billion (US$722.4 million), compared to RMB4.16 billion (US$606.3 million) as of December 31, 2007. Cash flow generated from operating activities was approximately RMB513.3 million (US$74.8 million) for the second quarter of 2008, compared to RMB495.0 million (US$72.2 million) and RMB331.0 million (US$48.3 million) for the preceding quarter and the second quarter of 2007, respectively.
On July 2, 2007, the Company’s Board authorized a share repurchase program of up to US$120 million of the Company’s outstanding ADSs. As of July 1, 2008, the Company had spent in aggregate a total purchase consideration of approximately US$46.4 million (including transaction costs). The share repurchase program ended on July 1, 2008.
By July 11, 2008, the Company’s outstanding zero-coupon convertible subordinated notes due July 15, 2023 (the “Notes”) totaling US$63.4 million as of June 30, 2008 were fully converted at the request of the noteholders pursuant to a redemption notice issued by the Company to the noteholders dated June 13, 2008. In the redemption notice, the Company called for the redemption of the Notes, and noteholders might surrender their notes for conversion at any time before the close of business on July 11, 2008 at the conversion price of US$0.4815 per ordinary share.
** The United States dollar (US$) amounts disclosed in this press release
are presented solely for the convenience of the reader. Translations
of amounts from RMB into United States dollars for the convenience of
the reader were calculated at the noon buying rate of US$1.00 =
RMB6.8591 on June 30, 2008 in The City of New York for the cable
transfers of RMB as certified for customs purposes by the Federal
Reserve Bank of New York. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that rate
on June 30, 2008, or at any other certain date. The percentages stated
are calculated based on RMB.
Conference Call
NetEase’s management team will host a conference call at 9:00 pm Eastern Time on Wednesday, August 13, 2008 (Beijing/Hong Kong Time: 9:00 am, Thursday, August 14, 2008). Chief Executive Officer William Ding, Acting Chief Financial Officer Onward Choi, and Co-Chief Operating Officer Michael Tong will be on the call to discuss the quarterly results and answer questions.
Interested parties may participate in the conference call by dialing 800-240-2134 (international: 303-262-2054), 10-15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 800-405-2236 (international 303-590-3000), and entering passcode 11117399#. The replay will be available through August 28, 2008 Eastern Time.
This call is being webcast live and archived, and will be available for 12 months on NetEase’s corporate web site at http://corp.netease.com , Investor Info: Earnings Call.
About NetEase
NetEase.com, Inc. is a leading China-based Internet technology company that pioneered the development of applications, services and other technologies for the Internet in China. NetEase’s online communities and personalized premium services have established a large and stable user base for the NetEase websites which are operated by its affiliates. In particular, NetEase provides online game services to Internet users through the licensing or in-house development of massively multi-player online role-playing games, including Fantasy Westward Journey, Westward Journey Online II, Westward Journey Online III, Tianxia II and Datang.
NetEase also offers online advertising on its websites which enables advertisers to reach its substantial user base. In addition, NetEase has paid listings on its search engine and web directory and classified ads services, as well as an online mall, which provides opportunities for e-commerce and traditional businesses to establish their own storefront on the Internet. NetEase also offers wireless value-added services such as news and information content, matchmaking services, music and photos from the Web which are sent over SMS, MMS, WAP, IVR and Color Ring-back Tone technologies.
Other community services which the NetEase websites offer include instant messaging, online personal ads, matchmaking, alumni clubs and community forums. NetEase is also the largest provider of free e-mail services in China. Furthermore, the NetEase websites provide various channels of content. NetEase aggregates news content on world events, sports, science and technology, and financial markets, as well as entertainment content such as cartoons, games, astrology and jokes, from over one hundred international and domestic content providers.
This press release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that NetEase will not be successful in its product diversification efforts, including its focus on item- and fee-based games and exploration of strategic licensing opportunities; the risk that the online game market will not continue to grow or that NetEase will not be able to maintain its leading position in that market, which could occur if, for example, its new online games or expansion packs and other improvements to its existing games do not become as popular as management anticipates; the ability of NetEase to effectively market its games and other services and achieve a positive return on its marketing expenditures; the risk that changes in Chinese government regulation of the online game market may limit future growth of NetEase’s revenue or cause revenue to decline; the risk that NetEase may not be able to continuously develop new and creative online services; the risk that NetEase will not be able to control its expenses in future periods; competition in NetEase’s existing and potential markets; governmental uncertainties (including possible changes in the effective tax rates applicable to NetEase and its subsidiaries and affiliates and the ability of NetEase to receive approvals of the preferential tax treatments previously available to certain of its subsidiaries and VIEs in China), general competition and price pressures in the marketplace; the risk that security, reliability and confidentiality concerns may impede broad use of the Internet and e-commerce and other services; the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase’s business and financial results; and other risks outlined in NetEase’s filings with the Securities and Exchange Commission. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law.
NETEASE.COM, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30, June 30,
2007 2008 2008
RMB RMB USD (Note 1)
Assets
Current assets:
Cash 2,482,820,821 2,399,140,819 349,774,871
Time deposits 1,675,813,944 2,555,926,069 372,632,863
Accounts receivable, net 166,727,514 193,788,408 28,252,745
Prepayments and other
current assets 45,143,728 51,984,984 7,578,980
Deferred tax assets 65,787,113 53,998,465 7,872,529
Total current assets 4,436,293,120 5,254,838,745 766,111,988
Non-current assets:
Non-current rental deposits 3,033,171 3,361,265 490,045
Property, equipment and
software, net 183,471,666 177,187,171 25,832,423
Prepayment for land use
right, net 26,956,800 12,692,783 1,850,503
Deferred tax assets 19,060,225 19,156,835 2,792,908
Other long-term assets 16,844,399 16,630,620 2,424,607
Total non-current assets 249,366,261 229,028,674 33,390,486
Total assets 4,685,659,381 5,483,867,419 799,502,474
Liabilities and Shareholders’
Equity
Current liabilities:
Zero-coupon convertible
subordinated notes due
July 15, 2023 641,778,908 435,086,431 63,432,000
Accounts payable 89,143,868 106,281,532 15,494,968
Salary and welfare payables 68,653,742 66,705,318 9,725,083
Taxes payable 92,438,670 179,856,649 26,221,611
Deferred revenue 354,966,697 405,937,457 59,182,321
Accrued liabilities 29,844,067 40,537,832 5,910,080
Total current liabilities 1,276,825,952 1,234,405,219 179,966,063
Long-term payable:
Other long-term payable 10,200,000 10,200,000 1,487,076
Total long-term payable 10,200,000 10,200,000 1,487,076
Total liabilities 1,287,025,952 1,244,605,219 181,453,139
Shareholders’ equity 3,398,425,631 4,239,058,030 618,019,569
Minority interests 207,798 204,170 29,766
Total liabilities and
shareholders’ equity 4,685,659,381 5,483,867,419 799,502,474
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended
June 30, March 31, June 30, June 30,
2007 2008 2008 2008
RMB RMB RMB USD (Note 1)
Revenues:
Online game
services 475,149,731 555,859,907 595,039,049 86,751,768
Advertising
services 65,328,019 77,144,002 103,937,354 15,153,206
Wireless
value-added
services and
others 17,494,877 18,919,553 16,897,198 2,463,472
Total revenues 557,972,627 651,923,462 715,873,601 104,368,446
Business taxes (21,926,013) (7,469,810) 137,081,472 19,985,344
Total net
revenues 536,046,614 644,453,652 852,955,073 124,353,790
Total cost of
revenues (98,267,119) (112,495,076) (130,164,922) (18,976,968)
Gross profit 437,779,495 531,958,576 722,790,151 105,376,822
Operating
expenses:
Selling and
marketing
expenses (49,272,271) (38,246,993) (53,403,127) (7,785,734)
General and
administrative
expenses (48,380,093) (43,143,442) (44,127,629) (6,433,443)
Research and
development
expenses (45,110,176) (46,184,577) (52,208,647) (7,611,589)
Total
operating
expenses (142,762,540) (127,575,012) (149,739,403) (21,830,766)
Operating
profit 295,016,955 404,383,564 573,050,748 83,546,056
Other income
(expenses):
Investment
income 117,317 101,650 123,534 18,010
Interest
income 28,409,895 30,873,332 31,439,986 4,583,690
Other, net (8,934,188) (51,178,963) (26,439,269) (3,854,627)
Profit before
tax 314,609,979 384,179,583 578,174,999 84,293,129
Income tax (2,013,483) (114,832,848) (140,003,786) (20,411,393)
Profit after
tax 312,596,496 269,346,735 438,171,213 63,881,736
Minority
interests -- 3,511 117 17
Net profit 312,596,496 269,350,246 438,171,330 63,881,753
Earnings per
share, basic 0.10 0.09 0.14 0.02
Earnings per
ADS, basic 2.52 2.22 3.62 0.53
Earnings per
share,
diluted 0.09 0.08 0.14 0.02
Earnings per
ADS, diluted 2.35 2.08 3.39 0.49
Weighted
average
number of
ordinary
shares
outstanding
basic 3,100,597,113 3,028,995,782 3,027,874,505 3,027,874,505
Weighted
average
number
of ADS
outstanding,
basic 124,023,885 121,159,831 121,114,980 121,114,980
Weighted
average
number of
ordinary
shares
outstanding,
diluted 3,318,874,571 3,233,744,526 3,233,701,752 3,233,701,752
Weighted
average
number
of ADS
outstanding,
diluted 132,754,983 129,349,781 129,348,070 129,348,070
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended
June 30, March 31, June 30, June 30,
2007 2008 2008 2008
RMB RMB RMB USD (Note 1)
Cash flows from
operating
activities:
Net profit 312,596,496 269,350,246 438,171,330 63,881,753
Adjustments to
reconcile net
profit to net
cash provided
by operating
activities:
Depreciation and
amortization 24,063,948 24,085,433 23,183,012 3,379,891
Share-based
compensation
cost 27,057,772 19,282,517 20,836,332 3,037,765
Allowance/
(reversal) of
provision for
doubtful debts 2,009,537 (1,202,665) (1,419,319) (206,925)
Gain on disposal
of property,
equipment
and software (321,538) (53,816) (23,045) (3,360)
Write-off of
property,
equipment
and software -- -- 5,247 765
Unrealized
exchange losses 8,866,712 50,399,867 26,574,778 3,874,383
Share of loss by
minority
interests -- (3,511) (117) (17)
Net equity share
of loss from an
associated
company -- 386,123 487,300 71,044
Changes in
operating
assets and
liabilities:
Accounts
receivable (47,689,980) 53,521,635 (77,960,545) (11,366,002)
Prepayments
and other
current
assets (18,488,436) (5,467,334) (3,312,399) (482,921)
Deferred tax
assets 4,126,531 (6,896,626) 18,685,274 2,724,158
Deferred tax
assets -
non-current (1,389,030) (84,913) (11,697) (1,705)
Accounts
payable 31,741,208 (900,446) 16,206,953 2,362,840
Salary and
welfare
payables 5,216,308 (17,343,345) 15,394,921 2,244,452
Taxes payable (347,813) 68,672,447 18,745,532 2,732,943
Deferred
revenue (11,475,172) 40,579,198 10,391,562 1,515,004
Deferred tax
liabilities (4,089,877) -- -- --
Accrued
liabilities (829,872) 635,974 7,367,340 1,074,097
Net cash
provided by
operating
activities 331,046,794 494,960,784 513,322,459 74,838,165
Cash flows from
investing
activities:
Purchase
of property,
equipment
and
software (7,948,685) (15,418,337) (20,258,398) (2,953,507)
Proceeds
from sale
of property,
equipment
and
software 5,812 56,540 62,501 9,112
Prepayment
on land
use right (26,956,800) (822,182) -- --
Incentive
received
on land
use right -- -- 15,000,000 2,186,876
Transfer
from
restricted
cash (761,580,600) -- -- --
Net change
in time
deposits
with terms
of three
months 313,909,363 (252,686,082) (309,877,981) (45,177,644)
Placement/
rollover
of matured
time
deposits (90,542,729) (422,426,062) (201,856,509) (29,429,008)
Uplift of
matured
time
deposits 212,513,368 126,035,000 180,542,729 26,321,635
Net change
in other
assets -- (412,578) 81,783 11,923
Net cash
(used in)
investing
activities (360,600,271) (565,673,701) (336,305,875) (49,030,613)
Cash flows from
financing
activities:
Proceeds from
employees
exercising
stock
options 18,924,290 642,039 328,603 47,908
Repurchase of
company
shares (574,604,375) (76,433,652) -- --
Payment of
other long-
term payable (38,575) -- -- --
Net cash
provided
by (used in)
financing
activities (555,718,660) (75,791,613) 328,603 47,908
Effect of
exchange
rate changes
on cash held
in foreign
currencies (2,236,633) (74,851,929) (39,668,730) (5,783,372)
Net increase
(decrease)
in cash (587,508,770) (221,356,459) 137,676,457 20,072,088
Cash, beginning
of the quarter 1,507,868,910 2,482,820,821 2,261,464,362 329,702,783
Cash, end of the
quarter 920,360,140 2,261,464,362 2,399,140,819 349,774,871
Supplemental
disclosures
of cash flow
information:
Cash paid
for income
tax, net of
tax refund 16,061,871 33,512,049 117,313,562 17,103,346
Supplemental
schedule of
non-cash
investing and
financing
activities:
Treasury stock
cancellation 643,954,432 -- 76,433,652 11,143,394
Fixed asset
purchases
financed by
accounts
payable 11,520,005 9,716,130 10,529,644 1,535,135
Conversion
of
convertible
notes to
ordinary
shares -- -- 168,377,187 24,548,000
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
UNAUDITED SEGMENT INFORMATION
Quarter Ended
June 30, March 31, June 30, June 30,
2007 2008 2008 2008
RMB RMB RMB USD (Note 1)
Revenues:
Online game services 475,149,731 555,859,907 595,039,049 86,751,768
Advertising services 65,328,019 77,144,002 103,937,354 15,153,206
Wireless value-added
services and others 17,494,877 18,919,553 16,897,198 2,463,472
Total revenues 557,972,627 651,923,462 715,873,601 104,368,446
Business taxes:
Online game services (15,679,941) (747,630) 133,155,985 19,413,040
Advertising services (5,552,882) (6,557,240) (8,834,675) (1,288,022)
Wireless value-added
services and others (693,190) (164,940) 12,760,162 1,860,326
Total business taxes (21,926,013) (7,469,810) 137,081,472 19,985,344
Net revenues:
Online game services 459,469,790 555,112,277 728,195,034 106,164,808
Advertising services 59,775,137 70,586,762 95,102,679 13,865,184
Wireless value-added
services and others 16,801,687 18,754,613 29,657,360 4,323,798
Total net revenues 536,046,614 644,453,652 852,955,073 124,353,790
Cost of revenues:
Online game services (45,151,473) (54,290,222) (63,985,689) (9,328,584)
Advertising services (31,585,837) (38,290,401) (45,063,123) (6,569,830)
Wireless value-added
services and others (21,529,809) (19,914,453) (21,116,110) (3,078,554)
Total cost of
revenues (98,267,119) (112,495,076) (130,164,922) (18,976,968)
Gross profit (loss):
Online game services 414,318,317 500,822,055 664,209,345 96,836,224
Advertising services 28,189,300 32,296,361 50,039,556 7,295,354
Wireless value-added
services and others (4,728,122) (1,159,840) 8,541,250 1,245,244
Total gross profit 437,779,495 531,958,576 722,790,151 105,376,822
Gross profit (loss)
margin:
Online game services 90.2% 90.2% 91.2% 91.2%
Advertising services 47.2% 45.8% 52.6% 52.6%
Wireless value-added
services and others (28.1%) (6.2%) 28.8% 28.8%
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
NOTES TO UNAUDITED FINANCIAL INFORMATION
Note 1: The conversion of Renminbi (RMB) into United States dollars (USD)
is based on the noon buying rate of USD1.00 = RMB6.8591 on June
30, 2008 in The City of New York for cable transfers of Renminbi
as certified for customs purposes by the Federal Reserve Bank of
New York.
Note 2: Share-based compensation cost reported in the Company's unaudited
condensed consolidated statements of operations is set out as
follows:
Quarter Ended
June 30, March 31, June 30, June 30,
2007 2008 2008 2008
RMB RMB RMB USD (Note 1)
Share-based compensation
cost included in:
Cost of revenue 4,211,757 3,147,772 3,396,419 495,170
Operating expenses
- Selling and marketing
expenses 4,088,683 2,548,679 2,675,811 390,111
- General and
administrative expenses 9,233,855 7,084,995 7,538,343 1,099,028
- Research and development
expenses 9,523,477 6,501,071 7,225,759 1,053,456
