Annual and Transition Report (foreign Private Issuer) (20-f)

Date: April 16, 2015

SUNGY MOBILE LIMITED

/s/ Yuqiang Deng

Yuqiang Deng

Chairman and Chief Executive Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014.

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission file number: 001-36195

SUNGY MOBILE LIMITED

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Floor 17, Tower A, China International Center

No. 33 Zhongshan 3rd Road

Yuexiu District, Guangzhou 510055

People’s Republic of China

(Address of principal executive offices)

Longfei Zhou

Chief Financial Officer

Tel: +86 (20) 6681-5066

E-mail: zhoulongfei@gomo.com

Floor 17, Tower A, China International Center

No. 33 Zhongshan 3rd Road

Yuexiu District, Guangzhou 510055

People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Exchange on Which Registered
American depositary shares, each representing six Class A ordinary share, par value US$0.0001 per share		The NASDAQ Global Market
Class A ordinary share, par value $0.0001 per share*		The NASDAQ Global Market

*	Not for trading, but only in connection with the listing on The NASDAQ Global Market of the American depositary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 66,866,388 Class A ordinary shares, par value US$0.0001 per share, and 123,172,962 Class B ordinary shares, par value US$0.0001 per share, were outstanding as of December 31, 2014.

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

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP x		International Financial Reporting Standards as issued by the International Accounting Standards Board ¨			Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

TABLE OF CONTENTS


INTRODUCTION			1
FORWARD-LOOKING STATEMENTS			2
PART I			3
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			3
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			3
ITEM 3. KEY INFORMATION			3
ITEM 4. INFORMATION ON THE COMPANY			40
ITEM 4A UNRESOLVED STAFF COMMENTS			68
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS			68
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			91
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			102
ITEM 8. FINANCIAL INFORMATION			106
ITEM 9. THE OFFER AND LISTING			107
ITEM 10. ADDITIONAL INFORMATION			108
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			118
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			119
PART II			121
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			121
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			121
ITEM 15. CONTROLS AND PROCEDURES			121
ITEM 16. [RESERVED]			122
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT			122
ITEM 16B. CODE OF ETHICS			122
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES			123
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			123
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			123
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			123
ITEM 16G. CORPORATE GOVERNANCE			123
ITEM 16H. MINE SAFETY DISCLOSURE			124
PART III			125
ITEM 17. FINANCIAL STATEMENTS			125
ITEM 18. FINANCIAL STATEMENTS			125
ITEM 19. EXHIBITS			125

INTRODUCTION

Unless otherwise indicated and except where the context otherwise requires, references in this annual report on Form 20-F to:

•

“Sungy Mobile Limited,” “we,” “us,” “our company” and “our” refer to Sungy Mobile Limited, its subsidiaries and, in the context of describing our operations and consolidation financial information, also include our variable interest entities, Guangzhou Jiubang Digital Technology Co., Ltd., or Jiubang Digital, Guangzhou Sanju Advertising Media Co., Ltd., or Sanju Advertising, Guangzhou Hengye Software Technology Co., Ltd., or Hengye Software, and Guangzhou Zhiteng Computer Technology Co., Ltd., or Zhiteng Computer;

•

“ADSs” refers to our American depositary shares, each of which represents six Class A ordinary shares;

•

“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;

•

“ordinary shares” refers to our Class A and Class B ordinary shares, par value US$0.0001 per share;

•

“RMB” and “Renminbi” refer to the legal currency of China;

•

“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States;

•

“user” for our GO series products refers to a smartphone in which one or more of our GO series products has been downloaded and activated, according to our internal statistics. Each smartphone is counted as one user regardless of the number of GO series products installed on that smartphone;

•

“monthly active user” for our GO series products refers to a smartphone in which one or more of our GO series products has been downloaded and activated and that accessed mobile internet at least once during the relevant month, according to our internal statistics. Each smartphone is counted as one monthly active user in any given month regardless of the number of GO series products installed on that smartphone;

•

“unique visitor” to 3G.cn means a visitor to 3G.cn from a specific mobile phone containing an individual browser cookie. No subsequent visits from the same mobile phone using the same cookie during a relevant period are added to our total unique visitors count for that period. An individual who accesses 3G.cn multiple times from the same mobile phone with the same cookie is counted as a unique visitor for each cookie he or she uses; and

•

A “paid download” refers to a download of our mobile application product from application stores in any of the following two categories: (i) our paid mobile application product, Next Launcher, and (ii) paid premium themes or advanced functionalities for our free mobile application products.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “is expected to,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

•

our growth strategies;

•

our ability to retain and increase our user base and expand our product and service offerings;

•

our ability to monetize our platform;

•

our future business development, results of operations and financial condition;

•

competition from companies in a number of industries including internet companies that provide mobile internet portal services and operate mobile reading services;

•

expected changes in our revenues and certain cost or expense items;

•

our expectation regarding the use of proceeds from our initial public offering;

•

general economic and business condition globally and in China; and

•

assumptions underlying or related to any of the foregoing.

You should thoroughly read this annual report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. Other sections of this annual report, including the Risk Factors and Operating and Financial Review and Prospects sections, discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements we make as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

A. Selected Financial Data

The following table presents (1) selected consolidated statements of comprehensive income (loss) data for the years ended December 31, 2012, 2013 and 2014 and the selected consolidated balance sheets data as of December 31, 2013 and 2014 derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1; and (2) the selected consolidated statements of comprehensive income (loss) data for the year ended December 31, 2011 and the selected consolidated balance sheets data as of December 31, 2011 and 2012 derived from our audited consolidated financial statements for the year ended December 31, 2011 and 2012, which are not included in this annual report. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements and related notes and the information under “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report.


	For the Year Ended December 31,
	2011			2012			2013			2014
	RMB			RMB			RMB			RMB			US$
Selected Consolidated Statements of Comprehensive Income (Loss) Data:
Revenues		96,594,538			185,218,681			328,843,318			369,219,983			59,507,459
Cost of revenues⁽¹⁾		(46,617,793	)		(74,813,098	)		(94,144,743	)		(134,037,756	)		(21,602,965	)

Gross profit		49,976,745			110,405,583			234,698,575			235,182,227			37,904,494
Operating Expenses:
Research and development expenses ⁽¹⁾		(30,190,352	)		(34,041,250	)		(46,641,102	)		(89,679,663	)		(14,453,738	)
Selling and marketing expenses ⁽¹⁾		(35,305,268	)		(45,914,065	)		(47,293,583	)		(104,196,733	)		(16,793,465	)
General and administrative expenses ⁽¹⁾		(23,224,454	)		(25,614,849	)		(51,246,338	)		(119,854,801	)		(19,317,087	)

Operating income (loss)		(38,743,329	)		4,835,419			89,517,552			(78,548,970	)		(12,659,796	)
Change in fair value of warrants		(2,356,037	)		—			—			—			—
Share of losses of equity method investments		(3,744,390	)		(1,072,946	)		—			(622,909	)		(100,395	)
Impairment loss on equity method investments		(389,270	)		—			—			—			—
Gain on disposal of an equity method investment		—			4,182,485			—			—			—
Investment income		2,251,269			124,862			360,750			9,381,389			1,512,005
Interest income		205,715			194,643			279,777			29,388,576			4,736,579
Other income		—			—			—			6,407,465			1,032,696

Income (loss) before income taxes		(42,776,042	)		8,264,463			90,158,079			(33,994,449	)		(5,478,911	)
Income tax benefit (expense)		—			6,903,561			1,656,813			(13,673,721	)		(2,203,804	)

Net income (loss)		(42,776,042	)		15,168,024			91,814,892			(47,668,170	)		(7,682,715	)
Basic earnings (loss) per ordinary share		(1.89	)		(0.83	)		0.28			(0.24	)		(0.04	)
Diluted earnings (loss) per ordinary share		(1.89	)		(0.83	)		0.27			(0.24	)		(0.04	)
Weighted average ordinary shares outstanding
Basic		51,880,468			51,880,468			67,653,340			199,508,989
Diluted		51,880,468			51,880,468			70,950,210			199,508,989

(1)	The amount of share-based compensation costs for the years ended December 31, 2012, 2013 and 2014 are as follows:


	For the Year Ended December 31,
	2011			2012			2013			2014
	RMB			RMB			RMB			RMB			US$
Cost of revenues		74,458			76,111			639,246			2,633,316			424,413
Research and development expenses		111,716			164,374			1,944,824			5,410,007			871,935
Selling and marketing expenses		52,355			124,850			728,459			2,559,662			412,543
General and administrative expenses		53,365			60,748			14,510,015			54,368,924			8,762,680

Total		291,894			426,083			17,822,544			64,971,909			10,471,571


	As of December 31,
	2011			2012			2013			2014
	RMB			RMB			RMB			RMB			US$
Selected Consolidated Balance Sheets Data:
Cash and cash equivalents		81,011,002			83,598,378			759,388,415			172,246,142			27,761,039
Time deposits		—			—			—			424,000,000			68,336,396
Accounts receivable, net		33,167,598			46,341,590			84,344,499			72,566,125			11,695,536
Total Assets		135,853,500			164,318,473			903,003,569			893,380,937			143,986,871
Total liabilities		33,894,056			46,632,878			68,013,032			121,172,610			19,529,481
Redeemable convertible preferred shares		390,097,630			447,127,915			—			—			—
Ordinary shares		42,360			42,360			133,483			126,722			20,424
Treasury shares		—			—			—			(2,852,216	)		(459,694	)
Accumulated deficit		(327,181,409	)		(369,820,097	)		(321,423,826	)		(368,587,259	)		(59,405,483	)
Total shareholders’ equity (deficit)		(288,138,186	)		(329,442,320	)		834,990,537			772,208,327			124,457,390

Exchange Rate Information

Our business is primarily conducted in China and a majority of our revenues are denominated in RMB. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report were made at a rate of RMB6.2046 to US$1.00, the exchange rate on December 31, 2014, as set forth in the H.10 statistical release published by the Federal Reserve Board. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign currency and through restrictions on foreign exchange activities. On April 10, 2015, the exchange rate, as set forth in the H.10 statistical release of the Federal Reserve Board, was RMB6.2082 to US$1.00.

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our other periodic reports or any other information to be provided to you.


	Certified Exchange Rate
Period	Period End		Average (1)		Low		High
	(RMB per US$1.00)
2009		6.8259		6.8295		6.8470		6.8176
2010		6.6000		6.7603		6.8330		6.6000
2011		6.2939		6.4475		6.6364		6.2939
2012		6.2301		6.2990		6.3879		6.2221
2013		6.0537		6.1412		6.2438		6.0537
2014		6.2046		6.1704		6.2591		6.0402
October		6.1124		6.1251		6.1385		6.1107
November		6.1429		6.1249		6.1429		6.1117
December		6.2046		6.1886		6.2256		6.1490
2015
January		6.2495		6.2181		6.2535		6.1870
February		6.2695		6.2518		6.2695		6.2399
March		6.1990		6.2386		6.2741		6.1955
April (through April 10, 2015)		6.2082		6.1989		6.2082		6.1930

(1)	Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Related to Our Business

Our GO series products and GO platform are relatively new, and the continued growth of our business is subject to a high degree of uncertainty.

Our GO series products and GO platform are relatively new and have only a short operating history, and the core elements of our GO platform are unique and rapidly evolving. Our GO series products have rapidly achieved global popularity since the launch of GO Launcher EX in November 2010. However, due to the relatively short history of GO series products and services, the sustainability of user demand and the continued growth of our GO series products and GO platform are subject to a high degree of uncertainty. There are few proven methods of projecting user demand or industry trends on which we can rely, and we cannot assure you that we will be successful in the future. As the mobile internet industry is experiencing constant changes and innovation, many of the determining factors for the future of our GO series products and our GO platform are beyond our control, including our ability to anticipate and adapt to rapid changes in industry trends and the tastes and preferences of our users, our ability to develop a larger portfolio of GO series products and services that will continue to be popular among users, our ability to integrate a large number of third party mobile internet products and services into our GO platform to serve a wider range of our users’ needs, the continued worldwide growth in the use of our mobile internet products, and the availability and popularity of other competing mobile internet products.

We have devoted, and expect to continue to devote, substantial resources to the development of our GO platform and the expansion of the products and services offered on this platform, but we cannot guarantee that we will be able to continuously improve the functionality and performance of our GO series products so that they continue to appeal to our users, advertisers, third-party developers or other business partners.

There are significant uncertainties in the revenue potential of our GO series products and GO platform.

There is no proven revenue model for our GO series products and GO platform, as the fast growth of the mobile internet industry is a very recent phenomenon and we offer a unique, innovative portfolio of products and services that redefines the Android user experience. Leveraging the large user base of our GO series products, we have been experimenting with various revenue models, including user purchases of premium themes and premium launcher product, in-app purchases of advanced functionalities, and advertisers’ payments for different forms of advertising on our GO platform either through direct sales or through advertising agencies and mobile advertising networks such as GetJar Inc., or GetJar, which we acquired in February 2014, and Google AdMob. We also intend to enter into arrangements with more third-party mobile internet products and services providers for their offerings on our GO platform. We cannot assure you that our existing revenue streams can continue to grow as we expected or that we can successfully identify new significant revenue streams, nor can we guarantee that we will be successful in developing and building an effective revenue model for our GO platform. In addition, we may from time to time realign our strategies and shift our business focus. Starting in the second half of 2014, we realigned our strategy towards strengthening and expanding our user base and portfolio of products and temporarily shifted our focus from monetization to marketing and product development, and our revenue decreased in the fourth quarter of 2014, compared to that of the prior quarter. We cannot guarantee that our change in business focus will be proven successful. As a result, there is significant uncertainty in our revenue potential.

Our business is increasingly subject to the risks relating to international operations, which could adversely affect our financial conditions and results of operations.

Our business has rapidly expanded internationally since we released our GO Launcher EX and other GO series products. The international market forms an important component of our growth strategy, but expanding our business internationally exposes us to a number of risks, including:

•

Difficulty in identifying appropriate local or international third-party business partners and establishing and maintaining a good working relationship with them;

•

Difficulty in selecting appropriate geographical regions for overseas expansion;

•

Difficulty in understanding local markets and culture;

•

Fluctuations in currency exchange rates;

•

Compliance with applicable foreign laws and regulations, including internet content requirements, foreign exchange controls, cash repatriation restrictions, intellectual property protection rules and data privacy requirements; and

•

Increased costs associated with doing business in foreign jurisdictions.

Our financial condition and results of operations could be adversely affected by these and other risks associated with conducting international operations.

Our GO series products and GO platform are built on the Android operating system and are highly reliant on third-party mobile internet products distribution platforms such as Google Play. Our revenues may suffer if the market demand for Android smartphones decreases, or if any of the distribution platforms that help make our GO series products available for download changes its standard terms and conditions in a way that is detrimental to us.

We built up our GO series products and GO platform on the Android operation system. Any significant downturn in the overall demand for Android smartphones or the use of Android smartphones could significantly and adversely affect the demand for our launcher products, which in turn would materially affect our revenues generated from GO series products. Although the Android smartphone market has grown rapidly in recent years, it is uncertain whether the Android smartphone market will remain growing at a similar rate in the future. In addition, due to the constantly evolving nature of the smartphone industry, another operating system for smartphones may eclipse the Android operating system and send the Android system into a decline in popularity. To the extent that our GO series products continue to be operated on Android smartphones and to the extent that our future revenues substantially depend on the use and sales of Android smartphones, our business would be vulnerable to any downturns in the Android smartphone market.

In addition, we rely upon third-party mobile internet products distribution platforms such as Google Play to make our GO series products available for user download. Google Play, a global application distribution platform on Android smartphones, is currently the main distribution channel for our GO series products outside of China. In China, where Google Play is not available, we work with other similar local distribution platforms to make our GO series products available to users in the country. We expect to continue to derive a substantial number of downloads of our GO series products from such distribution platforms, especially Google Play. As such, the promotion, distribution and operation of our platform products are subject to Google Play’s and other similar distribution platforms’ standard terms and policies for application developers, which are very broad and subject to the interpretation of, and frequent changes by, Google Play and these other distribution platforms. If Google Play, or any of the major distribution platforms that help make our GO series products available for download, changes its standard terms and conditions in a way that is detrimental to us, or terminates its existing relationship with us, revenues from our GO series products and services could be materially and adversely affected.

We may not be able to continually meet user demand and retain or expand our user base.

Although we constantly monitor and research user needs, we may be unable to meet user demand on a continual basis or anticipate future user demands. A decrease in the number of users may reduce our monetization opportunities and have a material and adverse effect on our business, financial condition and results of operations. In order to attract and retain users and remain competitive, we must continue to innovate our products and services, improve user experience, and implement new technologies and functionalities.

The mobile internet business is characterized by constant changes, including but not limited to rapid technological evolution, continual shifts in user demands, frequent introductions of new products and services and constant emergence of new industry standards and practices. As a result, users may leave us for our competitors’ products and services more quickly than in other sectors. Thus our success will depend, in part, on our ability to respond to these changes on a timely and cost-effective basis, including improving and marketing our existing products and services and developing and pricing new products and services in response to evolving user needs. Our ability to successfully retain or expand our user base will depend on our ability to achieve the following, among others:

•

Anticipate and effectively respond to the growing number of mobile internet users in general and GO platform and GO series product users in particular;

•

Attract, retain and motivate talented application designers, product managers and engineers who have experience developing our GO series products or other mobile internet products and services;

•

Effectively market our existing and new mobile internet products and price them in response to evolving user needs;

•

Timely develop and launch new Go series products and other mobile internet products cost-effectively;

•

Further improve our GO platform to provide a compelling and optimal user experience through integration of products and services provided by existing and new third-party developers or business partners as well as our 3G.cn mobile portal and mobile reading base; and

•

Further provide quality content to attract and retain visitors, advertisers and readers to 3G.cn and our mobile reading base.

We cannot assure you that our existing products and services will continue to be sufficiently popular with our users. We may be unsuccessful in adding compelling new products and services to further diversify our product offerings. 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 the way our existing GO series products have done. If we fail to continue to achieve sufficient user satisfaction through our products or services or our products and services fail to meet our expectation to maintain and expand our user base, our business, results of operations and financial condition will be materially and adversely affected.

We may not be able to effectively manage our growth or implement our future business strategies, in which case our business and results of operations may be materially and adversely affected.

We anticipate continuous expansion in our business, both through internal growth and strategic cooperation with third party partners. We have experienced a period of rapid growth and expansion that has placed, and continues to place, significant strain on our management and resources. We cannot assure you that this level of significant growth will be sustainable or achieved at all in the future. We believe that our continued growth will depend on our ability to develop and enhance our products and services, attract new users, retain existing users, encourage additional purchases by existing users, continue developing innovative technologies in response to user demand, maintain an open platform for Android smartphone products and services from third party developers, increase brand awareness through marketing and promotional activities, react to changes in market trends, expand into new market segments, integrate our products onto our platform, attract new advertisers and retain existing advertisers and take advantage of the growth in the relevant markets. We cannot assure you that we will achieve any of the above.

To manage our growth and attain and maintain profitability, we will also need to further expand, train, manage and motivate our workforce and manage our relationships with users, third party developers, business partners and advertisers. We anticipate that we will need to implement a variety of enhanced and upgraded operational and financial systems, procedures and controls, including the improvement of our accounting and other internal management systems. All of these endeavors involve risks and will require substantial management efforts and skills and significant additional expenditures. In addition, we currently derive revenues for GO series products primarily from outside of China, whereas our revenues from 3G.cn and our mobile reading services are primarily derived from China; this geographic diversification in the sources of our revenues may raise the level of difficulty in managing our growth and profitability. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations. In addition, we cannot assure you that we will be able to effectively manage our growth or implement our future business strategies effectively, and failure to do so may materially and adversely affect our business and results of operations.

We have limited relevant operating history and it may be difficult to evaluate our business and prospects.

We commenced operations in 2003, and our business has undergone significant changes with the development of different mobile internet products, from the establishment of 3G.cn in 2004 to the beginning of charging fees for our mobile reading services in 2010 and, more recently, the launch of GO Launcher EX in November 2010. In October 2014, we began to implement a business realignment plan to fine-tune our business, including reduction in our workforce and allocating more resources on our mobile platform. Given our history and our diversified sources of revenues, including the relatively new GO series products, and given the risks frequently encountered by fast-growing companies in relatively new and rapidly evolving industries such as the mobile internet industry, it may be difficult for you to evaluate our business, financial performance and prospects. Our historical growth rate may not be indicative of our future performance. We cannot assure you that we will grow at the same rate as we did in the past. You should consider our prospects in light of the risks and uncertainties that fast-growing companies in a relatively new and rapidly evolving market may encounter or to which such companies may be exposed.

If we fail to attract advertisers or if our advertisers reduce their spending with us, our revenues, profitability and prospects may be materially and adversely affected.

In the years ended December 31, 2012, 2013 and 2014, our marketing revenues from mobile portal and mobile application products and services accounted for 37.5%, 43.0% and 50.6%, respectively, of our total revenues. We expect to derive an increasing percentage of revenues from marketing service, especially from our mobile application products and services, and our profitability and prospects will partly depend on the continued development of the advertising industry and advertisers’ allocation of budgets to mobile internet advertising. Companies that advertise on mobile internet may utilize other methods or channels that are more established than the marketing solutions we offer. If the mobile advertising market size does not increase from current levels, or if we are unable to capture and retain a sufficient share of that market, our ability to maintain or increase our current level of marketing revenues and our profitability and prospects could be materially and adversely affected.

We generate our marketing revenues from working with mobile advertising networks, advertising agencies and direct advertisers. During certain periods, we relied on a small number of advertising customers who contributed a significant portion of our market revenue. For the year ended December 31, 2013, one of our direct advertisers contributed approximately 19.8% of our marketing revenue, or 8.5% of our total revenues. We may continue to rely on a limited number of advertising customers in the future. In addition, we cannot assure you that we will be able to retain our existing direct advertisers, maintain relations with existing advertising agencies or mobile advertising networks, attract new direct advertisers or work with new advertising agencies and mobile advertising networks. If any direct advertisers or advertising agencies determine that their expenditures on advertising with us do not generate expected returns, for reasons such as the amount and quality of content on our GO platform or 3G.cn fail to attract a sufficient number of users, such direct advertisers or advertising agencies may allocate a greater portion or all of their advertising budgets to other channels and reduce or discontinue doing business with us. Since our arrangements with third-party advertising agencies typically involve short-term framework or project-based agreements, we cannot assure you that we can continue cooperating with such advertising agencies in the future. Although we intend to reduce reliance on third-party advertising networks by developing our own advertising network in the future, failure to retain existing advertisers, enhance relations with existing advertising agencies and mobile advertising networks, attract new direct advertisers, work with new advertising agencies and mobile advertising networks or efficiently manage advertising inventory may materially and adversely affect our business, financial condition and results of operations.

We face competition in all aspects of our business. If we fail to compete effectively or if our reputation is damaged, our business, financial condition and results of operations may be materially and adversely affected.

Although we currently have a leading presence in the smartphone launcher platform products market, we cannot guarantee that we will be able to maintain our leading position in the future. We may face potential competition from leading mobile internet companies or smartphone manufacturers if they start to allocate resources and focus on the development in this business sector, and new competitors may also emerge. With more entrants into the smartphone launcher platform products business, aggressive price cutting by competitors may result in downward pressure on our gross margins in the future. We may then have to take actions to retain and attract users, such as cutting the price of our product and service offerings, which could adversely affect our profitability. If we fail to compete effectively, our market share would decrease and our results of operations would be materially and adversely affected.

We also face competition in other aspects of our business, particularly from companies that provide mobile portal services and mobile reading services. Some of our competitors have longer operating histories and significantly greater financial, technical and marketing resources than we do, and in turn have an advantage in attracting and retaining users and advertisers. In addition, many of our competitors that provide mobile portal and mobile reading services have significantly larger user bases and more established brand names than we do and may be able to more effectively leverage their user bases and brand names to provide integrated products and services, and thereby increase their respective market shares.

If we are not able to effectively compete in any aspect of our business or if our reputation is harmed by rumors or allegations regarding our business, our overall user base may decrease, which could reduce our paying users or make us less attractive to advertisers. We may be required to spend additional resources to further increase our brand recognition and promote our products and services, and such additional spending could adversely affect our profitability. Furthermore, if we are involved in disputes with any of our competitors that result in negative publicity relating to us, such disputes, regardless of their veracity or outcome, may harm our reputation or brand image and in turn lead to reduced number of users and advertisers. Any legal proceedings or measures we take in response to such disputes may be expensive, time-consuming and disruptive to our operations and divert our management’s attention.

We may incur net losses and experience negative cash flow from operating activities in the future and may not be able to obtain additional capital in a timely manner or on acceptable terms, or at all.

We have incurred net losses historically and, in 2014, we incurred a net loss of RMB47.7 million (US$7.7 million). We may incur losses in the future. Although we generated positive cash flow from operating activities in the past three fiscal years, we cannot guarantee we will continue to generate positive cash flows in the future.

Our ability to achieve and maintain profitability and positive cash flow from operating activities depends on various factors, including but not limited to, the acceptance of our products and services by mobile internet users, the growth and maintenance of our user base, our ability to control our costs and expenses and grow our revenues and the effectiveness of our selling and marketing activities. In addition, in response to the continuing increase of our operating expenses, we have initiated certain measures, including reduction in our total workforce, to improve our operational efficiency, which may also affect our ability to achieve and maintain profitability and positive cash flow from operating activities. We may not be able to achieve or sustain profitability or positive cash flow from operating activities, and if we achieve positive operating cash flow, it may not be sufficient to satisfy our anticipated capital expenditures and other cash needs. As such, we may not be able to fund our operating expenses and expenditures and may be unable to fulfill our financial obligations as they become due, which may result in voluntary or involuntary dissolution or liquidation proceeding of our company and a total loss of your investment.

Our mobile reading services historically generated a substantial portion of our revenues. Our business and results of operations may be adversely affected if we fail to identify, attract and retain promising authors to generate popular literary content and support the continued growth of our mobile reading services.

In the years ended December 31, 2012, 2013 and 2014, mobile reading services accounted for 39.3%, 30.3% and 23.0%, respectively, of our total revenues. We expect that our mobile reading services will continue to be an important revenue generating source and we rely on our authors to produce attractive literary content and drive the continued growth of our mobile reading services. We may not be able to identify, attract and retain promising authors to produce popular literary content on a scale sufficient to support the continued growth of our mobile reading services. We may lose our most successful authors to competitors who may offer our authors more favorable terms that we are unable to match. Our popular authors may request more favorable terms or higher prices for licensing or transferring the proprietary rights of their literary works to us. We cannot guarantee that the content created by our authors will be popular enough to help us increase the number of paying users or increase their spending with our mobile reading services. Although some of our authors agree to create literary content exclusively for us, we cannot control their productivity or the quality of their works produced within the contract term. We cannot be certain that the authors will continue to prefer to publish their literary works with our mobile reading services. In the event of any decline in our authors’ productivity or the quality of the literary works they produce, or if we are unable to attract or retain qualified authors, we may incur substantial costs to procure suitable replacement authors and content, which could have a negative impact on the number of our readers for our mobile reading services, and ultimately, on our business, financial condition and results of operations.

Our business depends substantially on the continuing efforts of our management team and key employees, and our business operations may be severely disrupted if we lose their services.

Our future success depends substantially on the continued efforts of our management team and key employees, in particular, Mr. Yuqiang Deng, our chief executive officer, Mr. Yingming Chang, our chief operating officer and Mr. Zhu Zhi, our co-chief operating officer. The loss of any of our management team members could harm our business. In addition, if any of our key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all, which could result in significant disruptions to our business, and the integration of replacement personnel could be time-consuming and expensive and cause additional disruptions to our business. If any of our core management team members or key employees joins a competitor or forms a competing company, we may lose customers, know-how and key professionals and staff members.

In addition, if we are unable to attract or retain qualified employees to achieve a high level of success, we may not be able to grow our business or execute our business strategy and as a result, our revenues and profitability may decline. Each of our executive officers and key employees has made undertakings relating to non-competition obligations. However, these undertakings may not be enforceable in China, where our executives and key employees reside, in light of uncertainties with China’s legal system. See “Item 3. Key Information—D. Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.” In addition, if one or more of our executives or other key personnel do not act in the best interests of our company when a conflict of interest arises, our business, prospects and reputation may be harmed.

The performance and functionality of our GO platform may be impacted by third party developers’ internet mobile products offered via our GO platform.

We have published a development kit for our GO platform to encourage third parties to develop themes for our GO series products. Over 10,000 third-party developed themes for our GO series products are currently available to suit our users’ diverse needs and preferences, in addition to the over 1,000 themes we have developed internally. We intend to expand our GO platform by cooperating with more third parties to offer their products and services on our platform. Although currently no single third-party developer is critical to our GO platform and we continue to develop our core GO series products and services internally, if the number of high quality third-party developers on our GO platform decreases, the overall quality of third-party developed products and services declines or the products from the third-party developers fail to be compatible with our GO platform, our ability to monetize the GO platform may be negatively impacted and we may have to allocate more resources to internally develop the relevant products, which could have a material and adverse effect on our financial results. In addition, if we fail to integrate 3G.cn, the mobile reading services or other GO series products into our GO platform, the business potential for the sustainable growth of our GO platform could be substantially limited.

We contract with third parties to provide content for 3G.cn and our mobile reading services and we may lose users and revenues if these arrangements are terminated or if the quality of their content deteriorates.

We have arrangements with a number of third parties to provide content to our 3G.cn, for example, news agencies and publishers, entertainment and sports program providers, and our mobile reading services, and we have relied and will continue to rely on third parties for a significant portion of the content and materials (including all news-related content and materials) that we offer on 3G.cn and on our mobile reading services. If a large number of these content providers terminate relationships with us, materially change our existing arrangements, or fail to deliver high-quality content that meets users’ needs, or if we fail to find other content providers to maintain or expand the content we offer, we may lose our users and suffer significant revenue losses.

In addition, the PRC government has the ability to restrict or prevent state-owned media from cooperating with us in providing certain content to us, which will result in a decline in the amount and scope of content we offer on 3G.cn, in which case our revenues will be negatively impacted. Certain state-owned media companies from whom we currently procure content have built their own portal websites and may discontinue the cooperation with us in the future.

We cannot assure you that we will be able to retain our third party content providers or attract new third-party providers to provide sufficient and popular content or materials, which may materially and adversely affect our business, financial condition and results of operations.

We depend on revenue-sharing arrangements with major mobile network carriers in China for a significant portion of our revenues from mobile reading.

A significant portion of our revenues from mobile reading services is derived from our revenue-sharing arrangements with major mobile network carriers in China, such as China Mobile, which run their own mobile reading base. We provide content to the mobile reading libraries of these mobile network carriers and receive a percentage of the fees paid by their users. For example, in 2012, 2013 and 2014, we derived approximately 59%, 51% and 60%, respectively, of our net revenues related to our mobile reading services from revenue-sharing arrangements with China Mobile. Our agreements with these major mobile network carriers generally have a term of one year and there can be no assurance that the agreements will be extended or renewed upon the expiration of their respective terms or that we will be able to extend or renew such agreements on terms and conditions favorable to us or at all. If any of the major mobile network carriers breaches its obligations under its agreement with us or refuses to extend such agreement when the term expires, we may lose all or a portion of the users of the relevant mobile network carrier. Our mobile reading services will suffer if our relationship with any of the major mobile network carriers terminates or deteriorates, or if there are material changes to terms and conditions of the agreements which are detrimental to us.

We face risks relating to third parties’ billing and payment systems.

We depend on the billing and payment systems of third parties such as wireless carriers, mobile payment service providers (such as Google Play) and third-party payment processors to maintain accurate records of payments of sales proceeds by users and collect such payments. We receive periodic statements from these third parties which indicate the aggregate amount of fees that were charged to users of our products and services. Our business and results of operations could be adversely affected if these third parties fail to accurately account for or calculate the revenues generated from the sales of our products and services. If there are security breaches or failure or errors in the payment process of these third parties, user experience may be affected and our business results may be negatively impacted.

Failure to timely collect our receivables from third parties whose billing and payment systems we use and third-party payment processors may adversely affect our cash flows. Our wireless carriers and third-party payment processors may from time to time experience cash flow difficulties. Consequently, they may delay their payments to us or fail to pay us at all. Any delay in payment or inability of current or potential wireless carriers and third-party payment processors to pay us may significantly harm our cash flow and results of operations.

In addition, we rely on the billing statements provided by third party wireless carriers and third-party payment service providers in order to recognize a substantial portion of our revenues from our products and services. We may not be able to recognize revenue from our products and services from these third parties in the period in which the services are performed if we do not receive the billing statements from these third parties. Due to the delays in receiving such billing statements, our revenues may fluctuate between periods and may not reflect the actual performance of our services.

We also do not have control over the security measures of our third-party payment service providers, and security breaches of the online payment systems that we use could expose us to litigation and possible liability for failing to secure confidential customer information and could, among other things, damage our reputation and the perceived security of all of the online payment systems that we use. If a well-publicized internet or mobile network security breach were to occur, users concerned about the security of their online payments may become reluctant to purchase our products through payment service providers even if the publicized breach did not involve payment systems or methods used by us. In addition, there may be billing software errors that would damage customer confidence in these payment systems. If any of the above were to occur and damage our reputation or the perceived security of the payment systems we use, we may lose paying users and users may be discouraged from purchasing our internal mobile products, which may have an adverse effect on our business and results of operations.

Non-compliance on the part of third parties with which we conduct business could disrupt our business and adversely affect results of our operation.

Our third-party content providers or other business partners may be subject to regulatory penalties or punishments because of their regulatory compliance failures, which may disrupt our business. Although we conduct a rigid review of legal formalities and certifications before entering into contractual relationships with our business partners, such as third party content providers, application developers and landlords, we cannot be certain whether any such third party has infringed or will infringe any third parties’ legal rights or violate any regulatory requirements. The legal liabilities and regulatory actions on our commercial partners may affect our business activities and reputation and in turn, our results of operations. For example, according to PRC regulations, all lease agreements are required to be registered with the local housing authorities. We presently lease properties at three different locations in China, and any failure to complete these required registrations by our landlords may expose our landlords and us to potential monetary fines. As of December 31, 2014, we have cooperated with a number of mobile game developers to assist them with operation of their mobile games on China Mobile Games Platform, one of the largest third-party online game platforms in China. Going forward, we will continue to cooperate with selected mobile game publishers and developers on our GO platform or third-party platforms. The online game industry, including online mobile games, is highly regulated in China and each online game operator is required to obtain licenses and permits and complete filing procedures for specific mobile games as well as to comply with various requirements when conducting business. We require our partners in the mobile game industry to provide their licenses, permits or filing documents in respect of the relevant online games before entering into cooperation arrangements with them, but we cannot assure you that such commercial partners or other developers who distribute online games and other applications through our platform without entering into cooperation arrangements with us will maintain all applicable permits and approvals, and any noncompliance on the part of such commercial partners may cause potential liabilities to us and in turn disrupt our operations.

If we fail to keep up with rapid technological changes in the internet and smartphone industries, our future growth may be adversely affected.

The internet industry and the smartphone industry are characterized by rapid and innovative technological changes. Our future success will depend on our ability to respond to rapidly changing technologies, adapt our products and services to evolving industry standards and improve the performance, functionality and reliability of our products and services. Our failure to adapt to such changes could harm our business. If we are slow to develop products and services that are compatible with smartphones, or if the products and services we develop are not widely accepted and used by smartphone users, we may not be able to capture a significant share of this increasingly important market. In addition, the widespread adoption of new internet, networking or telecommunications technologies or other technological changes for smartphones could require substantial expenditures to modify or adapt our products, services or infrastructure. If we fail to keep up with rapid and innovative technological changes to remain competitive, our future growth may be adversely affected.

If we fail to maintain and enhance our brands, or if we incur excessive expenses in this effort, our business, results of operations and prospects may be materially and adversely affected.

We believe that maintaining and enhancing our brands, such as the GO brand for our GO platform, the GGbook brand for our mobile reading services and the 3G brand for our mobile internet portal, is of significant importance to the success of our business. Maintaining and enhancing the recognition and reputation of our brands are critical to our success and ability to compete. Since our products and services are relatively new in the mobile internet market, brand maintenance and enhancement may directly affect our ability to maintain our market position.

Many factors, some of which are beyond our control, are important to maintaining and enhancing our brands and may negatively impact our brands and reputation if not properly managed, such as:

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our ability to maintain a convenient and reliable user experience as user preferences evolve and as we expand into new service categories and new service lines;

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our ability to increase brand awareness among existing and potential users, readers, authors, content providers and advertisers through various marketing and promotional activities;

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our ability to adopt new technologies or adapt our products and services to meet user needs or emerging industry standards;

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our ability to effectively control the quality of third-party developers that offer their products and services on our GO platform; and

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our ability to distinguish our GO name from other similar names in the market and maintain and enhance such name in the face of potential challenges from third parties.

Although we have established and developed our brands mostly through word of mouth referrals and repeat users and, in the case of GO series products, the Google Play distribution platform, as we expand, we may conduct various marketing and brand promotion activities to continue promoting our brands. We cannot assure you, however, that these activities will be successful or that we will be able to achieve the brand promotion effect we expect. In addition, any negative publicity in relation to our mobile internet products or services, regardless of its veracity, could harm our brands and reputation.

We have sometimes received, and expect to continue to receive, complaints from users regarding the quality of the products and services we offer. If our users’ complaints are not addressed to their satisfaction, our reputation and our market position could be significantly harmed, which may materially and adversely affect our business and prospects.

There are third parties in the mobile internet market with the name “GO” in their names or brands. These third parties may have registered similar brands to ours in different jurisdictions. We may be unable to clearly distinguish our GO name from such other similar names in the market, and may encounter difficulties in maintaining our GO name if there are challenges from third parties holding similar names.

Legal proceedings or allegations of impropriety against us or our management could have a material adverse impact on our reputation, results of operations, financial condition and liquidity.

We have been, and may be in the future, subject to allegations or lawsuits brought by our competitors, individuals or other entities against us or our management, including claims of unfair, unethical, fraudulent or otherwise inappropriate business practices. Any such lawsuit or allegation, with or without merit, or any perceived unfair, unethical, fraudulent or inappropriate business practice by us or perceived wrong doing by any key member of our management team could harm our reputation and user base and distract our management from day-to-day operations of our company. We cannot assure you that we or key members of our management team will not be subject to lawsuits or allegations of a similar nature in the future. Where we can make a reasonable estimate of the liability relating to pending litigation and determine that an adverse liability resulting from such litigation is probable, we will record a related contingent liability. As additional information becomes available, we will assess the potential liability and revise estimates as appropriate. In 2012, 2013 and 2014, we did not record any contingent liabilities relating to pending litigation. However, when we record or revise our estimates of contingent liabilities in the future, the amount of our estimates may be inaccurate due to the inherent uncertainties relating to litigation. In addition, the outcomes of actions we institute against third parties may not be successful or favorable to us. Litigations and allegations against us may also generate negative publicity that significantly harms our reputation, which may materially and adversely affect our user base and our ability to attract authors and advertisers. In addition to the related cost, managing and defending litigation and related indemnity obligations can significantly divert management’s and the board of directors’ attention from operating our business. We may also need to pay damages or settle the litigation with a substantial amount of cash. All of these could have a material adverse impact on our business, results of operation and cash flows.

We may be subject to intellectual property infringement claims or other allegations, which could require us to pay substantial statutory penalties or other damages and fines, remove relevant content or enter into license agreements which may not be available on commercially reasonable terms.

Some third parties may own technology patents, copyrights, trademarks, trade secrets and internet content, which they may use to assert claims against us. We require our editors and relevant staff to sign agreements upon joining our company, to undertake to follow certain procedures designed to reduce the likelihood that we may use, develop or make available any content or applications without the proper licenses or necessary third party consents. However, these procedures may not be effective in completely preventing the unauthorized posting or use of copyrighted material or the infringement of other rights of third parties.

The validity, enforceability and scope of protection of intellectual property rights in internet-related industries, particularly in China, is uncertain and still evolving. For example, as we face increasing competition and as litigation becomes a more common way to resolve disputes in China, we face a higher risk of being the subject of intellectual property infringement claims. We have also been subject to administrative penalties for offering certain literary works with expired licenses. Pursuant to relevant laws and regulations, internet service providers, including mobile internet service providers, may be held liable for damages if such providers have reasons to know that the works uploaded or linked infringe the copyrights of others. In cases involving the unauthorized posting of copyrighted content by users on websites in China, there have been court proceedings but no settled court practice that provides clear guidance as to under what circumstances hosting providers and administrators of a website such as 3G.cn or a reading base such as our mobile reading base or GO platform can be held liable for the unauthorized posting by third parties of copyrighted material. Any such proceeding could result in significant costs to us and divert our management’s time and attention from the operation of our business, as well as potentially adversely impact our reputation, even if we are ultimately absolved of all liability.

In addition, we cannot assure you that we will not become subject to intellectual property laws in other jurisdictions, such as the United States, by virtue of our ADSs being listed on NASDAQ, the ability of users to access, download and use our products and services in the United States and other jurisdictions, the ownership of our ADSs by investors in the United States and other jurisdictions, or the extraterritorial application of foreign law by foreign courts or otherwise, among other reasons. If a claim of infringement brought against us in the United States or other jurisdictions is successful, we may be required to pay substantial penalties or other damages and fines, remove relevant content or enter into license agreements which may not be available on commercially reasonable terms or at all. Even though the allegations or claims could be baseless, defense against any of these allegations or claims would be both costly and time-consuming and could significantly divert the efforts and resources of our management and other personnel.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We regard our trademarks, service marks, patents, domain names, trade secrets, proprietary technologies and similar intellectual property as critical to our success, and we rely on trademark and patent law, trade secret protection and confidentiality and license agreements with our employees and others to protect our proprietary rights. As of March 31, 2015, we had registered 12 domain names that are material to our business, including 3G.net.cn , 3G.cn and jiubang.com, 81 software copyrights, 16 patents, 61 trademarks and service marks in China, eight, four and eight trademarks in South Korea, Japan and the United States, respectively. In addition, we have filed 161 patent applications covering certain of our proprietary technologies in China and the United States. We have filed 89 trademark applications in China. We have also filed 16 trademark applications in South Korea, Japan and the U.S.

Monitoring unauthorized use of our intellectual property rights is difficult and costly, and we cannot be certain that we can effectively prevent misappropriation of our intellectual properties, particularly in 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.

In addition, it is often difficult to create and enforce intellectual property rights in China and other countries outside of the United States. Patents, trademarks and service marks may also be invalidated, circumvented, or challenged. Trade secrets are difficult to protect, and our trade secrets may be leaked or otherwise become known or be independently discovered by others. Confidentiality agreements may be breached, and we may not have adequate remedies for any breach. Even where adequate, relevant laws exist in China and other countries outside of the United States, it may not be possible to obtain swift and equitable enforcement of such laws, or to obtain enforcement of a court judgment or an arbitration award delivered in another jurisdiction, and accordingly, we may not be able to effectively protect our intellectual property rights or enforce agreements in such countries. Given the potential cost, effort, risks and downsides of obtaining patent protection, in some cases we have not applied and do not plan to apply for patents or other forms of formal intellectual property protection for certain key technologies. If some of these technologies are later proven to be important to our business and are used by third parties without our authorization, especially for commercial purposes, our business and competitive position may be harmed.

If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment for internet-based and mobile-based businesses in China, our business, financial condition and results of operations may be materially and adversely affected.

The internet industry in China, including the mobile internet, is highly regulated. Our PRC variable interest entities are required to obtain and maintain applicable licenses or approvals from different regulatory authorities in order to provide their current services. Under the current PRC regulatory scheme, a number of regulatory agencies, including the General Administration of Press, Publication, Radio, Film and Television, or GAPPRFT, the Ministry of Culture, or MOC, Ministry of Industry and Information Technology, or MIIT, and the State Council Information Office, or SCIO, jointly regulate all major aspects of the internet industry, including the mobile internet business. Operators must obtain various government approvals and licenses for relevant internet or publication business. We have obtained Internet Content Provider Licenses, or ICP licenses, for provision of internet and mobile network information services, a Value-added Telecommunications Business Operation License, or SP license, for provision of mobile network information services, a License for Online Transmission of Audio-visual Programs and an Internet Publishing License for internet publication and mobile games business and an Online Culture Operating License for operation of online games and music and entertainment products and an Online Culture Operating License for operation of internet comic and animation products. We have also obtained SMS Service Access Codes for provision of internet and mobile network information services. These licenses are essential to the operation of our business and are generally subject to annual government review. However, we cannot assure you that we can successfully renew these licenses annually or that these licenses are sufficient to conduct all of our present or future business.

We have applied for the approval to include publication of internet literature and mobile literature in our Internet Publishing License. We have also applied for the approval from the SCIO to publish news on 3G.cn or disseminate new through the mobile internet. We currently operate a current events channel on 3G.cn related to current topics and social events produced by third party news agencies. As previously reported by certain news media in 2013, the State Internet Information Office named our mobile portal application, as one of the several mobile apps that provided internet news services without proper licenses or approvals, and required the named mobile apps to rectify the non-compliance as soon as possible. We have communicated with the State Internet Information Office and rectified the situation to meet their requirements. If the PRC government promulgates new laws and regulations that require additional licenses or imposes additional restrictions on the operation of relevant internet businesses and/or mobile and web-based subscription services that we plan to launch, the PRC government has the power to, among other things, levy fines, confiscate our income, revoke our business licenses, and require us to discontinue or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material and adverse effect on our results of operations.

As we further develop and expand our products and services, we may need to obtain additional qualifications, permits, approvals or licenses. For example, we may be required to obtain a License for Production and Operation of Radio and TV Programs, and an Internet News Publication License for the productions and operation of our news programs. We cannot assure you that we or the service or content providers will be granted such qualifications, permits, approvals or licenses in a timely manner or at all. Prior to the receipt of such qualifications, permits, approvals or licenses, we may be deemed as being in violation of relevant laws or regulations and be subject to penalties, such as confiscation of the net revenues that were generated through the unlicensed internet activities, the imposition of fines and the discontinuation or restriction of our operations. Any such penalties may disrupt our business operations and materially and adversely affect our business, financial condition and results of operations.

In addition, internet companies in China are subject to a variety of existing and new rules, regulations, policies, and license and permit requirements. In connection with enforcing these rules, regulations, policies and requirements, relevant government authorities may suspend services by, or revoke licenses of, any internet content service provider that is deemed to provide illicit content online, and such activities may be intensified in connection with any ongoing government campaigns. For example, in April 2014, the Chinese government initiated a campaign to enhance and enforce its scrutiny on the dissemination of pornographic content on the internet in China, or the Internet Purifying Campaign. As a result, various literary and visual and audio content websites, including certain widely known websites, were subject to administrative penalties ranging from fines to proposed license revocation to suspension of website operations, due to unhealthy and indecent content on these websites. We disabled certain functions on our mobile reading services for several days and conducted an internal compliance investigation in order to ensure that the literary content within the services are in compliance with the standards set out by the authorities. Our revenues from mobile reading services were also negatively affected in 2014. As of the date of this report, we have not received any warning or order from any government authorities. However, we cannot be sure that our internal investigation was sufficient to remove all content that may be viewed unhealthy, indecent or otherwise problematic. In addition, while we maintain a regular internal monitoring and compliance protocol, we cannot ascertain that we would not fall foul of any changing or new government regulations or standards in the future. If we receive a public warning from the relevant government authorities or our licenses for reading or portal services are revoked, our reputation would be harmed and our share trading price may fluctuate widely. If the operation of our mobile online reading services is suspended, our revenues and results of operation may be materially and adversely affected.

Concerns about collection and use of personal data could damage our reputation and deter current and potential users from using our products and services, which could have material adverse effects on our business and results of operations.

Concerns about our personalization technology with regard to the collection, use or disclosure of personal information or other privacy-related matters, even if unfounded, could damage our reputation and results of operations. For example, one of our competitors had previously publicly spread allegations about our collection of user data. Although we were subsequently able to refute such allegations, such negative publicity and any additional negative publicity in relation to our services or products, regardless of its veracity, could seriously harm our reputation which in turn may deter current and potential users from using our products and services, which could have material adverse effects on our business and results of operations.

We apply strict management and protection for any information provided by users and, under our privacy policy, without our users’ prior consent, we will not provide any of our users’ personal information to any unrelated third party. While we strive to comply with our privacy policy as well as all applicable data protection laws and regulations, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, and could damage our reputation. User and regulatory attitudes towards privacy are evolving, and future regulatory or user concerns about the extent to which personal information is used or shared with advertisers or others may adversely affect our ability to share certain data with advertisers, which may limit certain methods of targeted advertising. Concerns about the security of personal data could also lead to a decline in general usage of our products and services, which could lead to lower user numbers. For example, if the PRC government authorities require real-name registration by our users, the growth of our user numbers may slow down and our business, financial condition and results of operations may be adversely affected. See “—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulations of internet and mobile internet businesses and companies.” A significant reduction in user numbers could have a material and adverse effect on our business, financial condition and results of operations.

Errors, flaws or failures in our products or services could harm our reputation or decrease market acceptance of our services and products.

Our products and services may contain errors, flaws or failures that may only become apparent after their release, especially in terms of updated versions of our mobile internet products and services. We receive user feedbacks in connection with errors, flaws or failures in our products and services from time to time, and such errors, flaws or failures may also come to our attention during our internal testing process. We generally have been able to resolve such errors, flaws or failures in a timely manner, but we cannot assure you that we will be able to detect and resolve all of them effectively or in a timely manner. Errors, flaws or failures in our services and products may adversely affect user experience and cause our users to stop using our services and products, which could materially and adversely affect our business and results of operations.

If any system failure, interruptions and downtime occurs, our business, financial condition and results of operations may be materially and adversely affected.

Although we seek to reduce the possibility of disruptions or other outages, our GO platform, 3G.cn and our mobile reading services may be disrupted by problems with our own technology and system, such as malfunctions in our software or other facilities and network overload. Our systems may be vulnerable to damage or interruption from telecommunication failures, power loss, computer attacks or viruses, earthquakes, floods, fires, terrorist attacks and similar events. Parts of our system are not fully redundant or backed up, and our disaster recovery planning may not be sufficient for all eventualities. Despite any precaution we may take, the occurrence of a natural disaster or other unanticipated problems at our hosting facilities could result in lengthy interruptions in the availability of our products and services. Any interruption in the ability of our users to use our products and services could reduce our future revenues, harm our future profits, subject us to regulatory scrutiny and lead users to seek alternative internet mobile products.

Our servers may experience some downtime from time to time, which may negatively affect our brand and user perception of the reliability of our systems. Any scheduled or unscheduled interruption in the ability of users to use our servers could result in an immediate, and possibly substantial, loss of revenues.

We have limited control over the prices of the services provided by telecommunication service providers and may have limited access to alternative networks or services. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to mobile internet users increase, our user traffic may decline and our business may be harmed.

Security breaches or computer virus attacks could have a material adverse effect on our business prospects and results of operations.

Any significant breach of security of our computer systems could significantly harm our business, reputation and results of operations and could expose us to lawsuits brought by our users and partners and to sanctions by governmental authorities in the jurisdictions in which we operate. We cannot assure you that our IT systems will be completely secure from future security breaches or computer virus attacks. Anyone who is able to circumvent our security measures could misappropriate proprietary information, including the personal information of our users, obtaining users’ names and passwords and enabling the hackers to access users’ other online and mobile accounts, if those users use identical user names and passwords. They could also misappropriate other information, including financial information, uploaded by our users in a secure environment. These circumventions may cause interruptions in our operations or damage our brand image and reputation. Our servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could cause system interruptions, website slowdown or unavailability, delays in communication or transactions, or loss of data. We may be required to incur significant additional costs to protect against security breaches or to alleviate problems caused by such breaches. In addition, a significant security breach or virus attack on our system could result in a material adverse impact on our business and results of operations.

We have granted, and may continue to grant, options, restricted shares and other types of awards under our share incentive plans, which may result in increased share-based compensation expenses.

We adopted a 2006 global share plan in June 2006, which was amended and restated in October 2013, or the 2006 Plan, and a 2010 global share plan in June 2010, which was amended and restated in October 2013, or the 2010 Plan. Under the 2006 Plan, we are authorized to grant options or other types of awards to purchase a maximum of 5,224,126 ordinary shares and as of December 31, 2014, options to purchase a total of 3,589,698 ordinary shares of our company were granted (excluding those forfeited) under the 2006 Plan. Under the 2010 Plan, we are authorized to grant options or other types of awards to purchase a maximum of 5,373,659 ordinary shares and as of December 31, 2014, options to purchase a total of 3,384,174 ordinary shares of our company were grant (excluding those forfeited) under the 2010 Plan. In October 2013, we adopted a 2013 share incentive plan, which was restated and amended in July 2014, or the 2013 Plan. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2013 Plan is 7,317,073, plus an automatic annual increase on January 1 of each year, beginning on January 1, 2015, by the number of shares representing 2% of the then total issued and outstanding share capital of our company as of December 31, of the preceding year, or such less number as the board shall determine. As of December 31, 2014, options to purchase a total of 3,070,380 ordinary shares of our company and 1,162,926 restricted shares were granted (excluding those forfeited) under the 2013 Plan. For the years ended December 31, 2012, 2013 and 2014, we recorded RMB0.4 million, RMB17.8 million and RMB65.0 million, respectively, in share-based compensation expenses. The amount of these expenses is based on the fair value of the share-based compensation awards we granted. The expenses associated with share-based compensation have affected our net income (loss) and may reduce our net income or increase our net loss in the future, and any additional securities issued under share-based compensation schemes will dilute the ownership interests of our shareholders, including holders of our ADSs. We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, or consultants, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.

If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404 requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. See “Item 15. Controls and Procedures.” As of December 31, 2014, our management identified a material weakness relating to insufficient accounting personnel with appropriate U.S. GAAP knowledge for financial information processing and reporting and a significant deficiency related to information technology general control, or ITGC, in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States. ITGC deficiencies include the failure to maintain an information technology management and security policy as guidance for processing financial and business data. We have implemented and are continuing to implement a number of measures to address the material weakness and significant deficiency identified. However, we cannot assure you that we will be able to continue implementing these measures in the future to remedy the existing material weakness and the significant deficiency, or that we will not identify additional material weaknesses or significant deficiencies in the future.

In addition, once we cease to be an “emerging growth company” as such term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

Future strategic alliances or acquisitions may not be successful and may have a material and adverse effect on our business, reputation and results of operations.

We may enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose from time to time. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

In February 2014, we acquired GetJar, a privately held mobile advertising network based on California. This first international acquisition provides our platform with state-of-the-art mobile data analytics capabilities that will support our mobile advertising research and development initiatives. If appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. Completed transactions or future acquisitions and the subsequent integration of new assets and businesses into our own would require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. There are uncertainties as to entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant. In addition to possible shareholders’ approval, we may also have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs.

Our results of operations may be subject to wide fluctuations due to a number of factors, which may adversely affect the trading price of our ADSs.

We may experience seasonality and other fluctuations in our business, reflecting fluctuations in mobile internet and smartphone usage. Revenues from mobile application products and services are typically higher in the fourth quarter due to Christmas holidays and increased marketing campaigns during the period. We generally experienced weaker demands for our mobile reading services and mobile portal marketing services in the first quarter of each year due to the Chinese New Year holidays. Revenues from mobile portal marketing services are generally higher in the third and fourth quarters as there are typically more large-scale marketing campaigns during the period on our portal website. Thus, our operating results in one or more future periods may fluctuate substantially or fall below the expectations of securities analysts and investors. In such event, the trading price of our ADSs may fluctuate significantly.

We have limited business insurance coverage. Any uninsured occurrence of business disruption may result in substantial costs to us and the diversion of our resources, which could have an adverse effect on our results of operations and financial condition.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies. We do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured occurrence may disrupt our business operations, require us to incur substantial costs and divert our resources, which could have an adverse effect on our results of operations and financial condition.

Our business, financial condition and results of operations, as well as our ability to obtain financing, may be adversely affected by the downturn in the global or Chinese economy.

The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and is facing new challenges, including the escalation of the European sovereign debt crisis in 2011 and the slowdown of the Chinese economy starting in 2012. The world economy is facing new challenges, including the potential renegotiation of the terms of the Greece sovereign debt in 2015 and the recent and projected slowdown of the Chinese economy. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including China’s. There have also been concerns over unrest in the Middle East and Africa, which have resulted in volatility in oil and other markets, and over the possibility of a war involving Iran. There have also been concerns about the economic effect of the earthquake, tsunami and nuclear crisis in Japan and tensions in the relationship between China and Japan. The mobile internet products and services industry may be affected by economic downturns. A prolonged slowdown in the world economy, including in the Chinese economy, may lead to a reduced amount of mobile internet advertising, which could materially and adversely affect our business, financial condition and results of operations. Our products and services may be viewed as discretionary by our users, who may choose to discontinue or reduce spending on such products and services during an economic downturn. In such an event, our ability to retain existing users and increase new users will be adversely affected, which would in turn negatively impact our business and results of operations.

Moreover, a slowdown or disruption in the global or Chinese economy may have a material and adverse impact on financings available to us. The weakness in the economy could erode investor confidence, which constitutes the basis of the credit market. The recent financial turmoil affecting the financial markets and banking system may significantly restrict our ability to obtain financing in the capital markets or from financial institutions on commercially reasonable terms, or at all. Although we are uncertain about the extent to which the recent global financial and economic crisis and slowdown of Chinese economy may impact our business in the short-term and long-term, there is a risk that our business, results of operations and prospects would be materially and adversely affected by any global economic downturn or disruption or slowdown of Chinese economy.

Any catastrophe, including natural catastrophes and outbreaks of health pandemics and other extraordinary events, could disrupt our business operations.

Our operations may be vulnerable to interruption and damage from natural and other types of catastrophes, including earthquakes, fire, floods, hail, windstorms, severe winter weather (including snow, freezing water, ice storms and blizzards), environmental accidents, power loss, communications failures, explosions, man-made events such as terrorist attacks and similar events. Due to their nature, we cannot predict the incidence, timing and severity of catastrophes. If any such catastrophe or extraordinary event occurs in the future, our ability to operate our business could be seriously impaired. Such events could make it difficult or impossible for us to deliver our services and products to our users and could decrease demand for our products. Because we do not carry property insurance and significant time could be required to resume our operations, our financial position and results of operations could be materially and adversely affected in the event of any major catastrophic event.

In addition, our business could be adversely affected by the outbreak of influenza A (H1N1), avian influenza, H7N9, severe acute respiratory syndrome (SARS) or other pandemics. Any occurrence of these pandemic diseases or other adverse public health developments in China or elsewhere could severely disrupt our staffing or the staffing of our business partners and otherwise reduce the activity levels of our work force and the work force of our business partners, causing a material and adverse effect on our business operations.

Risks Related to Our Corporate Structure

If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC governmental restrictions on foreign investment in mobile internet businesses, or if these laws or regulations or interpretations of existing laws or regulations change in the future, we could be subject to severe penalties, including the shutting down of our platform and our business operations.

Foreign ownership of internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates internet access, the distribution of online information, the online advertising, the operation of online games and the conduct of online commerce through strict business licensing requirements and other government regulations. These laws and regulations also limit foreign ownership in PRC companies that provide internet information distribution services. Specifically, foreign ownership in an internet information provider or other value-added telecommunication service providers may not exceed 50%. In addition, according to the Several Opinions on the Introduction of Foreign Investment in the Cultural Industry promulgated by the MOC, the GAPPRFT, the National Development and Reform Commission and the Ministry of Commerce, or the MOFCOM, in July 2005, foreign investors are prohibited from investing in or operating, among others, any internet cultural operating entities. Companies providing mobile internet services such as ours are governed by these rules and regulations on internet companies in China.

We are a Cayman Islands company and we conduct our operations in China primarily through a series of contractual arrangements entered into among our PRC subsidiary, Jiubang Computer Technology (Guangzhou) Co., Ltd., or Jiubang Computer, our PRC variable interest entities, including Guangzhou Jiubang Digital Technology Co., Ltd., or Jiubang Digital, Guangzhou Sanju Advertising Media Co., Ltd., or Sanju Advertising, Guangzhou Hengye Software Technology Co., Ltd., or Hengye Software and Guangzhou Zhiteng Computer Technology Co., Ltd., or Zhiteng Computer, the shareholders of these variable interest entities and us. Our contractual arrangements with our PRC variable interest entities and their shareholders enable us to exercise effective control over our PRC variable interest entities because we have the power to direct activities of our variable interest entities that most significantly impact the economic performance of the variable interest entities and the obligation to absorb the expected losses and the right to receive the expected residual return of the variable interest entities that could potentially be significant to the variable interest entities. Accordingly, the financial statements for the variable interest entities are consolidated in our financial statements under U.S. GAAP. All of the equity (net assets) or deficit (net liabilities) and net income (loss) of the variable interest entities are attributed to us. For a detailed description of these contractual arrangements, see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Contractual Arrangements.”

On September 28, 2009, the GAPPRFT, the National Copyright Administration and the Office of National Work Group for Combating Pornography and Illegal Publications jointly issued a Notice on Implementing the Provisions of the State Council on “Three Determination” and the Relevant Explanation of the State Commission Office for Public Sector Reform on Further Strengthening the Administration of the Pre-approval of Online Games and Examination and Approval of Imported Online Games, or Circular 13. Circular 13 restates that foreign investors are not permitted to invest in online game-operating businesses in China via wholly owned, equity joint venture or cooperative joint venture investments and expressly prohibits foreign investors from gaining control over or participating in domestic mobile game operators through indirect ways such as establishing other joint venture companies or entering into contractual or technical arrangements such as the variable interest entity structural arrangements we adopted. We are not aware of any companies that have adopted a corporate structure that is the same as or similar to ours having been penalized or terminated under Circular 13 since the effective date of the circular. Furthermore, the enforcement of Circular 13 is still subject to substantial uncertainty, including possible subsequent joint actions by relevant authorities, such as the MOC. In the event that we, our PRC subsidiaries, or PRC variable interest entities are found to be in violation of the prohibition under Circular 13, the GAPPRFT, in conjunction with the relevant regulatory authorities in charge, may impose applicable penalties, which in the most serious cases may include suspension or revocation of relevant licenses and registrations. In addition, various media sources have reported that the Chinese Securities Regulatory Commission, or the CSRC, prepared a report proposing pre-approval by a competent central government authority of offshore listings by China-based companies with variable interest entity structures, such as ours, that operate in industry sectors subject to foreign investment restrictions. However, it is unclear whether the CSRC officially issued or submitted such a report to a higher level government authority or what any such report provides. Furthermore, on January 19, 2015, the MOFCOM issued a discussion draft of the proposed Foreign Investment Law, which may place restrictions on variable interest entity structures adopted by us, but the enactment timetable, interpretation, implementation and influence thereof remain unclear. See “—Risks Related to Doing Business in China—Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of the draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

Based on the advice of our PRC legal counsel, Fangda Partners, the current corporate structure of our PRC subsidiaries and our PRC variable interest entities, and the contractual arrangements among our PRC subsidiary, our PRC variable interest entities, their shareholders and us, as described in this annual report, are in compliance with existing PRC laws, rules and regulations. However, we were further advised by our PRC legal counsel that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations, and these laws or regulations or interpretations of these laws or regulations may change in the future. Furthermore, the relevant government authorities have broad discretion in interpreting these laws and regulations. Accordingly, we cannot assure you that PRC government authorities will not ultimately take a view contrary to the opinion of our PRC legal counsel.

If our corporate structure, contractual arrangements and businesses of our company, our PRC subsidiaries or our PRC variable interest entities are found to be in violation of any existing or future PRC laws or regulations, the relevant governmental authorities would have broad discretion in dealing with such violation, including

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levying fines, confiscating our income or the income of our PRC subsidiaries or PRC variable interest entities,

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revoking or suspending the business licenses or operating licenses of our PRC subsidiaries or PRC variable interest entities,

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shutting down our servers or blocking our platform, discontinuing or placing restrictions or onerous conditions on our operations,

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requiring us to discontinue our operations,

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requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from our initial public offering to finance our business and operations in China, and

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taking other regulatory or enforcement actions that could be harmful to our business.

Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. Our PRC variable interest entities contributed most of our consolidated net revenues in the years ended December 31, 2012, 2013 and 2014. If the imposition of any of these penalties causes us to lose the rights to direct the activities of our PRC variable interest entities or our right to receive their economic benefits, we would no longer be able to consolidate such entities.

We rely on contractual arrangements with our PRC variable interest entities and their shareholders for the operation of our business, which may not be as effective as direct ownership. If our PRC consolidated affiliated entities and their shareholders fail to perform their obligations under these contractual arrangements, we may have to resort to litigation or arbitration to enforce our rights, which may be time-consuming, unpredictable, expensive and damaging to our operations and reputation.

Because of PRC restrictions on foreign ownership of mobile internet businesses in China, we depend on contractual arrangements with our PRC variable interest entities in which we have no ownership interest to conduct our business. These contractual arrangements are intended to provide us with effective control over these entities and allow us to obtain economic benefits from them. Our PRC variable interest entities are owned directly by Messrs. Yuqiang Deng, and Yingming Chang, our management team members, and Mr. Xiangdong Zhang, our former president and former director. However, these contractual arrangements may not be as effective in providing control as direct ownership. For example, our PRC variable interest entities and their shareholders could breach their contractual arrangements with us by, among other things, failing to operate our business in an acceptable manner or taking other actions that are detrimental to our interests. If we were the controlling shareholder of these PRC variable interest entities with direct ownership, we would be able to exercise our rights as shareholders to effect changes to their board of directors, which in turn could implement changes at the management and operational level. However, under the current contractual arrangements, as a legal matter, if our PRC variable interest entities or their shareholders fail to perform their obligations under these contractual arrangements, we may have to incur substantial costs to enforce such arrangements, and rely on legal remedies under PRC law, including contract remedies, which may be time-consuming, unpredictable and expensive. If we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, our business and operations could be severely disrupted, which could materially and adversely affect our results of operations and damage our reputation. See “—Risks Relating to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.”

Our contractual arrangements with our PRC variable interest entities may result in adverse tax consequences to us.

As a result of our corporate structure and the contractual arrangements among our PRC subsidiary, our PRC variable interest entities, their shareholders and us, we are effectively subject to the 6% PRC value-added tax and related surcharges on revenues generated by our subsidiaries from our contractual arrangements with our PRC variable interest entities, if any. The PRC Enterprise Income Tax Law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its affiliates or related parties to the relevant tax authorities. These transactions may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year during which the transactions are conducted. We may be subject to adverse tax consequences if the PRC tax authorities were to determine that the contracts between us and our PRC variable interest entities were not on an arm’s length basis and therefore constitute a favorable transfer pricing arrangements. If this occurs, the PRC tax authorities could request that our PRC variable interest entities and any of their respective subsidiaries adjust their taxable income upward for PRC tax purposes. Such a pricing adjustment could adversely affect us by reducing expense deductions recorded by such PRC variable interest entities and thereby increasing these entities’ tax liabilities, which could subject these entities to late payment fees and other penalties for the underpayment of taxes. Our consolidated net income may be materially and adversely affected if our PRC variable interest entities’ tax liabilities increase or if it becomes subject to late payment fees or other penalties.

The shareholders of our variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our business.

The individual shareholders of our variable interest entities are also shareholders and/or directors and officers of our company. Conflicts of interest may arise between the roles of these individuals as shareholders, directors and officers of our company and as shareholders of our variable interest entities. We rely on these individuals to abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to our company that requires them to act in good faith and in the best interest of our company and not to use their positions for personal gains. We cannot assure you that when conflicts arise, shareholders of our variable interest entities will act in the best interest of our company or that the conflicts will be resolved in our favor. If we cannot resolve any conflicts of interest or disputes between us and these shareholders, we would have to rely on legal proceedings, which may be expensive, time-consuming and disruptive to our operations. There is also substantial uncertainty as to the outcome of any such legal proceedings.

We may rely on dividends paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of our ADSs and ordinary shares.

We are a holding company, and we may rely on dividends to be paid by our wholly owned PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to the holders of our ADSs and ordinary shares and service any debt we may incur. If our wholly owned PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

Under PRC laws and regulations, wholly foreign-owned enterprises in the PRC, such as Jiubang Computer, may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. At the discretion of the wholly foreign-owned enterprise, it may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. Any limitation on the ability of our wholly owned PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Certain shareholders have substantial influence over our company and their interests may not be aligned with the interests of our other shareholders, which may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their securities.

As of March 31, 2015, Mr. Yuqiang Deng, our chairman and chief executive officer, Mr. Yingming Chang, our chief operating officer, and Mr. Xiangdong Zhang, our former president and former director, beneficially own an aggregate of 31.1% of our outstanding shares and 41.9% of the then total voting power. Mr. Yuqiang Deng, Mr. Yingming Chang and Mr. Xiangdong Zhang together hold 100% of the equity interest in each of our PRC variable interest entities, including Jiubang Digital through their shareholding in Sanju Advertising. They have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of any contemplated sale of our company and may reduce the price of our ADSs.

In addition, if any of our core management team members violates the terms of their non-compete undertakings or employment agreements with us or their legal duties by diverting business opportunities from us, it will result in our loss of corporate opportunities. These actions may take place even if they are opposed by our other shareholders, including those who purchased ADSs in our initial public offering. Although we have adopted a code of business conduct and ethics to help restrict conflicts of interest involving directors and officers, any violation of this code by our existing officers or directors may materially and adversely affect our business operations. For more information regarding the beneficial ownership of our company by our principal shareholders, see “Directors, Senior Management, and Employees.”

We may lose the ability to use and enjoy assets held by our PRC variable interest entities that are important to the operation of our business if such entities go bankrupt or become subject to a dissolution or liquidation proceeding.

Some of our PRC variable interest entities hold certain assets, such as patents for the proprietary technology that are essential to the operations of our platform and important to the operation of our business. If any of these PRC variable interest entities goes bankrupt and all or part of its assets become subject to liens or rights of third party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of such PRC variable interest entities undergoes a voluntary or involuntary liquidation proceeding, the unrelated third party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Risks Related to Doing Business in China

Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.

The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

Substantially all of our assets are located in China and a significant number of our users, advertisers, suppliers and business partners are from China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over the Chinese economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us. The Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, the Chinese economy has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and adversely affect our results of operations and financial condition.

We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet and mobile internet businesses and companies.

The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry, including mobile internet companies. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violations of applicable laws and regulations. Issues, risks and uncertainties relating to PRC regulation of the internet business include, but are not limited to, the following:

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There are uncertainties related to the regulation of the internet business in China, including evolving licensing practices and the requirement for real-name registrations. Permits, licenses or operations at some of our subsidiaries and PRC variable interest entities may be subject to challenge, or we may fail to obtain permits or licenses that may be deemed necessary for our operations or we may not be able to obtain or renew certain permits or licenses. See “—Risks Relating to Our Business and Industry—If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment for internet-based and mobile-based businesses in China, our business, financial condition and results of operations may be materially and adversely affected” and “PRC Regulation.” We are currently not required by PRC law to ask users for their real name and personal information when they register for a user account. We cannot assure you that PRC regulators would not require us to implement compulsory real-name registration in the future.

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The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the SCIO, the MIIT and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry. We are unable to determine what policies this new agency or any new agencies to be established in the future may have or how they may interpret existing laws, regulations and policies and how they may affect us. Further, new laws, regulations or policies may be promulgated or announced that will regulate internet activities, including internet publication and online advertising businesses. If these new laws, regulations or policies are promulgated, additional licenses may be required for our operations. If our operations do not comply with these new regulations after they become effective, or if we fail to obtain any licenses required under these new laws and regulations, we could be subject to penalties.

In July 2006, the MIIT issued the Notice of the Ministry of Information Industry on Intensifying the Administration of Foreign Investment in Value-added Telecommunications Services. This notice prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunication business operating licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunication business in China. According to this notice, either the holder of a value-added telecommunication business operating license or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunication services. The notice also requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain such facilities in the regions covered by its license. Currently, all contracts with telecommunication carriers and other service providers to host the servers used in our business were entered into by Jiubang Digital, and such arrangements are in compliance with this notice. Jiubang Digital also owns a majority of the domain names and trademarks necessary for daily operation, and holds the ICP license and the SP license necessary to conduct our operations in China.

The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet and mobile internet businesses in China, including our business. There are also risks that we may be found to violate the existing or future laws and regulations given the uncertainty and complexity of China’s regulation of internet business.

Content posted or displayed on GO platform, 3G.cn and our mobile reading base, including advertisements, may be found objectionable by PRC regulatory authorities and may subject us to penalties and other severe consequences.

The PRC government has adopted regulations governing internet and wireless access and the distribution of information over the internet and wireless telecommunication networks. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited from displaying content that may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of the PRC. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, the closure of the concerned platforms and reputational harm. The operator may also be held liable for such censored information displayed on or linked to their platform. For a detailed discussion, see “Item 4. Information on the Company — B. Business Overview — PRC Regulation — Information Security and Censorship.”

Since our inception, we have worked closely with relevant government authorities to monitor the content on our platform and to make the utmost effort in complying with relevant laws and regulations. However, it may not be possible to determine in all cases the types of content that could result in our liability as a distributor of such content, and if any of the content on GO platform, 3G.cn or our mobile reading base is deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. For example, as reported by certain news media, the State Internet Information Office recently named our mobile portal application, as one of the several mobile apps that contained certain inappropriate content, and required the named mobile apps to rectify the non-compliance as soon as possible. We have communicated with the State Internet Information Office and rectified the situation to meet their requirements.

We may also be subject to potential liability for any unlawful actions of our users or third party service providers on our platform or for content we distribute that is deemed inappropriate. It may be difficult to determine the type of content or actions that may result in liability to us, and if we are found to be liable, we may be prevented from operating our business in China. Moreover, the costs of compliance with these regulations may continue to increase as a result of more content being made available by an increasing number of users and third party business parties on our GO platform, 3G.cn and the mobile reading base, which may adversely affect our results of operations. Although we have adopted internal procedures to monitor content and to remove offending content once we become aware of any potential or alleged violation, we may not be able to identify all the content that may violate relevant laws and regulations or third party intellectual property rights and even if we manage to identify and remove offending content, we may still be held liable for such third-party content.

In addition, under PRC advertising laws and regulations, we are obligated to monitor the advertising content shown on our GO platform and 3G.cn to ensure that such content is true and accurate and in full compliance with applicable laws and regulations. In addition, where a special government review is required for specific types of advertisements prior to internet posting, such as advertisements relating to pharmaceuticals, medical instruments, agrochemicals and veterinary pharmaceuticals, we are obligated to confirm that such review has been performed and approval has been obtained. Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information. In circumstances involving serious violations by us, PRC governmental authorities may force us to terminate our advertising operations or revoke our licenses.

While we have made significant efforts to ensure that the advertisements shown on our GO platform and 3G.cn are in full compliance with applicable PRC laws and regulations, we cannot assure you that all the content contained in such advertisements or offers is true and accurate as required by the advertising laws and regulations, especially given the uncertainty in the interpretation of these PRC laws and regulations. If we are found to be in violation of applicable PRC advertising laws and regulations, we may be subject to penalties and our reputation may be harmed, which may have a material and adverse effect on our business, financial condition, results of operations and prospects. For additional discussion, see “Item 3. Key Information - D. Risk Factors - Risks Related to Our Business - If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment for internet-based and mobile-based businesses in China, our business, financial condition and results of operations may be materially and adversely affected”.

Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.

Under the PRC Enterprise Income Tax Law (“EIT Law”) effective on January 1, 2008, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. On April 22, 2009, the State Administration of Taxation (“SAT”) issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies (“SAT Circular 82”), which provides certain specific criteria to determine whether the “de facto management body” of a PRC controlled enterprise that is incorporated offshore is located in China or not. Further to SAT Circular 82, on July 27, 2011, the SAT issued the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial) (“SAT Bulletin 45”) to provide further guidance on the implementation of SAT Circular 82; which became effective on September 1, 2011. SAT Bulletin 45 clarified certain issues in the areas of resident status determination, post-determination administration and competent tax authorities.

According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered as a PRC tax resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC. SAT Bulletin 45 further clarifies the resident status determination, post-determination administration, as well as competent tax authorities. It also specifies that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated enterprise.

Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups instead of those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’s general position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.

We do not meet all of the conditions above; therefore, we believe that we should not be treated as a “resident enterprise” for PRC tax purposes even if certain standards for “de facto management body” prescribed in SAT Circular 82 are applicable to us. However, we have been advised by our PRC counsel, that it is possible that the PRC tax authorities may take a different view given the lack of certainty regarding the interpretation and implementation of the EIT Law including its implementing rules, both of which became effective on January 1, 2008. If the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC enterprise income tax purposes, our world-wide income could be subject to PRC tax at a rate of 25%, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.

Although dividends paid by one PRC tax resident to another PRC tax resident should qualify as “tax-exempt income” under the EIT Law, we cannot assure you that, if our Cayman Islands holding company is treated as PRC tax resident, dividends by our PRC subsidiaries to our Cayman Islands holding company will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends, and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.

Foreign ADS holders may also be subject to PRC withholding tax on dividends payable by us and gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is sourced from within the PRC. Although our holding company is registered in the Cayman Islands, the dividends received and gains realized by our foreign ADS holders will technically be regarded as income from sources within the PRC if we are classified as a PRC resident enterprise. Any such tax will reduce the returns on your investment in our ADSs.

Finally, we face uncertainties on the reporting and consequences on private equity financing transactions, private share transfers and share exchange involving the transfer of shares in our company by non-resident investors. According to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises issued by the PRC State Administration of Taxation on December 10, 2009, with retroactive effect beginning January 1, 2008, or SAT Circular 698, and the Notice on Several Issues Concerning Enterprise Income Tax for Indirect Share Transfer by Non-PRC Resident Enterprises, issued by the PRC State Administration of Taxation on February 3, 2015, or SAT Circular 7, an “indirect transfer” of assets of a PRC resident enterprise, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable properties, if such transaction arrangement lacks of reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and tax filing or withholding obligations may be triggered, depending on the nature of the PRC taxable properties being transferred. According to SAT Circular 7, “PRC taxable properties” include assets of a PRC establishment or place of business, real properties in the PRC, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining if there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable properties; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable properties have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the offshore enterprise shareholder, the business model and organizational structure; the offshore tax treatment on the indirect transfer of PRC taxable properties; the replicability of the transaction by direct transfer of PRC taxable properties; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business of a foreign enterprise, the resulting gain is to be included with the annual enterprise filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to PRC real properties or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the competent tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Currently, neither SAT Circular 698 nor SAT Circular 7 applies to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.

We cannot assure you that the PRC tax authorities will not, at their discretion, adjust any capital gains and impose tax return filing and withholding or tax payment obligations on the transferors and transferees, while our PRC subsidiaries may be requested to assist in the filing. Any PRC tax imposed on a transfer of our shares or any adjustment of such gains would cause us to incur additional costs and may have a negative impact on the value of your investment in us.

If our preferential tax treatments are revoked, become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions, and our results of operations could be materially and adversely affected.

The Chinese government has provided various tax incentives to our subsidiaries in China. These incentives include reduced enterprise income tax rates. For example, under the EIT Law and its implementation rules, the statutory enterprise income tax rate is 25%. However, Jiubang Digital was recognized as a “high and new technology enterprise”, which enabled it to enjoy an enterprise income tax rate of 15% until December 31, 2016. Jiubang Computer and Hengye Software have obtained “double soft” certification, and they are entitled to exemption of the enterprise income tax for the first two years and half rate reduction of enterprise income tax for the subsequent three years. Any increase in the enterprise income tax rate applicable to our PRC subsidiaries or PRC variable interest entities in China, or any discontinuation or retroactive or future reduction of any of the preferential tax treatments currently enjoyed by our PRC subsidiaries or PRC variable interest entities in China, could adversely affect our business, results of operations and financial condition. In addition, in the ordinary course of our business, we are subject to complex income tax and other tax regulations and significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our results of operations and financial condition would be materially and adversely affected.

China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and other adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress on August 30, 2007 and effective as of August 1, 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion, and at least two of these operators each had a turnover of more than RMB400 million within China) must be cleared by MOFCOM before they can be completed. In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the Circular No. 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Under Circular No. 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns.

In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.

PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.

The PRC State Administration of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No. 37, effective on July 4, 2014, and its appendixes, that require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in their ability to contribute additional capital into its PRC subsidiary. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion, including (i) the requirement by SAFE to return the foreign exchange remitted overseas within a period specified by SAFE, with a fine of up to 30% of the total amount of foreign exchange remitted overseas and deemed to have been evasive and (ii) in circumstances involving serious violations, a fine of no less than 30% of and up to the total amount of remitted foreign exchange deemed evasive. Furthermore, the persons-in-charge and other persons at our PRC subsidiaries who are held directly liable for the violations may be subject to criminal sanctions.

We have completed foreign exchange registration of PRC resident shareholders of Mr. Yuqiang Deng and Mr. Xiangdong Zhang for our financings that were completed before the end of 2010 and the subsequent transfer of their shares to their respective personal holding companies. We have also applied for foreign exchange registration of Mr. Yingming Chang, a PRC resident, for the shares he holds in our company, and are in the process of updating the foreign exchange registration of Mr. Yuqiang Deng and Mr. Xiangdong Zhang. Since SAFE Circular No. 37 was issued recently, there remains uncertainty with respect to its interpretation and implementation, and we cannot predict how such SAFE regulations will affect our business operations. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with the SAFE regulations by our PRC resident shareholders. In addition, in some cases, we may have little control over either our present or prospective direct or indirect PRC resident shareholders or the outcome of such registration procedures. A failure by our current or future PRC resident shareholders to comply with the SAFE regulations could subject us to fines or other legal sanctions, restrict our cross-border investment activities, limit our subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

On February 15, 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued by SAFE on March 28, 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We and our PRC employees who have been granted stock options are subject to these regulations upon the completion of our initial public offering. Failure of our PRC stock option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to us, or otherwise materially adversely affect our business.

PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of our initial public offering to make loans to our PRC subsidiaries and variable interest entities or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in China through our PRC subsidiaries and variable interest entities. We may make loans to our PRC subsidiaries and variable interest entities, or we may make additional capital contributions to our PRC subsidiaries.

Any loans by us to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our wholly owned PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our wholly owned PRC subsidiaries by means of capital contributions, these capital contributions must be approved by MOFCOM or its local counterpart. Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are not likely to make such loans to our variable interest entities, which are PRC domestic companies. Further, we are not likely to finance the activities of our variable interest entities by means of capital contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in mobile internet services, online advertising, online games and related businesses.

In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. In addition, SAFE promulgated Circular 45 on November 9, 2011 in order to clarify the application of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used.

Since SAFE Circular 142 has been in place for more than five years, SAFE decided to further reform the foreign exchange administration system in order to satisfy and facilitate the business and capital operations of foreign invested enterprises, and issued the Circular on the Relevant Issues Concerning the Launch of Reforming Trial of the Administration Model of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises in Certain Areas on July 4, 2014, or SAFE Circular 36. SAFE Circular 36 suspends the application of SAFE Circular 142 in certain areas and allows a foreign-invested enterprise registered in such areas to use the RMB capital converted from foreign currency registered capital for equity investments within the PRC, which will be regarded as the reinvestment of foreign-invested enterprise. On March 30, 2015, SAFE issued the Circular on the Reforming of the Management Method of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, which will take effective on June 1, 2015, or SAFE Circular 19. Under SAFE Circular 19, a foreign-invested enterprise may also choose converting its registered capital from foreign currency to RMB on self-discretionary basis, and the RMB capital converted can be used for equity investments within PRC, which will be regarded as the reinvestment of foreign-invested enterprise. After the validation of Circular 19, Circular 142 and Circular 36 will be abolished.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or variable interest entities or with respect to future capital contributions by us to our PRC subsidiaries. Our failure to complete such registrations or obtain such approvals may negatively affect our ability to use the proceeds we received from our initial public offering and to capitalize or otherwise fund operations of our PRC operating subsidiary, Jiubang Computer, and any other new subsidiaries we may establish in the future for business purposes, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Our PRC subsidiaries and PRC variable interest entities are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

We are a holding company registered in the Cayman Islands. We rely on dividends from our PRC subsidiaries as well as consulting and other fees paid to us by our PRC variable interest entities for our cash and financing requirements, such as the funds necessary to pay dividends and other cash distributions to our shareholders, including holders of our ADSs, and service any debt we may incur. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends. Since we have not achieved profitability, we are not yet required to allocate funds for such reserve funds. Furthermore, if our PRC subsidiaries and PRC variable interest entities incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us, which may restrict our ability to satisfy our liquidity requirements.

In addition, the EIT Law and its implementation rules provide that withholding tax rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.

The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. However, the People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within a narrow band. However, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem with the U.S. dollar. Since June 2010, the Renminbi has started to slowly appreciate against the U.S. dollar, though there have been periods recently when the U.S. dollar has appreciated against the Renminbi. In April 2012, the PRC government announced that it would allow more RMB exchange rate fluctuation. In March 2014, the People’s Bank of China decided to further adjust the Renminbi exchange rate regime to enhance the flexibility of the Renminbi exchange rate by enlarging the floating band of the Renminbi’s trading prices against the U.S. dollar in the interbank spot foreign exchange market from 1.0% to 2.0%. It is difficult to predict how long the current situation may last and when and how this relationship between the Renminbi and the U.S. dollar may change again.

There remains significant international pressure on the Chinese government to adopt a flexible currency policy to allow the Renminbi to appreciate against the U.S. dollar. Significant revaluation of the Renminbi may have a material adverse effect on your investment. The majority of our revenues and costs are denominated in Renminbi. Any significant revaluation of Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we received from our initial public offering into Renminbi to pay our operating expenses, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, a significant depreciation of the Renminbi against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

Governmental control of currency conversion may limit our ability to utilize our cash balance effectively and affect the value of your investment.

The PRC government imposes control on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive a substantial portion of our revenues in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

Increases in labor costs in the PRC may adversely affect our business and our profitability.

The economy of China has been experiencing increases in labor costs in recent years. China’s overall economy and the average wage in China are expected to continue to grow. The average wage level for our employees has also increased in recent years.

In addition, we have been subject to stricter regulatory requirements in terms of entering labor contract with our employees and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract law, that became effective in January 2008 and its implementation rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations. In October 2014, as part of our strategic business realignment, we terminated employment relationship with approximately 100 of our employees who are entitled to receive severance pay from us, which resulted in additional cost and expenses for us. On October 28, 2010, the Standing Committee of the National People’s Congress promulgated the PRC Social Insurance Law, or the Social Insurance Law, which became effective on July 1, 2011. According to the Social Insurance Law, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance and maternity insurance and the employers must, together with their employees or separately, pay the social insurance premiums for such employees.

We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to our users by increasing prices for our products or services, our profitability and results of operations may be materially and adversely affected. Also, as the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employment practice do not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.

If the custodians or authorized users of controlling non-tangible assets of our company, including our corporate chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and adversely affected.

Under PRC law, legal documents for corporate transactions, including contracts such as revenue-sharing contracts with advertisers, publishers and authors, which are important to our business, are executed using the chops or seals of the signing entity, or with the signature of a legal representative whose designation is registered and filed with the relevant branch of the Administration of Industry and Commerce.

Although we usually utilize chops to enter into contracts, the designated legal representatives of each of our PRC subsidiaries and variable interest entities have the apparent authority to enter into contracts on behalf of such entities without chops and bind such entities. All designated legal representatives of our PRC subsidiaries and variable interest entities are members of our senior management team who have signed employment undertaking letters with us or our PRC subsidiaries and variable interest entities under which they agree to abide by various duties they owe to us. In order to maintain the physical security of our chops and the chops of our PRC entities, we generally store these items in secured locations accessible only by the authorized personnel of each of our subsidiaries and variable interest entities. Although we monitor such authorized personnel, there is no assurance such procedures will prevent all instances of abuse or negligence. Accordingly, if any of our authorized personnel misuse or misappropriate our corporate chops or seals, we could encounter difficulties in maintaining control over the relevant entities and experience significant disruption to our operations. If a designated legal representative obtains control of the chops in an effort to obtain control over any of our PRC subsidiaries or variable interest entities, we, our PRC subsidiaries or variable interest entities would need to pass a new shareholder or board resolution to designate a new legal representative and we would need to take legal action to seek the return of the chops, apply for new chops with the relevant authorities, or otherwise seek legal redress for the violation of the representative’s fiduciary duties to us, which could involve significant time and resources and divert management attention away from our regular business. In addition, the affected entity may not be able to recover corporate assets that are sold or transferred out of our control in the event of such a misappropriation if a transferee relies on the apparent authority of the representative and acts in good faith.

Our auditor, like other independent registered public accounting firms operating in China, has not been subject to inspection by the Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in this annual report filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered public accounting firms operating in China, is currently not inspected by PCAOB.

Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of PCAOB to conduct inspections of independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections and lose confidence in our reported financial information and procedures and the quality of our financial statements.

Proceedings instituted by the SEC against certain PRC-based accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

In December 2012, the SEC brought administrative proceedings against five accounting firms in China, including our independent registered public accounting firm, alleging that they had refused to produce audit work papers and other documents related to certain other China-based companies under investigation by the SEC. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of these firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed and approved by the SEC.

In February 2014, the initial decision was appealed. While under appeal and in February 2015, four of these PRC based accounting firms (“the Chinese member firms of “Big Four” accounting firms”) reached a settlement with the SEC. As part of the settlement, each of the Chinese member firms of “Big Four” accounting firms agreed to settlement terms that include a censure; undertakings to make a payment to the SEC; procedures and undertakings as to future requests for documents by the SEC; and possible additional proceedings and remedies should those undertakings not be adhered to.

If the settlement terms are not adhered to or in the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding China-based, United States-listed companies and the market price of our ADSs may be adversely affected.

If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to our delisting from the NASDAQ Global Select Market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of the draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

The MOFCOM published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The MOFCOM is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects.

Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by the MOFCOM, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding 50% of more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE and its investment amount exceeds certain thresholds or its business operation falls within “negative list,” to be separately issued by the State Council in the future, market entry clearance by the MOFCOM or its local counterparts will be required. Otherwise, all foreign investors may make investments on the same terms as domestic investors without being subject to additional approval from the government authorities as mandated by the existing foreign investment legal regime.

The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “—Risks Relating to Our Corporate Structure—If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC governmental restrictions on foreign investment in mobile internet businesses, or if these laws or regulations or interpretations of existing laws or regulations change in the future, we could be subject to severe penalties, including the shutting down of our platform and our business operations”. Under the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the “negative list,” the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal.

However, the draft Foreign Investment Law has not taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point. Moreover, it is uncertain whether the Internet industry, in which our variable interest entities operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” to be issued. If the enacted version of the Foreign Investment Law and the final “negative list” mandate further actions, such as MOFCOM market entry clearance, to be completed by companies with existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all, and our business and financial condition may be materially and adversely affected.

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

Risks Related to Our ADSs

The trading prices of our ADSs are likely to be volatile, which could result in substantial losses to investors.

The trading prices of our ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other similarly situated companies in China that have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of these Chinese companies’ securities after their offerings, including companies in the internet and mobile internet businesses, may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting or other practices at other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have engaged in such practices. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance.

In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following:

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variations in our net revenues, earnings and cash flow;

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announcements of new investments, acquisitions, strategic partnerships, or joint ventures;

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announcements of new services and expansions by us or our competitors;

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changes in financial estimates by securities analysts;

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changes in the number of our users;

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fluctuations in our operating metrics;

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failure on our part to realize monetization opportunities as expected;

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additions or departures of key personnel;

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release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

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detrimental negative publicity about us, our competitors or our industry;

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regulatory developments affecting us or our industry; and

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potential litigation or regulatory investigations.

Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company until the fifth anniversary from the date of our initial listing in November 2013. As a result of our current status as an emerging growth company, our investors may not have access to certain information that they may deem important.

The JOBS Act also provides that an emerging growth company need not comply with any new or revised financial accounting standard until such date that a non-reporting company is required to comply with such new or revised accounting standard. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

If securities or industry analysts cease to publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.

The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our ADSs, the market price for our ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.

The sale or availability for sale, or perceived sale or availability for sale, of substantial amounts of our ADSs could adversely affect their market price.

Sales of substantial amounts of our ADSs in the public market after the completion of our initial public offering, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in our initial public offering are freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. In connection with our initial public offering, we and our officers, directors and our shareholders have agreed not to sell any shares or ADSs for 180 days after the November 21, 2013 without the prior written consent of the underwriters. However, the underwriters may release the securities subject to lock-up agreements from the lock-up restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. Class A ordinary shares underlying our outstanding options will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. We may also issue additional options in the future which may be exercised for additional Class A ordinary shares. There were 80,023,782 Class A ordinary shares (excluding 629,502 shares issued to the depositary in anticipation of future exercise of options) outstanding as of March 31, 2015. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs.

Our articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.

Our currently effective amended and restated articles of association contains provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are registered under Cayman Islands law.

We are an exempted company limited by shares registered under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law (2013 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our existing articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.

Judgments obtained against us by our shareholders may not be enforceable in our home jurisdiction.

We are a Cayman Islands company and a substantial majority of our assets are located outside of the United States. A significant percentage of our current operations are conducted in China. In addition, a significant majority of our current directors and officers are nationals and residents of countries other than the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

There are uncertainties as to whether Cayman Islands courts would:

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recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and

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impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your Class A ordinary shares.

As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying Class A ordinary shares in accordance with these instructions. You will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. Under our amended and restated memorandum and articles of association which is currently in effect, the minimum notice period required for convening a general meeting is 14 days. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.

You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our Class A ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to ten votes per share. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares.

Due to the disparate voting powers attached to these two classes of ordinary shares, as of March 31, 2015, our existing holders of Class B ordinary shares collectively own approximately 93.2% of the voting power of our outstanding shares and have considerable influence over matters requiring shareholders’ approval, including election of directors and significant corporate transactions, such as a merger or sale of our company or our assets. In particular, Mr. Yuqiang Deng, Mr. Yingming Chang and Mr. Zhi Zhu, our core management team members, and their respective affiliates, beneficially own approximately 25.6% of our total outstanding shares, representing 34.7% of our total voting power, as of March 31, 2015. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks that it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement. As a result, you may be unable to transfer your ADSs when you wish to.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company”.

We are a public company and incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, and NASDAQ, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.0 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will 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. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

We may be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes, which could subject United States investors in our ADSs or Class A ordinary shares to significant adverse United States income tax consequences.

We will be classified as a “passive foreign investment company,” or “PFIC” if, in the case of any particular taxable year, either (a) 75% or more of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of the average quarterly value of our assets (as determined on the basis of fair market value) during such year produce or are held for the production of passive income (the “asset test”). Although the law in this regard is unclear, we treat our PRC variable interest entities as being owned by us for purposes of applying the PFIC income and asset tests, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated financial statements.

While we do not believe we were a PFIC for our taxable year ended December 31, 2014, there is a risk that we may become a PFIC for our current taxable year ending December 31, 2015 or future taxable years because of our significant cash balances and because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs or Class A ordinary shares. Accordingly, fluctuations in the market price of our ADSs or Class A ordinary shares may cause us to become a PFIC for the current or subsequent taxable years. The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets, which will be affected by how, and how quickly, we use our liquid assets. Under circumstances where we determine not to deploy significant amounts of cash for active purposes or not to treat our PRC variable interest entities as owned by us for United States federal income tax purposes, our risk of being classified as a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are classified as a PFIC in any taxable year, a U.S. holder (as defined in “Item 10. Additional Information – E. Taxation—Material United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ADSs or Class A ordinary shares and on the receipt of distributions on the ADSs or Class A ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules, and such U.S. holder may be subject to burdensome reporting requirements. Further, if we are classified as a PFIC for any year during which a U.S. holder holds our ADSs or Class A ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ADSs or Class A ordinary shares. Each U.S. holder is urged to consult its tax advisor concerning the United States federal income tax consequences of an investment in our ADSs or ordinary shares if we are treated as a PFIC for our current taxable year or any future taxable year, including the possibility of making a “mark-to-market” election. For more information, please see “Item 10. Additional Information – E. Taxation—Material United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations.”

ITEM 4.

INFORMATION ON THE COMPANY

A. History and Development of the Company

We commenced operations in June 2003, with the establishment of Guangzhou Jiubang Digital Technology Co., Ltd., or Jiubang Digital. We, through Jiubang Digital, started our mobile internet business, including the launch of 3G.cn, our mobile internet portal in March 2004, and subsequently our GO Launcher EX in November 2010. Jiubang Digital is one of our PRC variable interest entities through the contractual arrangement described below.

In January 2005, we incorporated Sungy Data Ltd. under the laws of the British Virgin Islands as our offshore holding company.

In March 2005, Sungy Data Ltd. established Jiubang Computer Technology (Guangzhou) Co., Ltd., or Jiubang Computer, our wholly owned subsidiary in China. Jiubang Computer entered into a series of contractual arrangements, as a result of which Sungy Data Ltd. became primary beneficiary of, and exercise effective control over the operations of, these PRC entities:

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In June 2006, we entered into certain contractual arrangements with Jiubang Digital and its then shareholders. As of March 31, 2015, Guangzhou Sanju Advertising Media Co., Ltd., or Sanju Advertising (a company wholly owned by Mr. Yuqiang Deng, Mr. Xiangdong Zhang and Mr. Yingming Chang), Mr. Yuqiang Deng, and Mr. Xiangdong Zhang each holds 80%, 16% and 4% of the equity interest in Jiubang Digital, respectively;

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In June 2006, we entered into certain contractual arrangements with Sanju Advertising and its then shareholders. As of March 31, 2015, Mr. Yuqiang Deng, Mr. Xiangdong Zhang and Mr. Yingming Chang each holds 70%, 20% and 10% of the equity interest in Sanju Advertising, respectively. Sanju Advertising primarily engages in advertising services;

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In August 2006, we entered into certain contractual arrangements with Guangzhou Zhiteng Computer Technology Co., Ltd., or Zhiteng Computer and its then shareholders. As of March 31, 2015, Mr. Yuqiang Deng and Mr. Xiangdong Zhang each holds 80% and 20% of the equity interest in Zhiteng Computer, respectively. Zhiteng primarily engages in technology supporting services; and

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In May 2010, we entered into certain contractual arrangements with Guangzhou Hengye Software Technology Co., Ltd., or Hengye Software and its then shareholders. As of March 31, 2015, Mr. Yuqiang Deng, Mr. Xiangdong Zhang and Mr. Yingming Chang each holds 70%, 10% and 20% of the equity interest in Hengye, respectively. Hengye Software primarily engages in mobile internet value-added services.

Currently, Jiubang Computer is our operating subsidiary in China whose authorized scope of business includes research and development of computer software, providing computer information technology service and technology consulting service, and selling products and services provided by the company. Jiubang Computer is engaged in research and development activities and also provides services to our VIEs and third parties, including technology development, technical consulting and market research and consulting services.

In November 2008, we acquired 70% of the equity interest in XMedia Technologies Ltd, or XMedia, a company incorporated in the Cayman Islands. In November 2009, we acquired the remaining 30% equity interest in XMedia. As a result, XMedia became our wholly-owned subsidiary.

In February 2011, we indirectly acquired 33% of the equity interest in Zhuhai Zhengdian Technology Co., Ltd., or Zheng Dian, a company incorporated in China. In May 2012, we sold all of our equity interest in Zheng Dian.

In August 2013, Sungy Data Ltd. was redomiciled in the Cayman Islands as an exempted company registered under the laws of the Cayman Islands. In October 2013, Sungy Data Ltd. was renamed Sungy Mobile Limited.

In November 2013, Sungy Mobile Limited’s ADSs were listed on The NASDAQ Stock Market under the symbol “GOMO.” In December 2013, Sungy Mobile Limited completed an initial public offering of 8,050,000 ADSs, representing 48,300,000 Class A ordinary shares.

In February 2014, we acquired GetJar, a privately held mobile advertising network based in California for $4.9 million in cash. We may issue up to an aggregate of 1,443,074 Class A ordinary shares to the seller of GetJar by early 2016 as earnout payments if certain performance targets for 2014 are achieved; however, these performance targets were not achieved, and we will not make the earnout payments to the seller of GetJar. We also incorporated Sungy Technology Limited under the laws of the British Virgin Islands, which holds the intellectual properties in relation to the operation of GetJar.

Our principal executive offices are located at Floor 17, Tower A, China International Center, No. 33 Zhongshan 3 Road, Yuexiu District, Guangzhou 510055, People’ s Republic of China. Our telephone number at this address is (+86 20) 6681 5066. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc.

See “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Capital Expenditures” for a discussion of our capital expenditures and divestitures.

B. Business Overview

Overview

We are a leading provider of mobile internet products and services globally with a focus on applications and mobile platform development. Our platform product, GO Launcher EX, manages apps, widgets and functions on Android smartphones and serves as users’ first entry point to their phones.

We have developed a portfolio of GO series products which include our launcher products and a broad range of other GO series apps and widgets that provide rich functionality, enhanced performance and extensive personalization for Android smartphones. We have created and continued to expand a GO platform that is built upon GO Launcher EX and integrates all of our GO series products as well as third-party mobile internet products and services.

In addition to our GO series products and GO platform, we also offer 3G.cn, a mobile internet portal, and mobile reading services, both of which provide us with a stable and growing user and paying customer base.

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We launched 3G.cn, one of the first Chinese mobile internet portals, in March 2004, when the mobile internet was still in its infancy. It provides mobile users access to a vast array of professional media and user-generated content, such as entertainment and sports events coverage in multi-media formats. 3G.cn had more than 42 million unique visitors in December 2014.

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We started charging fees for our mobile reading services in the first half of 2010 to capture one of the early monetization opportunities in the mobile internet industry. Our mobile reading services are comprised of an expanding library of original and copyrighted literary works and a growing and highly engaged user community.

We generate our revenues through advertising in various forms, paid apps and premium themes, in-app purchase for advanced functionalities as well as users’ purchases of literary content.

Our GO Series Products and Platform

Our GO series products include launcher products and a broad range of other GO series apps and widgets that provide rich functionality, enhanced performance and extensive personalization to Android smartphones. We launched our GO series products at a time when demand for Android apps were on the rise. Our GO series products have rapidly achieved global popularity since the launch of GO Launcher EX in November 2010.

In the fourth quarter of 2014, we have temporarily shifted our focus to product development and realigned our strategy towards strengthening and expanding our flagship GO series platform of applications. Through this business shift, we plan to develop more themes and functions for our GO series products to suit our users’ diverse needs and preferences. We believe these measures will enable us to further enrich our users’ experience and help to increase our users’ stickiness on our GO series products and GO platform.

The following table sets forth the key operating data relating to our core GO series products:


	Accumulated Number of User as of December 31, 2014			Accumulated Number of Paid Downloads as of December 31, 2014
	(million)			(million)
GO Launcher EX		395			1.7
GO SMS Pro		153			2.3
GO Keyboard		92			0.7
All GO series products		554	⁽¹⁾		5.1

(1)	When calculating the accumulated number of users of all GO series products, we count each individual user only once regardless of the number of GO series products such individual user may be using.

Launcher Products and Other GO Series Products

The advent of the smartphone era, especially the continuing popularity of the Android smartphones, has transformed smartphones from expensive electronic devices into everyday consumer staple. While the Android operating system provides the low level functions of smartphones, all Android smartphones come with a pre-installed launcher that operates above the Android operating system and manages all apps, widgets and functions through a main user interface after the smartphone is powered on. A launcher on an Android smartphone can typically be customized to fit various user preference. It determines to a great extent the performance, functionality, feel, look and handle of smartphones and is one of the determining factors of user experience on different smartphones.

Smartphone users, especially the younger generation, became dissatisfied with the limited functionality and performance and the same feel and look of the factory configured launcher of the standard Android smartphones. As a result, these users are attracted to third-party launcher products that can provide them with redefined experience.


		After the release in November 2010, GO Launcher EX has attracted approximately 395 million users worldwide as of December 31, 2014. GO Launcher EX can be downloaded for free, although it has paid premium features.

		GO Launcher EX offers extensive functions and high performance that turn the use of smartphones into a more productive experience. In addition, through themes, widgets and various levels of customization, GO Launcher EX users can extensively personalize their smartphones and change the otherwise monotonous phones into exciting and sensible instruments that perform more in sync with their owners’ habits and symbolize the individuality of their owners. For example:

		• GO Launcher EX includes many new functions and features not available in factory installed launchers and other third-party launchers, which significantly increases the utility of smartphones and makes smartphone use more convenient and intuitive.

		• Developed using our sophisticated 3D graphics engine, the graphics rendering speed of GO Launcher EX can reach 57-60 frames per second, approximately 50-80% faster than the factory installed launcher, which creates much smoother visual effects for screen transitions.

		• GO Launcher EX provides more than 10,000 eye-catching themes developed either by us internally or by numerous creative theme designers worldwide representing numerous styles and rich cultural implications. It also provides more than 25 types of dynamic screen transition effects.

		GO Launcher EX is currently available in 44 languages, serving users in over 200 countries and regions.

		GO Launcher EX has received a score of 4.5 out of 5 as of December 31, 2014 on Google Play.

		Next Launcher is our second launcher product and is a paid app featuring striking 3D effects, entertaining operation experience and visual enjoyment. For example, apps can be customized to rotate, swing, float or bounce on screens. Screen transition can have classic cylinder, flip, cubic effect as well as true 3D crystal, cloth and folding effects. Users can also define additional finger gestures such as double finger glide and double click for their favored operations. In 2014, we have added new animation effects, such as finger effect, and other new features, like mixture of different visual effects and gravity sensor, in our Next Launcher product. With additional themes and custom widgets downloadable from Google Play, it provides extensive and extremely comprehensive options for users looking to spice up their smartphones. Users can also build their customized app icons by editing its size, angle, style and label. In addition, in 2014 our product team improved the functionalities of Next Launcher in its latest version in a comprehensive way – easier application management, more stable system operation and more efficient memory usage – aiming at bringing better experience to our users.

Founded on the success of GO Launcher EX, we developed certain other GO series products and services through apps and widgets to further improve the functionality, performance and personalization of smartphones. Go Keyboard is one of our most popular GO series mobile apps.


		• GO Keyboard has more functionalities than a factory installed keyboard. It helps users type faster on their smartphone screens by providing intuitive keyboard layout, fluid transition between alphabet, numbers and symbols, more than 800 emoticons and accurate word prediction and auto-correction functions.

		• It can be further customized through the choice of more than 7,600 themes and various settings for sound, vibration, display and transition effects.

		• It provides input for 48 languages and supports a broad range of smartphones and tablets.

		• Users: approximately 92 million; Google Play Score: 4.5

We have also developed a large number of add-on widgets for GO Launcher EX, all of which provide additional functionalities and performance enhancement to improve user experience. The table below includes a list of the main widgets we have developed.


Switch		• Provides a fast way to turn on/off or adjust common functions, such as Wi-Fi and GPS connection, screen brightness, screen locker, flashlight, and battery usage.

Calendar		• Provides simpler and faster way to work with calendar.

Clock		• Provides world clock and time browsing tool on home screen.

Note		• Helps manage schedules and notes efficiently. A user can use task style to add schedules, note style to quickly write down thoughts, and even doodle style to record his or her plan by drawing a picture. It also supports sharing schedules with other users.

Search		• Searches internet, users’ contacts and installed apps in a single user interface.

Contacts		• Allows a user to make phone calls, send messages, emails or chat from home screen by one click without opening contacts app.

Weather		• Displays live weather conditions without opening GO Weather.

Message		• Enables viewing of SMS messages on screen without opening GO SMS Pro.

Email		• Enables sending/receiving of emails directly on home screen without the need to open any email app; supports most of the popular email apps in the market.

Facebook		• Enables viewing of Facebook postings without opening Facebook app.

Twitter		• Enables reading of tweets and timeline/mentions/messages or uploading of photos without opening Twitter app.

Weibo		• Enables viewing of Weibo postings without opening Sina’s Weibo app, a Twitter-like social media.

Task manager		• Accesses task manager functions without opening Task Manager app.

Power manager		• Accesses power manager functions without opening Power Manager app.

Store		• Offers apps, widgets, games, themes and wallpapers on our GO platform, and users can pay through Google Play account.

Development of GO Series Products

We strive to be a pacesetter in our industry in terms of developing new products and services. For example, we believe we were among the first in our industry to develop the Switch widget that provides a fast way to turn on/off or adjust common functions of smartphones. We were one of the first to automatically categorize installed apps and provide app search functions in launcher products. We were also one of the first to enable hand gestures in the operation of Android smartphones. Many of these features have been followed by other launcher providers and become industry standard configurations. We believe we are one of the few developers that apply 3D graphics engine in user interface development and have successfully implemented the 3D technology into a launcher product.

Before we commit to develop any products, we typically conduct extensive studies of user needs and market demand. We then go through a prescribed series of steps, including testing user interactions, graphics design, client and server end software development, internal testing and beta version testing, often with multiple iterations, before officially releasing the products. Once our products are released, we collect and closely study data on user satisfaction and user feedback. We have a customer service team to collect feedbacks and identify areas in which our products need to be further enhanced or fine-tuned. In addition, our sophisticated data analytics system automatically collects and analyzes more than three terabytes of data per day and generates a large number of daily reports relating to the operations of our products, which further help us timely identify areas that need improvement. We have been promptly releasing new versions of our products to resolve issues thus identified after product releases, enhance existing functions or add new features to improve our products.

We devoted substantial resources to our research and development efforts, with the focus on the area of cloud computing, big data mining and analytics, mobile advertisement platform and advanced user interface capabilities. In 2014, we developed a recommendation engine, through which we are able to analyze selected data derived from our users and to provide personalized service, information and advertisement placement catering to our users’ preference and interests. As of December 31, 2014, our research and development department consisted of 323 employees.

Promotion of GO Series Products and Platform

We believe that creating superior products with high user satisfaction levels is the most effective way to market and promote our GO series products and GO platform. Through constant improvement and fine-tuning, we have received high ratings and a large number of positive comments on Google Play and other third-party app stores, which has successfully attracted many new users to use our products. Our product team also interacts with fans on some of the most popular social network platforms, including Facebook, Twitter and Google+, which we believe will reinforce our brandname and attract new users. We as a development team have also gradually gained considerable respect in users community, and most our GO series products reached the one million download threshold within a couple of months of their releases.

We also promote our GO series products through displaying advertisement on third-party platforms and in-app cross promotion. We display the advertisement of our products on major mobile social platforms, such as Facebook, Google AdWords/AdMob and Inmobi, and third-party app stores, such as mobomarket, mobogenie and 1mobile. In addition, users of any one of our GO series products can readily become interested in trying, and are provided convenient in-app access to other complementary GO series products, which create a strong network effect to cross-market our GO series products. Through mobile advertising networks, we can cross-promote apps with other app developers by displaying the advertisements of other app developers’ apps in our apps in exchange for them to display the advertisements of our GO series apps.

Starting in January 2012, we entered into arrangements with several leading Chinese smartphone manufacturers to pre-install GO Launcher in some of their smartphone models at no cost.

Through achieving higher user satisfaction, cross-promotion and pre-installation, we have been able to build a large community of loyal users for our GO series products and GO platform.

Distribution and Payment

Our GO series products are available for download on Google Play, other similar third-party app stores as well as GO Market, our mobile application store for Chinese users. While overseas users pay through Google Play, users in China pay through various third-party payment methods such as Alipay and SMS.

Our 3G.cn Mobile Internet Portal

3G.cn, our mobile internet portal, was one of the earliest multi-media portals in China to be solely devoted to serving mobile internet users. It provides mobile internet users with access to a vast array of professional media and user-generated content on a wide range of topics, including entertainment, sports and current events, in a variety of media. We launched 3G.cn in 2004, when China’s mobile internet industry was still in its infancy.

Channels

3G.cn offers more than 12 free channels that cater to a broad range of focuses and interests. Some of our most popular channels include the following:

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NOW Live Broadcast. NOW, a special live broadcast channel on the portal, delivers real time blow-by-blow coverage of live broadcasts for events relating to a diverse range of topics, including sports, entertainment and technology. We partner with various media outlets to obtain exclusive coverage of games and entertainment programs, so that we can provide users with the most up to date information on popular events. For example, for the 2012 London Olympics, 3G.cn had the rights to provide mobile internet coverage.

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General Information. Our general information channel includes articles sourced from third-party major media outlets organized by keywords, topic and popularity, covering diverse areas of interest such as international stories, regional events, finance analysis, military coverage and cultural stories. We provide links to the official websites for popular movies, and for famous sports teams. We also provide in-depth coverage and analysis of current events and public interest topics.

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Apps download center. Our apps download center is dedicated to providing downloads of popular new software / apps that optimize user experience of smartphones, including GO series products, online travel agents programs, city map guides and other resources for entertainment and everyday practical uses.

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Mobile reading. We provide access from 3G.cn to our mobile reading database, providing visitors with access to a vast, expanding library of original and copyrighted literary works covering a broad range of genres.

Organization and Management of Content

We obtain content for 3G.cn through cooperation with media agencies and content-sharing with entertainment-related content providers such as other major media sites in China. We also have strong in-house capabilities to produce original content with respect to entertainment and sports. Our staff writers are responsible for writing, editing, organizing and managing content, and include field reporters for sports and entertainment stories.

To help our smartphone users navigate and explore the vast content on 3G.cn, we created a navigation guide specifically tailored for mobile internet users, grouping content by topics, common interest keywords and popularity, making it easier for users to browse or directly identify items of interest to them.

Revenues from 3G.cn

We primarily generate revenues from 3G.cn through advertising. With the large number of visitors to 3G.cn, the vast array of content on the website and the broad range of advertising formats we offer, we are able to attract numerous advertisers from a variety of industries, including smartphone manufacturers, mobile game developers and credit card companies, among others.

Generally, advertisers on 3G.cn enter into contracts with us directly or through advertising agencies, with each contract typically lasting a few weeks for each advertising slot purchased. Advertisements on 3G.cn are charged primarily on the basis of duration, with pricing variations depending on the size, display method and prominence of the locations for these advertisements. As we continue to improve the content on 3G.cn, we expect that we will attract an increasing number of visitors and advertisers and derive more advertising revenues from 3G.cn in the future.

Promotion of 3G.cn

We believe that the best way to promote 3G.cn is to maintain a broad range of high quality content and deliver superior visitor experience. We aim to maintain and expand our large attractive user base and our large advertising space inventory that enables advertisers to connect and engage with their targeted audiences and promote their products and services.

3G.cn also promotes large sports events and entertainment shows organized by third parties in exchange for receiving publicity during the broadcast of these events. We promote popular movies on the entertainment channel of 3G.cn in exchange for being mentioned on the movie’s press materials. We also continually sponsor auto shows as part of our publicity strategy.

Our Mobile Reading Services

We started charging fees for our mobile reading content in 2010. Currently, our mobile reading services consist of GGBook, a mobile app for smartphones, a literary channel on 3G.cn, and content that can be accessed from third-party internet operators’ mobile reading databases. We are one of the earliest mobile reading service providers in China offering original content. We offer an expanding collection of original and copyrighted third-party literary works to a large, growing and highly engaged user community.

Large and Expanding Content

As of December 31, 2014, we had over 125,000 pieces of free and premium works on our mobile reading base, of which approximately 39,000 pieces require readers to pay. Approximately one-third of the literature available on our mobile reading base are original content to which we have exclusive publishing or reproduction rights, while the remaining are sourced from other mobile reading database in China or traditional offline-published books. We offer a comprehensive and continually expanding library of original and copyrighted literary works covering a wide range of genres, from romance, fantasy, martial arts, science fiction and mystery to humor. We engage registered authors who provide original content for our mobile reading base. Our authors transfer to us the copyright to their works in exchange for a fee based on the revenue we earn from their works. We also acquire licenses to post contents from traditional, offline-published books and make them available to our mobile readers.

Organization and Management of Content

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Professional editing team . We have an editing team with more than 50 editors devoted to the reviewing and editing of literary content as of December 31, 2014.

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Content Organization and Monitoring . We categorize our literary works by topic, popularity, authorship, free versus premium content and various other groupings so as to make it easier for readers to browse, search, read and bookmark different works. We have a team that ensures the literary works we offer are in compliance with applicable PRC laws and regulations, aided by a software program that periodically sweeps our platform for sensitive key words or questionable content. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Content posted or displayed on GO platform, 3G.cn and our mobile reading base, including advertisements, may be found objectionable by PRC regulatory authorities and may subject us to penalties and other severe consequences.”

Highly Engaged Reader Base

One of the key elements to the success of our mobile reading services is our highly engaged reader base. Our readers visit our mobile reading library through a variety of smartphones, and frequently comment on, rate and provide constructive feedback on authors’ literary works that are continually published chapter by chapter. This interaction between authors and readers enhances user stickiness, encourages readers to regularly visit our mobile reading base and makes our reader base attractive to advertisers.

Quality Authors

We believe that our large and highly engaged online user community creates a natural network effect that attracts China’s aspiring and established authors and helps to keep our library in line with the latest reader interests. We provide a medium for authors to publish literary works that can easily reach a vast, highly engaged reader base. By publishing on our mobile reading base, a writer can, share revenues with us, and use our community to establish a fan base. Many of our readers are inspired by ideas shared in our reader community, and in turn have become popular authors themselves, attracting more readers to our reading base.

We seek to sign talented authors who have potential for commercial success. Authors receive reviews from our readers and editing advice from our editing team, which in turn improve their writing skills and help them find topics and styles suited to themselves and to their reader base. In 2012, one of our authors became the top ten most searched authors on Baidu.com, China’s most popular search engine. In addition, 30 of our authors have published offline as of December 31, 2014.

Revenues from Mobile Reading

We offer customized subscription packages designed to maximize reader satisfaction and to generate greater recurring revenues. We provide free content as well as paid premium content to our readers; we believe that our free content attracts readers to visit and browse our online literature library. Typically, our readers register as members and browse through the content of our library before transferring money to their accounts with us to purchase premium content. Our premium original content can be subscribed for by month—providing unlimited access to a certain number of works for a month for a set fee—or by chapters or books. We also provide content to reading channels of third party internet operators and receive a percentage of the fees paid by their users who subscribe to our content.

Distribution and Payment

We have a large number of readers who seek to join an established, vibrant mobile reading community. We believe the best way to promote our mobile reading base is to deliver superior content and reader experience. The more readers we engage for our mobile reading base, the more vibrant our mobile reading community becomes, and the greater the value we can bring to our readers, which further encourages loyalty and incentivize reader referrals.

In addition to offering original content on our own mobile reading base through 3G.cn and GGBook, we share our original content with third-party reading channels in China under revenue-sharing arrangements. Currently, third-party reading channels we work with include those operated by major mobile network carriers and internet companies in China. These third-party reading channels provide our original content with valuable additional exposure and enhance the monetization of our original content.

Our readers pay for our mobile reading content through SMS, phone cards and payment systems operated by major mobile carriers in China.

Competition

The mobile internet industry is rapidly evolving and highly competitive. We face competition in all major aspects of our business:

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GO series products . We face competition from numerous competing products for Android smartphones from third-party developers, such as Facebook Home in the field of launcher products. We will continue to innovate and improve our existing products and services and develop new ones to maintain our competitive advantages.

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3G.cn . 3G.cn faces a variety of competitors in China, as a significant portion of major internet companies in China have mobile internet portals. In the future, we expect to continue to compete with other internet portals for visitors, content and advertisers.

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Mobile reading services . Our most prominent competitor in mobile reading services in China is Cloudary Corporation’s network of original literature websites. Our mobile reading services also compete with literary content providers. We compete with these companies for content, readers, authors, advertisers and distribution channels, and expect to continue such competition as we further expand.

Intellectual Property

We regard our patents, trademarks, domain names, copyrights, trade secrets, proprietary technologies and similar intellectual property as critical to our success. We seek to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret protection laws in the United States, the PRC and other jurisdictions, as well as through confidentiality agreements and procedures with our employees, business partners and others. The intellectual property rights we own as of March 31, 2015 include: (1) 16 patents relating to our proprietary technology; (2) 12 registered domain names that are material to our business, including 3G.net.cn, 3G.cn and jiubang.com; (3) copyrights to 81 software programs relating to various aspects of our operations; and (4) 61 trademarks and service marks registered in China, eight, four and eight trademarks in South Korea, Japan and the United States, respectively, for our brands and logos, including logos for GO Launcher EX and GO series products. In addition, we have filed 160 patent applications in China covering certain of our proprietary technologies and 89 trademark applications in China and 16 trademark applications in South Korea, Japan and the U.S. as of March 31, 2015.

Legal Proceedings

We are currently not a party to, and are not aware of any threat of, any legal, arbitration or administrative proceedings that, in the opinion of our management, are likely to have a material and adverse effect on our business, financial condition or results of operations. From time to time, we have become, and may in the future become, a party to various legal or administrative proceedings or claims arising in the ordinary course of our business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. Regardless of the outcome, legal or administrative proceedings or claims may have an adverse impact on us because of defense and settlement costs, diversion of management attention and other factors.

PRC REGULATION

Certain areas related to the internet, such as telecommunications, internet information services, connections to the international information networks, internet information security and censorship and online games (including online mobile games) operations, are covered extensively by a number of existing laws and regulations issued by various PRC governmental authorities, including:

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the Ministry of Industry and Information Technology, or the MIIT (formerly the Ministry of Information Industry);

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the Ministry of Culture, or the MOC;

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the General Administration of Press and Publication, Radio, Film and Television, or the GAPPRFT, established as a result of institutional reform integrating the General Administration of Press and Publication, and the State Administration for Radio, Film and Television;

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the National Copyright Administration, or the NCA;

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the State Administration for Industry and Commerce, or the SAIC;

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the State Council Information Office, or the SCIO;

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the Ministry of Commerce, or the MOFCOM;

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the Bureau of Protection of State Secrets;

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the Ministry of Public Security; and

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the State Administration of Foreign Exchange, or the SAFE.

As the online social platform and online games (including online mobile games) industries are still at an early stage of development in China, new laws and regulations may be adopted from time to time to require new licenses and permits in addition to those we currently have. There are substantial uncertainties on the interpretation and implementation of any current and future Chinese laws and regulations, including those applicable to the online social platform and online games (including online mobile games) industries. See “Item 3—Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.” And this section sets forth the most important laws and regulations that govern our current business activities in China and that affect the dividends payment to our shareholders.

Regulation on Telecommunications Services and Foreign Ownership Restrictions

The Telecommunications Regulations, which became effective on September 25, 2000, are the core regulations on telecommunications services in China. The Telecommunications Regulations set out basic guidelines on different types of telecommunications business activities, including the distinction between “basic telecommunications services” and “value-added telecommunications services.” According to the Catalog of Telecommunications Business (2003 Amendment), implemented on April 1, 2003 and attached to the Telecommunications Regulations, internet information services are deemed a type of value-added telecommunications services. The Telecommunications Regulations require the operators of value-added telecommunications services to obtain value-added telecommunications business operation licenses from MIIT or its provincial delegates prior to the commencement of such services. Under these regulations, if the value-added telecommunications services offered include mobile network information services, the operation license for value-added telecommunications business must include the provision of such services in its covered scope.

The Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which took effect on January 1, 2002 and were amended on September 10, 2008, are the key regulations that regulate foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that the foreign investor of a telecommunications enterprise is prohibited from holding more than 50% of the equity interest in a foreign-invested enterprise that provides value-added telecommunications services, including the provision of internet content. Moreover, such foreign investor shall demonstrate a good track record and experience in operating value-added telecommunications services when applying for the value-added telecommunications business operation license from the MIIT.

On July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Services, or the MILT Circular 2006, which requires that (a) foreign investors can only operate a telecommunications business in China through establishing a telecommunications enterprise with a valid telecommunications business operation license; (b) domestic license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, or providing any resource, sites or facilities to foreign investors to facilitate the unlicensed operation of telecommunications business in China; (c) value-added telecommunications service providers or their shareholders must directly own the domain names and registered trademarks they use in their daily operations; (d) each value-added telecommunications service provider must have the necessary facilities for its approved business operations and maintain such facilities in the geographic regions covered by its license; and (e) all value-added telecommunications service providers should improve network and information security, enact relevant information safety administration regulations and set up emergency plans to ensure network and information safety. The provincial communications administration bureaus, as local authorities in charge of regulating telecommunications services, (a) are required to ensure that existing qualified value-added telecommunications service providers will conduct a self-assessment of their compliance with the MILT Circular 2006 and submit status reports to the MET before November 1, 2006; and (b) may revoke the value-added telecommunications business operation licenses of those that fail to comply with the above requirements or fail to rectify such non-compliance within specified time limits. Due to the lack of any additional interpretation from the regulatory authorities, it remains unclear what impact MILT Circular 2006 will have on us or the other PRC internet companies with similar corporate and contractual structures.

To comply with such foreign ownership restrictions, we operate our businesses in China through Jiubang Digital, Sanju Advertising, Zhiteng Computer and Hengye Software, all of which are owned by PRC citizens or entities. Jiubang Computer was established by Sungy Data Ltd. (now renamed as Sungy Mobile Limited). Jiubang Digital, Sanju Advertising, Zhiteng Computer, and Hengye Software are all controlled by Jiubang Computer through a series of contractual arrangements. See “Item 4. Information on the Company — C. Organizational Structure.” Moreover, Jiubang Digital owns a majority of the domain names, registered trademarks and facilities necessary for daily operations in compliance with the MILT Circular 2006. Based on the understanding of the current PRC laws, rules and regulations of our PRC legal counsel, Fangda Partners, our corporate structure complies with all applicable PRC laws, and does not violate, breach, contravene or circumvent or otherwise conflict with any applicable PRC laws. However, we were further advised by our PRC legal counsel that there are substantial uncertainties with respect to the interpretation and application of existing or future PRC laws and regulations and thus there is no assurance that Chinese governmental authorities would take a view consistent with the opinions of our PRC legal counsel.

Internet Information Services

The Administrative Measures on Internet Information Services, or the ICP Measures, issued by the State Council on September 25, 2000 and amended on January 8, 2011, regulate the provision of internet information services. According to the ICP Measures, “internet information services” refer to services that provide internet information to online users, and are categorized as either commercial services or non-commercial services. Pursuant to the ICP Measures, internet information commercial service providers shall obtain an ICP license, a sub-category of the value-added telecommunications business operation license, from the relevant local authorities before engaging in the provision of any commercial internet information services in China. In addition, if the internet information services involve provision of news, publication, education, medicine, health, pharmaceuticals, medical equipment and other services that statutorily require approvals from other additional governmental authorities, such approvals must be obtained before applying for the ICP license.

We currently, through Jiubang Digital, Zhiteng Computer and Hengye Software, our PRC variable interest entities, hold ICP licenses, covering the provision of internet and mobile network information services, issued by the Guangdong branch of the MILT on August 15, 2013, December 13, 2011 and April 8, 2013, respectively. Besides, the ICP Measures and other relevant measures also ban the internet activities that constitute publication of any content that propagates obscenity, pornography, gambling and violence, incite the commission of crimes or infringe upon the lawful rights and interests of third parties, among others. If an internet information service provider detects information transmitted on their system that falls within the specifically prohibited scope, such provider must terminate such transmission, delete such information immediately, keep records and report to the governmental authorities in charge. Any provider’s violation of these prescriptions will lead to the revocation of its ICP license and, in serious cases, the shutting down of its internet systems.

Internet Publication and Cultural Activities

The Tentative Measures for Internet Publication Administration, or Internet Publication Measures, were jointly promulgated by the GAPPRFT and the MILT on June 27, 2002 and became effective on August 1, 2002. The Internet Publication Measures imposed a license requirement for any company that engages in internet publishing, which means any act by an internet information service provider to select, edit and process content or programs and to make such content or programs publicly available on the internet. The Internet Publication Measures also require the professional editorial personnel of an Internet publishing entity to examine the published content to ensure that it complies with applicable laws. Failure to do so may subject us to fines and other penalties, the compliance of which, if fails, may subject us to fines and other penalties. The provision of online games is deemed an internet publication activity; therefore, an online game operator must (i) obtain an Internet Publishing License so that it can directly offer its online games to the public in the PRC, or (ii) publish its online games through a qualified press entity by entering into an entrustment agreement.

The Rules for the Administration of Electronic Publication, or the Electronic Publication Rules, was issued by the GAPPRFT on February 21, 2008 and became effective on April 15, 2008. Under the Electronic Publication Rules and other regulations issued by the GAPPRFT, online games are classified as a kind of electronic publication, and publishing of online games is required to be conducted by licensed electronic publishing entities that have been issued standard publication codes. Pursuant to the Electronic Publication Rules, if a PRC company is contractually authorized to publish foreign electronic publications, it must obtain the approval of, and register the copyright license contract with, the GAPPRFT.

We, through Jiubang Digital, obtained an Internet Publishing License for the mobile internet dissemination of the content of publications in the literature category that have been published in China and the publication of mobile games on February 5, 2013. We are also in the process of applying to expand the permitted activities under the Internet Publishing License of Jiubang Digital to cover the publication of online literature and mobile literature. For more information on the pre-approval by the GAPPRFT, see “Regulation on Online Games and Foreign Ownership Restrictions.”

On May 10, 2003, the MOC promulgated the Tentative Measures for the Administration of Online Culture, or the Online Cultural Measures, which became effective on July 1, 2003 and subsequently amended on July 1, 2004 and on April 1, 2011 respectively. According to the Online Cultural Measures, internet information services providers engaging in online cultural activities shall obtain a license from the provincial branches of the MOC. Online cultural activities, as defined in the Online Cultural Measures, include dissemination of online cultural products, such as audiovisual products and gaming products, and importing, publishing and broadcasting of internet cultural products among other things. Specifically, entities are required to obtain online cultural operating licenses from the provincial branches of the MOC if they intend to commercially engage in any of the following activities:

(a) production, duplication, import, publishing or broadcasting of online cultural products; (b) publishing of online cultural products on the internet or transmission thereof via the internet or mobile telecommunication networks to computers, fixed-line or mobile phones, television sets, gaming consoles or Internet café for the purpose of browsing, reviewing, using or downloading such products by online users; or (c) exhibitions or contents related to online cultural products. If internet information services providers engage in online cultural activities but fail to obtain online cultural operating licenses, they may be ordered to shut down their websites and subject to fines and penalties of confiscating illegal gain.

We, through Jiubang Digital and Zhiteng Computer, have obtained the Internet Culture Operation Licenses from the Guangdong branch of the MOC, respectively, which collectively cover the business scope of the provision of music, entertainment, comic and animation and gaming products through internet.

Regulation on Online Games and Foreign Ownership Restrictions

On June 3, 2010, the MOC promulgated the Provisional Administration Measures of Online Games, or the Online Game Measures, which came into effect on August 1, 2010. The Online Game Measures governs the research, development and operation of online games. It specifies that the MOC is responsible for the censorship of imported online games and the filing of records of domestic online games. The procedures for the filing of records of domestic online games must be conducted with the MOC within 30 days after the commencement date of the online operation of such online games or the occurrence date of any material alteration of such online games.

All operators of online games, or Online Game Business Operators, are required to obtain Internet Culture Operation Licenses. An Internet Culture Operation License is valid for three years and in case of renewal, the renewal application should be submitted 30 days prior to the expiry date of such license. An Online Game Business Operator should request the valid identity certificate of game users for registration, and notify the public 60 days ahead of the termination of any online game operations or the transfer of online game operational rights Online Game Business Operators are also prohibited from (a) setting compulsory matters in the online games without game users’ consent; (b) advertising or promoting the online games that contain prohibited content, such as anything that compromise state security or divulges state secrets; and (c) inducing game users to input legal currencies or virtual currencies to gain online game products or services, by way of random draw or other incidental means. It also states that the state cultural administration authorities will formulate the compulsory clauses of a standard online game service agreement, which have been promulgated on July 29, 2010 and are required to be incorporated into the service agreement entered into between the Online Game Business Operators, with no conflicts with the rest of clauses in such service agreements. Jiubang Digital holds a valid Internet Culture Operation License issued on May 29, 2013 that authorizes Jiubang Digital to engage in the provision of music, entertainment and gaming products through internet.

On July 11, 2008, the General Office of the State Council promulgated the Regulation on Main Functions, Internal Organization and Staffing of the GAPPRFT, or the Regulation on Three Provisions. On September 7, 2009, the Central Organization Establishment Commission issued the corresponding interpretations, or the Interpretations on Three Provisions. The Regulation on Three Provisions stipulates that the MOC is authorized to regulate the online game industry, while the GAPPRFT is authorized to approve the publication of online games before their launch on the internet. The Interpretation on Three Provisions further provides that once an online game is launched on the internet, it will be completely under the regulation of the MOC, and that if an online game is launched on the internet without obtaining prior approval from the GAPPRFT, the MOC, instead of the GAPPRFT, is directly responsible for investigating the game. On July 11, 2013, the General Office of the State Council promulgated the Provisions on the Main Responsibilities, Internal Institutions and Staffing of GAPPRFT, or the Three-Decision Provisions, which reiterates the restrictions stipulated in the Regulation on Three Provisions.

On September 28, 2009, the GAPPRFT, the NCA and the National Working Group to Eliminate Pornography and Illegal Publications jointly issued the Circular on Consistent Implementation of the Stipulation on the Three Determinations of the State Council and the Relevant Interpretations of the State Commission for Public Sector Reform and the Further Strengthening of the Pre-approval of Online Games and the Approval and Examination of Imported Online Games, or Circular 13. Circular 13 explicitly prohibits foreign investors from directly or indirectly engaging in online gaming business in China, including through variable interest entity structures, or VIE Structures. Foreign investors are not allowed to indirectly control or participate in PRC operating companies’ online games (including online mobile games) operations, whether (a) by establishing other joint ventures, entering into contractual arrangements or providing technical support for such operating companies; or (b) in a disguised form such as by incorporating or directing user registration, user account management or game card consumption into online gaming platforms that are ultimately controlled or owned by foreign companies. Circular 13 reiterates that the GAPPRFT is responsible for the examination and approval of the import and publication of online games and states that downloading from the internet is considered a publication activity, which is subject to approval from the GAPPRFT. Violations of Circular 13 will result in severe penalties. For detailed analysis, see “Item 3. Key Information —D. Risk Factors—Risks Relating to Our Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet and mobile internet businesses and companies.”

Anti-fatigue Compliance System and Real-name Registration System

On April 15, 2007, in order to curb addictive online game-playing by minors, eight PRC government authorities, including the GAPPRFT, the Ministry of Education, the Ministry of Public Security and the MIIT, jointly issued a circular requiring the implementation of an anti-fatigue compliance system and a real-name registration system by all PRC online games (including online mobile games) operators. Under the anti-fatigue compliance system, three hours or less of continuous playing by minors, defined as game players under 18 years of age, is considered to be “healthy”, three to five hours is deemed “fatiguing”, and five hours or more is deemed “unhealthy.” Game operators are required to reduce the value of in-game benefits to a game player by half if it discovers that the amount of a time a game player spends online has reached the “fatiguing” level, and to zero in the case of the “unhealthy” level.

To identify whether a game player is a minor and thus subject to the anti-fatigue compliance system, a real-name registration system should be adopted to require online games (including online mobile games) players to register their real identity information before playing online games. Pursuant to a notice issued by the relevant eight government authorities on July 1, 2011, online games (including online mobile games) operators must submit the identity information of game players to the National Citizen Identity Information Center, a subordinate public institution of the Ministry of Public Security, for verification as of October 1, 2011.

We are currently not required by PRC law to ask users for their real name and personal information when they register for a user account. We cannot assure you that PRC regulators would not require us to implement compulsory real-name registration in the future. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet businesses and companies.” In addition, we require our mobile game developer to comply with the requirements under the PRC law, but we cannot assure you that such commercial partners will effectively implement the anti-fatigue rules, and any noncompliance on the part of such commercial partners may cause potential liabilities to us and in turn disrupt our operations. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—Non-compliance on the part of third parties with which we conduct business could disrupt our business and adversely affect results of our operation”.

Online Music

On November 20, 2006, the MOC issued Several Suggestions of the MOC on the Development and Administration of Internet Music, or the Suggestions, which became effective on the same date. The Suggestions, among other things, reiterate the requirement for an internet service provider to obtain an Internet Culture Operation License to carry out any business relating to internet music products. In addition, foreign investors are prohibited from operating internet culture businesses. However, the laws and regulations on internet music products are still evolving, and there have not been any provisions clarifying whether music products will be regulated by the Suggestions or how such regulation would be carried out.

On August 18, 2009, the MOC promulgated the Notice on Strengthening and Improving the Content Review of Online Music, or the Online Music Notice. According to the Online Music Notice, only “internet culture operating entities” approved by the MOC may engage in the production, release, dissemination (including providing direct links to music products) and importation of online music products. The content of online music shall be reviewed by or filed with the MOC. Internet culture operating entities should establish a strict self-monitoring system of online music content and set up a special department in charge of such monitoring.

Jiubang Digital holds a valid Internet Culture Operation License covering our provision of online music. If any music provided through our platform is found to lack necessary filings and/or approvals, we could be requested to cease providing such music or be subject to claims from third parties or penalties from the MOC or its local branches. Moreover, the unauthorized posting of online music on our platform by third parties may expose us to the risk of administrative penalties and intellectual property infringement lawsuits. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Our Industry—Non-compliance on the part of third parties with which we conduct business could disrupt our business and adversely affect results of our operation.”

In 2011, the MOC greatly intensified its regulation of the provision of online music products. According to the series of Notices on Clearing Online Music Products that are in Violation of Relevant Regulations promulgated by the MOC since January 7, 2011, entities that provide any the following will be subject to relevant penalties or sanctions imposed by the MOC: (a) online music products or relevant services without obtaining corresponding qualifications, (b) imported online music products that have not passed the content review of the MOC or (c) domestically developed online music products that have not been filed with the MOC. Thus far, we believe that we have eliminated from our platform any online music products that may fall into the scope of those prohibited online music products thereunder.

Online Internet News Dissemination

Pursuant to the Provisional Regulations for the Administration of Internet Websites Engaging in News Publication Services and the Provisions for the Administration of Internet News Information Services, each promulgated by the SCIO and the MIIT, which became effective as of November 7, 2000 and September 25, 2005, respectively, websites established by non-news organizations may publish news released by certain official news agencies but may not publish news generated by themselves or news sourced elsewhere. In order to disseminate news, such websites must satisfy the relevant requirements set forth in the applicable regulations and have acquired approval from the SCIO after securing permission from the news office of the provincial-level government. In addition, websites intending to publish news released by the aforementioned news agencies must enter into agreements with the respective organizations, and file copies of such agreements with the news office of the provincial-level government.

In order to comply with these laws and regulations, we have applied for the approval from the SCIO to publish news on 3G.cn or disseminate news through the mobile internet. We cannot assure you that we may be able to obtain one. If we cannot secure the approval from the SCIO, our operations on 3G.cn may be adversely affected. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment for internet-based and mobile-based businesses in China, our business, financial condition and results of operations may be materially and adversely affected.”

Online Transmission of Audio-Visual Programs

The Measures for the Administration of Publication of Audio-Visual Programs through Internet or Other Information Network, or the Audio-Visual Measures, promulgated by the GAPPRFT on July 6, 2004 and put into effect on October 11, 2004, apply to the activities relating to the opening, broadcasting, integration, transmission or download of audio-visual programs using internet or other information network. Under the Audio-Visual Measures, to engage in the business of transmitting audio-visual programs, a license issued by GAPPRFT is required. Foreign invested enterprises are not allowed to carry out such business.

On April 13, 2005, the State Council promulgated the Certain Decisions on the Entry of the Non- state-owned Capital into the Cultural Industry. On July 6, 2005, five PRC governmental authorities, including the MOC, the GAPPRFT, the CSRC and the MOFCOM, jointly adopted the Several Opinions on Canvassing Foreign Investment into the Cultural Sector. According to these regulations, non-state-owned capital and foreign investors are not allowed to engage in the business of transmitting audio-visual programs through information networks.

To further regulate the provision of audio-visual program services to the public via the internet, including through mobile networks, within the territory of the PRC, the GAPPRFT and the MEET jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Service, or the Audio-Visual Program Provisions, on December 20, 2007, which came into effect on January 31, 2008. Providers of internet audio-visual program services are required to obtain a License for Online Transmission of Audio-Visual Programs issued by the GAPPRFT, or complete certain registration procedures with the GAPPRFT. In general, providers of internet audio-visual program services must be either state-owned or state-controlled entities, and the business to be carried out by such providers must satisfy the overall planning and guidance catalog for internet audio-visual program service determined by the GAPPRFT. In a press conference jointly held by the GAPPRFT and the MIIT to answer questions relating to the Audio-Visual Program Provisions in February 2008, the GAPPRFT and the MIIT clarified that providers of internet audio-visual program services who engaged in such services prior to the promulgation of the Audio-Visual Program Provisions are eligible to register their business and continue their operation of internet audio-visual program services so long as those providers did not violate the relevant laws and regulations in the past. On May 21, 2008, GAPPRFT issued a Notice on Relevant Issues Concerning Application and Approval of License for the Online Transmission of Audio-Visual Programs, which further sets out detailed provisions concerning the application and approval process regarding the License for Online Transmission of Audio-Visual Programs. The notice also states that providers of internet audio-visual program services that engaged in such services prior to the promulgation of the Audio-Visual Program Provisions are eligible to apply for the license so long as their violation of the laws and regulations is minor in scope and can be rectified in a timely manner and they have no records of violation during the last three months prior to the promulgation of the Audio-Visual Program Provisions. Further, on March 31, 2009, GAPPRFT promulgated the Notice on Strengthening the Administration of the Content of Internet Audio-Visual Programs, which reiterates the pre-approval requirements for the audio-visual programs transmitted via the internet, including through mobile networks, where applicable, and prohibits certain types of internet audio-visual programs containing violence, pornography, gambling, terrorism, superstition or other similarly prohibited elements. On March 17, 2010, the GAPPRFT issued the Internet Audio-Visual Program Services Categories (Provisional), or the Provisional Categories, which classified internet audio-visual program services into four categories.

Jiubang Digital holds a valid License for Online Transmission of Audio-Visual Programs, under which we can broadcast films, teleplays and cartoons.

Regulation of Short Message Services and Telecommunications Networks Code Number Resources

Under current PRC laws and regulations, a commercial operator of short message services, which are parts of the information services of the second category of value-added telecommunications services, must obtain a value-added telecommunications business operating license for short message services from the appropriate telecommunications authorities in order to carry on any commercial short message services operations in China through mobile network.

On April 15, 2004, the MIIT issued the Notice on Certain Issues Regarding Standardizing Short Message Services, specifying that only those information services providers which hold relevant licenses can provide short message services in the PRC. The Notice requires information services providers to examine the contents of short messages and record and keep for five months the time of sending and receiving the short messages, the mobile numbers or codes of the sending and receiving terminals of the short messages.

On January 29, 2003, the MIIT issued the Administrative Measures on Telecommunications Networks Code Number Resources, or the Code Number Measures to regulate code numbers, including those of mobile communications networks. The Code Number Measures require entities which provide short message services in multiple provinces to apply to the MIIT for inter-regional code number, and the other entities which provide short message services in one province to apply to the MIIT’s provincial branch for local code number. The Code Number Measures also set forth qualification, materials, and procedures for obtaining such code numbers.

In June 2006, the MIIT issued the Administrative Measures on Application, Distribution, Usage and Withdrawal of SMS Services Access Codes. This Administrative Measures require that the administration and usage of services in connection with SMS short codes to comply with the Code Number Measures and those SMS services providers to file with either the MIIT or its provincial branches according to the coverage of such business of those services providers.

We currently, through Jiubang Digital, Hengye Software and Zhiteng Computer, have obtained licenses for provision of information services via mobile networks. Further, Jiubang Digital, Hengye Software and Zhiteng Computer have all obtained code numbers for use in Guangdong province.

Regulation on Advertising Business and Conditions on Foreign Investment

The SAIC is the primary governmental authority regulating advertising activities in China. Regulations that apply to advertising business primarily include:

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Advertisement Law of the People’s Republic of China, promulgated by the Standing Committee of the National People’s Congress on October 27, 1994 and effective since February 1, 1995;

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Administrative Regulations for Advertising, promulgated by the State Council on October 26, 1987 and effective since December 1, 1987; and

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Implementation Rules for the Administrative Regulations for Advertising, promulgated by the State Council on January 9, 1988 and amended on December 3, 1998, December 1, 2000 and November 30, 2004, respectively.

According to the above regulations, companies that engage in advertising activities must each obtain, from the SAIC or its local branches, a business license which specifically includes operating an advertising business in its business scope. An enterprise engaging in advertising business within the specifications in its business scope does not need to apply for an advertising operation license, provided that such enterprise is not a radio station, television station, newspaper or magazine publisher or any other entity otherwise specified in the relevant laws or administrative regulations. Enterprises conducting advertising activities without such a license may be subject to penalties, including fines, confiscation of advertising income and orders to cease advertising operations. The business license of an advertising company is valid for the duration of its existence, unless the license is suspended or revoked due to a violation of any relevant laws or regulations.

PRC advertising laws and regulations set certain content requirements for advertisements in China, including, among other things, prohibitions on false or misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. Advertisers, advertising agencies, and advertising distributors are required to ensure that the content of the advertisements they prepare or distribute is true and in complete compliance with applicable laws. In providing advertising services, advertising operators and advertising distributors must review the supporting documents provided by advertisers for advertisements and verify that the content of the advertisements complies with applicable PRC laws and regulations. Prior to distributing advertisements that are subject to government censorship and approval, advertising distributors are obligated to verify that such censorship has been performed and approval has been obtained. Violation of these regulations may result in penalties, including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. Where serious violations occur, the SAIC or its local branches may revoke such offenders’ licenses or permits for their advertising business operations.

Under the Administrative Regulations on Foreign-Invested Advertising Enterprises, promulgated in 2008, there is no longer any maximum foreign shareholding percentage restriction applicable to foreign-invested advertising enterprises. However, foreign investors are required to have at least three years prior experience of operating an advertising business outside of China as their main business before receiving approval to directly own a 100% interest in an advertising company in China. Foreign investors with at least two years prior experience of operating an advertising business outside China as their main business are allowed to establish a joint venture with domestic advertising enterprises to operate an advertising business in China.

Intellectual Property Rights Software Registration

Software Registration

The State Council and the NCA have promulgated various rules and regulations and rules relating to protection of software in China. According to these rules and regulations, software owners, licensees and transferees may register their rights in software with the SCB or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are encouraged to go through the registration process and registered software rights may be entitled to better protections. As of March 31, 2015, we had registered copyrights to 81 software programs in China.

Patents

The National People’s Congress adopted the Patent Law of the People’s Republic of China in 1984 and amended it in 1992, 2000 and 2008, respectively. A patentable invention, utility model or design must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation. The Patent Office under the State Intellectual Property Office is responsible for receiving, examining and approving patent applications. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application date. Except under certain specific circumstances provided by law, any third-party user must obtain consent or a proper license from the patent owner to use the patent, or else the use will constitute an infringement of the rights of the patent holder.

As of March 31, 2015, we had obtained 16 patents granted from, and 160 patent applications are under review by, the State Intellectual Property Office.

Copyright Law

The Copyright Law of the People’s Republic of China, promulgated in 1990 and amended in 2001 and 2010, or the Copyright Law, and its related implementing regulations, promulgated in 1991 and amended in 2013 are the principal laws and regulations governing the copyright related matters. The amended Copyright Law covers internet activities, products disseminated over the internet and software products, among the subjects entitled to copyright protections. Registration of copyright is voluntary, and is administrated by the China Copyright Protection Center.

To further clarify some key internet copyright issues, on November 27, 2012, the PRC Supreme People’s Court promulgated the Regulation on Several Issues Concerning Applicable Laws on Trial of Civil Disputes over the Infringement of Information Network Transmission Right, or the 2013 Regulation. The 2013 Regulation took effect on January 1, 2013, and replaced the Interpretations on Some Issues Concerning Applicable Laws for Trial of Disputes over Internet Copyright that was initially adopted in 2000 and subsequently amended in 2004 and 2006. Under the 2013 Regulation, where an internet information service provider work in cooperation with others to jointly provide works, performances, audio and video products of which the right holders have information network transmission right, such behavior will constitute joint infringement of third parties’ information network transmission right, and the PRC court shall order such internet information service provider to assume join liability for such infringement. If an internet information service provider can prove that it has only provided network services through automatic access, automatic transmission, data storage space, search functions, links, document sharing technology, etc., and thereby argues that it has not been involved in any alleged joint infringement, the PRC court shall find in favor of such internet information service provider. If an internet information service provider fails to delete, block, disconnect or take other necessary measures, or if it provides technological support or other aid when it knows or should have known of the network user’s infringement on the information network transmission right, the PRC court shall find that such aid constitutes contributory infringement. The PRC court shall determine whether an internet information service provider is liable for abetting or contributory infringement according to its findings on the degree of fault of the internet information service provider. The fault of the internet information service provider is determined according to various criteria, including situations where such provider knew or should have known of the network user’s infringement against third party’s information network transmission right. If an internet information service provider can prove it has adopted fairly reasonable and effective technological measures, and yet still finds it difficult to discover infringement against information network transmission conducted by the network user, the PRC court shall find such provider to be not at fault. Where an internet information service provider promotes popular video and films through setting up a list, directory, index, descriptive paragraph, briefing or other means of recommendation, and the public can download, browse or acquire them through other methods directly from the internet information service provider’s webpage, the PRC court may find that such provider knew of the network user’s infringement on the information network transmission right of others.

Under the Copyright Law and its implementation rules, anyone infringing upon the copyrights of others is subject to various civil liabilities, which include stopping the infringement, eliminating the damages, apologizing to the copyright owners and compensating the copyright owners for such owners’ actual and other losses resulting from such infringement. If the actual loss of the copyright owner is difficult to calculate, the income received by the offender as a result of the copyright infringement shall be deemed to be the actual loss; or if such income is in itself difficult to calculate, the relevant PRC court may decide the amount of the actual loss up to RMB500,000 for each infringement.

To address the problem of copyright infringement related to content posted or transmitted on the internet, the PRC National Copyright Administration and the MIIT jointly promulgated the Measures for Administrative Protection of Copyright Related to Internet on April 29, 2005. These measures, which became effective on May 30, 2005, apply to acts of automatically providing services such as uploading, storing, linking or searching works, audio or video products, or other contents through the internet based on the instructions of internet users who publish contents on the internet, or the Internet Content Providers, without editing, amending or selecting any stored or transmitted content. When imposing administrative penalties upon the act which infringes upon any users’ right of communication through information networks, the Measures for Imposing Copyright Administrative Penalties, promulgated in 2009, shall be applied.

Where a copyright holder finds that certain internet content infringes upon its copyright and sends a notice to the relevant internet information service operator, the relevant internet information service operator is required to (i) immediately take measures to remove the relevant contents, and (ii) retain all infringement notices for six months and to record the content, display time and IP addresses or the domain names related to the infringement for 60 days. After any content is removed by an internet information service operator according to the notice of a copyright holder, the content provider may deliver a counter-notice to both the internet information service operator and the copyright holder, stating that the removed content does not infringe upon the copyright of other parties. After the delivery of such counter-notice, the internet information service operator may immediately reinstate the removed contents and shall not bear administrative legal liability for such reinstatement.

An internet information service operator may be subject to cease-and-desist orders and other administrative penalties such as confiscation of illegal income and fines, if it is clearly aware of a copyright infringement through the internet or, although not aware of such infringement, it fails to take measures to remove relevant content upon receipt of the copyright owner’s notice of infringement and, as a result, damages public interests. Where there is no evidence to indicate that an internet information service operator is clearly aware of the existence of copyright infringement, or the internet information service operator 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 administrative legal liabilities.

On May 18, 2006, the State Council issued the Regulations on Protection of the Right of Communication through Information Network, which took effect on July 1, 2006 and was amended on January 30, 2013. Under this regulation, an internet information service provider may be exempt from indemnification liabilities under the following circumstances:

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any internet information service provider that provides automatic internet access service upon instructions from its users or provides automatic transmission service for works, performances and audio-visual products provided by its users are not required to assume indemnification liabilities if (a) it has not chosen or altered the transmitted works, performance and audio-visual products and (b) it provides such works, performances and audio-visual products to the designated users and prevents any person other than such designated users from obtaining access.

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any internet information service provider that, for the sake of improving network transmission efficiency, automatically stores and provides to its own users the relevant works, performances and audio-visual products obtained from any other internet information service providers, are not required to assume the indemnification liabilities if (a) it has not altered any of the works, performance or audio-visual products that are automatically stored; (b) it has not affected such original internet information service provider in holding the information about where the users obtain the relevant works, performance and audio-visual products; and (c) when the original internet information service provider revises, deletes or shields the works, performances and audio-visual products, it will automatically revise, delete or shield the same.

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any internet information service provider that provides its users with information memory space for such users to provide the works, performances and audio-visual products to the general public via an informational network are not required to assume the indemnification liabilities if (a) it clearly indicates that the information memory space is provided to the users and publicizes its own name, contact person and web address; (b) it has not altered the works, performance and audio-visual products that are provided by the users; (c) it is not aware of or has no reason to know that the works, performances and audio-visual products provided by the users infringe upon the copyrights of others; (d) it has not directly derived any economic benefit from the providing of the works, performances and audio-visual products by its users; and (e) after receiving a notice from the copyright holder, it promptly deletes the allegedly infringing works, performances and audio-visual products pursuant to the relevant regulation.

Since 2005, the NCA, together with certain other PRC governmental authorities, have jointly launched annual campaigns specifically aimed to crack down on internet copyright infringement and piracy in China; these campaigns normally last for three to four months every year. According to the Notice of 2010 Campaign to Crack Down on Internet Infringement and Piracy promulgated by the NCA, the Ministry of Public Security and the MIIT on July 19, 2010, the 2010 campaign mainly targeted internet audio and video programs, literature websites, online games, animation, software and art works related to Shanghai World Expo and Guangzhou Asian Games. During the 2010 campaign, starting from late July to the end of October 2010, the local branches of NCA focused on popular movies and TV series, newly published books, online games and animation, music and software and various illegal activities, including, for example, illegal uploading or transmission of a thirty party’s works without proper license or permission, sales of pirated audio-video and software through e-commerce platforms, providing search links, information storage, web hosting or internet access services for third parties engaging in copyright infringement or piracy of copyrighted works and the infringement by use of mobile media. In serious cases, the operating permits of the websites engaging illegal activities were revoked, and such websites were ordered to shut down.

We have adopted measures to mitigate copyright infringement risks, including, for instance, establishing a routine reporting and registration system updated on a monthly basis.

Domain Name

In September 2002, the CNNIC issued the Implementing Rules for Domain Name Registration setting forth detailed rules for registration of domain names, which were amended on May 29, 2012. On November 5, 2004, the MIIT promulgated the Measures for Administration of Domain Names for the Chinese Internet, or the Domain Name Measures. The Domain Name Measures regulate the registration of domain names, such as the first tier domain name “.cn.” On May 28, 2012, the CNNIC issued the Measures on Domain Name Dispute Resolution and relevant implementing rules, pursuant to which the CNNIC can authorize a domain name dispute resolution institution to decide disputes. As of March 31, 2015, we had registered 12 domain names that are material to our business, including “www.3g.cn”, “www.3G.net.cn” and “www.jiubang.com”.

Trademark

The PRC Trademark Law, adopted in 1982 and amended in 1993, 2001 and 2013 with its implementation rules adopted in 2014, protects registered trademarks. The Trademark Office of the SAIC handles trademark registrations and grants a protection term of ten years to registered trademarks. Trademark license agreements must be filed with the Trademark Office for record. As of March 31, 2015, we had registered 61 trademarks and service marks and had filed 89 trademark applications in China.

Internet Infringement

On December 26, 2009, the Standing Committee of National People’s Congress promulgated the Tort Law of the People’s Republic of China, or the Tort Law, which became effective on July 1, 2010. Under the Tort Law, an internet user or an internet service provider that infringes upon the civil rights or interests of others through using the internet assumes tort liability. If an internet user infringes upon the civil rights or interests of another through using the internet, the person being infringed upon has the right to notify and request the internet service provider whose internet services are facilitating the infringement to take necessary measures including the deletion, blocking or disconnection of an internet link. If, after being notified, the internet service provider fails to take necessary measures in a timely manner to end the infringement, it will be jointly and severally liable for any additional harm caused by its failure to act. According to the Tort Law, civil rights and interests include the personal rights and rights of property, such as the right to life, right to health, right to name, right to reputation, right to honor, right of portraiture, right of privacy, right of marital autonomy, right of guardianship, right to ownership, right to usufruct, right to security interests, copyright, patent right, exclusive right to use trademarks, right to discovery, right to equity interests and right of heritage, among others.

Regulation of Internet Content

The PRC government has promulgated measures relating to internet content through a number of governmental agencies, including the MIIT, the MOC and the GAPPRFT. These measures specifically prohibit internet activities, such as the operation of online games, that result in the publication of any content which is found to contain, among others, propagate obscenity, gambling or violence, instigate crimes, undermine public morality or the cultural traditions of the PRC, or compromise state security or secrets. If an ICP license holder violates these measures, its ICP license may be revoked and its websites may be shut down by the relevant government agencies.

Information Security and Censorship

Internet content in China is regulated and restricted from a state security standpoint. Internet companies in China are required to complete security filing procedures and regularly update information security and censorship systems for their websites with local public security bureau. The PRC Law on Preservation of State Secrets, which became effective on October 1, 2010 requires an internet information services providers to discontinue disseminating any information that may be deemed to be leaked state secrets and to report such incidents in a timely manner to the state security and public security authorities. Failure to do so in a timely and adequate manner may subject the internet information services providers to liability and certain penalties given by the Ministry of State Security, the Ministry of Public Security and/or the MIIT or their respective local branches.

On December 13, 2005, the Ministry of Public Security promulgated Provisions on Technological Measures for Internet Security Protection, or the Internet Protection Measures, which took effect on March 1, 2006. The Internet Protection Measures require all internet information services operators to take proper measures including anti-virus, data back-up and other related measures, and keep records of certain information about their users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days and submit the above information as required by laws and regulations.

The National People’s Congress, China’s national legislative body, enacted the Decisions on the Maintenance of Internet Security on December 28, 2000, that may subject persons to criminal liabilities in China for any attempt to: (a) gain improper entry to a computer or system of strategic importance; (b) disseminate politically disruptive information; (c) leak state secrets; (d) spread false commercial information or (e) infringe upon intellectual property rights.

In 1997, the Ministry of Public Security issued the Administration Measures on the Security Protection of Computer Information Network with Internationally Connections, which prohibit using the internet in ways which, among others, result in a leakage of state secrets or a spread of socially destabilizing content. The Ministry of Public Security has supervision and inspection powers in this regard, and relevant local security bureaus may also have jurisdiction. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites.

On December 28, 2012, the Standing Committee of the National People’s Congress reiterated relevant rules on the protection of internet information by issuing the Decision on Strengthening the Protection of Network Information, or the 2012 Decision. The 2012 Decision distinctly clarified certain relevant obligations of the internet information service provider. For example, the 2012 Decision specifies that the internet information service provider should take relevant technical measures and other necessary actions to prevent the leakage, damage or loss of each user’s personal information collected in the internet information service provider’s operation activities, and shall take remedial measures when the leakage, damage or loss of the citizen’s personal information occurs or may possibly occur. Once it discovers any transmission or disclosure of information prohibited by the relevant laws and regulations, the internet information service provider shall stop transmission of such information, take measures such as elimination, keeping relevant record, and reporting to relevant authorities.

To comply with the above laws and regulations, we have established an internet information security department to implement measures on information filtering. For example, we have adopted monitor system, and installed on our platform various alerts on sensitive words or abnormal activities of users. We also have a dedicated team that maintains constant surveillance on the information posted on our platform, with different categories for monitoring purposes, according to subject and content. We have also established and follow a strict review process and storage system of relevant records which, in combination with various information security measures, have effectively prevented the public dissemination of statutory prohibited information through our websites in the past. We intend to continue to further update our measurements and system and work closely with relevant authorities to avoid any violation of relevant laws and regulations in the future.

Privacy Protection

PRC laws and regulations do not prohibit internet content providers from collecting and analyzing their users’ personal information if appropriate authorizations are obtained and if in a way that is legal, reasonable and necessary. We require our users to accept a user agreement whereby they agree to provide certain personal information to us. PRC laws and regulations prohibit internet content providers from disclosing any information transmitted by users through their networks to any third parties without their authorization unless otherwise permitted by law. If an internet content provider violates these regulations, the MIIT or its local bureaus may impose penalties and the internet content provider may be liable for damages caused to its users.

Regulation of Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange. The core regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, as amended in August 2008, or the FEA Regulations. Under the FEA Regulations, the Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade- and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made.

On August 29, 2008, SAFE promulgated Circular 142 to regulate the conversion of foreign currency into Renminbi by a foreign-invested enterprise by restricting the ways in which the converted Renminbi may be used. Circular 142 stipulates that the registered capital of a foreign-invested enterprise that has been settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and cannot be used for equity investments within the PRC. Meanwhile, the SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested enterprise settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed without the SAFE’ s approval, and may not in any case be repayment of Renminbi loans if the proceeds of such loans have not been used. Violations of Circular 142 may lead to severe penalties including heavy fines. As a result, Circular 142 may significantly limit our ability to transfer the net proceeds from our initial public offering to our other PRC subsidiaries through Jiubang Computer and Beijing XMedia Science and Technology Co., Ltd., or Beijing XMedia, our wholly owned subsidiaries in China, and thus may adversely affect our business expansion in China. We may not be able to convert the net proceeds into Renminbi to invest in or acquire any other PRC companies, or establish other VIEs in the PRC.

Dividend Distribution . The Foreign Investment Enterprise Law, promulgated in 1986 and amended in 2000, and the Administrative Rules under the Foreign Investment Enterprise Law, promulgated in 2001, are the key regulations governing distribution of dividends of foreign-invested enterprises.

Under these regulations, a wholly foreign-invested enterprise in China, or a WFOE, may pay dividends only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a WFOE is required to allocate at least 10% of its accumulated profits each year, if any, to statutory reserve funds unless its reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash dividends. The proportional ratio for withdrawal of rewards and welfare funds for employees shall be determined at the discretion of the WFOE. Profits of a WFOE shall not be distributed before the losses thereof before the previous accounting years have been made up. Any undistributed profit for the previous accounting years may be distributed together with the distributable profit for the current accounting year.

Circular 37. Pursuant to SAFE’s Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, issued and effective on July 4, 2014, and its appendixes, PRC residents, including PRC institutions and individuals, must register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interest in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event.

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making distributions of profit to the offshore parent and from carrying out subsequent cross-border foreign exchange activities and the special purpose vehicle may be restricted in their ability to contribute additional capital into its PRC subsidiary. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion. These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions and share transfer that we make in the future if our shares are issued to PRC residents. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.”

Stock Option Rules. The Administration Measures on Individual Foreign Exchange Control were promulgated by the PBOC on December 25, 2006, and their Implementation Rules, issued by the SAFE on January 5, 2007, became effective on February 1, 2007. Under these regulations, all foreign exchange matters involved in employee stock ownership plans and stock option plans participated in by onshore individuals, among others, require approval from the SAFE or its authorized branch. Furthermore, the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, were promulgated by SAFE on February 15, 2012, that replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued by SAFE on March 28, 2007. Pursuant to the Stock Option Rules, PRC residents who are granted shares or stock options by companies listed on overseas stock exchanges based on the stock incentive plans are required to register with SAFE or its local branches, and PRC residents participating in the stock incentive plans of overseas listed companies shall retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plans on behalf of these participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, purchase and sale of corresponding stocks or interests, and fund transfer. In addition, the PRC agents are required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agents or the overseas entrusted institution or other material changes. The PRC agents shall, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents. In addition, the PRC agents shall file each quarter the form for record-filing of information of the Domestic Individuals Participating in the Stock Incentive Plans of Overseas Listed Companies with SAFE or its local branches.

We and our PRC citizen employees who have been granted share options, or PRC optionees, are subject to the Stock Option Rules. If we or our PRC optionees fail to comply with the Individual Foreign Exchange Rule and the Stock Option Rules, we and/or our PRC optionees may be subject to fines and other legal sanctions. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.”

In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in the PRC who exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or if we fail to withhold their income taxes as required by relevant laws and regulations, we may face sanctions imposed by the PRC tax authorities or other PRC government authorities.

Regulation on Tax

PRC Enterprise Income Tax

The PRC enterprise income tax is calculated based on the taxable income determined under the applicable EIT Law including its implementation rules. On March 16, 2007, the National People’s Congress of China enacted the EIT Law, which became effective on January 1, 2008. On December 6, 2007, the State Council promulgated the implementation rules to the EIT Law, which also became effective on January 1, 2008. The EIT Law imposes a uniform enterprise income tax rate of 25% on all resident enterprises in China, including foreign-invested enterprises and domestic enterprises, unless they qualify for certain exceptions, and terminates most of the tax exemptions, reductions and preferential treatment available under the previous tax laws and regulations. According to the EIT Law and relevant regulations, subject to the approval of competent tax authorities, the income tax of an enterprise that has been determined to be a high and new technology enterprise shall be reduced to a preferential rate of 15%.

Moreover, under the EIT Law, enterprises organized under the laws of jurisdictions outside China with their “de facto management bodies” located within China may be considered PRC resident enterprises and are therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Though the implementation rules of the EIT Law define “de facto management bodies” as “establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise,” the only detailed guidance currently available for the definition of “de facto management body” as well as the determination of offshore incorporated PRC tax resident status and its administration are set forth in the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies (“Circular 82”), and the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial) (“SAT Bulletin No. 45”), both issued by the SAT, which provide guidance on the administration as well as determination of the tax residency status of a Chinese-controlled offshore-incorporated enterprise, defined as an enterprise that is incorporated under the law of a foreign country or territory and that has a PRC company or PRC corporate group as its primary controlling shareholder.

According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions set forth in Circular 82 are met:

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the primary location of the day-to-day operational management is in the PRC;

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decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC;

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the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and

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50% or more of voting board members or senior executives habitually reside in the PRC.

In addition, Bulletin No. 45 provides clarification on the resident status determination, post-determination administration, and competent tax authorities. It also specifies that when provided with a copy of PRC resident determination certificate from a resident Chinese-controlled offshore-incorporated enterprise, the payer should not withhold 10% income tax when paying certain PRC-sourced income such as dividends, interest and royalties to the Chinese-controlled offshore-incorporated enterprise.

Although we do not believe that our company should be treated as a PRC resident enterprise for PRC tax purposes, substantial uncertainty exists as to whether we will be deemed to be such by the relevant authorities. In the event that we are considered a PRC resident enterprise, we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income.

In addition, although the EIT Law provides that dividend income between “qualified resident enterprises” is exempted income, and the implementation rules refer to “qualified resident enterprises” as enterprises with “direct equity interest”, it is unclear whether dividends we receive from our PRC subsidiaries are eligible for exemption, if our Cayman Islands holding company is treated as PRC tax resident.

According to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises issued by the PRC State Administration of Taxation on December 10, 2009, with retroactive effect beginning January 1, 2008, or SAT Circular 698, and the Notice on Several Issues Concerning Enterprise Income Tax for Indirect Share Transfer by Non-PRC Resident Enterprises, issued by the PRC State Administration of Taxation on February 3, 2015, or SAT Circular 7, an “indirect transfer” of assets of a PRC resident enterprise, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable properties, if such transaction arrangement lacks of reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and tax filing or withholding obligations may be triggered, depending on the nature of the PRC taxable properties being transferred. According to SAT Circular 7, “PRC taxable properties” include assets of a PRC establishment or place of business, real properties in the PRC, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining if there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable properties; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable properties have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the offshore enterprise shareholder; the business model and organizational structure; the offshore tax treatment on the indirect transfer of PRC taxable properties; the replicability of the transaction by direct transfer of PRC taxable properties; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business of a foreign enterprise, the resulting gain is to be included with the annual enterprise filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to PRC real properties or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the competent tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Currently, neither SAT Circular 698 nor SAT Circular 7 applies to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.

PRC Business Tax

Pursuant to applicable PRC tax regulations, any entity or individual conducting business in the service industry is generally required to pay a business tax at the rate of 5% on the revenues generated from providing such services. However, if the services provided are related to technology development and transfer, such business tax may be exempted subject to the approval of relevant tax authorities. In addition, certain businesses, such as mobile game and online reading, are subject to 3% business tax and surcharges pursuant to applicable PRC tax regulations.

Value Added Tax

On January 1, 2012, the Chinese State Council officially launched a pilot value-added tax (“VAT”) reform program (“Pilot Program”), applicable to businesses in selected industries. Businesses in the Pilot Program would pay VAT instead of business tax. The Pilot Program initially applied only to transportation industry and “modern service industries” (“Pilot Industries”) in Shanghai and would be expanded to eight trial regions (including Beijing and Guangdong province) and nationwide if conditions permit. The Pilot Industries in Shanghai included industries involving the leasing of tangible movable property, transportation services, research and development and technical services, information technology services, cultural and creative services, logistics and ancillary services, certification and consulting services. Revenues generated by advertising services, a type of “cultural and creative services”, are subject to the VAT tax rate of 6%. According to official announcements made by competent authorities in Beijing and Guangdong province, Beijing launched the same Pilot Program on September 1, 2012, and Guangdong province launched it on November 1, 2012. In Beijing and Guangdong province, we will pay the pilot VAT instead of business taxes for our advertising activities, and for any other parts of our business that are deemed by the local tax authorities to belong to Pilot Industries.

On May 24, 2013, the Ministry of Finance and the State Administration of Taxation issued the Circular on Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries, or the Pilot Collection Circular. The scope of certain modern services industries under the Pilot Collection Circular extends to the inclusion of radio and television services. In addition, according to the Notice on Including the Telecommunications Industry in the Pilot Program of Levying Value-added Tax in Lieu of Business Tax, which became effective on June 1, 2014, the scope of certain modern services industries under the Pilot Collection Circular further extends to the telecommunications industry.

Cultural Development Fee

According to applicable PRC tax regulations or rules, advertising service providers are generally required to pay a cultural development fee at the rate of 3% on the revenues (a) which are generated from providing advertising services and (b) which are also subject to the value-added tax.

Dividends Withholding Tax

Under the old EIT Law that was effective prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises, such as dividends paid to us by Jiubang Computer or Beijing XMedia, our PRC subsidiaries, were exempt from PRC withholding tax. We are a Cayman Islands holding company and substantially all of our income may come from dividends we receive from our subsidiaries located in the PRC. Pursuant to the EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to us by our PRC subsidiaries are subject to withholding tax at a rate of 10%.

As uncertainties remain regarding the interpretation and implementation of the EIT Law and its implementation rules, we cannot assure you that, if we are deemed a PRC resident enterprise, any dividends to be distributed by us to our non-PRC shareholders and ADS holders would not be subject to any PRC withholding tax. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.”

Labor Laws and Social Insurance

The principle laws that govern employment include:

•

Labor Law of the People’s Republic of China, promulgated by the Standing Committee of the National People’s Congress on July 5, 1994, effective since January 1, 1995 and amended on August 27, 2009; and

•

Labor Contract Law of the People’s Republic of China, promulgated by the Standing Committee of the National People’s Congress on June 29, 2007 and effective since January 1, 2008 and amended on December 28, 2012.

According to the Labor Law and Labor Contract Law, employers must execute written labor contracts with full-time employees. All employers must compensate their employees with wages equal to at least the local minimum wage standards. All employers are required to establish a system for labor safety and sanitation, strictly comply with state rules and standards and provide employees with workplace safety training. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative penalties. For serious violations, criminal liability may arise.

In addition, employers in China are required to provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance and housing funds.

We have caused all of our full-time employees to enter into written labor contracts with us and have provided and currently provide our employees with the proper welfare and employment benefits.

New M&A Regulations and Overseas Listings

On August 8, 2006, six PRC governmental agencies jointly promulgated the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rules, which became effective on September 8, 2006 and amended on June 22, 2009. The New M&A Rules require offshore special purpose vehicles formed to pursue overseas listing of equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on any stock exchange overseas.

The application of the M&A Rules remains unclear. Based on the understanding on the current PRC laws, rules and regulations and the M&A Rules of our PRC Legal Counsel, Fangda Partners, prior approval from the CSRC is not required under the M&A Rules for the listing and trading of our ADSs on NASDAQ because the company does not constitute a special purpose vehicle as defined by the M&A Rules which is required to obtain approval from the CSRC for overseas listings. However, as there has been no official interpretation or clarification of the M&A Rules, we are also advised by our PRC legal counsel that there is uncertainty as to how this regulation will be interpreted or implemented.

Considering the uncertainties that exist with respect to the issuance of new laws, regulations or interpretation and implementing rules, the opinion of our PRC legal counsel, summarized above, is subject to change. If the CSRC or another PRC regulatory agency subsequently determines that prior CSRC approval was required, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies.

C. Organizational Structure

The following diagram illustrates our corporate structure and significant subsidiaries and variable interest entities as of the date of this annual report:

LOGO

(1)	Jiubang Digital is one of our variable interest entities. Mr. Yuqiang Deng, Mr. Xiangdong Zhang, and Sanju Advertising, one of our variable interest entities, each owns 16%, 4% and 80% of Jiubang Digital’s equity interests, respectively.

(2)	Sanju Advertising is one of our variable interest entities. Mr. Yuqiang Deng, Mr. Xiangdong Zhang and Mr. Yingming Chang each owns 70%, 20% and 10% of Sanju Advertising’s equity interests, respectively.

(3)	Zhiteng Computer is one of variable interest entities. Mr. Yuqiang Deng and Mr. Xiangdong Zhang each owns 80% and 20% of Zhiteng Computer’s equity interests, respectively.

(4)	Hengye Software is one of our variable interest entities. Mr. Yuqiang Deng, Mr. Xiangdong Zhang and Mr. Yingming Chang each owns 70%, 10% and 20% of Hengye Software’s equity interests, respectively.

D. Property, Plants and Equipment

Our principal executive offices are located on leased premises comprising approximately 6,200 square meters in Guangzhou, China. This facility currently accommodates our management headquarters, principal development, engineering, editorial departments, finance, human resources and administrative activities. The leases for this Guangzhou facility expire in 2017. We also have a branch office in San Francisco, focusing on handling advertising and sales for the overseas market, a branch office in Beijing, focusing on selling and marketing. We lease these premises in Beijing under lease agreements from independent third parties, and we plan to renew these leases from time to time as needed.

Our servers are hosted in leased internet data centers in different geographic regions in China. These data centers are owned and maintained by domestic internet data center providers. We typically enter into leasing and hosting service agreements with these internet data center providers that are renewed periodically. We believe that our existing facilities are sufficient for our current needs and we will obtain additional facilities, principally through leasing, to accommodate our future expansion plans.

ITEM 4A

UNRESOLVED STAFF COMMENTS

None.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

Overview

We generate our revenues through paid apps and premium themes, in-app purchase for advanced functionalities, advertising in various forms as well as users’ purchases of literary content. Our total revenues increased from RMB185.2 million in 2012 to RMB328.8 million in 2013, and further increased to RMB369.2 million (US$59.5 million) in 2014. We generated net income of RMB15.2 million and RMB91.8 million in 2012 and 2013, respectively, and incurred net loss of RMB47.7 million (US$7.7 million) in 2014.

Discussion of Selected Statements of Operations Items

Revenues

In the years ended December 31, 2012, 2013 and 2014, we derived our revenues from mobile application products and services, mobile reading services, mobile portal marketing services, and certain other services. The following table sets forth the principal components of our total revenues by amount and as a percentage of our total revenues for the periods presented.


	For the Year Ended December 31
	2012				2013				2014
	RMB		% of total revenues		RMB		% of total revenues		RMB		US$		% of total revenues
Total revenues:
Mobile application products and services		34,056,890		18.4		153,363,875		46.6		186,879,488		30,119,506		50.6
Mobile reading services		72,766,802		39.3		99,791,329		30.3		85,007,148		13,700,665		23.0
Mobile portal marketing services		57,506,160		31.0		52,211,716		15.9		55,423,444		8,932,638		15.0
Other revenues		20,888,829		11.3		23,476,398		7.2		41,909,903		6,754,650		11.4
Total		185,218,681		100.0		328,843,318		100.0		369,219,983		59,507,459		100.0

Our revenues from mobile application products and services increased from RMB34.1 million in 2012 to RMB153.4 million in 2013, and further increased to RMB186.9 million (US$30.1 million) in 2014. Revenues from our mobile reading services increased from RMB72.8 million in 2012 to RMB99.8 million in 2013, and decreased to RMB85.0 million (US$13.7 million) in 2014. Revenues from our mobile portal marketing services decreased from RMB57.5 million in 2012 to RMB52.2 million in 2013, and increased to RMB55.4 million (US$8.9 million) in 2014. However, we cannot guarantee we will maintain the growth of our revenue in future. See “Item 3. Key Information - D. Risk Factors - Risks Related to Our Business - There are significant uncertainties in the revenue potential of our GO series products and GO platform.”

Our revenues in mobile application products and services began to increase in 2012 after we rolled out most of our GO series products in 2012 and such products continued to gain global popularity throughout the year. On the other hand, our mobile reading services and mobile portal marketing services continue to contribute a significant portion of our revenues.

Mobile application products and services

Revenues from our mobile application products and services accounted for 18.4%, 46.6% and 50.6% of our total revenues in 2012, 2013 and 2014, respectively. Mobile application products and services revenues mainly include revenues generated from (i) users’ purchase of premium themes and advanced functionalities for our free GO series products and Next Launcher, our paid product, and (ii) advertisements displayed on our GO series products. We provide advertising services both directly to advertisers and through third-party advertising networks. We sell mobile application products through application stores such as Google Play.

We believe that the most significant factors affecting revenues from mobile application products and services include:

•

Mobile internet penetration rate . The fast growth of the mobile internet industry is a very recent phenomenon. The success of our mobile application products and services rely upon the popularity and penetration rate of mobile internet in different parts of the world.

•

Popularity of the Android system . We currently sell our mobile application products and services around the Android operating system. We may be affected by any significant downturn in the overall demand for or use of Android smartphones or any decline in the popularity of Android as an operating system, to the extent that our mobile application products and services continue to be operated on Android smartphones.

•

Number of free and paid downloads . A larger number of paid downloads are associated with more downloads of premium themes and advanced functionalities for our free GO series products and Next Launcher, our paid product. A larger number of free downloads may generate more paid downloads for premium themes and advanced functionalities for our free GO series products. It also attracts more monthly active users, which may in turn drive marketing revenues from advertisements displayed on our GO series products. In addition, we may from time to time shift our business focus from monetization to marketing and product development, and such strategic realignment may affect our revenue.

•

Mobile internet marketing revenues . Mobile internet marketing is a relatively new advertising model. The effectiveness of mobile internet as a marketing tool, measured in various ways such as click-through rates, may heavily influence advertisers’ attitude toward marketing on our GO platform. We generate revenues for advertisements displayed on our GO series products with advertising networks. We are also in the process of developing our own mobile internet marketing network and, after its completion, we may be able to retain a larger portion of these revenues and may be able to generate additional revenue streams by delivering advertisements to third-party mobile applications on behalf of our own advertising clients.

•

New products and revenue model . Our business and revenue model relating to GO series products and GO platform is still new and evolving. We have been experimenting with various revenue models with varying degrees of success. We intend to develop additional new products and services and experiment with new revenue models to fully explore our business potential.

We started to offer direct advertising services, i.e., helping advertisers sourced directly by us distribute and promote their products on our GO platform, in the first quarter of 2012. Marketing revenues from direct advertising services have increased because the number of user actions that generate revenues for us, such as clicks, downloads, installations or activations, and are attributable to the advertisements published on our GO series products continued to increase due to (i) increases in number of our direct advertisers and advertising space offered to direct advertisers in our GO series products, (ii) improvement in our ability to more effectively distribute relevant advertisements to our users and (iii) increases in our monthly active users. Certain of our GO series products available for paid downloads are free of advertisements, and thus do not contribute to advertising sales.

We also offer advertising services on our GO platform through advertising networks or third party advertising agencies. Starting in the second quarter of 2012, users can download our premium themes and advanced functionalities for GO series products using their Go Gold, previously named as GetJar Gold, a virtual currency of GetJar, an advertising network which we acquired in February 2014. Prior to the acquisition, we received fees from GetJar, which generates advertising revenues from its advertising customers. In addition, we have established business relationship with Google AdMob previously. We entered into broader advertising arrangements with Google AdMob in 2013 and allowed advertisements from Google to be delivered to and displayed on our GO series products automatically. We generate revenues based on the number of clicks or actions attributable to these advertisements. Marketing revenues from the advertising networks have increased because the number of user actions that generate revenues for us and are attributable to the advertisements published on our GO series products continued to increase primarily due to (i) increase in advertising space offered to third-party advertising networks in our GO series products and (ii) increases in our monthly active users.

Revenues from paid downloads were mainly from downloads of premium themes or advanced functionalities for our GO series products and, to a lesser extent, from downloads of our paid product, Next Launcher. Premium themes downloaded include those developed by ourselves and by third parties using our publicly available development kit. A small portion of the third-party premium theme developers have arrangements with us under which we sell their themes under our name through Google Play. We receive payments from Google Play and these third party developers receive a fixed percentage of the sales prices from us. Other third-party premium theme developers market and sell their themes by themselves under their own names and we receive no payment from these sales. However, these premium themes considerably contribute to the popularity of our GO series products. Our revenues from paid downloads were affected by changes in our product mix and were also significantly correlated to the number of paid downloads, which in turn were mainly driven by the number of our offerings of paid products, premium themes and advanced functionalities and our success in promoting these offerings.

Mobile reading services

Revenues from our mobile reading services accounted for 39.3%, 30.3% and 23.0% of our total revenues in 2012, 2013 and 2014, respectively. We derive revenues by providing content to third parties, such as uploading our literary content to third-party operated mobile reading platforms that charge their users for access to our content. Under revenue-sharing arrangements with such third parties, we receive an agreed percentage of the fees generated by the content we provide. Our mobile reading services revenues also include revenues generated from readers’ purchases of online literary content from our own reading channel on 3G.cn and GGBook. Such content can be subscribed for by chapter, by book or by month—providing access to a certain number of literary works for a month for a set fee.

We believe that the most significant factors affecting revenues from our mobile reading services include:

•

Distribution channels and revenue-sharing. A majority of our revenues from our mobile reading services are derived from reading platforms operated by third parties. We have entered into revenue-sharing arrangements with major mobile network carriers in China that run their own mobile reading databases, as well as with other mobile reading services providers such as major internet search companies and portals. Pursuant to these arrangements, we provide our original content to other mobile reading services providers in exchange for a portion of the reader fees they charge for our literary content. Our ability to distribute our literary content through more third-party mobile reading services providers, the growth in the number of paying users on these third-party service providers’ mobile reading platforms and our ability to negotiate more favorable revenue-sharing arrangements can significantly affect revenues from our mobile reading services.

•

Service mix and pricing. Users pay for our contents, by month, by book or by chapter, depending on what choices of subscription packages are available to them. Each of the mobile network carriers, third-party mobile reading services providers and ourselves offers multiple subscriptions packages with different levels of subscription fees for different amount of literary content. The mix of the subscription service package offerings—the number, type and price of our literary works that are included in a subscription package can vary greatly—and their acceptance by users can affect our revenues. We have no control over the subscription service packages offered by mobile network carriers and other third parties.

Mobile portal marketing services

Revenues from our mobile portal marketing services accounted for 31.0%, 15.9% and 15.0% of our total revenues in 2012, 2013 and 2014, respectively. Our mobile portal marketing services revenues primarily consist of advertising on 3G.cn in different formats and over different periods of time. We either charge advertisers a fixed fee for advertisements of certain sizes and formats in fixed locations over a period of time, or charge advertisers per action, such as when each time a user clicks on an advertisement, downloads, installs or activates an item being advertised.

We believe that the most significant factors affecting revenues from mobile portal marketing services include:

•

Number of advertisers. We attract advertisers by offering innovative mobile internet advertising solutions to fit the different needs of our advertisers. In addition, we have continually worked to enrich the content offerings on 3G.cn in order to increase its popularity, making it increasingly more attractive to advertisers.

•

Average revenue per advertiser . Average revenue per advertiser is primarily affected by market acceptance of mobile internet advertising and the allocation of advertising budgets by our advertisers to 3G.cn. As the mobile internet industry is relatively new, the effectiveness of mobile advertising is less proven than the results for other forms of more traditional advertising. Our average revenue per advertiser may increase as advertisers allocate more advertising budgets to us.

Other revenues

Other revenues are primarily derived from the fees received from third parties for the sale of digital products and services, either provided by third parties or developed by ourselves, such as paid content, picture download, and access to game or music files. The other revenues are recognized when the products are delivered or the services are rendered.

Cost of Revenues

Cost of revenues consists primarily of (i) content acquisition cost; (ii) distribution fees; (iii) personnel costs; (iv) processing fees paid to mobile application stores; (v) custody and bandwidth costs and (vi) depreciation and amortization. We expect that our cost of revenues will increase in absolute amount as we further grow our user base and expand our products and services.

Content acquisition cost . Content acquisition cost mainly includes copyright fees paid to authors and publishers for the right to publish literary products on our mobile reading base, distribution fees related to our mobile reading business and acquisition cost for content displayed in our websites and certain themes developed by third parties for our GO launcher products. The copyright fees are initially recorded as intangible assets and amortized, on a straight-line basis, over the estimated useful life of the applicable literary products. Our content acquisition cost increased from 2012 to 2013 and 2014.

Distribution fees . Distribution fees mainly include the amount paid to third parties that direct users to access our products or services, which may fluctuate from period to period.

Personnel costs . Personnel costs include salaries, other forms of compensation, including share-based compensation, and insurance for our employees of those departments directly involved in providing our services and the sale of mobile application products and related services. Our personnel costs increased from 2012 to 2013, primarily because the expansion in our business required the hiring of additional personnel to run our daily operations and additional compensation to incentivize existing employees, and remained stable in 2014. We expect personnel costs to remain stable in 2015.

Processing fees paid to mobile application stores . Processing fees paid to mobile application stores include fees paid to stores such as Google Play, through which we sell our GO series products. Our processing fees paid to mobile application stores increased from 2012 to 2013 because of the growth in revenue from GO series products, but decreased in 2014, primarily due to the decrease in revenues from users’ purchase of our paid products.

Custody and bandwidth fees . Custody and bandwidth fees are paid to third parties for the hosting and maintenance of our servers and the purchase of bandwidth. Our custody and bandwidth fees were relatively stable between 2012 and 2013, and increased from 2013 to 2014.

Depreciation and amortization . Depreciation and amortization mainly include depreciation of property and equipment, and amortization of intangible assets other than those recorded in the content acquisition cost. Our depreciation and amortization decreased from 2012 to 2013, but increased significantly in 2014, primarily due to the amortization of intangible assets acquired associated with the acquisition of GetJar. We expect the depreciation and amortization to remain stable in 2015.

Operating Expenses

Our operating expenses consist of (i) research and development expenses, (ii) selling and marketing expenses and (iii) general and administrative expenses. The following table sets forth the components of our operating expenses for the periods indicated, both in absolute amounts and as percentages of our total revenues.


	For the Year Ended December 31
	2012				2013				2014
	RMB		% of total revenues		RMB		% of total revenues		RMB		US$		% of total revenues
	(in thousands, except for percentage)
Operating expenses:
Research and development expenses		34,041		18.4		46,641		14.2		89,679		14,454		24.3
Selling and marking expenses		45,914		24.8		47,294		14.4		104,197		16,793		28.2
General and administrative expenses		25,615		13.8		51,246		15.6		119,855		19,317		32.5

Total operating expenses		105,570		57.0		145,181		44.2		313,731		50,564		85.0

Research and development expenses

Research and development expenses consist primarily of salaries and benefits, including share-based compensation, for research and development personnel, custody and bandwidth costs, rental costs and depreciation of office premise and servers utilized by the research and development personnel, as well as other expenses we have incurred in researching and developing our GO platform, GO series products, 3G.cn and mobile reading services. Research and development expenses increased from RMB34.0 million in 2012 to RMB46.6 million in 2013 and RMB89.7 million (US$14.5 million) in 2014, due to the need for higher levels of compensation for our research and development personnel. In addition, increased staff-related costs associated with the acquisition of GetJar also partially resulted in the increase of our research and development expenses in 2014. We expect our research and development expenses may increase as we expand our research and development team to develop new products and services for our GO platform, improve technology for data analysis to further enhance user experience and develop enhanced features for our existing products and services to attract more users.

Selling and marketing expenses

Selling and marketing expenses consist primarily of salaries and benefits, including share-based compensation, commissions for our selling and marketing personnel, and also advertising and promotion expenses. Our selling and marketing expenses increased from RMB45.9 million in 2012 to RMB47.3 million in 2013 and RMB104.2 million (US$16.8 million) in 2014, primarily reflecting increased expenses in the promotion and advertisement of our products worldwide, as well as increased commissions for our selling and marketing personnel. We expect that our selling and marketing expenses may increase as we will continue to focus on the marketing, commercialization and promotion of our new products.

General and administrative expenses

General and administrative expenses consist primarily of salaries and benefits, including share-based compensation, for our general and administrative personnel, professional service fees and other administrative expenses. Our general and administrative expenses increased from RMB25.6 million in 2012 to RMB51.2 million in 2013 and RMB119.9 million (US$19.3 million) in 2014, primarily due to the increased share-based compensation costs to the management and administrative staff. We expect our general and administrative expenses to remain stable in 2015.

Share-based compensation expenses

The amount of share-based compensation costs for the years ended December 31, 2012, 2013 and 2014 is allocated as follows:


	For the Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB		US$
Cost of revenues		76,111		639,246		2,633,316		424,413
Research and development expenses		164,374		1,944,824		5,410,007		871,935
Selling and marketing expenses		124,850		728,459		2,559,662		412,543
General and administrative expenses		60,748		14,510,015		54,368,924		8,762,680

Total		426,083		17,822,544		64,971,909		10,471,571

We grant stock-based award such as share options to eligible employees, officers and directors. For awards granted to employees, officers, and directors initially accounted for as equity-classified awards, they are measured at the grant date fair value of the awards and are recognized using the straight-line method, net of estimated forfeiture rates, over the requisite service period, which is generally the vesting period. For awards classified as liability-classified awards, they are measured at fair value at each reporting date. As of December 31, 2014, there are no outstanding liability-classified share-based awards. In the future, we expect our share-based compensation expenses to increase in the absolute amount as our business continues to expand and as we continue to recruit qualified personnel to enhance our compliance capability to meet our reporting obligations under the U.S. securities laws as a public company.

Taxation

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of, the Cayman Islands. There are no exchange control regulations or currency restrictions in the Cayman Islands.

British Virgin Islands

Sungy Mobile Limited, before completing its transfer by way of continuation to the Cayman Islands, was a BVI business company subject to the provisions of the BVI Business Companies Act, 2004. When Sungy Mobile Limited was a BVI business company, it was exempt from all provisions of the Income Tax Act of the BVI (including with respect to all dividends, interests, rents, royalties, compensation and other amounts payable by us to persons who are not persons resident in the BVI).

Capital gains realized with respect to any shares, debt obligations or other securities of a company by persons who are not persons resident in the BVI are also exempt from all provisions of the Income Tax Act of the BVI.

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not persons resident in the BVI with respect to any shares, debt obligations or any of our other types of securities, save for interest payable to or for the benefit of an individual resident in the European Union.

Hong Kong

No Hong Kong profits tax has been provided as we have no assessable profit arising in Hong Kong.

PRC

Current taxation primarily represented the provision for a state and local corporate income tax, or EIT, for subsidiaries and variable interest entities, or VIEs, operating in the PRC. Under the EIT Law, which became effective on January 1, 2008, all our PRC entities are subject to EIT at a rate of 25%, with the exception of any preferential treatments they may receive, such as the recognition that Jiubang Digital received as a “high and new technology enterprise”, which enabled it to enjoy a 15% preferential tax rate in place of the statutory 25% enterprise income tax until December 31, 2016.

According to a policy promulgated by the state tax bureau of the PRC and effective from 2008 onwards, enterprises engaged in research and development activities are entitled to claim 150% of the research and development expenses so incurred in a year as tax deductible expenses in determining its tax assessable profits for that year, or Super Deduction. Jiubang Digital has claimed such Super Deduction in ascertaining its tax assessable profits from 2009 to 2013.

In addition, according to the EIT Law and its implementation rules, foreign enterprises, which have no establishment or place in the PRC but derive dividends, interest, rents, royalties and other income (including capital gains) from sources in the PRC shall be subject to PRC withholding tax, or WHT, at 10% (a further reduced WHT rate may be available according to the applicable double tax treaty or arrangement). The 10% WHT is applicable to any dividends to be distributed from any of our subsidiaries to our company out of any profits such subsidiaries derived after January 1, 2008.

Our revenues from mobile reading services, mobile application products and services and other services are subject to business taxes at a rate of 3%-5% in the first half of 2014 and value added taxes at a rate of 3% or 6% in the second half of 2014, as well as related surcharges at a rate of 12% of business taxes and value added taxes in aggregate. Our revenues from mobile portal marketing service are subject to value added taxes at a rate of 6% and related surcharges at a rate of 12% of value added taxes in aggregate. In addition, certain mobile portal marketing revenues are subject to cultural development fees at a rate of 3%.

For more information on PRC tax regulations, see “Item 4. Information on the Company — B. Business Overview — PRC Regulation —Regulation on Tax.”

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities; (2) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (3) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future based on available information which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.

Consolidation

Foreign ownership of mobile internet related businesses is subject to significant restrictions under current PRC laws and regulations. Our PRC subsidiaries are foreign owned business entities under the PRC law and accordingly are prohibited from providing mobile internet related business in the PRC, including having ownership of entities engaged in providing such services.

We conduct majority of our business activities through the variable interest entities (“VIEs”). We have entered into a series of contractual arrangements with VIEs and their equity holders, including loan agreements, master exclusive service agreements, business cooperation agreements, exclusive call option agreements, proxy agreements and power of attorney, spousal consent letters and equity pledge agreements.

We have a controlling financial interest in the VIEs because we have (i) the power to direct activities of the VIEs that most significantly impact the economic performance of the VIEs; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIEs that could potentially be significant to the VIEs. Accordingly, the financial statements for the VIEs are consolidated in our consolidated financial statements. All of the equity (net assets) or deficits (net liabilities) and net income (loss) of the VIEs are attributed to us.

Under the terms of the VIE Agreements, we have (i) the right to receive economic benefits that could potentially be significant to the VIEs in the form of service fees under the master exclusive service agreements when such services are provided; (ii) the right to receive all dividends declared by the VIEs and the right to all undistributed earnings of the VIEs; (iii) the right to receive the residual benefits of the VIEs through its exclusive purchase option to acquire 100% of the equity interests in the VIEs, to the extent permitted under PRC law. Accordingly, the financial statements of the VIEs are consolidated in our consolidated financial statements.

We believe, based on the legal opinion of our PRC counsel, the contractual arrangements are legally binding and enforceable, and do not violate current PRC laws and regulations. However, because of the substantial uncertainties involved as advised by our PRC legal counsel, if such contracts are held to be unenforceable, or if there are changes in PRC laws and regulations that affect our ability to effectively control the VIEs, we may be precluded from consolidating these companies in the future.

Business combination

We account for business combinations using the purchase method of accounting in accordance with ASC topic 805 (“ASC 805”): Business Combinations. The purchase method of accounting requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities we acquired, based on their estimated fair values. The consideration transferred of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.

The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and noncontrolling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. We determine discount rates to be used based on the risk inherent in the acquiree’s business model and industry comparisons. Terminal values are based on the expected life of assets, forecasted life cycle and forecasted cash flows over that period.

Where the consideration in an acquisition includes contingent consideration the payment of which depends on the achievement of certain specified conditions post-acquisition, the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability it is subsequently carried at fair value with changes in fair value reflected in earnings.

Goodwill

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is reviewed for impairment at least annually. We perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that the fair value of a reporting is greater than its carrying amount, the two-step goodwill impairment test is not required.

If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to be performed.

We perform our annual impairment review of goodwill on December 31, and when a triggering event occurs between annual impairment tests. No impairment loss was recorded for any of the periods presented.

Equity method investments

We apply the equity method to account for an equity investment, in common stock or in-substance common stock, according to ASC 323 Investment — Equity Method and Joint Ventures, over which it has significant influence but does not own a majority equity interest or otherwise control.

An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity’s common stock. We consider subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity’s common stock.

Under the equity method of accounting, our share of the investee’s results of operations is reported as share of income (losses) of equity method investments in the consolidated statements of comprehensive income (loss).

We recognize an impairment loss when there is a decline in value below the carrying value of the equity method investment that is considered to be other-than-temporary. The process of assessing and determining whether impairment on an investment is other-than-temporary requires a significant amount of judgment. To determine whether an impairment is other-than-temporary, management considers whether it has the ability and intent to hold the investment until recovery and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the decline in value, any change in value subsequent to the period end, and forecasted performance of the investee.

Investment securities

Investment securities at December 31, 2014 consist of corporate convertible debt and equity securities. The classification of investment securities is based on our intent, which is re-evaluated at each balance sheet date, with respect to those securities. Investment securities other than trading securities and held-to-maturity securities are classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses, net of income tax as a separate component of accumulated other comprehensive income within the consolidated statements of changes in equity (deficit). A decline in the fair value of an available-for-sale that is deemed to be other-than-temporary results is an impairment to reduce the carrying amount to fair value. Realized gains and losses and impairment, which are judged to be other than temporary, if any, are recognized in the consolidated statements of comprehensive income (loss). In computing realized gains and losses on available-for-sale securities, we determine cost based on amounts paid, including direct costs to acquire the security.

As at December 31, 2014, all investment securities are classified as available-for-sale investments.

Revenue recognition

Mobile Application Products and Services Revenue

We develop and sell mobile application products, including Go Series applications and themes and widgets that can be used in the application through online application stores such as Google Play. Mobile phone users can access those stores and download the mobile application products by making payment through the payment agents authorized by the relative stores.

For the sale of mobile application products, when no free updates or other post contract customer support (“PCS”) are provided, revenues are recognized upon the delivery of the mobile application products and the other revenue recognition criteria are met at time of delivery.

We began to sell a mobile application product in December 2012 for which free upgrades were provided on a when-and-if-available basis for an unspecified period, which is considered PCS. Since we were not able to establish vendor-specific objective evidence (“VSOE”) of the fair value of the PCS, we recognized revenue from the sale of the mobile application ratably over the estimated life of the mobile application during the year ended December 31, 2012.

In June 2013, our management having the relevant authority established the selling price or VSOE of the PCS. The sales term of the mobile application product was modified by explicitly stating separate sales prices for the mobile application and the one-year free upgrades, as well as the annual renewal rate for upgrades after the one year period. We believe the annual renewal rate for the upgrades is substantive because the renewal rate is within our normal pricing practice and the expected life of mobile application product is more than two years.

The separate sales prices for the mobile application with the one-year free upgrades, and the annual renewal rate were introduced to the marketplace within 30 days after they were established by our management having the relevant authority and did not change from the prices established by management having the relevant authority.

Therefore, for the years ended December 31, 2013 and 2014, upon the sale of the mobile application, the consideration attributable to the fair value of the PCS is initially deferred and recognized as revenue on a straight-line basis over the one year service period with the remaining or residual consideration recognized as revenue. We do not sell the mobile application product without PCS.

We also offer advertising service on our mobile application products. Our revenue recognition policy for the provision of advertising services on our mobile application products is the same as the revenue recognition policy for the provision of advertising services on our portal website.

The majority of our revenues for mobile application products and services are derived from countries outside of China.

Mobile Reading Revenue

Service provided directly to users

We generate revenue from the sale of online premium literature contents to the users. The users purchase the content by chapter or by book and cannot cancel the purchase once made.

The content sold to users usually has no expiry period unless otherwise stated. The revenue from the sale of online content or other community tools (such as votes and gifts for an author) is recognized at the time of sale as we do not have any further obligation after providing the content to the user upon sale and all other criteria for revenue recognition are met.

Service provided to users through third parties

We also derive revenues by providing our literature contents to third parties, primarily mobile operators. We upload the literature content to wireless platforms of the mobile operators and the royalty right resides with us. The mobile operators charge a fee from its wireless users when they access our literature contents through the mobile operator’s wireless platform via their mobile devices (such as mobile handsets). Such fee is charged either on a monthly subscription basis under which users can access the variety of contents offered on the mobile operators’ platform or per usage basis based on the number of books or chapters of our literature content accessed by the users. We receive an agreed percentage of the fee from the mobile operators.

For the per usage basis arrangement, we have access to the information on the content accessed by the wireless users from a platform operated by the mobile operator on a monthly basis. With respect to the monthly subscription basis arrangement, we rely on the monthly billing statements generated by the mobile operator each month to determine its share of the fees. There is normally time lag of 3 to 4 months until we receive the billing statements from the mobile operator and we have no visibility into these revenues prior to receipts of the billing statements.

•

Under the per usage basis, since we have timely access to usage information, revenues are recognized in the period in which the content has been provided that no significant obligation remains, collection of the receivable is reasonably assured and the amounts can be reliably estimated. The revenue is measured based on our analysis of the usage information for the month provided by the mobile operators and the contractual rates with the mobile operators. Based on revenues amounts subsequently confirmed by the mobile operators, there were no significant adjustments between our analysis of the usage information and the mobile operators’ statements received.

•

Under the monthly subscription basis, since we do not have timely access to usage information, revenue is recognized in the period when the billing statements for the related service have been received. Before the billing statements are received, we cannot reliably determine the revenue earned for that period.

The revenues recognized under the arrangements with the mobile operators represent only our share of the revenues to be received from the operators since we are not the primary obligor in the arrangement.

Mobile Portal Marketing Revenue

We offer customers to advertise on our portal website in particular formats and over particular periods of time. The mobile portal advertising formats primarily include banners, links, logos, buttons, pop-up windows, jump-out boxes, floating signs, and rich media. Portal advertising agreements are entered into with various third-party advertising agencies representing their customers and with advertising customers directly. For certain advertising agreements, we are required to pay certain percentages of revenues to the advertising agencies as rebates. We have two pricing models offered to advertisers, consisting of a fixed price pricing model and a cost per action pricing model.

Under the fixed price pricing model, we charge advertisers a fixed fee to advertise over a period of time. Mobile portal marketing revenue, net of agency cash rebates, is recognized ratably over the period in which the advertisement is displayed and only if collection of the resulting receivable is reasonably assured.

Under the cost per action pricing model, the advertisers pay us only when a user clicks on or downloads one of their advertisements or installs or activates the products advertised. We recognize revenue on the fees charged to advertisers each time a user clicks on or downloads one of the advertisements or installs or activates the products advertised that appear on our portal website.

Other Revenues

Other revenues are primarily derived from the fees received from third parties for the sale of digital products and services, either provided by third parties or developed by ourselves, such as paid content, picture download, and access to game or music files. The other revenues are recognized once the products are delivered or the services are rendered.

We evaluate whether it is appropriate to record the gross amount of our revenues and related costs by considering a number of factors, including, among other things, whether we are the primary obligor under the arrangement, have inventory risk, and have latitude in establishing prices.

Share-based Compensation

We account for share-based compensation following the provisions of ASC Topic 718, Compensation—Stock Compensation, under which we measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize the cost over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. We have elected to recognize the compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. However, the cumulative amount of compensation cost recognized at any date equals at least the portion of the grant date fair value of such award that is vested at that date.

In June 2006, we adopted the 2006 Plan, which was amended and restated in October 2013. The 2006 Plan provides for the granting of stock options and other stock-based awards to our key employees, directors and consultants. Our board of directors authorized and reserved for the issuance of up to 5,224,126 ordinary shares under the 2006 Plan. Immediately prior to the completion of our initial public offering, the ordinary shares underlying the options granted under the 2006 Plan were re-designated as Class A ordinary shares.

In June 2010, we adopted the 2010 Plan, which was amended and restated in October 2013. The 2010 Plan provides for the granting of stock options and other stock-based awards to our key employees, directors and consultants. Our board of directors authorized and reserved for the issuance of up to 5,373,659 ordinary shares under the 2010 Plan. Immediately prior to the completion of our initial public offering, the ordinary shares underlying the options granted under the 2010 Plan were re-designated as Class A ordinary shares.

In October 2013, we adopted the 2013 Plan, which was amended and restated in July 2014. The 2013 Plan provides for the granting of stock options and other stock-based awards to our key employees, directors and consultants. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2013 Plan is 7,317,073, plus an automatic annual increase on January 1 of each year, beginning on January 1, 2015, by the number of shares representing 2% of the then total issued and outstanding share capital of our company as of December 31, of the preceding year, or such less number as the board shall determine.

From July 1, 2006 to December 31, 2014, our board of directors has granted the following options to our executive officers and employees:


Grant date	Number of options	Exercise price (US$)	Fair value of ordinary share (US$)
Prior to January 1, 2012	10,824,428	0.02 – 1.90	0.17 – 0.59
July 1, 2012	75,675	1.90	0.64
December 1, 2012	305,878	1.90	0.84
June 1, 2013	3,646,400	0.0001 – 0.8826	1.65
September 1, 2013	1,677,500	0.8826	1.70
November 21, 2013	35,000	1.87	1.87
March 18, 2014	63,931	1.30	4.78
March 18, 2014	100,000	1.90	4.78
May 12, 2014	30,000	2.29	2.66
July 17, 2014	20,000	1.86	1.75
July 30, 2014	25,684	1.87	1.86
October 08, 2014	2,794,716	1.14	1.21
October 13, 2014	600,000	1.30	1.23
October 20, 2014	15,000	1.29	1.25
October 23, 2014	5,394	0.87	1.38
October 23, 2014	90,029	1.30	1.38
October 23, 2014	37,500	0.8826	1.38
November 03, 2014	200,000	1.12	1.04
December 08, 2014	160,000	0.852	0.83

In determining the estimated fair value of stock options granted to executive officers and certain employees prior to our initial public offering in November 2013, we have considered the guidance prescribed by the AICPA Audit and Accounting Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid, which sets forth the preferred types of valuation that should be used. We have followed the “Level B” recommendation, and established the fair value of our ordinary shares at the dates of grant using a retrospective valuation with the assistance of American Appraisal China Ltd. We obtained a retrospective valuation instead of contemporaneous valuation because our financial and managerial resources were limited before 2013. We are ultimately responsible for all the fair value measurements in relation to the options and ordinary shares.

In determining the fair value of our ordinary shares for the purpose of determining the fair value of the stock options, we followed a two-step process. In the first step, the equity value of our company was determined by taking into consideration the income approach, or the discounted cash flow method. Due to lack of consistencies in the guideline companies’ valuation ratios, we did not apply any weight for the market approach to arrive at the equity value of our company. Instead, the market approach is only used to corroborate the valuation results based on the income approach.

In estimating the total equity value of our ordinary shares, we considered the discounted cash flow, or DCF, method, which incorporates the projected cash flow of our management’s best estimation as of each measurement date. The projected cash flow estimation includes, among others, analysis of projected revenue growth, gross margins and terminal value. The assumptions used in deriving the fair value of ordinary shares are consistent with our business plan.

The key assumptions used in developing the cash flow forecasts include: (i) five-year compounded annualized growth rates of revenue range from 33% to 134%; (ii) gross margin forecast to improve with increasing economies of scale; and (iii) a terminal growth rate after the projection period.

The DCF method of the income approach involves applying appropriate weighted average cost of capital, or WACC, to discount the future cash flows forecast to present value. WACC comprises a required rate of return on equity plus the current tax-effected rate of return on debt, weighted by the relative percentages of equity and debt in the capital structure of comparable public companies whose business operations are similar to that of ours. The required rates of return on equity were based on an estimation of the market required rate of return for investing in business similar to ours, which were derived by using the capital asset pricing model, or CAPM. Under CAPM, the discount rate was determined with consideration of the risk-free rate, industry-average correlated relative volatility coefficient beta, equity risk premium, size of our company, the scale of our business and our ability in achieving forecasted projections.

The risks associated with achieving the forecasts were assessed in selecting the appropriate WACC, which had been determined to range from 19% to 28%.

In estimating the fair value of our ordinary shares by the DCF method, our management does not think there would be disproportionate returns of cash flows to different shareholders. That is, we do not think the controlling shareholders would receive greater returns than the non-controlling shareholders through their control of business decisions or participation in the daily operations of the business. Therefore, neither control premium nor a lack of control discount was considered in our valuations.

We also applied a discount for lack of marketability, or DLOM, ranging from 40% to 10%, to reflect the fact that there is no ready market for shares in a closely-held company like us. When determining the DLOM, the Black-Scholes option pricing model was used. Under this option-pricing method, the cost of the put option, which can hedge the price change before the privately held shares can be sold, was considered as a basis to determine the discount for lack of marketability. This option pricing method was used because it takes into account certain company-specific factors, including the timing of the expected initial public offering and the volatility of the share price of the guideline companies engaged in the same industry.

The above assumptions used in determining the fair values were consistent with our business plan and major milestones we achieved. We also applied general assumptions, including the following:

•

there will be no major changes in the existing political, legal, fiscal and economic conditions in countries in which we will carry on our business;

•

there will be no major changes in the current taxation law in countries in which we operates, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;

•

exchange rates and interest rates will not differ materially from those presently prevailing;

•

the availability of financing will not be a constraint on the future growth of our operation;

•

we will retain and have competent management, key personnel, and technical staff to support our ongoing operation; and

•

industry trends and market conditions for related industries will not deviate significantly from economic forecasts.

In the second step, since our capital structure comprised convertible preferred shares and ordinary shares at each grant date, we allocated our equity value among each class of equity securities using the option-pricing method. The option-pricing method treats ordinary shares and preferred shares as call options on our company’s equity value and liquidation preference of the preferred shares.

In determining the fair value of stock options granted to executive officers and certain employees, we have used the binomial option pricing model for the years ended December 31, 2012 and 2013. Under this option pricing model, certain assumptions, including the risk-free interest rate, the expected dividends on the underlying ordinary shares and the expected volatility of the price of the underlying shares for the contract term of the options, are required in order to determine the fair value of the options. Changes in these assumptions could significantly affect the fair value of stock options and hence the amount of compensation expense we recognize in our consolidated financial statements. For the options granted, we used the following assumptions on the date of grant in determining the estimated fair value per option:


	Option Granted In
	2012	2013
Expected volatility	60% - 63%	54 - 60%
Expected dividends yield	0%	0%
Exercise multiple	2.2	2.2
Risk-free interest rate per annum	2.02% - 2.77%	1.72% - 2.97%
Estimate fair value of underlying ordinary shares (per share)	US$0.64 - 0.84	US$1.65 - 1.87

Since we did not have a trading history at the time the stock options were granted and we did not have sufficient share price history to calculate our own historical volatility, expected volatility of our future ordinary share price was estimated based on the price volatility of the shares of selected public companies in the similar industry, which we refer to as guideline companies.

For the year ended December 31, 2014, we calculated the fair value of the share options on the grant date using the Black-Scholes-Merton pricing valuation model. The assumptions used in the valuation model are summarized as follows:


		Option Granted In
		2014
Expected dividend yield		0%
Expected volatility		49% - 62%
Expected term		1.05-6.75
Risk-free interest rate (per annum)		0.12% - 2.04%

Income taxes

We assess the likelihood that our net deferred income tax assets will be realized. To the extent that we believe that it is more likely than not that some portion or the entire amount of deferred income tax assets will not be realized, we establish a valuation allowance.

In assessing the realizability of deferred income tax assets, we consider whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or tax loss carried forward are utilized. We consider the scheduled reversal of deferred income tax liability, projected future taxable income and tax planning strategies in making this assessment.

As of December 31, 2012, we assessed the need for the valuation allowance provided against the deferred income tax assets of Jiubang Digital since it began to generate pre-tax income during 2012. Based on current business plans and projected net income in the near future, we believes it is more likely than not that Jiubang Digital will realize the deferred income tax assets in the near future. Consequently, we recorded a deferred income tax benefit in the amount of RMB6.9 million due to the reversal of the valuation allowance of the deferred income tax assets of Jiubang Digital. The amount of the deferred income tax assets considered realizable as of December 31, 2012 could be reduced in the near term if estimates of future taxable income are reduced.

As of December 31, 2013, we assessed the need for the valuation allowance previously provided against the deferred income tax assets of Jiubang Computer, Beijing XMedia, Sanju Advertising and Beijing Yunlei Cultural Communication Co., Ltd, or Beijing Yunlei which generated pre-tax income during 2013. Based on current business plans and projected net income in the near future, we believe it is more likely than not that these entities will realize the deferred income tax assets in the near future. Consequently, we recorded a deferred income tax benefit in the amount of RMB11.2 million due to the reversal of the valuation allowance of the deferred income tax assets of these entities. The amount of the deferred income tax assets considered realizable as of December 31, 2013 could be reduced in the near term if estimates of future taxable income are reduced.

As of December 31, 2014, we assessed the need for the valuation allowance. The valuation allowance of the deferred income tax assets was RMB17,388,482 as of December 31, 2014.

Recently Issued Accounting Pronouncements

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for annual reporting periods beginning after December 15, 2016. We will implement the provisions of ASU 2014-09 as of January 1, 2017. We have not yet determined the impact of the new standard on its current policies for revenue recognition.

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated. Our business has grown rapidly since our inception. Our limited operating history makes it difficult to predict our future results of operations. We believe that period-to-period comparisons of results of operations should not be relied upon as indicative of future performance.


	For the Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB			US$
Summary Consolidated Statements of Comprehensive Income (Loss) Data:
Revenues		185,218,681			328,843,318			369,219,983			59,507,459
Cost of revenues⁽¹⁾		(74,813,098	)		(94,144,743	)		(134,037,756	)		(21,602,965	)

Gross profit		110,405,583			234,698,575			235,182,227			37,904,494
Research and development expenses ⁽¹⁾		(34,041,250	)		(46,641,102	)		(89,679,663	)		(14,453,738	)
Selling and marketing expenses ⁽¹⁾		(45,914,065	)		(47,293,583	)		(104,196,733	)		(16,793,465	)
General and administrative expenses ⁽¹⁾		(25,614,849	)		(51,246,338	)		(119,854,801	)		(19,317,087	)

Operating income (loss)		4,835,419			89,517,552			(78,548,970	)		(12,659,796	)
Share of losses of equity method investments		(1,072,946	)		—			(622,909	)		(100,395	)
Gain on disposal of an equity method investment		4,182,485			—			—			—
Investment income		124,862			360,750			9,381,389			1,512,005
Interest income		194,643			279,777			29,388,576			4,736,579
Other income		—			—			6,407,465			1,032,696

Income (loss) before income taxes		8,264,463			90,158,079			(33,994,449	)		(5,478,911	)
Income tax benefit (expense)		6,903,561			1,656,813			(13,673,721	)		(2,203,804	)

Net income (loss)		15,168,024			91,814,892			(47,668,170	)		(7,682,715	)

(1)	The amount of share-based compensation costs for the years ended December 31, 2012, 2013 and 2014 are as follows:


	For the Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB		US$
Cost of revenues		76,111		639,246		2,633,316		424,413
Research and development expenses		164,374		1,944,824		5,410,007		871,935
Selling and marketing expenses		124,850		728,459		2,559,662		412,543
General and administrative expenses		60,748		14,510,015		54,368,924		8,762,680

Total		426,083		17,822,544		64,971,909		10,471,571

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Revenues. Our revenues increased by 12.3% from RMB328.8 million in 2013 to RMB369.2 million (US$59.5 million) in 2014. This increase was primarily due to increases in revenues from mobile application products and services.

Mobile application products and services. Revenues from our mobile application products and services increased by 21.9% from RMB153.4 million in 2013 to RMB186.9 million (US$30.1 million) in 2014. This increase was primarily due to an increase in our marketing revenues related to GO series products from RMB89.1 million in 2013 to RMB131.3 million (US$21.2 million) in 2014, which was due to the increased popularity of our GO series products and services, an increase in the number of user actions that generated revenues such as clicks, downloads, installations or activations, and were attributable to the advertisements published in our GO series products, and an increased variety of advertising formats and services we offered. Increase in the above revenue was partly attributable to an increase in the average monthly active users for our GO series products. Total average monthly active users of GO series products increased from 94 million in the fourth quarter of 2013 to 111 million in the fourth quarter 2014. However, we cannot guarantee our revenue will continue to grow in future. See “Item 3. Key Information - D. Risk Factors - Risks Related to Our Business - There are significant uncertainties in the revenue potential of our GO series products and GO platform.”

Mobile reading services. Revenues from our mobile reading services decreased by 14.8% from RMB99.8 million in 2013 to RMB85.0 million (US$13.7 million) in 2014, as a result of fewer purchases for our online literary content. We expect our revenues from mobile reading services may continue to decline in 2015. For additional discussion, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment for internet-based and mobile-based businesses in China, our business, financial condition and results of operations may be materially and adversely affected.”

Mobile portal marketing services. Revenues from our mobile portal marketing services were RMB55.4 million (US$8.9 million) in 2014, compared to RMB52.2 million in 2013.

Other revenues. Our other revenues increased by 78.5% from RMB23.5 million in 2013 to RMB41.9 million (US$6.8 million) in 2014. This increase was primarily due to the increase in revenues from operating mobile games.

Cost of Revenues. Our cost of revenues increased by 42.4% from RMB94.1 million in 2013 to RMB134.0 million (US$21.6 million) in 2014. The increase in our cost of revenues was primarily a result of the following factors:

(i)

an increase in distribution fees from RMB9.9 million in 2013 to RMB30.9 million (US$5.0 million) in 2014, which primarily due to the rewards paid to application developers by GetJar and the distribution fee in connection with mobile games;

(ii)

an increase in depreciation and amortization from RMB1.5 million in 2013 to RMB10.0 million (US$1.6 million) in 2014 mainly due to the amortization of intangible assets acquired associated with the acquisition of GetJar; and

(iii)

an increase in content acquisition cost from RMB32.4 million in 2013 to RMB40.8 million (US$6.6 million) in 2014.

Operating Expenses. Our operating expenses increased by 116.1% from RMB145.2 million in 2013 to RMB313.7 million (US$50.6 million) in 2014, due to increases in research and development expenses, selling and marketing expenses and general and administrative expenses.

Research and development expenses. Our research and development expenses increased by 92.3% from RMB46.6 million in 2013 to RMB89.7 million (US$14.5 million) in 2014. This increase was primarily due to higher levels of compensation for our research and development personnel. In addition, increased staff-related costs as a result of the acquisition of GetJar also partially increased our research and development expenses.

Selling and marketing expenses . Our selling and marketing expenses increased by 120.3% from RMB47.3 million in 2013 to RMB104.2 million (US$16.8 million) in 2014. This increase was primarily because we strengthened our efforts on the marketing, commercialization and promotion of our new products to the customers worldwide.

General and administrative expenses. Our general and administrative expenses increased by 133.9% from RMB51.2 million in 2013 to RMB119.9 million (US$19.3 million) in 2014. This increase was primarily because the share-based compensation costs in 2014 increased by RMB39.9 million (US$6.4 million), compared to that of the prior year.

Investment income. Our investment income increased from RMB0.4 million in 2013 to RMB9.4 million (US$1.5 million) in 2014, primarily due to the realized gain derived from disposal of our investment in Weibo Corporation’s ADS of RMB8.3 million (US$1.3 million).

Interest income. Our interest income increased from RMB0.3 million in 2013 to RMB29.4 million (US$4.7 million) in 2014, primarily attributable to the interest income derived from time deposit invested in 2014.

Other income. Our other income of RMB6.4 million (US$1.0 million) in 2014 represented the gain from an exchange of an intangible asset for the equity method investment in Guangzhou Woshou Information Technology Co., Ltd., or Woshou, a software service company based in the PRC.

Income Tax Expense. Our income tax expense was RMB13.7 million (US$2.2 million) in 2014, as compared to an income tax benefit of RMB1.7 million in 2013. This was primarily due to the increased taxable income generated by certain of our consolidated entities.

Net Loss. As a result of the foregoing, we recorded a net loss of RMB47.7 million (US$7.7 million) in 2014, as compared to a net income of RMB91.8 million in 2013.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Revenues. Our revenues increased by 77.5% from RMB185.2 million in 2012 to RMB328.8 million in 2013. This increase was primarily due to increases in revenues from our mobile application products and services and mobile reading services.

Mobile application products and services. Revenues from our mobile application products and services increased by 350.3% from RMB34.1 million in 2012 to RMB153.4 million in 2013. This increase was primarily due to (i) an increase in our marketing revenues related to GO series products from RMB11.9 million in 2012 to RMB89.1 million in 2013, which was due to the increased popularity of our GO series products and services, an increase in the number of user actions that generated revenues such as clicks, downloads, installations or activations, and were attributable to the advertisements published in our GO series products, and an increased variety of advertising formats and services we offered, and (ii) an increase in revenues generated from paid downloads of premium themes and advanced functionalities for our free GO series products and Next Launcher, our paid mobile application product, from RMB22.2 million in year ended December 31, 2012 to RMB64.3 million in 2013, as we started offering premium themes and advanced functionalities in the second quarter of 2012 with the number of paid downloads of GO series products increasing from approximately 0.2 million in the first quarter of 2012 to approximately 0.6 million in the fourth quarter of 2013. Increases in the above revenue streams were partly attributable to an increase in the average monthly active users for our GO series products. The increase in our average monthly active users in turn resulted from an increase in the accumulated number of free downloads of our GO series products from approximately 207 million as of December 31, 2012 to approximately 364 million as of December 31, 2013.

Mobile reading services. Revenues from our mobile reading services increased by 37.1% from RMB72.8 million in 2012 to RMB99.8 million in 2013, primarily due to an increase in revenues from third-party reading channels from RMB58.0 million in 2012 to RMB79.4 million in 2013, as a result of higher demand for our literary content from reading channels operated by both major mobile network carriers and other third party mobile reading services providers.

Mobile portal marketing services. Revenues from our mobile portal marketing services were RMB52.2 million in 2013, compared to RMB57.5 million in 2012.

Other revenues. Our other revenues increased by 12.4% from RMB20.9 million in 2012 to RMB23.5 million in 2013. This increase was primarily due to an increase in third-party provided value-added services, such as paid content and access to game or music files, which we help promote through different online channels.

Cost of Revenues. Our cost of revenues increased by 25.8% from RMB74.8 million in the year ended December 31, 2012 to RMB94.1 million in 2013. The increase in our cost of revenues was primarily a result of the following factors:

(i)	an increase in content acquisition cost from RMB23.1 million in 2012 to RMB32.4 million in 2013;

(ii)	an increase in personnel costs from RMB18.5 million in 2012 to RMB21.1 million in 2013;

(iii)

an increase in processing fees paid to mobile application stores from RMB6.7 million in 2012 to RMB18.4 million in 2013;

(iv)	an increase in office rental fees from RMB2.6 million in 2012 to RMB3.2 million in 2013; and

(v)	offset by a decrease in distribution fees from RMB15.4 million in 2012 to RMB9.9 million in 2013.

The increase in these costs and fees was primarily attributable to the expansion of our business, which required more content, personnel and office space for the delivery of our products and services. Our custody and bandwidth fees was RMB5.6 million in 2012, which stayed stable with the custody and bandwidth fees in 2013.

Operating Expenses. Our operating expenses increased by 37.5% from RMB105.6 million in 2012 to RMB145.2 million in 2013, due to increases in research and development expenses, selling and marketing expenses and general and administrative expenses.

Research and development expenses. Our research and development expenses increased by 37.0% from RMB34.0 million in 2012 to RMB46.6 million in 2013. This increase was primarily due to increased headcount and salaries of our research and development staff, and partly due to the increase of share-based compensation allocated to our research and development staff in the year of 2013.

Selling and marketing expenses. Our selling and marketing expenses increased by 3.0% from RMB45.9 million in 2012 to RMB47.3 million in 2013. We incurred higher personnel costs as a result of increased commissions for our selling and marketing personnel, which was partly offset by a decrease in advertising and marketing expenses as we conducted less brand promotion activities such as sponsorship for industry forum and sport events in the period.

General and administrative expenses. Our general and administrative expenses increased by 100.1% from RMB25.6 million in 2012 to RMB51.2 million in 2013. This increase was primarily due to (i) the increase in share-based compensation costs due to awards granted to our officers and employees; (ii) foreign exchange losses of RMB3.2 million mainly arising from the exchange of proceeds from our initial public offering denominated in U.S. dollars into Renminbi; and (iii) the costs associated with office relocation amounting to RMB3.5 million in 2013.

Income Tax Benefit. Our income tax benefit was RMB1.7 million in 2013, as compared to an income tax benefit of RMB6.9 million in 2012. This was primarily due to the recognition of deferred income tax assets of Jiubang Computer, Beijing XMedia, Sanju Advertising and Beijing Yunlei amounting to RMB11.2 million, offset by the current income tax expense of RMB7.9 million and the realization of deferred income tax assets of Jiubang Digital of RMB1.6 million in 2013.

Net Income. As a result of the foregoing, we recorded a net income of RMB91.8 million in 2013, as compared to a net income of RMB15.2 million in 2012.

B. Liquidity and Capital Resources

Cash Flows and Working Capital

Our principal sources of liquidity are the proceeds from our initial public offering and the private placement concurrently with our initial public offering, as well as the cash flows generated from our operations.

In 2014, we repurchased 2,157,962 ADSs from the market with a total amount of RMB99.7 million (US$16.1 million), including prepayment of RMB3.3 million (US$0.5 million) as of December 31, 2014.

In February 2014, we acquired GetJar, a privately held mobile advertising network based in California for $4.9 million in cash. We may issue up to an aggregate of 1,443,074 Class A ordinary shares to the seller of GetJar by early 2016 as earnout payments if certain performance targets for 2014 are achieved; however, the performance targets of GetJar were not achieved in 2014, and we will not make the earnout payments to the seller of GetJar.

In October 2014, we entered into a share purchase agreement with MobileWoo Technology Holdings Limited, or MobileWoo, and certain other parties thereto, pursuant to which we purchased certain existing Series A and Series B preferred shares of MobileWoo from the selling shareholders, and certain number of Series B Preferred Shares issued by MobileWoo, for an aggregate cash consideration of approximately US$8.5 million.

As of December 31, 2014, we had RMB172.2 million (US$27.8 million) in cash and cash equivalents, as well as RMB424.0 million (US$68.3 million) in time deposits. We expect to require cash to fund our ongoing operational needs, particularly our research and development expenses and selling and marketing expenses. We believe that our cash and the anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the next 12 months. However, we may require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to selectively pursue. If our existing cash resources are insufficient to meet our requirements, we may seek to sell equity or equity-linked securities, debt securities or borrow from banks.

Our PRC subsidiaries and variable interest entities, in the aggregate, held RMB41.6 million and RMB74.8 million (US$12.1 million) in cash and cash equivalents as of December 31, 2013 and 2014, respectively. The U.S. subsidiaries, including those owned by our variable interest entities, in the aggregate, held RMB12.2 million and RMB24.0 million (US$3.9 million) in cash as of December 31, 2013 and 2014, respectively. For information regarding restrictions and potential tax liabilities on profit distribution from these entities, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment” and “—PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.”

Our PRC subsidiaries are categorized as “foreign-invested enterprises” pursuant to applicable PRC laws, and accordingly their dividend remittances to foreign investors are conducted through the following four steps:

•

making up any losses incurred during the current year and past years and paying enterprise income taxes;

•

appropriating no less than 10% of the accumulative after-tax profits as a statutory reserve fund until the aggregate amount of such reserve fund reaches 50% of each PRC subsidiary’s respective registered capital;

•

reserving a certain amount for the employee welfare funds at the discretion of the PRC subsidiary; and

•

distributing all or some of the remaining profits to the PRC subsidiary’s direct foreign shareholders as dividends. In accordance with the EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to our overseas holding company by our PRC subsidiaries are subject to withholding tax at a rate of 10%. The economic benefits of our PRC variable interest entities are mainly transferred to Jiubang Computer Technology (Guangzhou) Co., Ltd. through payment of service fees under the Business Cooperation Agreements and the Master Exclusive Services Agreements entered into between Jiubang Computer Technology (Guangzhou) Co., Ltd. and each variable interest entity, which are subject to the business tax and related surcharges. Upon receipt of such service fees, they will become a portion of Jiubang Computer Technology (Guangzhou) Co., Ltd.’s revenues and can be remitted to its parent company through the four-step process above.

The following table sets forth a summary of our cash flows for the years indicated:


	For the Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB			US$
Net cash provided by operating activities		12,250,505			69,882,307			74,021,486			11,930,098
Net cash used in investing activities		(9,714,048	)		(13,080,787	)		(556,223,546	)		(89,646,963	)
Net cash provided by (used in) financing activities		—			620,001,707			(104,121,115	)		(16,781,278	)
Effect of foreign currency exchange rate changes on cash		50,919			(1,013,190	)		(819,098	)		(132,014	)
Cash and cash equivalents at the beginning of year		81,011,002			83,598,378			759,388,415			122,391,196
Net increase (decrease) in cash		2,587,376			675,790,037			(587,142,273	)		(94,630,157	)

Cash and cash equivalents at the end of year		83,598,378			759,388,415			172,246,142			27,761,039

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2014 was RMB74.0 million (US$11.9 million), primarily resulted from RMB429.2 million (US$69.2 million) of cash we received mainly from the sale of our products and services, partially offset by our employee salaries and welfare payment of RMB140.5 million (US$22.7 million), our payments for cost of services, including distribution fees and processing fees, of RMB146.4 million (US$23.6 million) and our general operating costs of RMB52.2 million (US$8.4 million).

Net cash provided by operating activities for the year ended December 31, 2013 was RMB69.9 million, primarily resulted from RMB318.3 million of cash we received mainly from the sale of our products and services, partially offset by our employee salaries and welfare payment of RMB103.1 million, our payments for cost of services, including distribution fees and processing fees, of RMB79.1 million and our general operating costs of RMB54.6 million.

Net cash provided by operating activities for the year ended December 31, 2012 was RMB12.3 million, primarily resulting from RMB212.0 million of cash we received mainly from the sale of our products and services, partially offset by our employee salaries and welfare payment of RMB85.3 million, our payments for cost of services, including charges of distribution fees and processing fees, of RMB61.5 million, and our general operating costs of RMB46.0 million.

Investing Activities

Net cash used in investing activities was RMB556.2 million (US$89.6 million) for year ended December 31, 2014, primarily attributable to the investment in time deposits of RMB424.0 million (US$68.3 million), purchase of short term investment of RMB110.0 million (US$17.7 million), purchase of available-for-sale investments of RMB92.3 million (US$14.9 million), acquisition of subsidiaries (net of acquisition costs and cash acquired) of RMB31.1 million (US$5.0 million), purchase of property, equipment and intangible assets of RMB28.2 million (US$4.5 million), investment in equity method investments of RMB13.5 million (US$2.2 million), partially offset by proceeds from maturity of short-term investment of RMB102.5 million (US$16.5 million), proceeds from disposal of an available-for-sale investment of RMB38.6 million (US$6.2 million) and receipt of government grant related to property and equipment of RMB1.8 million (US$0.3 million).

Net cash used in investing activities was RMB13.1 million for year ended December 31, 2013, primarily attributable to purchase of short term investment of RMB52.5 million, purchase of property, equipment and intangible assets of RMB14.5 million, partially offset by proceeds from maturity of short-term investment of RMB40.0 million, receipt of cash for disposal of an equity method investment of RMB6.4 million, receipt of government grants related to property and equipment of RMB4.2 million and proceeds from loan repayment by related parties of RMB3.8 million.

Net cash used in investing activities was RMB9.7 million in the year ended December 31, 2012, primarily attributable to our purchase of property, equipment and intangible assets of RMB5.1 million and non-interest bearing loan provided to related parties amounting to RMB4.8 million.

Financing Activities

Net cash used in financing activities was RMB104.1 million (US$16.8 million) for the year ended December 31, 2014, primarily attributable to the payment for repurchase of ordinary shares of RMB99.7 million (US$16.1 million), and the payment of issuance costs of ordinary shares in connection with IPO of RMB6.0 million (US$1.0 million), partially offset by the proceeds from the exercise of share options of RMB1.6 million (US$0.3 million).

Net cash provided by financing activities was RMB620.0 million in the year ended December 31, 2013, primarily attributable to the proceeds from our initial public offering and concurrent private placement in connection with the IPO, net of underwriting discounts and commissions of RMB637.8 million and payment of issuance costs of RMB15.3 million.

There was no cash provided by financing activities in the year ended December 31, 2012.

Capital Expenditures

We incurred capital expenditures of RMB5.1 million, RMB14.5 million and RMB28.2 million (US$4.5 million) in 2012, 2013 and 2014, respectively. Our capital expenditures are primarily used to purchase computers, servers and other equipment. As our business expands, we may purchase new servers and other equipment in the future. We estimate that our capital expenditures for the property and equipment will be approximately RMB30.0 million in 2015.

C. Research and Development, Patents and Licenses, Etc.

Our business success has benefited from our continuous efforts on intellectual property protection, including patent, trademark, copyright and trade secrets. See “Item 4. Information on the Company — B. Business Overview — Intellectual Property” for a description of the protection of our intellectual property.

Research and Development Expenses

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since the beginning of our fiscal year 2014 that are reasonably likely to have a material effect on our net revenues, operating income (loss), profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

E. Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity (deficit), or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2014:

Payment Due by Period

Total

Less than
1 year

1-2 years

3-5 years

More than
5 years

(in thousands of RMB)

Operating lease obligations, net of sublease rental income ⁽¹⁾

16,722

8,097

6,982

1,643

—

(1)

Operating lease obligations refer to the lease of bandwidth and offices under operating lease agreements, where a significant portion of the risks and rewards of ownership are retained by the lessor. Payments made under operating leases, net of sublease rental income are charged to the consolidated statements of comprehensive income (loss) on a straight-line basis over the period of the lease, including any free lease periods.

Other than the obligations set forth above, we did not have any other long-term debt obligations, operating lease obligations, purchase obligations or other long-term liabilities as of December 31, 2014.

G. Safe Harbor

See “Forward Looking Statements” on page 2 of this annual report.

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.	Directors and Senior Management

The following table sets forth information regarding our directors and executive officers as of the date of this annual report. There are no family relationships among any of the directors or executive officers of our company.


Directors and Executive Officers	Age	Position/Title
Yuqiang Deng	39	Chairman and Chief Executive Officer
Yingming Chang	40	Director and Chief Operating Officer
Zhi Zhu	38	Co-Chief Operating Officer
Fei Yang	57	Director
Feng Li	39	Independent Director
Yong Chen	39	Independent Director
Gang Zhao	37	Independent Director
Xiangguang Zou	44	Independent Director
Longfei Zhou	37	Chief Financial Officer

Yuqiang Deng is our co-founder and has been our director and chief executive officer since our inception. Prior to co-founding our company in 2003, Mr. Deng worked as an engineer at China Telecom from 1999 to 2001, and as an engineer at China Mobile from 2001 to 2003. Mr. Deng received a bachelor’s degree in information science from Peking University in China.

Yingming Chang has been our chief operating officer since 2005 and our director since 2006. Before joining us, Mr. Chang served as a senior product manager and regional manager at BenQ China from 1999 to 2005, responsible for the business operations of multiple branches. Mr. Chang studied information science at Peking University in China.

Zhi Zhu has been our co-chief operating officer since October 2014, and he was our independent director from November 2013 to May 2014. Mr. Zhu has been the chief executive officer of Beijing MobileWoo Information Technology Co. Ltd. from 2010 to November 2014, and currently serves as an independent non-executive director of Epro Ltd, a Hong Kong-listed company. Mr. Zhu also founded Beijing Mo Bi Tong Da Software Co., Limited (whose name was later changed to Evans Interconnection (Beijing) Mobile Software Technology Co., Ltd.) in 2009 and served as the general manager. From 2006 to 2008, Mr. Zhu worked as an account program manager and a partner manager at Philips Semiconductors. Mr. Zhu completed a three-year professional course in mobile communications at Beijing University of Posts and Telecommunications in China and received a master’s degree in mobile communication systems from University of Surrey in the UK.

Fei Yang has served as our director since January 2005. Mr. Yang joined and has acted as the partner of IDG Capital Partners, or IDG Capital, since 1997. Prior to joining IDG Capital, Mr. Yang was the director of IPO Division of Guangdong Government Securities Regulatory Commission, vice president of Guangdong United Future Exchange and the director of Consultant Division of Guangdong Foreign Trade and Economy Institute. Mr. Yang has profound experience and knowledge in economy research. He devoted himself to the project of “Strategy of Pushing Regional Economy Forward” launched by the central government of China in 1996. Graduated from Sun Yat Sen University in China, Mr. Yang received a bachelor’s degree in science in 1982 and a master’s degree in 1989.

Dr. Feng Li has served as our independent director since July 2014. Dr. Li is currently a professor of accounting with tenure at the University of Michigan’s Stephen M. Ross School of Business. He has authored publications over a range of topics, including employee stock options, annual report readability, and earnings forecasts. Dr. Li has also participated in a variety of consulting projects for leading asset management firms and funds. Dr. Li received his Ph.D. in accounting and MBA from the University of Chicago, and received his bachelor’s degree in economics from Fudan University in China.

Yong Chen has served as our independent director since May 2014. Mr. Chen has extensive leadership experience in the operation, product designing and user management of internet-related business. Mr. Chen currently serves as chief operating officer of Tianya Club, one of the leading internet forums for blogging and bulletin board system, or BBS, in China. In this position, Mr. Chen is responsible for overseeing core business operations of Tianya Club, including mobile, online games, travel, BBS, and content management. Mr. Chen received a bachelor’s degree in computer science and communications from Zhejiang University in China.

Gang Zhao has served as our independent director since May 2014. Mr. Zhao currently is the general manager of Anguanjia, a leading independent third party mobile security service provider in China. Under Mr. Zhao’s leadership, Anguanjia achieved a number of outstanding milestones including the introduction of several innovative products such as “Safe Management”, “Mobile Cloud Security”, and “Anquan Open Platform”. Prior to this role, Mr. Zhao served in several managerial roles, responsible for operations management and product development in a number of Chinese leading internet companies. Mr. Zhao received a bachelor’s degree in computer science and technology from Peking University in China.

Xiangguang Zou has served as our independent director since October 2014. Ms. Zou currently is the vice president and the compliance officer of Pactera Technology International Ltd, a company focusing on consulting and technology services. She had been continuously serving as the head of corporate legal affairs and the compliance officer of a NYSE and later NASDAQ listed company between 2007 and 2014, accumulating experience in corporate governance, SOX404 and FCPA compliance, and anti-fraud control. Before joining Pactera Technology International Ltd, Ms. Zou had been working as an attorney in international law firms advising investment and commercial transactions for nine years. Ms. Zou received her national lawyer’s certificate in 1997 and has her BA degree from Sun Yat Sen University and LL.B degree from China University of Law and Political Science.

Longfei Zhou has been our chief finance officer since November 2014. Before joining us, Mr.Zhou held various finance-related positions in several companies, including chief financial officer of Philips & Neusoft Medical System Co, Ltd from 2011 to 2013, corporate controller of TCL Multimedia from 2007 to 2010 and financial staff of Philips Consumer Electronic across various regions including its subsidiaries in France, Singapore and China from 2004 to 2007. From 1999 to 2002, Mr. Zhou worked at Alcatel Shanghai Bell as software engineer. Mr. Zhou received his bachelor’s degree in computer science from Nanjing University of Science & Technology and master degree of finance in Ecole de Management Lyon (E.M.Lyon) in France.

B.	Compensation of Directors and Executive Officers

For the fiscal year ended December 31, 2014, we paid an aggregate of approximately RMB1.7 million (US$0.3 million) in cash, including salaries and bonuses, to our executive officers, and we paid cash compensation of approximate RMB0.2 million (US$38,692) to our non-executive directors. For details on the share incentive grants to our officers and directors, see “—Share Incentive Plans.” We set aside RMB0.1 million (US$17,031) for executive pension and retirement benefits in 2014 as required by PRC law.

Employment Agreements

We have entered into employment agreements with our senior executive officers. We may terminate a senior executive officer’s employment for cause at any time without remuneration for certain acts of the officer, such as being convicted of any criminal conduct, any act of gross or willful misconduct or any serious, willful, grossly negligent or persistent breach of any employment agreement provision, or engaging in any conduct which may make the continued employment of such officer detrimental to our company. We may also terminate a senior executive officer’s employment by giving one month’s prior written notice if the senior executive officer is not qualified for his position after we provide relevant training to him. A senior executive officer may terminate his or her employment at any time by giving one month’s prior written notice.

In connection with the employment agreement, each senior executive officer has entered into an intellectual property ownership and confidentiality agreement and agreed to hold all information, know-how and records in any way connected with the products of our company, including, without limitation, all software and computer formulae, designs, specifications, drawings, data, manuals and instructions and all customer and supplier lists, sales and financial information, business plans and forecasts, all technical solutions and the trade secrets of our company, in strict confidence perpetually. Each officer also agrees that we shall own all the intellectual property developed by such officer during his or her employment.

Share Incentive Plans

We have adopted three share incentive plans, namely, the 2006 Plan, the 2010 Plan and the 2013 Plan. The purpose of these three share incentive plans is to attract and retain the best available personnel by linking the personal interests of the members of the board, officers, employees and consultants to the success of our business and by providing such individuals with an incentive for outstanding performance to generate superior returns for our shareholders.

2006 Global Share Plan

We adopted the 2006 Plan in June 2006, which was amended and restated in October 2013. Under the 2006 Plan, the maximum number of shares in respect of which awards that may be granted is 5,224,126.

The following paragraphs summarize the terms of the 2006 Plan.

Types of Awards. The Plan permits the awards of options and rights to purchase restricted shares.

Plan Administration. Our board or a committee of our board duly authorized for the purpose of the 2006 Plan can act as the plan administrator. The plan administrator will determine the participants to receive the awards, the number of awards to be granted to each participant, and the terms and conditions of each award grant. The plan administrator can modify or amend each award grant and construe and interpret the terms of the 2006 Plan and the award grant.

Award Agreement. Options or rights to purchase restricted shares granted under the 2006 Plan are evidenced by an award agreement that sets forth the terms and conditions for each grant.

Exercise Price and Purchase Price. The exercise price of an option may be determined by the plan administrator at its discretion. However, the exercise price in respect of certain incentive stock option shall not be less than the fair market value on the effective date of the 2006 Plan and may be varied at the election of the plan administrator. The purchase price in respect of restricted shares shall be determined by the plan administrator.

Eligibility. We may grant awards to our employees, directors or consultants or employees, directors or consultants or our parent companies or subsidiaries.

Term of the Awards. The option granted under the 2006 Plan shall be valid and effective for a period of ten years from the grant date. The right to purchase restricted shares will expire upon 30 days from the date of the grant.

Acceleration of Awards upon Change in Control. If a change in control of our company occurs and the successor entity refuses to assume or substitute for an award, unless the award agreement otherwise provides, the participant will vest in and have the right to exercise the awards as to all the underlying shares and all restrictions on restricted shares will lapse. If the participant does not exercise the award within a period of time as determined by the plan administrator, the award will terminate upon expiration of such period for no consideration.

Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement.

Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator.

Termination. The plan administrator may at any time terminate the operation of the 2006 Plan.

2010 Global Share Plan

We adopted the 2010 Plan in June 2010, which was amended and restated in October 2013. Under the 2010 Plan, the maximum number of shares in respect of which awards under the 2010 Plan may be granted is 5,373,659.

The terms and conditions under 2010 Plan are substantially the same as those stipulated in the 2006 Plan except the exercise price of certain incentive option and the purchase price of a restricted share, which shall not be less than US$0.8826, unless the administrator determines otherwise.

We have historically determined the exercise price of shares granted under the 2006 Plan and the 2010 Plan based on a number of factors, such as the type of awards, the length of time in which such employees were with our company the function of such employees and the price of our preferred share issuances or service time and type of a consultant. Certain employees who joined our company near its inception were issued options with lower exercise prices than other employees. In addition, employees who we consider to be our key personnel may also be issued options with a lower exercise price.

2013 Share Incentive Plan

We adopted the 2013 Plan in October 2013, which was amended and restated in July 2014. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2013 Plan is 7,317,073, plus an automatic annual increase on January 1 of each year, beginning on January 1, 2015, by the number of shares representing 2% of the then total issued and outstanding share capital of our company as of December 31, of the preceding year, or such less number as the board shall determine. The following paragraphs summarize the terms of the 2013 Plan.

Types of Awards. The following briefly describe the principal features of the various awards that may be granted under the 2013 Plan.

•

Options. Options provide for the right to purchase a specified number of our ordinary shares at a specified price and usually will become exercisable at the discretion of our plan administrator in one or more installments after the grant date. The option exercise price may be paid, subject to the discretion of the plan administrator, in cash or check, in our ordinary shares which have been held by the option holder for such period of time as may be required by our plan administrator, in other property with value equal to the exercise price, through a broker-assisted cashless exercise, or by any combination of the foregoing.

•

Restricted Shares. A restricted share award is the grant of our ordinary shares which are subject to certain restrictions and may be subject to risk of forfeiture. Unless otherwise determined by our plan administrator, a restricted share is nontransferable and may be forfeited or repurchased by us upon termination of employment or service during a restricted period. Our plan administrator may also impose other restrictions on the restricted shares, such as limitations on the right to vote or the right to receive dividends.

•

Restricted Share Units. A restricted share unit award is the grant of the right to receive an ordinary share at a future date and may be subject to forfeiture. Our plan administrator has the discretion to set performance objectives or other vesting criteria that will determine the number or value of restricted share units to be granted. Unless otherwise determined by our plan administrator, a restricted share unit is nontransferable and may be forfeited or repurchased by us upon termination of employment or service during a restricted period. Our plan administrator, at the time of grant, specifies the dates on which the restricted share units become fully vested.

Plan Administration. Our board or a committee of one or more members of our board duly authorized for the purpose of the 2013 Plan can act as the plan administrator.

Award Agreement. Options, restricted shares or restricted share units granted under the 2013 Plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each grant.

Exercise Price and Purchase Price. The exercise price in respect of any option shall be determined by the plan administrator and set forth in the award agreement which may be a fixed or variable price related to the fair market value of the shares. The exercise price per share subject to an option may be amended or adjusted in the absolute discretion of the plan administrator, the determination of which shall be final, binding and conclusive. The purchase price in respect of restricted shares shall be determined by the plan administrator.

Eligibility. We may grant awards to our employees, consultants or directors.

Term of the Awards. The 2013 Plan shall be valid and effective for a period of ten years from the date of effectiveness. The term of each option, restricted share or restricted share unit grant shall be ten years from the date of the grant.

Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement.

Transfer Restrictions. Awards for options or restricted shares may not be transferred in any manner by the award holders and may be exercised only by such holders, subject to limited exceptions. Restricted shares may not be transferred during the period of restriction.

Termination. The plan administrator may, with the approval of the board, at any time terminate the operation of the 2013 Plan.

The following table summarizes, as of March 31, 2015, the outstanding options granted to our executive officers, directors and other individuals as a group.

Ordinary Shares
Underlying Options
Awarded

Exercise Price
(US$/Share)

Date of Grant

Date of Expiration

Zhi Zhu

2,494,716

1.14

October 8, 2014

October 7, 2024

0.782

Febuary 28, 2015

Febuary 27, 2025

Yong Chen

2.29

May 12, 2014

May 11, 2024

Gang Zhao

2.29

May 12, 2014

May 11, 2024

Feng Li

1.86

July 17, 2014

July 16, 2024

Xianggang Zou

1.29

October 20, 2014

October 19, 2024

Longfei Zhou

1.12

November 3, 2014

November 3, 2024

Other individuals as a group

0.87

December 1, 2006

November 30, 2016

1.3

December 31, 2007

December 31, 2017

1.3

July 1, 2008

June 30, 2018

1.3

December 31, 2008

December 31, 2018

1.3

July 1, 2009

June 30, 2019

1.3

December 1, 2009

November 30, 2019

1.3

December 1, 2010

November 30, 2020

1.5

July 1, 2011

June 30, 2021

1.9

July 1, 2011

June 30, 2021

1.2

December 1, 2011

November 30, 2021

1.9

December 1, 2011

November 30, 2021

0.935

December 1, 2011

Five years after the
vesting date

1.1

December 1, 2011

November 30, 2021

1.9

July 1, 2012

June 30, 2022

1.9

December 1, 2012

November 30, 2022

0.0001

June 1, 2013

July 21, 2020

0.8826

June 1, 2013

June 1, 2023

0.8826

September 1, 2013

September 1, 2023

1.14

October 8, 2014

October 7, 2024

1.30

October 13, 2014

October 12, 2024

0.852

December 8, 2014

December 7, 2024

Total

9,279,574

*	The aggregate number of ordinary shares underlying the outstanding options and restricted shares held by this individual is less than 1% of our total outstanding shares.

The following table summarizes, as of March 31, 2015, the restricted shares granted to our executive officers, directors and other individuals as a group (excluding those forfeited).


	Restricted Shares Granted		Date of Grant
Zhi Zhu		*		January 1, 2015
Yong Chen		*		May12, 2014
Gang Zhao		*		May 12, 2014
Feng Li		*		July 17, 2014
Xiangguang Zou		*		January 5, 2015
Other individuals as a group		*		June 1, 2014
		*		September 1, 2014
		*		December 3, 2014
		*		August 22, 2014

Total		1,423,998

*	The aggregate number of ordinary shares underlying the outstanding options and restricted shares held by this individual is less than 1% of our total outstanding shares.

In addition, we granted 322,968 and 156,317 restricted shares to Mr. Yuqiang Deng and Mr. Zhi Zhu, respectively, on April 1, 2015. Our board also approved to grant in August 2015 such numbers of restrited shares as the following value divided by the closing ADS price on August 3, 2015: to Mr. Yuqiang Deng, the U.S. dollar amount equivalent to RMB1,250,000; and to Mr. Zhi Zhu, the U.S. dollar amount equivalent to RMB605,000.

Other Equity Based Awards

In September 2013, we granted share purchase rights to certain officers to purchase an aggregate of 2,831,374 and 13,266,202 ordinary shares of our company at a purchase price of US$0.28 and US$0.8826 per share, respectively. Twenty-five percent of these ordinary shares after being purchased will become transferable on each of the first, second, third and fourth anniversary of the grant date. In the event that the officer terminates the employment with us, any ordinary shares that are not transferable will be forfeited, and we will repurchase these ordinary shares at the original purchase price. In August 2014, due to the resignation of one of our officers, 613,263 oridiary shares previously granted to him were forfeited. In October 2014, one of our senior management resigned as director and officer, and was engaged by us as a consultant following his resignation. The transfer schedules under his original share purchase right agreements remain unchanged.

In August 2014, we granted to one of our employees, for his future consulting services to us, certain share purchase rights which entitled him to purchase 163,536 shares at a purchase price of US$0.8826 per share.

Except for those forfeited mentioned above, these share purchase rights are exercisable as of the date of this annual report.

C.	Board Practices

Our board of directors currently consists of seven directors. A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested provided that the nature of the interest has been disclosed prior to board’s consideration. A director may exercise all the powers of the company to borrow money, mortgage its business, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party. See “Item 6. Directors, Senior Management and Employees — B. Compensation of Directors and Executive Officers” for a description of the employment agreements we have entered into with our senior executive officers.

Committees of the Board of Directors

We have established an audit committee, a compensation committee and a corporate governance and nominating committee under the board of directors. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.

Audit Committee. Our audit committee consists of Dr. Feng Li, Mr. Yong Chen and Ms. Xiangguang Zou and is chaired by Dr. Feng Li. Mr. Yong Chen, Ms. Xiangguang Zou and Dr. Feng Li satisfy the “independence” requirements of NASDAQ and meet the independence standards under Rule 10A-3 under the Securities Exchange Act of 1934, as amended. We have determined that Dr. Feng Li qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:

•

selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm;

•

reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;

•

reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;

•

discussing the annual audited financial statements with management and the independent registered public accounting firm;

•

reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of any material control deficiencies;

•

annually reviewing and reassessing the adequacy of our audit committee charter;

•

meeting separately and periodically with management and the independent registered public accounting firm; and

•

reporting regularly to the board.

Compensation Committee. Our compensation committee consists of Dr. Feng Li, Mr. Yong Chen and Mr. Gang Zhao, and is chaired by Mr. Yong Chen. Dr. Feng Li, Mr. Yong Chen and Mr. Gang Zhao satisfy the “independence” requirements of NASDAQ. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our directors may not be present at any committee meeting during which their compensation is deliberated upon. The compensation committee is responsible for, among other things:

•

reviewing at least annually the total compensation package for our executive officers and making recommendations to the board with respect to it;

•

approving and overseeing annually the total compensation package for our executives other than the chief executive officer;

•

reviewing annually the compensation of our directors and making recommendations to the board with respect to it;

•

reviewing and reassessing our compensation committee charter at least annually and submitting any recommended changes to the board; and

•

periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and employee pension and welfare benefit plans.

Corporate Governance and Nominating Committee. Our nominating committee consists of Dr. Feng Li, Mr. Gang Zhao and Ms. Xiangguang Zou, and is chaired by Ms. Xiangguang Zou. Dr. Feng Li, Mr. Gang Zhao and Ms. Xiangguang Zou satisfy the “independence” requirements of NASDAQ. The nominating committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating committee is responsible for, among other things:

•

recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;

•

reviewing annually with the board the current composition of the board with regards to characteristics such as independence, age, skills, experience and availability of service to us;

•

selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating committee itself;

•

monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance;

•

periodically reporting to the board on our corporate governance and nominating committee’s findings and actions; and

•

reviewing and reassessing our corporate governance and nominating committee charter at least annually and submitting any recommended changes to the board .

Duties of Directors

Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also owe to us a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time.

Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution or the unanimous written resolution of all shareholders. A director will be removed from office automatically if, among other things, the director (1) becomes bankrupt or makes any arrangement or composition with his creditors; or (2) dies or is found to be or becomes of unsound mind.

D.	Employees

The following table sets forth the numbers of our employees, categorized by function, as of December 31, 2014:


Functions	Number of Employees
Management		67
Research and development		323
Sales and marketing		37
General and administration		128
Editing		86

Total		641

We had a total of 1,298, 762 and 641 employees as of December 31, 2012, 2013 and 2014, respectively.

We have developed a corporate culture that encourages initiative, technical superiority and self-development. In addition, we periodically evaluate our employees’ performance and provide them with training sessions tailored to each job function to enhance performance and service quality.

As required by regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. We have accrued, in the aggregate, RMB0.1 million ($17,031) for pension or similar retirement benefits for our executive officers and directors, as required under PRC laws, for the fiscal year ended December 31, 2014. We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes.

E.	Share Ownership

Class A Ordinary Shares

As of March 31, 2015, we had 80,023,782 Class A ordinary shares outstanding, excluding 629,502 shares issued to the depositary in anticipation of future exercise of options. In addition, as of March 31, 2015, we have granted outstanding options and share purchase rights to purchase a total of 24,927,423 Class A ordinary shares, and 1,423,998 restricted shares to our directors, executive officers, other employees and consultants. For information regarding the Share Incentive Plans, see “Item 6.— B. Compensation of Directors and Executive Officers.”

Class B Ordinary Shares

As of March 31, 2015, we had 109,386,066 Class B ordinary shares.

Beneficial Ownership

The following table sets forth information concerning the beneficial ownership of our ordinary shares as of March 31, 2015, by:

•

each of our directors and executive officers; and

•

each person known to us to beneficially own more than 5% of our ordinary shares.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire or that would become unrestricted shares within 60 days after March 31, 2015, the most recent practicable date, including through the exercise of any option, warrant, or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

The calculations in the table below assume that there were 189,409,848 ordinary shares outstanding as of March 31, 2015, excluding 629,502 shares issued to the depositary in anticipation of future exercise of options as of March 31, 2015.

Ordinary Shares
Beneficially Owned As of March 31, 2015

Voting Power As of March 31,
2015

Number

%†

Directors and Executive Officers:

Yuqiang Deng ⁽¹⁾

46,053,632

23.4

33.5

Yingming Chang ⁽²⁾

4,442,111

2.3

1.2

Fei Yang ⁽³⁾

40,540,928

21.4

34.5

Feng Li ⁽⁴⁾

Yong Chen⁽⁵⁾

Gang Zhao⁽⁶⁾

Xiangguang Zou⁽⁷⁾

Zhi Zhu ⁽⁸⁾

Longfei Zhou ⁽⁹⁾

All Directors and Executive Officers as a Group

92,028,086

45.8

68.9

Principal Shareholders:

IDG funds ⁽¹⁰⁾

40,540,928

21.4

34.5

Freedom First Holdings Limited ⁽¹¹⁾

46,053,632

23.4

33.5

CBC Mobile Venture Limited ⁽¹²⁾

20,583,161

10.9

17.5

Hamamelis Holdings Limited ⁽¹³⁾

13,284,293

6.8

7.5

†

For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the total number of shares outstanding (excluding 629,502 shares issued to the depositary in anticipation of future exercise of options) as of March 31, 2015, which is 189,409,848 as of March 31, 2015, and the number of shares such person or group has the right to acquire upon exercise of option or other right within 60 days after March 31, 2015.

*	Less than 1%.

(1)

Represents 38,895,676 Class B ordinary shares held by Freedom First Holdings Limited, a BVI company wholly owned by DENG Holdings Limited, a Guernsey Company, which is wholly owned by the DENG Family Trust, a family trust of which Mr.Deng is the settler and Credit Suisse Trust Limited is the trustee, 7,014,034 Class A ordinary shares issuable to Mr. Deng upon his exercise of share purchase rights and 143,922 restricted shares granted to Mr. Deng. The business address of Mr. Deng is Floor 17, Tower A, China International Center, No. 33 Zhongshan 3^rd Road, Yuexiu District, Guangzhou, China.

(2)

Represents 1,047,600 Class B ordinary shares held by C-Cycle Limited, a BVI company wholly owned and controlled by Mr. Yingming Chang, and 3,394,511 Class A ordinary shares issuable to Mr. Chang upon his exercise of share purchase rights. The business address of Mr. Chang is Floor 17, Tower A, China International Center, No. 33 Zhongshan 3^rd Road, Yuexiu District, Guangzhou, China.

(3)

(4)	The business address of Mr. Feng Li is 19A, No.108 Guangyuanxilu, Xuhui District, Shanghai, China.

(5)	The business address of Mr. Yong Chen is 21F, Didu Building, Zhujiang Square, Binhaidadao, Haikou City, Hainan Province, China.

(6)	The business address of Mr. Gang Zhao is Room 207, Tower A, Winterless Center, No.1 Xidawang Road, Chaoyang District, Beijing, China.

(7)	The business address of Ms. Xiangguang Zou is 22626 NE Inglewood Hill Rd, Apt 732, Sammamish WA 98074, USA.

(8)	The business address of Mr. Zhi Zhu is Floor 17, Tower A, China International Centre, No.33 Zhong Shan 3^rd Road, Yue Xiu District, Guangzhou, 510055, China.

(9)	The business address of Mr. Longfei Zhou is Floor 17, Tower A, China International Center, No. 33 Zhongshan 3^rd Road, Yuexiu District, Guangzhou, China.

100

(10)

Represents (i) 21,428,600 Class B ordinary shares held by IDG Technology Venture Investment III, L.P., (ii) 14,729,964 Class B ordinary shares held by IDG-Accel China Growth Fund L.P., (iii) 3,010,129 Class B ordinary shares held by IDG-Accel China Growth Fund-A L.P., and (iv) 1,372,235 Class B ordinary shares held by IDG-Accel China Investors L.P. The voting and dispositive power in the shares held by IDG Technology Venture Investment III, L.P., IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P. and IDG-Accel China Investors L.P. are ultimately controlled by Mr. Quan Zhou and Mr. Chi Sing Ho. IDG Technology Venture Investment III, L.P. is incorporated in Delaware. IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P. and IDG-Accel China Investors L.P. are incorporated in the Cayman Islands. The registered address of IDG Technology Venture Investment III, L.P. is the Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. The registered address of each of IDG-Accel China Growth Fund L.P., IDG-Accel China Growth Fund-A L.P., and IDG-Accel China Investors L.P. is Intertrust Corporate Sevices (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands.

(11)

Represents 38,895,676 Class B ordinary shares held by Freedom First Holdings Limited, a BVI company wholly owned by DENG Holdings Limited, a Guernsey Company, which is wholly owned by the DENG Family Trust, a family trust of which Mr.Deng is the settler and Credit Suisse Trust Limited is the trustee, and 7,014,034 Class A ordinary shares issuable to Mr. Deng upon his exercise of share purchase rights and 143,922 restricted shares granted to Mr. Deng.

(12)

Represents 20,583,161 Class B ordinary shares. The voting and dispositive power in the shares held by CBC Mobile Venture Limited is controlled by China Broadband Capital Partners L.P., which is ultimately controlled by Mr. Suring Tian. The registered address of CBC Mobile Venture Limited is Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands.

(13)	Represents 8,318,692 Class B ordinary shares held by Hamamelis Holdings Limited, a BVI company wholly owned and controlled by Mr. Xiangdong Zhang, 4,871,347 Class A ordinary shares issuable to Mr. Zhang upon his exercise of share purchase rights, and 94,254 restrticted shares granted to Mr. Zhang.

As of March 31, 2015, 189,409,848 of our ordinary shares were issued and outstanding (excluding 629,502 shares issued to the depositary in anticipation of future exercise of options as of March 31, 2015), including 109,386,066 Class B ordinary shares and 80,023,782 Class A ordinary shares. Based on a review of the register of members maintained by our Cayman Islands registrar, we believe that as of March 31, 2015, 21,428,600 Class B ordinary shares and 72,002,388 Class A ordinary shares (excluding 629,502 shares issued to the depositary in anticipation of future exercise of options as of March 31, 2015) representing approximately 49.3% of our total outstanding shares were held by two record holders in the United States, which includes 72,002,388 Class A ordinary shares (excluding 629,502 shares issued to the depositary in anticipation of future exercise of options as of March 31, 2015) held of record by JPMorgan Chase Bank, N.A., the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. None of our existing shareholders have different voting rights from other shareholders in the same class. See “ — B. Compensation of Directors and Executive Officers — Employee Agreements” for a description of the employment agreements we have entered into with our senior executive officers.

We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

101

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.	Major Shareholders

Please refer to “Item 6. — Directors, Senior Management and Employees — E. Share Ownership.”

B.	Related Party Transactions

Contractual Arrangements

The PRC government extensively regulates foreign ownership of, and the licensing and permit requirements pertaining to, companies that provide internet-based services such as our GO platform. To comply with these restrictions, we conduct our operations primarily through contractual arrangements between Jiubang Computer, our PRC subsidiary, and Jiubang Digital, Sanju Advertising, Hengye software and Zhiteng Computer, our variable internal entities and their respective shareholders.

The following is a summary of the currently effective contractual arrangements, as amended and restated, among Sungy Mobile Limited, formerly known as Sungy Data Ltd., Jiubang Computer, Jiubang Digital and its shareholders and subsidiaries. Except explicitly indicated otherwise below, the contractual arrangements among Sungy Mobile Limited, Jiubang Computer, Sanju Advertising and its shareholders, the contractual arrangements among Sungy Mobile Limited, Jiubang Computer, Hengye Software and its shareholders, and the contractual arrangements among Sungy Mobile Limited, Jiubang Computer, Zhiteng Computer and its shareholders are substantially the same as the contractual arrangements among Sungy Mobile Limited, Jiubang Computer, Jiubang Digital and its shareholders and subsidiaries.

Contractual Arrangements with Jiubang Digital

Master Exclusive Service Agreement

Under the master exclusive service agreement between Jiubang Computer and Jiubang Digital and its subsidiaries, Jiubang Computer has the exclusive right to provide Jiubang Digital and its subsidiaries services related to Jiubang Digital’s business, including but not limited to technology development, technical consulting services, network development, updating and daily maintenance, market research and consulting services. Jiubang Computer has the right to determine the service fees based on the technical difficulty and complexity of the services and the actual labor costs it incurs for providing the services during the relevant period. The term of this agreement is ten years and will be automatically extended upon the expiration. Jiubang Computer may terminate the agreement at any time with a 30-day prior written notice to Jiubang Digital, whereas none of Jiubang Digital and its subsidiaries can terminate this agreement.

Business Cooperation Agreement

Pursuant to the business cooperating agreement by and among Sungy Mobile Limited, Jiubang Computer, Jiubang Digital’s shareholders, including Sanju Advertising, Mr. Yuqiang Deng and Mr. Xiangdong Zhang, Jiubang Digital and its subsidiaries, Jiubang Digital and its subsidiaries shall accept and follow our suggestions on their daily operations and financial management. The nominee shareholders of Jiubang Digital must appoint candidates recommended by us as Jiubang Digital’s board of directors, and Jiubang Digital must appoint candidates recommended by us as the directors of Jiubang Digital’s subsidiaries. Also, we have the right to appoint senior executives of Jiubang Digital and its subsidiaries. In addition, Jiubang Digital and its subsidiaries agree not to engage in any transaction that may materially affect their assets, obligations, rights or operation without our prior written consent. To ensure sufficient cashflow required by the business operations of Jiubang Digital, Sungy Mobile Limited agrees that it will, to the extent permissible under PRC law, through itself or any party designated by it, provide financial support to Jiubang Digital. The agreement shall be in effect as long as Jiubang Digital exists. None of Jiubang Digital, its shareholders and subsidiaries can terminate this agreement. Jiubang Computer may terminate the agreement by providing a 30-day prior written notice to Jiubang Digital and its shareholders.

102

Proxy Agreement and Power of Attorney

Under the proxy agreement and power of attorney by and among Sungy Mobile Limited, Jiubang Computer, Jiubang Digital and its shareholders, including Sanju Advertising, Mr. Yuqiang Deng and Mr. Xiangdong Zhang, each of Jiubang Digital’s shareholders irrevocably nominates, appoints and constitutes Sungy Mobile Limited as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of its equity interests in Jiubang Digital. Each shareholder further covenants with and undertakes that, if the shareholder receives any dividends, interest, any other forms of capital distributions, residual assets upon liquidation, or proceeds or consideration from the transfer of equity interest as a result of, or in connection with, such shareholder’s equity interests in Jiubang Digital, the shareholder shall, to the extent permitted by applicable laws, remit all such dividends, interest, capital distributions, assets, proceeds or consideration to Jiubang Computer or Sungy Mobile Limited, to the extent permitted by law, without any compensation. The proxy agreement and power of attorney will remain effective as long as Jiubang Digital exists. Jiubang Digital’s shareholders do not have the right to terminate this agreement or revoke the appointment of the attorney-in-fact without the prior written consent of Sungy Mobile Limited.

Loan Agreements

Under loan agreements by and among Jiubang Computer, Jiubang Digital and each of the individual shareholders of Jiubang Digital, Jiubang Computer made interest-free loans in an aggregate amount of RMB10.0 million to the two individual shareholders of Jiubang Digital exclusively for the purpose of the capital contribution of Jiubang Digital. The loans can only be repaid with the proceeds derived from the sale of all of the equity interests in Jiubang Digital to Jiubang Computer or its designated representatives pursuant to the equity option agreement. Each of the loan agreements has an indefinite term until the full repayment of the loan thereunder.

Except the foregoing, there are not any other loan agreements between our subsidiaries and shareholders of our variable interest entities.

Exclusive Option Agreement

Under the exclusive option agreement between Sungy Mobile Limited, Jiubang Computer, Jiubang Digital and its shareholders, Sungy Mobile Limited has the right to require each of the shareholders to transfer to Sungy Data Ltd., Jiubang Computer or a third party designated by Sungy Mobile Limited, to the extent permitted under PRC law, all or part of such shareholder’s equity interests in Jiubang Digital. Also, Sungy Mobile Limited has the right to require Jiubang Digital to transfer any and all of its assets to Jiubang Computer or a third party designated by Sungy Mobile Limited and has the sole discretion as to when to exercise such options, either in part or in full. Without Sungy Mobile Limited’s prior written consent, Jiubang Digital’s shareholders shall not transfer their equity interests in Jiubang Digital, and Jiubang Digital shall not transfer its assets. The transfer price will be the minimum amount of consideration permitted under PRC law at the time of such share transfer. The agreement will remain effective as long as Jiubang Digital exists. Sungy Mobile Limited and Jiubang Computer may terminate the agreement at any time with a ten-day prior written notice to Jiubang Digital and its shareholders, whereas none of Jiubang Digital and its shareholders can terminate this agreement.

Equity Pledge Agreement

Under the equity pledge agreement between Jiubang Computer, Jiubang Digital and its shareholders, the shareholders of Jiubang Digital have pledged all of their equity interests in Jiubang Digital to Jiubang Computer to guarantee the performance of all the obligations of Jiubang Digital and its shareholder and subsidiaries under the master exclusive service agreement, business cooperation agreement, loan agreements and exclusive option agreement. This pledge will remain effective until all the guaranteed obligations are performed or all the principal agreements are terminated.

Spousal Consent Letters

Pursuant to spousal consent letters, the spouse of each of Mr. Yuqiang Deng and Mr. Yingming Chang acknowledged that certain equity interests in Jiubang Digital (directly or through Sanju Advertising) held by and registered in the name of her spouse will be disposed of pursuant to relevant arrangements under the business cooperation agreement, the proxy agreement and power of attorney, the exclusive option agreement, the equity pledge agreement and the loan agreement. These spouses undertake not to take any action to interfere with the disposition of such equity interests, including, without limitation, claiming that such equity interests constitute communal property of marriage.

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Transactions with Affiliates

Our co-founders, Mr. Yuqiang Deng and Mr. Xiangdong Zhang, borrowed RMB3,511,093 and RMB1,265,454, respectively, from our company in 2012. The outstanding amounts due to us from Mr. Deng and Mr. Zhang as of December 31, 2012 were non-interest bearing and were repaid to us in full in cash on August 21, 2013. Mr. Zhang borrowed an additional RMB517,500 from our company during the six-month period ended June 30, 2013 and subsequently repaid the full amount in cash on August 30, 2013.

We entered into an investment agreement on November 28, 2014 with Mr. Yingming Chang, our chief operation officer and director, pursuant to which both parties incorporated a new joint venture primarily engaging in lottery-related business with a registered capital of RMB24.49 million. As of March 31, 2015, we owned 49% of the equity interests in this joint venture.

Shareholders Agreements

We entered into our second amended and restated shareholders agreement in September 2013 and a supplementary agreement in October 2013 with our shareholders, which consist of holders of ordinary shares, series A, series B and series C preferred shareholders.

Under this shareholders agreement, series A, series B and series C preferred shareholders, subject to certain conditions, have a right of first refusal with respect to any issuance of new shares by us, excluding the issuance of securities in connection with our initial public offering, under our 2006 Plan and 2010 Plan. In addition, Series A, Series B and Series C preferred shareholders have a right of first refusal and a co-sale right with respect to any transfer of our shares by other shareholders, and holders of more than 80% of our preferred shares also have a drag-along right with respect to the disposition of all or substantially all of the company’s assets or business or a change of control of our company.

Except for the registration rights, all preferred shareholders’ rights were terminated upon the completion of our initial public offering.

Registration Rights in Connection with Pre-IPO Financings

Pursuant to our current second amended and restated shareholders agreement dated September 1, 2013, as amended, we have granted certain registration rights to holders of our registrable securities, which include our ordinary shares issued or issuable pursuant to conversion of our preferred shares. Set forth below is a description of the registration rights granted under the agreement.

Demand Registration Rights. (1) holders of at least 80% of our outstanding registrable securities or (2) any time after six months following the completion of our initial public offering, holders of at least 25% of our outstanding registrable securities, have the right to demand that we file a registration statement covering the registration of all or a part of registrable securities then outstanding. We, however, are not obligated to effect a demand registration if we have effected three demand registrations and such registration have been declared effective. We have the right to defer filing of a registration statement for a period of not more than 60 days after the receipt of the request of the initiating holders if our president or chief executive officer determines in good faith that filing of a registration will be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period and cannot register any other securities during such 60-day period. Further, if the registrable securities are offered by means of an underwriting and the underwriter advises the initiating holders in writing that marketing factors require a limitation of the number of securities to be underwritten, the number of the registrable securities will be allocated among the holders on a pro rata basis according to the number of registrable securities each holder requesting registration is entitled to include in the offering.

Piggyback Registration Rights. If we propose to publicly offering our ordinary shares for our own account or for the account of a security holder, other than relating to any employee benefit plan or a corporate reorganization or a registration in which the only securities being registered are ordinary shares issuable upon conversion of debt securities are also being registered, we must offer holders of our registrable securities an opportunity to include in the registration all or any part of their registrable securities. If the managing underwriters of any underwritten offering determine in good faith that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriters may decide to exclude shares from the registration and the underwriting and to allocate the number of securities first to us and second to each of holders requesting for the inclusion of their registrable securities on a pro rata basis based on the total number of registrable securities held by each such holder and third, to holders of other securities of our company, provided that (1) only in our initial public offering may any registrable securities be excluded from such offering, and (2) in the case of any of our public offering subsequent to the initial public offering, the number of securities of selling holders of registrable securities may not be reduced below 25% of the aggregate number of registrable securities requested to be included in such offering.

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Form F-3 Registration Rights. Holders have the right to request that we effect registration statements on Form F-3 at any time after our initial public offering. We, however, are not obligated to effect such registration if, among other things, (1) Form F-3 is not available for such offering by the holders of registrable securities, (2) the aggregate anticipated price of such offering is less than US$0.5 million, and (3) we have effected a registration within the six-month period preceding the date of such request for Form F-3 registration. We have the right to defer filing of a Form F-3 registration statement for a period of not more than 60 days after the receipt of the request of relevant holders if our president or chief executive officer determines in good faith that filing of such registration will be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period and cannot register any other securities during such 60-day period.

Expenses of Registration. We will bear all registration expenses and the fees of a single counsel for the selling holders incurred in connection with any demand, piggyback or F-3 registration. All the registration expenses incurred other than the demand, piggyback, or F-3 registration, will be apportioned among the selling holders and the company. We are also not required to pay for any expenses of any registration proceeding begun in response to holders’ exercise of their demand registration rights if the registration request is subsequently withdrawn at the request of the holders of a majority of the registrable securities to be registered, subject to a few exceptions.

Termination of Obligations . We have no obligation to effect any demand, piggyback or Form F-3 registration upon the earlier of (i) the fifth anniversary after the completion of our initial public offering; and (ii) as to any registrable security holder, at such time as all registrable securities owned by such holder may be sold in any three-month period without registration pursuant to Rule 144 under the Securities Act.

Registration Rights in Connection with Concurrent Private Placement

Under the registration rights agreements entered into on November 8, 2013 in connection with our concurrent private placement of Class A ordinary shares, we have granted certain registration rights to investors in the private placement, Qihoo 360 and the subsidiary of Kingsoft, both of which we will refer to as investors below. Set forth below is a description of these registration rights.

Demand registration rights. At any time starting from six (6) months after November 8, 2013, the investors will have the right to demand that we file a registration statement covering the registration of all or a part of the registrable securities they hold on a form other than Form F-3. We, however, are not obligated to effect a demand registration if we have already effected a demand registrations and such registration has been declared effective. We have the right to defer filing of a registration statement for up to 60 days after the receipt of the request of the initiating holders if our president or chief executive officer determines in good faith that filing of a registration will be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period and cannot register any other securities during such 60-day period. Further, if the registrable securities are offered by means of an underwriting and the underwriter advises the initiating holders in writing that marketing factors require a limitation of the number of securities to be underwritten, the number of the registrable securities will be allocated among the investors on a pro rata basis according to the number of registrable securities each investor requesting registration is entitled to include in the offering.

Piggyback registration rights. If we propose to register any of our shares under the Securities Act in connection with the public offering of such securities, we must offer the investors an opportunity to include in the registration all or any part of their securities that each investor may request to be registered.

Form F-3 Registration Rights. At any time starting from six (6) months after November 8, 2013, the investors will have the right to request that we effect registration statements on Form F-3. We, however, are not obligated to effect such registration if, among other things, (1) Form F-3 is not available for such offering by the holders of registrable securities, (2) the aggregate anticipated price of such offering is less than US$0.5 million, and (3) we have effected a registration within the six-month period preceding the date of such request for Form F-3 registration. We have the right to defer filing of a Form F-3 registration statement for up to 60 days after the receipt of the request of relevant holders if our president or chief executive officer determines in good faith that filing of such registration will be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period and cannot register any other securities during such 60-day period. Further, if the registrable securities are offered by means of an underwriting and the underwriter advises the initiating holders in writing that marketing factors require a limitation of the number of securities to be underwritten, the number of the registrable securities will be allocated among the investors on a pro rata basis according to the number of registrable securities each investor requesting registration is entitled to include in the offering.

105

Employment Agreements

See “Item 6. Directors, Senior Management and Employees — B. Compensation of Directors and Executive Officers — Employee Agreements” for a description of the employment agreements we have entered into with our senior executive officers.

Share Incentives

See “Item 6. Directors, Senior Management and Employees — B. Compensation of Directors and Executive Officers” for a description of share-based compensation awards we have granted to our directors, officers and other individuals as a group.

C.	Interests of Experts and Counsel

Not applicable.

ITEM 8.

FINANCIAL INFORMATION

A.	Consolidated Statements and Other Financial Information

See “Item 18. Financial Statements.”

Legal Proceedings

We are not currently a party to any pending material litigation or other legal proceeding and are not aware of any pending or threatened litigation or other legal proceeding that may have a material adverse impact on our business or operations. However, we may be subject to various legal proceedings and claims that are incidental to our ordinary course of business.

Dividend Policy

We have not paid dividend in the past and do not have any present plan to pay any dividend in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We are a holding company registered in the Cayman Islands. We may receive dividends from our PRC subsidiary for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiary to pay dividends to us. See “Item 3. Key information—D. Risk Factors—Risks Relating to Our Corporate Structure and Our Industry—Our PRC subsidiaries and PRC consolidated affiliated entities are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements” and “Item 4. Information on the Company — B. Business Overview — PRC Regulation — Regulation of Foreign Currency Exchange and Dividend Distribution .”

Our board of directors has discretion on whether to distribute dividends, subject to the applicable laws. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our Class A ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities Other than Equity Securities — D. American Depositary Shares.” Cash dividends on our Class A ordinary shares, if any, will be paid in U.S. dollars.

B.	Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

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ITEM 9.

THE OFFER AND LISTING

A.	Offering and Listing Details

See “— C. Markets” and “Item 12. Description of Securities other than Equity Securities — D. American Depositary Shares.” We have a dual-class common share structure in which Class A ordinary shares have different voting rights than Class B ordinary shares. Class B ordinary shares are each entitled to ten votes, whereas Class A ordinary shares are each entitled to one vote. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our ADSs — Our dual class common share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.”

B.	Plan of Distribution

Not applicable.

C.	Markets

Our ADSs, each representing six Class A ordinary shares, have been listed on the NASDAQ Global Market since November 22, 2013 and trade under the symbol “GOMO”. The following table provides the high and low trading prices for our ADSs on the NASDAQ Global Market for the periods indicated.


	Trading Price
	High		Low
	US$		US$
Annual High and Low
Fiscal Year 2013 (from November 22, 2013 )		22.17		12.40
Fiscal Year 2014		33.87		4.75
Quarterly Highs and Lows
Fourth Fiscal Quarter of 2013 (from November 22, 2013)		22.17		12.40
First Fiscal Quarter of 2014		33.87		18.12
Second Fiscal Quarter of 2014		25.20		11.59
Third Fiscal Quarter of 2014		14.40		5.90
Fourth Fiscal Quarter of 2014		8.64		4.75
First Fiscal Quarter of 2015		5.60		3.25
Second Fiscal Quarter of 2015 (until April 15, 2015)		5.15		3.77
Monthly Highs and Lows
November 2014		7.18		5.39
December 2014		5.83		4.75
January 2015		5.60		4.88
February 2015		5.31		4.63
March 2015		5.00		3.25
April 2015 (until April 15, 2015)		5.15		3.77

D.	Selling Shareholders

Not applicable.

E.	Dilution

Not applicable.

F.	Expenses of the Issue

Not applicable.

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ITEM 10.

ADDITIONAL INFORMATION

A.	Share Capital

Not applicable.

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B.	Memorandum and Articles of Association

We are a Cayman Islands exempted company and our affairs are governed by our memorandum and articles of association and the Companies Law (2013 Revision) of the Cayman Islands, referred to as the Companies Law below. The following are summaries of certain provisions of our memorandum and articles of association in effect as of the date of this annual report insofar as they relate to the material terms of our ordinary shares.

Registered Office and Objects

Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The memorandum of association provides, inter alia, that the liability of the members of our company is limited to the amount, if any, for the time being unpaid on the ordinary shares. The objects for which our company is established are unrestricted, and we shall have full power and authority to carry out any object not prohibited by the Companies Law or any other law of the Cayman Islands and in view of the fact that we are an exempted company, we will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of our business carried on outside the Cayman Islands.

Board of Directors

See “Item 6. Directors, Senior Management and Employees — C. Board Practices — Duties of Directors” and “— Terms of Directors and Officers.”

Ordinary Shares

General

All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Our company will issue only non-negotiable shares, and will not issue bearer or negotiable shares.

Register of Members

Under Cayman Islands law, we must keep a register of members and there should be entered therein:

(a)	the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member;

(b)	the date on which the name of any person was entered on the register as a member; and

(c)	the date on which any person ceased to be a member.

Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members should be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members.

If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default or unnecessary delay in entering on the register the fact of any person having ceased to be a member of our company, the person or member aggrieved (or any member of our company or our company itself) may apply to the Cayman Islands Grand Court for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case, make an order for the rectification of the register.

Dividends

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors (provided always that dividends may be declared and paid only out of funds legally available therefor, namely out of either profit or our share premium account).

Conversion

Class B ordinary shares may be converted into the same number of Class A ordinary shares by the holders thereof at any time, while Class A ordinary shares cannot be converted into Class B ordinary shares under any circumstances.

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Voting Rights

On a show of hands each shareholder is entitled to one vote or, on a poll, each holder of Class A ordinary shares is entitled to one vote, while each holder of Class B ordinary shares is entitled to ten votes, voting together as one class on all matters that require a shareholder’s vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one shareholder present in person or by proxy. Rule 5640 of the NASDAQ Stock Market Marketplace Rules states that voting rights of existing shareholders of publicly traded common stock cannot be disparately reduced or restricted through any corporate action or issuance. The fact that we allow shareholders to vote by show of hands unless a poll is demanded is not in compliance with this rule. However, Maples and Calder, our counsel as to Cayman Islands law, has confirmed that the Companies Law does not require us to follow or comply with the requirements set out in Rules 5640 as referred to above, and there are also no such requirements under our amended and restated memorandum and articles of association currently in effect. In addition, NASDAQ has reviewed and granted us home country exemption with respect to this point. Therefore, we intend to follow home country practice in lieu of Rule 5640 as referred to above.

Maples and Calder, our counsel as to Cayman Islands law, has advised that such voting structure is in compliance with current Cayman Islands law as in general terms, a company and its shareholders are free to provide in the articles of association for such rights as they consider appropriate, subject to such rights not being contrary to any provision of the Companies Law and not inconsistent with common law. Maples and Calder has confirmed that the inclusion in the articles of provisions giving weighted voting rights to specific shareholders generally or on specific resolutions is not prohibited by the Companies Law. Further, weighted voting provisions have been held to be valid as a matter of English common law and therefore it is expected that such would be upheld by a Cayman Islands court.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of votes attached to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of votes cast attached to the ordinary shares. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Law and our memorandum and articles of association. A special resolution will be required for important matters such as a change of name or making changes to our memorandum and articles of association.

Transfer of Ordinary Shares

Any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.

However, our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which our company has a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:

•

the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;

•

the instrument of transfer is in respect of only one class of shares;

•

the instrument of transfer is properly stamped, if required;

•

the ordinary shares transferred are free of any lien in favor of us;

•

any fee related to the transfer has been paid to us; and

•

in the case of a transfer to joint holders, the transfer is not to more than four joint holders.

If our directors refuse to register a transfer they are required, within three months after the date on which the instrument of transfer was lodged, to send to each of the transferor and the transferee notice of such refusal.

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Liquidation

On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately. We are a “limited liability” company registered under the Companies Law, and under the Companies Law, the liability of our members is limited to the amount, if any, unpaid on the shares respectively held by them. Our memorandum of association contains a declaration that the liability of our members is so limited.

Calls on Ordinary Shares and Forfeiture of Ordinary Shares

Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption, Repurchase and Surrender of Ordinary Shares

We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors or by a special resolution of our shareholders. Our company may also repurchase any of our shares provided that the manner and terms of such purchase have been approved by our board of directors or by ordinary resolution of our shareholders, or are otherwise authorized by our memorandum and articles of association. Under the Companies Law, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Law no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.

Variations of Rights of Shares

If at any time, our share capital is divided into different classes of shares, all or any of the special rights attached to any class of shares may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class. Consequently, the rights of any class of shares cannot be detrimentally altered without a majority of two-thirds of the vote of all of the shares in that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights will not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

General Meetings of Shareholders

Shareholders’ meetings may be convened by a majority of our board of directors or our chairman. Additionally, on the requisition of shareholders representing not less than one-third of the voting rights entitled to vote at general meetings, the board shall convene an extraordinary general meeting. Advance notice of at least fourteen calendar days is required for the convening of our annual general shareholders’ meeting and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least two shareholders present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in our company. Rule 5620(c) of the NASDAQ Stock Market Marketplace Rules states that each company that is not a limited partnership shall provide for a quorum as specified in its by-laws for any meeting of the holders of common stock, provided that in no case shall such quorum be less than 33 1/3 % of the outstanding shares of the company’s common voting stock. The fact that we set shareholder meeting quorum at not less than one-third in nominal value of the total issued voting shares in our company is not in compliance with this rule. However, Maples and Calder, our counsel as to Cayman Islands law, has confirmed that the Companies Law does not require us to follow or comply with the requirements set out in Rules 5620(c) as referred to above, and there are also no such requirements under our amended and restated memorandum and articles of association currently in effect. In addition, NASDAQ has reviewed and granted us home country exemption with respect to this point. Therefore, we intend to follow home country practice in lieu of Rule 5620(c) as referred to above.

111

Election and Removal of Directors

Unless otherwise determined by our company in general meeting, our articles provide that our board will consist of not less than three directors. There are no provisions relating to retirement of directors upon reaching any age limit.

The directors have the power to appoint any person as a director either to fill a casual vacancy on the board or as an addition to the existing board. An appointment of a director may be on terms that the director will automatically retire from office at the next or a subsequent annual general meeting or upon any specified event or after any specified period. A director whose term of office expires is eligible for re-election at a meeting of the shareholders or re-appointment by our board.

Our articles provide that persons standing for election as directors at a duly constituted general meeting with requisite quorum are appointed by shareholders by way of ordinary resolution.

A director may be removed with or without cause by ordinary resolution. The notice must contain a statement of the intention to remove the director and must be served on the director not less than ten calendar days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal.

Proceedings of Board of Directors

Our articles provide that our business is to be managed and conducted by our board of directors. The quorum necessary for board meetings may be fixed by the board and, unless so fixed at another number, will be a majority of the directors.

Our articles provide that the board may from time to time at its discretion exercise all powers of our company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of our company and issue debentures, bonds and other securities of our company, whether outright or as collateral security for any debt, liability or obligation of our company or of any third party.

Inspection of Books and Records

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will in our articles provide our shareholders with the right to inspect our list of shareholders and to receive annual audited financial statements.

Changes in Capital

Our shareholders may from time to time by ordinary resolution:

•

increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;

•

consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;

•

convert all or any of our paid up shares into stock and reconvert that stock into paid up shares of any denomination;

•

sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived; or

•

cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so cancelled.

We may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by our company for an order confirming such reduction, reduce our share capital or any capital redemption reserve in any manner permitted by law.

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Exempted Company

We are an exempted company with limited liability under the Companies Law of the Cayman Islands. The Companies Law in the Cayman Islands distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:

•

an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;

•

an exempted company’s register of members is not required to be open to inspection;

•

an exempted company does not have to hold an annual general meeting;

•

an exempted company may issue no par value, negotiable or bearer shares;

•

an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

•

an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

•

an exempted company may register as a limited duration company; and

•

an exempted company may register as a segregated portfolio company.

“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.

C.	Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described elsewhere in “Item 4. Information on the Company — B. Business Overview,” “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions,” or elsewhere in this annual report.

D.	Exchange Controls

See “Item 4. Information on the Company — B. Business Overview — PRC Regulation — Regulation of Foreign Currency Exchange and Dividend Distribution.”

E.	Taxation

Cayman Islands Taxation

See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Discussion of Selected Statements of Operations Items—Taxation—Cayman Islands.”

People’s Republic of China Taxation

Under the existing tax laws in the PRC, we are qualified as a non-resident enterprise. We are a holding company registered in the Cayman Islands; our holding company holds 100% of the equity interests in Jiubang Computer and indirectly holds 100% of the equity interests in Beijing XMedia Science and Technology Co., Ltd. Our business operations are principally conducted through our PRC subsidiaries and our PRC variable interest entities. The PRC Enterprise Income Tax Law and its implementation rules, both of which became effective on January 1, 2008, provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its overseas parent that is not a PRC resident enterprise and has no establishment in the PRC, will normally be subject to PRC withholding tax at a rate of 10%.

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If the PRC tax authorities determine that Sungy Mobile Limited, our Cayman Islands holding company, is a PRC resident enterprise for enterprise income tax purposes, our world-wide income could be subject to PRC tax at a rate of 25%, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, although dividends paid by one PRC tax resident to another PRC tax resident should qualify as “tax-exempt income” under the PRC Enterprise Income Tax Law, we cannot assure you that dividends by our PRC subsidiaries to our Cayman holding company will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends, and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. In addition, ADS holders may be subject to PRC withholding tax on dividends payable by us and gains realized on the sale or other disposition of ADSs or Class A ordinary shares, if the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for enterprise income tax purposes. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.”

Material United States Federal Income Tax Considerations

The following is a summary of the material United States federal income tax considerations relating to the acquisition, ownership, and disposition of our ADSs or Class A ordinary shares by a U.S. holder (as defined below) that acquires our ADSs or Class A ordinary shares and holds our ADSs or Class A ordinary shares as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, administrative pronouncements and court decisions. This summary is based on existing United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (for example, certain financial institutions, insurance companies, broker-dealers, traders in securities that have elected the mark-to-market method of accounting for their securities, partnerships and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (including private foundations)), holders who are not U.S. holders, holders who own (directly, indirectly, or constructively) 10% or more of our voting stock, investors that will hold their ADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes, or investors that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, except to the extent described below, this summary does not discuss any non-United States, alternative minimum tax, state, or local tax considerations, or the Medicare tax. Each U.S. holder is urged to consult its tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations of an investment in our ADSs or Class A ordinary shares.

General

For purposes of this summary, a “U.S. holder” is a beneficial owner of our ADSs or Class A ordinary shares that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSs or Class A ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ADSs or Class A ordinary shares and partners in such partnerships are urged to consult their tax advisors as to the particular United States federal income tax consequences of an investment in our ADSs or Class A ordinary shares.

For United States federal income tax purposes, U.S. holders of ADSs will be treated as the beneficial owners of the underlying shares represented by the ADSs. Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs will not be subject to United States federal income tax. A U.S. holder’s tax basis in withdrawn Class A ordinary shares will be the same as in the ADSs surrendered, and the holding period of withdrawn Class A ordinary shares will include the period during which the holder held the surrendered ADSs.

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Passive Foreign Investment Company Considerations

A non-United States corporation, such as our company, will be classified as a “passive foreign investment company,” or “PFIC”, for United States federal income tax purposes, if, in the case of any particular taxable year, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of its average quarterly assets (as determined on the basis of fair market value) during such year produce or are held for the production of passive income. For this purpose, cash is categorized as a passive asset. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.

Although the law in this regard is unclear, we treat our PRC variable interest entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated financial statements.

While we do not believe that we were a PFIC for United States federal income tax purposes for the taxable year ended December 31, 2014, there is a risk that we may become a PFIC for our current taxable year ending December 31, 2015 or future taxable years because of our significant cash balances and because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs or Class A ordinary shares. Accordingly, fluctuations in the market price of our ADSs or Class A ordinary shares may cause us to become a PFIC for the current or subsequent taxable years

The determination of whether we are a PFIC will also depend, in part, on the composition of our income and assets, which will be affected by how, and how quickly, we use our liquid assets . Under circumstances where we determine not to deploy significant amounts of cash for active purposes or not to treat our PRC variable interest entities as owned by us for United States federal income tax purposes, our risk of being classified as a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. If we were classified as a PFIC for any year during which a U.S. holder held our ADSs or Class A ordinary shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. holder held our ADSs or Class A ordinary shares.

The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or Ordinary Shares” is written on the assumption that we will not be classified as a PFIC for United States federal income tax purposes. The United States federal income tax rules that apply if we are classified as a PFIC for the current taxable year or any subsequent taxable year are generally discussed below under “Passive Foreign Investment Company Rules.”

Dividends

Subject to the PFIC rules discussed below, any cash distributions (including the amount of any tax withheld) paid on our ADSs or Class A ordinary shares out of our current or accumulated earnings and profits, as determined under United States federal income tax principles, will generally be includible in the gross income of a U.S. holder as dividend income on the day actually or constructively received by the U.S. holder, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be reported as a “dividend” for United States federal income tax purposes. A non-corporate recipient of dividend income is generally subject to tax on dividend income from a “qualified foreign corporation” at a reduced United States federal tax rate rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period requirements are met.

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A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (b) with respect to any dividend it pays on stock (or ADSs in respect of such stock) which is readily tradable on an established securities market in the United States. Under current IRS guidance, our ADSs will be considered readily tradable on NASDAQ, which is an established securities market in the United States, for as long as the ADSs continue to be listed on such exchange. Thus, we believe that dividends we pay on our ADSs will meet the conditions required for the reduced tax rate. Since we do not expect that our Class A ordinary shares will be listed on established securities markets, it is unclear whether dividends that we pay on our Class A ordinary shares that are not backed by ADSs currently meet the conditions required for the reduced tax rate. There can be no assurance that our ADSs will continue to be considered readily tradable on an established securities market in later years.

In the event that we are deemed to be a PRC “resident enterprise” and are liable to pay tax under the PRC Enterprise Income Tax Law, we should be eligible for the benefits of the United States-PRC income tax treaty, which the Secretary of Treasury of the United States has determined is satisfactory for purposes of clause (a) above and which includes an exchange of information provision. If we are eligible for such benefits, dividends we pay on our Class A ordinary shares, regardless of whether such shares are represented by the ADSs, should generally be eligible for the reduced rate of taxation applicable to qualified dividend income whether or not such shares are readily tradable on an established securities market in the United States. Dividends received on the ADSs or Class A ordinary shares will not be eligible for the dividends received deduction allowed to corporations. Each U.S. holder is advised to consult its tax advisors regarding the availability of the reduced tax rate applicable to qualified dividend income for any dividends we pay with respect to our ADSs or Class A ordinary shares.

Dividends will generally be treated as income from foreign sources for United States foreign tax credit purposes and will generally constitute passive category income. In the event that we are deemed to be a PRC “resident enterprise” under the PRC Enterprise Income Tax Law, a U.S. holder may be subject to PRC withholding taxes on dividends paid on our ADSs or Class A ordinary shares. A U.S. holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on ADSs or Class A ordinary shares. A U.S. holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for United States federal income tax purposes, in respect of such withholdings, but only for a year in which such U.S. holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. Each U.S. holder is advised to consult its tax advisors regarding the availability of the foreign tax credit under its particular circumstances.

Sale or Other Disposition of ADSs or Class A Ordinary Shares

Subject to the PFIC rules discussed below, a U.S. holder will generally recognize capital gain or loss upon the sale or other disposition of ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. holder’s adjusted tax basis in such ADSs or Class A ordinary shares. Any capital gain or loss will be long-term if the ADSs or Class A ordinary shares have been held for more than one year and will generally be United States source gain or loss for United States foreign tax credit purposes. The deductibility of a capital loss may be subject to limitations. In the event that we are treated as a PRC “resident enterprise” under the PRC Enterprise Income Tax Law and gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income. Each U.S. holder is advised to consult its tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or Class A ordinary shares, including the availability of the foreign tax credit under their particular circumstances.

Passive Foreign Investment Company Rules

If we are classified as a PFIC for any taxable year during which a U.S. holder holds our ADSs or Class A ordinary shares, and unless the U.S. holder makes a mark-to-market election (as described below), the U.S. holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. holder (which generally means any distribution paid during a taxable year to a U.S. holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. holder’s holding period for the ADSs or Class A ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or Class A ordinary shares. Under the PFIC rules:

•

such excess distribution and/or gain will be allocated ratably over the U.S. holder’s holding period for the ADSs or Class A ordinary shares;

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•

such amount allocated to the current taxable year and any taxable years in the U.S. holder’s holding period prior to the first taxable year in which we are classified as a PFIC, or pre-PFIC year, will be taxable as ordinary income;

•

such amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to the U.S. holder for that year; and

•

an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year.

If we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or Class A ordinary shares and any of our non-United States subsidiaries is also a PFIC, such U.S. holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. Each U.S. holder is advised to consult its tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

As an alternative to the foregoing rules, a U.S. holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to our ADSs, provided that the ADSs are regularly traded on NASDAQ. If a mark-to-market election is made, the U.S. holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder’s adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. holder makes an effective mark-to-market election, in each year that we are a PFIC any gain recognized upon the sale or other disposition of the ADSs will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election.

If a U.S. holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. holder will not be required to take into account the mark-to-market gain or loss described above during any period that such corporation is not classified as a PFIC.

Because a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. holder who makes a mark-to-market election with respect to our ADSs may continue to be subject to the general PFIC rules with respect to such U.S. holder’s indirect interest in any of our non-United States subsidiaries that is classified as a PFIC.

We do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.

As discussed above under “Dividends”, dividends that we pay on our ADSs or Class A ordinary shares will not be eligible for the reduced tax rate that applies to qualified dividend income if we are classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year. In addition, if a U.S. holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, such holder is required to file an annual report containing such information as the United States Treasury Department may require and will generally be required to file an annual IRS Form 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such holder if we are or become classified as a PFIC, including the possibility of making a mark-to-market election.

Information Reporting and Backup Withholding

Certain U.S. holders are required to report information to the IRS relating to an interest in “specified foreign financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds a specified threshold, subject to certain exceptions. These rules also impose penalties if a U.S. holder is required to submit such information to the IRS and fails to do so.

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In addition, U.S. holders may be subject to backup withholding and information reporting to the IRS with respect to dividends on and proceeds from the sale or other disposition of our ADSs or Class A ordinary shares. Each U.S. holder is advised to consult with its tax advisor regarding the application of the United States backup withholding information reporting rules to the U.S. holder’s particular circumstances.

F.	Dividends and Paying Agents

Not applicable.

G.	Statement by Experts

Not applicable.

H.	Documents on Display

We previously filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to our initial public offering of our Class A ordinary shares represented by ADSs.

We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934 or the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year which is December 31. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. Copies of reports and other information, when filed, may also be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

We will furnish JPMorgan Chase Bank, N.A., the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.

I.	Subsidiary Information

For a listing of our significant subsidiaries, see “Item 4. Information on the Company — C. Organizational Structure.”

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

A majority of our revenues and expenses of our subsidiaries and PRC consolidated affiliated entities are denominated in Renminbi and their assets and liabilities are denominated in Renminbi. Our financing activities are denominated in U.S. dollars.

To date, we have not entered into any material hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. Although our exposure to foreign exchange risks is generally limited, the value of your investment in our ADSs will be affected by the exchange rate between the U.S. dollar and the Renminbi because the value of our business is effectively denominated in Renminbi, while our ADSs will be traded in U.S. dollars.

The Renminbi is not freely convertible into foreign currencies. Remittances of foreign currencies into the PRC and exchange of foreign currencies into Renminbi require approval by foreign exchange administrative authorities and certain supporting documentation. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of Renminbi into other currencies.

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The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the revised policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy resulted in a more than 20% appreciation of the Renminbi against the U.S. dollar in the following three years. During the period between July 2008 and June 2010, the exchange rate between the Renminbi and the U.S. dollar had been stable and traded within a narrow band. However, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem with the U.S. dollar. On June 20, 2010, the People’s Bank of China announced that the PRC government would further reform the Renminbi exchange rate regime and increase the flexibility of the exchange rate. Since then, the Renminbi has started to slowly appreciate against the U.S. dollar, though there have been periods recently when the U.S. dollar has appreciated against the Renminbi. It is difficult to predict how long the current situation may last and when and how this relationship between the Renminbi and the U.S. dollar may change again. To the extent that we need to convert U.S. dollars we receive from our initial public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert the Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amounts available to us.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in market interest rates. However, our future interest income may fall short of expectations due to changes in market interest rates.

Inflation

Since our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the change of consumer price index, or CPI, in China was 2.6%, 2.6% and 2.0% in 2012, 2013 and 2014, respectively. Although we have not in the past been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.	Debt Securities

Not applicable.

B.	Warrants and Rights

Not applicable.

C.	Other Securities

Not applicable.

D.	American Depositary Shares

Fees and Charges Our ADS holders May Have to Pay

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADSs or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:

•

a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;

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•

a fee of up to US$0.05 per ADS for any cash distribution made pursuant to the deposit agreement;

•

a fee of up to US$0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);

•

a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the shares or other deposited securities, the sale of securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which fees and charges shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);

•

a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the $0.05 per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto;

•

stock transfer or other taxes and other governmental charges;

•

cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares;

•

transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities;

•

in connection with the conversion of foreign currency into U.S. dollars, JPMorgan Chase Bank, N.A. shall deduct out of such foreign currency the fees and expenses charged by it or its agent so appointed in connection with such conversion; and

•

fees of any division, branch or affiliate of the depositary utilized by the depositary to direct, manage and/or execute any public and/or private sale of securities under the deposit agreement.

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.

Our depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program upon such terms and conditions as we and the depositary may agree from time to time. The Depositary may make available to us a set amount or a portion of the depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as we and the Depositary may agree from time to time. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary.

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PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.

The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-191846) for our initial public offering of 8,050,000 ADSs, representing 48,300,000 Class A ordinary shares, which registration statement was declared effective by the SEC on November 21, 2013.

In connection with the issuance and distribution of the ADSs, we received proceeds of approximately US$84.0 million from our initial public offering (net of US$6.3 million for underwriting discounts and commissions), which we used approximately US$2.5 million for other related costs as of December 31, 2013. In 2014, we used the net proceeds of approximately RMB117.3 million (US$18.9 million) from our initial public offering for general corporate purposes, which includes the acquisition of a subsidiary, the investments in investment securities, expanding selling and marketing activities and working capital needs.

ITEM 15.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2014, the end of the period covered by this Annual Report, and has concluded that, as of such date, our disclosure controls and procedures were not effective.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) to provide reasonable assurance that the financial information prepared by us for external purposes is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with U.S. GAAP. Our board of directors is responsible for ensuring that management fulfills its responsibilities. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all possible misstatements or frauds. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

To evaluate the effectiveness of our internal control over financial reporting, our management has used the Internal Control - Integrated Framework (1992), which is a suitable, recognized control framework established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In connection with this assessment, management identified a material weakness as described below:

•

insufficient accounting personnel with appropriate U.S. GAAP knowledge for financial information processing and reporting.

Because of the material weakness identified above, the management has concluded that our internal control over financial reporting was not effective as of December 31, 2014.

Remediation Plans

In addition to the material weakness disclosed above, we have also identified a significant deficiency related to information technology general control, or ITGC, deficiencies, and we were of the view that such significant deficiency existed as of December 31, 2014.

To remedy the material weakness and the significant deficiency, we have adopted several measures to improve our internal control over financial reporting, including:

•

in 2014, we hired additional staff for the finance department who worked for a Big Four international accounting firm and have U.S. GAAP experience, and plan to hire more staff who have U.S. GAAP experience.

121

•

we have established an independent audit committee to supervise the above measures, and appointed a qualified financial expert as chairman of our audit committee.

In addition, we have started to take a number of other steps to strengthen our internal control over financial reporting, including but not limited to:

•

to periodically evaluate the sufficiency of our accounting resources and needs for recruiting additional personnel and provide our accounting staff with regular U.S. GAAP training.

•

to establish an internal audit function, establish strategies for further implementation of internal audit work and hire additional accounting staff with U.S. GAAP experience, American Institute of Certified Public Accountants certificate, extensive accounting work experience or experience working in Big Four international accounting firms.

•

to develop and implement a full set of U.S. GAAP accounting policies and financial reporting procedures as well as related internal control policies and to continually and systematically evaluate, appraise, enhance and improve these policies and procedures to meet updated U.S. GAAP requirements and our reporting obligations as an U.S.-listed company. We expect that these accounting policies and financial reporting procedures will be carried out by a qualified supporting staff overseen by our chief financial officer, who will be responsible for the final results and the quality of implementation.

•

to implement a set of policies and procedures to address our ITGC deficiencies.

The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.”

Attestation Report of the Independent Registered Public Accounting Firm

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as we qualify as an “emerging growth company” under section 3(a) of the Exchange Act (as amended by the Jumpstart Our Business Startups Act, enacted on April 5, 2012), and are therefore exempt from the attestation requirement.

Changes in Internal Control over Financial Reporting

Except for the matters described above to improve our internal control over financial reporting, there were no significant changes in our internal control over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 16.

[RESERVED]

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Dr. Feng Li is our audit committee financial expert, who is an independent director under the standards set forth in Nasdaq Stock Market Rule 5605(a)(2) and Rule 10A-3 of the Exchange Act. Dr. Li is the chairman of our audit committee.

ITEM 16B.

CODE OF ETHICS

Our board of directors has adopted a code of ethics that applies to our directors, officers, employees and agents, including certain provisions that specifically apply to our chief executive officers, chief financial officer, chief operating officer, chief technology officer, vice presidents and any other persons who perform similar functions for us. We filed our code of business conduct and ethics as Exhibit 99.1 to our registration statement on Form F-1, as amended, which was originally filed with the SEC on October 22, 2013 and subsequently amended and filed with this annual report. We have posted a copy of our code of business conduct and ethics on our website at ir.sungymobile.com .

122

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by KPMG Huazhen (SGP), our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our independent registered public accounting firm during the periods other than those indicated below.


	For the Year Ended December 31,
	2013		2014
	RMB		RMB		US$
	(In thousands)
Audit fees ⁽¹⁾		600		3,600		580
Audit-related fees ⁽²⁾		4,420		—		—
Tax fees ⁽³⁾		100		—		—
All other fees ⁽⁴⁾		—		1,370		221

(1)	“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements.

(2)	“Audit-related fees” represents the aggregate fees billed in each of the fiscal years listed for assurance and related services by our principal auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”

(3)	“Tax fees” represents the aggregated fees billed for professional services rendered by our independent registered public accounting firm for tax compliance.

(4)	“All other fees” represents the aggregate fees billed for financial due diligence services in connection with our acquisitions rendered by our independent registered public accounting firm.

The policy of our audit committee or board of directors is to pre-approve all audit and non-audit services provided by KPMG Huazhen (SGP), including audit services, audit-related services, tax services and other services as described above, other than those for de minimis services which are approved by the audit committee prior to the completion of the audit. Our audit committee or board of directors has pre-approved all of our audit services, audit-related services and tax services for the year ended December 31, 2014.

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G.

CORPORATE GOVERNANCE

We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs, each representing six Class A ordinary shares, are listed on the NASDAQ Global Market. Under Rule 5615 of the NASDAQ Stock Market Marketplace Rules, Nasdaq-listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the NASDAQ with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the NASDAQ:

•

We allow shareholders to vote by show of hands unless a poll is demanded, which is inconsistent with Rule 5640 of the NASDAQ Stock Market Marketplace Rules which states voting rights of existing shareholders of publicly traded common stock cannot be disparately reduced or restricted through any corporate action or issuance; and

•

We set shareholder meeting quorum at not less than one-third in nominal value of the total issued voting shares in our company, which is inconsistent with Rule 5620(c) of the NASDAQ Stock Market Marketplace Rules which states that each company that is not a limited partnership shall provide for a quorum as specified in its by-laws for any meeting of the holders of common stock, provided that in no case shall such quorum be less than 33 1/3 % of the outstanding shares of the company’s common voting stock.

123

ITEM 16H.

MINE SAFETY DISCLOSURE

Not applicable.

124

PART III

ITEM 17.

FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18.

FINANCIAL STATEMENTS

The consolidated financial statements of Sungy Mobile Limited. are included at the end of this annual report.

ITEM 19.

EXHIBITS


Exhibit Number		Description of Document

1.1		Seventh Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect (incorporated herein by reference to Exhibit 3.2 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

2.1		Registrant’s Specimen American Depositary Receipt (incorporated herein by reference to Exhibit 4.1 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

2.2		Registrant’s Specimen Certificate for Class A ordinary shares (incorporated herein by reference to Exhibit 4.2 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

2.3		Form of Deposit Agreement, among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

2.4		Second Amended and Restated Shareholders’ Agreement dated September 1, 2013 and the supplementary agreement dated October 8, 2013 among the Registrant, its ordinary shareholders, preferred shareholders and other parties named therein (incorporated herein by reference to Exhibit 4.4 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.1		Amended and Restated 2006 Global Share Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1, as amended (File. No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.2		Amended and Restated 2010 Global Share Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.3		Form of Indemnification Agreement between the Registrant and its director and executive officers (incorporated herein by reference to Exhibit 10.3 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.4		Form of Employment Agreement between the Registrant and its executive officers (incorporated herein by reference to Exhibit 10.4 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

125


Exhibit Number		Description of Document

4.5		Business Cooperation Agreement among Sungy Mobile Limited, formerly known as Sungy Data Ltd, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Jiubang Digital Technology Co., Ltd. and its shareholders and subsidiaries (incorporated herein by reference to Exhibit 10.5 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.6		Proxy Agreement and Power of Attorney among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Jiubang Digital Technology Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.6 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.7		Master Exclusive Services Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Jiubang Digital Technology Co., Ltd. and its subsidiaries (incorporated herein by reference to Exhibit 10.7 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.8		English Translation of the Loan Agreements among Jiubang Computer Technology (Guangzhou) Co., Ltd., Yuqiang Deng and Guangzhou Jiubang Digital Technology Co., Ltd. (incorporated herein by reference to Exhibit 10.8 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.9		English Translation of the Loan Agreements among Jiubang Computer Technology (Guangzhou) Co., Ltd., Xiangdong Zhang and Guangzhou Jiubang Digital Technology Co., Ltd. (incorporated herein by reference to Exhibit 10.9 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.10		Exclusive Option Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Jiubang Digital Technology Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.10 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.11		Equity Pledge Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Jiubang Digital Technology Co., Ltd. and its shareholders (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.12		Business Cooperation Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Sanju Advertising Media Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.12 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.13		Proxy Agreement and Power of Attorney among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Sanju Advertising Media Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.14		Master Exclusive Services Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd. and Guangzhou Sanju Advertising Media Co., Ltd. (incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

126


Exhibit Number		Description of Document

4.15		Exclusive Option Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Sanju Advertising Media Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.15 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.16		Equity Pledge Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Sanju Advertising Media Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.16 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.17		Business Cooperation Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Hengye Software Technology Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.18		Proxy Agreement and Power of Attorney among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Hengye Software Technology Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.18 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.19		Master Exclusive Services Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd. and Guangzhou Hengye Software Technology Co., Ltd. (incorporated herein by reference to Exhibit 10.19 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.20		Exclusive Option Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Hengye Software Technology Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.20 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.21		Equity Pledge Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Hengye Software Technology Co., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.21 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.22		Business Cooperation Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Zhiteng Computer Technology Co., Ltd., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.22 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.23		Proxy Agreement and Power of Attorney among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Zhiteng Computer Technology Co., Ltd., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.23 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.24		Master Exclusive Services Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd. and Guangzhou Zhiteng Computer Technology Co., Ltd., Ltd. (incorporated herein by reference to Exhibit 10.24 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

127


Exhibit Number		Description of Document

4.25		Exclusive Option Agreement among Sungy Mobile Limited, Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Zhiteng Computer Technology Co., Ltd., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.25 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.26		Equity Pledge Agreement among Jiubang Computer Technology (Guangzhou) Co., Ltd., Guangzhou Zhiteng Computer Technology Co., Ltd., Ltd. and its shareholders (incorporated herein by reference to Exhibit 10.26 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.27		Spousal Consent issued by the spouse of Yuqiang Deng (incorporated herein by reference to Exhibit 10.27 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.28		Spousal Consent issued by the spouse of Yingming Chang (incorporated herein by reference to Exhibit 10.28 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.29		Supplementary Agreement to Certain Documents in Relation to Variable Interest Entities among Sungy Mobile Limited, its variable interest entities and other parties named therein (incorporated herein by reference to Exhibit 10.29 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.30		2013 Share Incentive Plan (incorporated herein by reference to Exhibit 10.30 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.31		Subscription Agreement between Sungy Mobile Limited and Qihoo 360 Technology Co. Ltd. (incorporated herein by reference to Exhibit 10.31 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.32		Registration Rights Agreement between Sungy Mobile Limited and Qihoo 360 Technology Co. Ltd. (incorporated herein by reference to Exhibit 10.32 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.33		Subscription Agreement between Sungy Mobile Limited and Cheetah Technology Corporation Limited (incorporated herein by reference to Exhibit 10.33 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.34		Registration Rights Agreement between Sungy Mobile Limited and Cheetah Technology Corporation Limited (incorporated herein by reference to Exhibit 10.34 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

4.35		Purchasing Agreement by and among Sungy Mobile Limited, GetJar Networks Limited and other parties thereto dated February 7, 2014 (incorporated herein by reference to Exhibit 4.35 to the annual report on Form 20-F (File. No. 001-36195), filed with the Securities and Exchange Commission on April 29, 2014)

4.36*		MobileWoo Technology Holdings Limited Shares Purchase Agreement by and among Sungy Mobile Limited, MobileWoo Technology Holdings Limited and other parties thereto dated October 2, 2014

4.37*		MobileWoo Technology Holdings Limited Second Amended and Restated Right of First Refusal and Co-sale Agreement by and among Sungy Mobile Limited, MobileWoo Technology Holdings Limited and other parties thereto dated October 14, 2014

4.38*		MobileWoo Technology Holdings Limited Second Amended and Restated Members Agreement, by and among Sungy Mobile Limited, MobileWoo Technology Holdings Limited and other parties thereto dated October 14, 2014

4.39*		MobileWoo Technology Holdings Limited Second Amended and Restated Voting Agreement, by and among Sungy Mobile Limited, MobileWoo Technology Holdings Limited and other parties thereto dated October 14, 2014

4.40*		MobileWoo Technology Holdings Limited Amended and Restated Restricted Share Agreement, by and among Sungy Mobile Limited, MobileWoo Technology Holdings Limited and other parties thereto dated October 14, 2014

4.41*		Indemnification Agreement between MobileWoo Technology Holdings Limited and Yuqiang Deng dated October 14, 2014

128


Exhibit Number		Description of Document

4.42*		English Translation of Investment Agreement by and among Mr. Yingming Chang, Guangzhou Jiubang Digital Technology Co., Ltd. and Guangzhou Jiucai Information Technology Co., Ltd. dated November 28, 2014

8.1*		List of Significant Subsidiaries

11.1		Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 10.34 to the registration statement on Form F-1, as amended (File No. 333-191846), initially filed with the Securities and Exchange Commission on October 22, 2013)

129


Exhibit Number		Description of Document

12.1*		Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

12.2*		Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13.1*		Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2*		Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15.1*		Consent of Maples and Calder

15.2*		Consent of Fangda Partners

15.3*		Consent of KPMG Huazhen (SGP)

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith

130

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets			F-3
Consolidated Statements of Comprehensive Income (Loss)			F-4
Consolidated Statements of Changes in Equity (Deficit)			F-5
Consolidated Statements of Cash Flows			F-8
Notes to the Consolidated Financial Statements			F-9

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Sungy Mobile Limited

We have audited the accompanying consolidated balance sheets of Sungy Mobile Limited and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income (loss), changes in equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2014. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 financial position of Sungy Mobile Limited and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG Huazhen (SGP)

Beijing, China

April 15, 2015

F-2

SUNGY MOBILE LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,
	2013			2014
	RMB			RMB			US$
ASSETS

Current assets:
Cash and cash equivalents (including cash and cash equivalents of VIEs of RMB52,345,013 and RMB49,749,804 as of December 31, 2013 and 2014, respectively)		759,388,415			172,246,142			27,761,039
Time deposits (including time deposits of VIEs of nil and nil as of December 31, 2013 and 2014, respectively)		—			424,000,000			68,336,396
Short-term investment (including short-term investment of VIEs of RMB1,500,000 and RMB20,000,000 as of December 31, 2013 and 2014, respectively)		12,500,000			20,000,000			3,223,415
Accounts receivable, net (including accounts receivable, net of VIEs of RMB68,544,138 and RMB65,394,402 as of December 31, 2013 and 2014, respectively)		84,344,499			72,566,125			11,695,536
Amount due from a related party (including amount due from a related party of VIEs of nil and RMB6,366,986 as of December 31, 2013 and 2014, respectively)		—			6,366,986			1,026,172
Prepaid expenses and other current assets (including prepaid expenses and other current assets of VIEs of RMB11,747,964 and RMB13,029,323as of December 31, 2013 and 2014, respectively)		14,545,788			28,756,061			4,634,636
Deferred income tax assets (including deferred income tax assets of VIEs of RMB11,902,908 and RMB9,365,253 as of December 31, 2013 and 2014, respectively)		16,421,037			10,728,503			1,729,121

Total current assets		887,199,739			734,663,817			118,406,315

Property and equipment, net (including property and equipment, net of VIEs of RMB8,902,848 and RMB15,436,416 as of December 31, 2013 and 2014, respectively)		9,214,738			16,851,536			2,715,975
Intangible assets, net (including intangible assets, net of VIEs of RMB2,070,778 and RMB15,779,468 as of December 31, 2013 and 2014, respectively)		2,070,778			26,710,724			4,304,987
Goodwill (including goodwill of VIEs of nil and nil as of December 31, 2013 and 2014, respectively)		—			11,255,985			1,814,135
Equity method investments (including equity method investments of VIEs of nil and RMB17,991,306 as of December 31, 2013 and 2014, respectively)		—			19,160,580			3,088,125
Investment securities (including investment securities of VIEs of nil and RMB621,270 as of December 31, 2013 and 2014, respectively)		—			73,122,050			11,785,135
Deferred income tax assets (including deferred income tax assets of VIEs of nil and RMB1,959,905 as of December 31, 2013 and 2014, respectively)		—			1,959,905			315,879
Other non-current assets (including other non-current assets of VIEs of RMB4,354,820 and RMB6,314,243 as of December 31, 2013 and 2014, respectively)		4,518,314			9,656,340			1,556,320

Total assets		903,003,569			893,380,937			143,986,871

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable (including accounts payable of VIEs of RMB9,291,942 and RMB8,241,139 as of December 31, 2013 and 2014, respectively)		9,354,988			10,633,383			1,713,790
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of VIEs of RMB44,224,588 and RMB60,283,606 as of December 31, 2013 and 2014, respectively)		50,797,381			89,621,014			14,444,288
Income tax payable (including income tax payable of VIEs of RMB7,860,663 and RMB13,410,026 as of December 31, 2013 and 2014, respectively)		7,860,663			16,074,092			2,590,673

Total current liabilities		68,013,032			116,328,489			18,748,751
Deferred income tax liabilities (including deferred income tax liabilities of VIEs of nil and RMB2,502,636 as of December 31, 2013 and 2014, respectively)		—			2,586,593			416,883
Non-current liabilities (including non-current liabilities of VIEs of nil and nil as of December 31, 2013 and 2014, respectively)		—			2,257,528			363,847

Total liabilities		68,013,032			121,172,610			19,529,481

Shareholders’ equity:
Class A ordinary shares:
US$0.0001 par value: 850,000,000 shares authorized; 58,995,186 and 66,236,886 shares issued and outstanding as of December 31, 2013 and 2014		36,211			40,696			6,559
Class B ordinary shares:
US$0.0001 par value: 150,000,000 shares authorized; 141,435,672 and 123,172,962 shares issued and outstanding as of December 31, 2013 and 2014		97,272			86,026			13,865
Treasury shares		—			(2,852,216	)		(459,694	)
Additional paid-in capital		1,111,259,393			1,084,368,371			174,768,457
Accumulated other comprehensive income		45,021,487			59,657,446			9,615,035
Accumulated deficit		(321,423,826	)		(368,587,259	)		(59,405,483	)

Total Sungy Mobile Limited shareholders’ equity		834,990,537			772,713,064			124,538,739

Noncontrolling interests		—			(504,737	)		(81,349	)

Total shareholders’ equity		834,990,537			772,208,327			124,457,390

Commitments and contingencies		—			—			—

Total liabilities and shareholders’ equity		903,003,569			893,380,937			143,986,871

The accompanying notes are an integral part of these consolidated financial statements.

F-3

SUNGY MOBILE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB			US$
Revenues		185,218,681			328,843,318			369,219,983			59,507,459
Cost of revenues		(74,813,098	)		(94,144,743	)		(134,037,756	)		(21,602,965	)

Gross profit		110,405,583			234,698,575			235,182,227			37,904,494

Research and development expenses		(34,041,250	)		(46,641,102	)		(89,679,663	)		(14,453,738	)
Selling and marketing expenses		(45,914,065	)		(47,293,583	)		(104,196,733	)		(16,793,465	)
General and administrative expenses		(25,614,849	)		(51,246,338	)		(119,854,801	)		(19,317,087	)

Operating income (loss)		4,835,419			89,517,552			(78,548,970	)		(12,659,796	)

Share of losses of equity method investments		(1,072,946	)		—			(622,909	)		(100,395	)
Gain on disposal of an equity method investment		4,182,485			—			—			—
Investment income		124,862			360,750			9,381,389			1,512,005
Interest income		194,643			279,777			29,388,576			4,736,579
Other income		—			—			6,407,465			1,032,696

Income (loss) before income taxes		8,264,463			90,158,079			(33,994,449	)		(5,478,911	)
Income tax benefit (expense)		6,903,561			1,656,813			(13,673,721	)		(2,203,804	)

Net income (loss)		15,168,024			91,814,892			(47,668,170	)		(7,682,715	)

Net loss attributable to noncontrolling interests		—			—			504,737			81,349

Net income (loss) attributable to Sungy Mobile Limited		15,168,024			91,814,892			(47,163,433	)		(7,601,366	)

Accretion of redeemable convertible preferred shares		(58,232,795	)		(50,711,382	)		—			—

Net income (loss) applicable to common stock		(43,064,771	)		41,103,510			(47,163,433	)		(7,601,366	)

Basic earnings (loss) per Class A and Class B ordinary share		(0.83	)		0.28			(0.24	)		(0.04	)

Diluted earnings (loss) per Class A and Class B ordinary share		(0.83	)		0.27			(0.24	)		(0.04	)

Net income (loss)		15,168,024			91,814,892			(47,668,170	)		(7,682,715	)
Other comprehensive income
Unrealized gains on available-for-sale investments, net of nil income tax		—			—			11,213,323			1,807,260
Foreign currency translation adjustment, net of nil income taxes		1,334,554			4,686,070			3,422,636			551,629

Comprehensive income (loss)		16,502,578			96,500,962			(33,032,211	)		(5,323,826	)

Comprehensive loss attributable to noncontrolling interests		—			—			504,737			81,349

Comprehensive income (loss) attributable to Sungy Mobile Limited		16,502,578			96,500,962			(32,527,474	)		(5,242,477	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

SUNGY MOBILE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)


	Attributable to Sungy Mobile Limited																					Noncontrolling interests		Total Shareholders’ Equity (Deficit)
	Class A Ordinary Shares				Class B Ordinary Shares				Treasury Shares		Additional Paid-in Capital			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Sungy Mobile Limited Shareholders’ Equity (Deficit)
	Number of Shares		Amount		Number of Shares		Amount		Treasury Shares		Additional Paid-in Capital			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Sungy Mobile Limited Shareholders’ Equity (Deficit)
			RMB				RMB		RMB		RMB			RMB		RMB			RMB			RMB		RMB
Balance as of January 1, 2012		—		—		51,880,468		42,360		—		—			39,000,863		(327,181,409	)		(288,138,186	)		—		(288,138,186	)
Net income		—		—		—		—		—		—			—		15,168,024			15,168,024			—		15,168,024
Foreign currency translation adjustment, net of nil income taxes		—		—		—		—		—		—			1,334,554		—			1,334,554			—		1,334,554
Share-based compensation		—		—		—		—		—		426,083			—		—			426,083			—		426,083
Accretion of redeemable convertible preferred shares		—		—		—		—		—		(426,083	)		—		(57,806,712	)		(58,232,795	)		—		(58,232,795	)

Balance as of December 31, 2012		—		—		51,880,468		42,360		—		—			40,335,417		(369,820,097	)		(329,442,320	)		—		(329,442,320	)

F-5

SUNGY MOBILE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)


	Attributable to Sungy Mobile Limited
	Class A Ordinary Shares				Class B Ordinary Shares								Additional			Accumulated Other					Total Sungy Mobile Limitied					Total Shareholders’
	Number of				Number of						Treasury		Paid-in			Comprehensive		Accumulated			Shareholders’			Noncontrolling		Equity
	Shares		Amount		Shares			Amount			Shares		Capital			Income		Deficit			Equity (Deficit)			interests		(Deficit)
			RMB					RMB			RMB		RMB			RMB		RMB			RMB			RMB		RMB
Balance as of January 1, 2013		—		—		51,880,468			42,360			—		—			40,335,417		(369,820,097	)		(329,442,320	)		—		(329,442,320	)
Net income		—		—		—			—			—		—			—		91,814,892			91,814,892			—		91,814,892
Foreign currency translation adjustment, net of nil income taxes		—		—		—			—			—		—			4,686,070		—			4,686,070			—		4,686,070
Repurchase and cancellation of ordinary shares		—		—		(575,300	)		(414	)		—		(2,499,940	)		—		—			(2,500,354	)		—		(2,500,354	)
Ordinary shares issued in connection with exercise of share options		—		—		3,452,400			2,123			—		—			—		—			2,123			—		2,123
Issuance of ordinary shares, upon initial public offering (“IPO”), net of issuance cost of RMB60,729,250		48,300,000		29,647		—			—			—		493,624,834			—		—			493,654,481			—		493,654,481
Concurrent private placement issuance of ordinary shares in connection with IPO		10,695,186		6,564										122,759,988								122,766,552			—		122,766,552
Conversion of redeemable Series A convertible preferred shares to ordinary shares		—		—		21,428,600			13,153			—		23,047,229			—		—			23,060,382			—		23,060,382
Conversion of redeemable Series B convertible preferred shares to ordinary shares		—		—		34,226,200			21,008			—		169,411,155			—		—			169,432,163			—		169,432,163
Conversion of redeemable Series C convertible preferred shares to ordinary shares		—		—		31,023,304			19,042			—		294,386,344			—		—			294,405,386			—		294,405,386
Share-based compensation		—		—		—			—			—		17,822,544			—		—			17,822,544			—		17,822,544
Accretion of redeemable convertible preferred shares		—		—		—			—			—		(7,292,761	)		—		(43,418,621	)		(50,711,382	)		—		(50,711,382	)

Balance as of December 31, 2013		58,995,186		36,211		141,435,672			97,272			—		1,111,259,393			45,021,487		(321,423,826	)		834,990,537			—		834,990,537

F-6

SUNGY MOBILE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)


	Attributable to Sungy Mobile Limited
																			Accumulated						Total Sungy						Total
	Class A Ordinary Shares						Class B Ordinary Shares									Additional			Other						Mobile Limited						Shareholders’
	Number of						Number of						Treasury			Paid-in			Comprehensive			Accumulated			Shareholders’			Noncontrolling			Equity
	Shares			Amount			Shares			Amount			Shares			Capital			Income			Deficit			Equity (Deficit)			interests			(Deficit)
				RMB						RMB			RMB						RMB			RMB			RMB			RMB			RMB
Balance as of January 1, 2014		58,995,186			36,211			141,435,672			97,272			—			1,111,259,393			45,021,487			(321,423,826	)		834,990,537			—			834,990,537
Net loss		—			—			—			—			—			—			—			(47,163,433	)		(47,163,433	)		(504,737	)		(47,668,170	)
Unrealized gains on available-for-sale investments, net of nil income tax		—			—			—			—			—			—			19,488,246			—			19,488,246			—			19,488,246
Reclassification adjustment for gains realized in net income on an available-for-sale investment		—			—			—			—			—			—			(8,274,923	)		—			(8,274,923	)		—			(8,274,923	)
Foreign currency translation adjustment, net of nil income taxes		—			—			—			—			—			—			3,422,636			—			3,422,636			—			3,422,636
Conversion of Class B ordinary shares into Class A ordinary shares		18,262,710			11,246			(18,262,710	)		(11,246	)		—			—			—			—			—			—			—
Repurchase and cancellation of ordinary shares		(12,391,506	)		(7,601	)		—			—			(2,852,216	)		(93,460,421	)		—			—			(96,320,238	)		—			(96,320,238	)
Ordinary shares issued in connection with exercise of share options and restricted shares vested		1,370,496			840			—			—			—			1,597,490			—			—			1,598,330			—			1,598,330
Share-based compensation		—			—			—			—			—			64,971,909			—			—			64,971,909			—			64,971,909

Balance as of December 31, 2014		66,236,886			40,696			123,172,962			86,026			(2,852,216	)		1,084,368,371			59,657,446			(368,587,259	)		772,713,064			(504,737	)		772,208,327

Balance as of December 31, 2014 — US$					6,559						13,865			(459,694	)		174,768,457			9,615,035			(59,405,483	)		124,538,739			(81,349	)		124,457,390

The accompanying notes are an integral part of these consolidated financial statements.

F-7

SUNGY MOBILE LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB			US$
Operating activities:
Net income (loss)		15,168,024			91,814,892			(47,668,170	)		(7,682,715	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Share-based compensation costs		426,083			17,822,544			64,971,909			10,471,571
Depreciation and amortization		8,312,528			6,947,110			16,159,845			2,604,494
Bad debt expense		—			—			1,636,604			263,773
Loss on disposal of property and equipment		6,978			545,494			231,630			37,332
Impairment loss of property and equipment		—			1,750,000			1,333,333			214,894
Gain on disposal of intangible assets		—			(8,100	)		—			—
Gain on an exchange of an asset for an equity method investment		—			—			(6,407,465	)		(1,032,696	)
Gain on disposal of an available-for-sale investment		—			—			(8,274,923	)		(1,333,675	)
Share of losses of equity method investments		1,072,946			—			622,909			100,395
Gain on disposal of an equity method investment		(4,182,485	)		—			—			—
Deferred income tax expense (benefit)		(6,903,561	)		(9,517,476	)		5,216,108			840,684
Unrealized foreign currency exchange loss (gain)		—			(4,878,709	)		4,437,629			715,218
Changes in operating assets and liabilities (net of effect of business acquisitions)
Accounts receivable		(13,173,992	)		(38,002,909	)		18,005,895			2,902,023
Prepaid expenses and other current assets		(478,141	)		(8,328,811	)		(12,388,325	)		(1,996,636	)
Other non-current assets		(1,592,041	)		(827,969	)		28,481			4,590
Accounts payable		2,338,061			3,408,426			(9,192,931	)		(1,481,632	)
Accrued expenses and other current liabilities		13,333,119			3,517,152			34,838,000			5,614,867
Income tax payable		—			7,860,663			8,213,429			1,323,764
Non-current liabilities		(2,077,014	)		(2,220,000	)		2,257,528			363,847

Net cash provided by operating activities		12,250,505			69,882,307			74,021,486			11,930,098

Investing activities:
Receipt of government grants related to property and equipment		200,000			4,200,000			1,800,000			290,107
Purchase of property and equipment		(3,574,421	)		(12,458,382	)		(15,959,883	)		(2,572,266	)
Purchase of intangible assets		(1,563,080	)		(2,073,814	)		(12,297,767	)		(1,982,040	)
Proceeds from disposal of intangible assets		—			40,500			—			—
Purchase of available-for-sale investments		—			—			(92,299,232	)		(14,875,936	)
Proceeds from disposal of an available-for-sale investment		—			—			38,582,907			6,218,436
Purchase of short-term investment		(25,000,000	)		(52,500,000	)		(110,000,000	)		(17,728,782	)
Proceeds from maturity of short-term investment		25,000,000			40,000,000			102,500,000			16,520,001
Investment in time deposits		—			—			(424,000,000	)		(68,336,396	)
Acquisition of subsidiaries, net of acquisition costs and cash acquired		—			—			(31,052,114	)		(5,004,692	)
Investment in equity method investments		—			—			(13,497,457	)		(2,175,395	)
Proceeds from disposal of an equity method investment		—			6,400,000			—			—
Issuance of loans to related parties		(4,776,547	)		(517,500	)		—			—
Proceeds from loans repayment by related parties		—			3,828,409			—			—

Net cash used in investing activities		(9,714,048	)		(13,080,787	)		(556,223,546	)		(89,646,963	)

Financing activities:
Proceeds from issuance of ordinary shares upon IPO, net of underwriting discounts and commissions of RMB39,307,514		—			515,076,220			—			—
Payment of issuance cost of ordinary shares in connection with IPO		—			(15,342,834	)		(6,026,669	)		(971,323	)
Proceeds from concurrent private placement issuance of ordinary shares in connection with IPO		—			122,766,552			—			—
Payment for repurchase of ordinary shares		—			(2,500,354	)		(99,692,776	)		(16,067,559	)
Proceeds from exercise of share options		—			2,123			1,598,330			257,604

Net cash provided by (used in) financing activities		—			620,001,707			(104,121,115	)		(16,781,278	)

Effect of foreign currency exchange rate changes on cash		50,919			(1,013,190	)		(819,098	)		(132,014	)

Net increase (decrease) in cash and cash equivalents		2,587,376			675,790,037			(587,142,273	)		(94,630,157	)
Cash and cash equivalents at beginning of year		81,011,002			83,598,378			759,388,415			122,391,196

Cash and cash equivalents at end of year		83,598,378			759,388,415			172,246,142			27,761,039

Supplemental disclosures of cash flow information:
Income taxes paid		—			—			(244,184	)		(39,355	)
Interest paid		—			—			—			—
Non-cash investing and financing activities:
Amount receivable from disposal of an equity method investment		6,400,000			—			—			—
Amount due to a related party offset with amount due from a related party		1,465,638			—			—			—
Accounts payable for property and equipment		1,310,000			2,200,000			—			—
IPO cost payable		—			6,026,669			—			—
Exchange of an asset for an equity method investment		—			—			6,407,465			1,032,696

The accompanying notes are an integral part of these consolidated financial statements.

F-8

SUNGY MOBILE LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 ORGANIZATION AND DESCRIPTION OF BUSINESS

Sungy Mobile Limited (formerly known as Sungy Data Ltd.) (the “Parent”), a holding company, was incorporated in January 2005. In March 2005, the Parent established a wholly-owned subsidiary, Jiubang Computer Technology (Guangzhou) Co., Ltd. (“Jiubang Computer”), in the People’s Republic of China (the “PRC”). During 2005 to 2007, the Parent and Jiubang Computer entered into a series of contractual agreements (as described in Note 2(z)) with Guangzhou Jiubang Digital Technology Co., Ltd. (“Jiubang Digital”), Guangzhou Sanju Advertising Media Co., Ltd. (“Sanju Advertising”), Guangzhou Hengye Software Technology Co., Ltd. (“Hengye Software”), Guangzhou Zhiteng Computer Technology Co., Ltd. (“Zhiteng Computer”) and each of their individual equity holders. As described in Note 2(z), the Parent is the primary beneficiary of Jiubang Digital, Sanju Advertising, Hengye Software and Zhiteng Computer (collectively, the “VIEs”). In February 2014, the Parent acquired 100% equity interest of GetJar, Inc. (“GetJar”), a privately held mobile advertising network based in California, United States.

The Parent, through its consolidated subsidiaries and VIEs (collectively, referred to as the “Company”), primarily provides mobile reading services and mobile portal marketing services, and sells mobile application products and related services in the PRC. To a lesser extent, the Company also sells its products and services outside of the PRC.

The Company completed its IPO on November 22, 2013 and its ordinary shares were traded in the form of American Depositary Share (“ADS”) on the NASDAQ Global Market. Each ADS represents six Class A ordinary shares.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

(b) Principles of Consolidation

The consolidated financial statements include the financial statements of the Parent, its consolidated subsidiaries and VIEs for which the Parent, through its wholly-owned subsidiary, Jiubang Computer, is the primary beneficiary. All significant intercompany balances and transactions have been eliminated upon consolidation.

Noncontrolling interests are separately presented as a component of equity in the consolidated financial statements.

(c) Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the fair value valuations of intangibles, contingent consideration arising from business combination, financial and equity instruments and share-based payments, the collectability of accounts receivable, the realizability of deferred income tax assets, the useful lives and residual values of property and equipment and intangible assets, the estimated useful lives of mobile application products, fair value of postcontract customer support (“PCS”), and the recoverability of the carrying values of long-lived assets and goodwill. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. Actual results could differ from those estimates.

F-9

(d) Foreign Currency

The accompanying consolidated financial statements have been expressed in Renminbi (“RMB”), the Company’s reporting currency.

The functional currency of the Parent and its subsidiaries in Cayman Islands, United Kingdom, Hong Kong, and the United States is the U.S. dollar (“US$”). The functional currency of the Parent’s consolidated PRC subsidiaries and VIEs is the RMB.

Transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in a foreign currency are remeasured into the functional currency using the applicable exchange rate at the balance sheet date. The resulting exchange differences are recorded in general and administrative expenses in the consolidated statements of comprehensive income (loss).

Assets and liabilities of the entities with functional currencies other than RMB are translated into RMB using the exchange rate on the balance sheet date. Revenues and expenses are translated into RMB at average rates prevailing during the reporting period. The resulting foreign currency translation adjustments are recognized as a separate component of accumulated other comprehensive income within the consolidated statements of changes in equity (deficit).

For the convenience of readers, the 2014 RMB amounts included in the accompanying consolidated financial statements have been translated into US$ at the rate of US$1.00 = RMB6.2046, being the noon buy rate for US$ in effect on December 31, 2014 in the City of New York for cable transfer in RMB per US$ as certified for custom purposes by the Federal Reserve Bank of New York. No representation is made that RMB amounts could have been, or could be, converted into US$ at that rate or at any other certain rate on December 31, 2014, or at any other date. The US$ convenience translation is not required under U.S. GAAP and all US$ convenience translation amounts in the accompanying consolidated financial statements are unaudited.

(e) Commitments and Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

(f) Fair Value Measurements

The Company applied the provisions of Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring and nonrecurring basis. ASC Topic 820 defines fair value as the price that would be received to sell 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. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC Topic 820 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. ASC Topic 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

•

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•

Level 3 inputs are unobservable inputs for the asset or liability.

F-10

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. In situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects management’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by management based on the best information available in the circumstances.

(g) Cash and cash equivalents

Cash and cash equivalents consists of cash on hand and cash in banks. None of the Company’s cash is restricted from withdrawal.

Cash balances include demand deposits in:


	December 31,
	2013		2014
	RMB		RMB
Financial institutions in the mainland of the PRC
—Denominated in RMB		713,371,057		111,487,572
—Denominated in US$		723,094		1,071,803

Total cash balances held at mainland PRC financial institutions		714,094,151		112,559,375

Financial institutions in Hong Kong Special Administrative Region (“HKSAR”) of the PRC
—Denominated in RMB		106,581		4,525,486
—Denominated in Hong Kong dollar		62,206		17,035,313
—Denominated in US$		32,652,558		13,527,134
—Denominated in British pound		18,413		17,475

Total cash balances held at HKSAR financial institutions		32,839,758		35,105,408

Financial institutions in United States
—Denominated in RMB		64,145		83,982
—Denominated in US$		12,131,440		23,909,436

Total cash balances held at United States financial institutions		12,195,585		23,993,418

Total cash balances held at financial institutions		759,129,494		171,658,201

Management believes these financial institutions have high credit ratings.

(h) Accounts Receivable

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. Accounts receivable are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

F-11

(i) Property and Equipment, net

Property and equipment is stated at historical cost.

Depreciation expense is calculated based on the straight line method over the following useful lives, taking into consideration the assets’ estimated residual value:


Computer equipment		3 to 5 years
Office equipment and furniture		3 to 5 years
Motor vehicles		4 years
Leasehold improvements		the shorter of the lease terms or the estimated useful lives of the assets

(j) Intangible Assets

Intangible assets mainly comprise literature content copyrights, intellectual properties, trademark and licenses. Intangible assets which have been acquired in business combinations are initially recorded at estimated fair value. Intangible assets not acquired in business combinations are initially recorded at cost. The estimated useful life of intangible assets, which is the period over which the intangible asset is expected to contribute directly or indirectly to the future cash flows of the Company, ranges between 1 and 10 years. Intangible assets are amortized on a straight-line basis, as the pattern of the economic benefit of intangible assets cannot be reliably determined over their estimated useful lives.

(k) Impairment of Long-Lived Assets, excluding Goodwill

Long-lived assets, excluding goodwill, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

(l) Goodwill

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is reviewed for impairment at least annually. The Company performs a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that the fair value of a reporting is greater than its carrying amount, the two-step goodwill impairment test is not required.

The Company performs its annual impairment review of goodwill at December 31, and when a triggering event occurs between annual impairment tests. No impairment loss was recorded for any of the periods presented.

F-12

(m) Business Combination

The Company accounts for its business combinations using the purchase method of accounting in accordance with ASC topic 805 (“ASC 805”): Business Combinations. The purchase method of accounting requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities the Company acquired, based on their estimated fair values. The consideration transferred of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.

The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and noncontrolling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Company determines discount rates to be used based on the risk inherent in the acquiree’s business model and industry comparisons. Terminal values are based on the expected life of assets, forecasted life cycle and forecasted cash flows over that period.

(n) Equity method investments

The Company applies the equity method to account for an equity investment, in common stock or in-substance common stock, according to ASC 323 Investment — Equity Method and Joint Ventures, over which it has significant influence but does not own a majority equity interest or otherwise control.

An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity’s common stock. The Company considers subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity’s common stock.

Under the equity method of accounting, the Company’s share of the investee’s results of operations is reported as share of income (losses) of equity method investments in the consolidated statements of comprehensive income (loss).

The Company recognizes an impairment loss when there is a decline in value below the carrying value of the equity method investment that is considered to be other-than-temporary. The process of assessing and determining whether impairment on an investment is other-than-temporary requires a significant amount of judgment. To determine whether an impairment is other-than-temporary, management considers whether it has the ability and intent to hold the investment until recovery and whether evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the decline in value, any change in value subsequent to the period end, and forecasted performance of the investee.

F-13

(o) Investment securities

Investment securities at December 31, 2014 consist of corporate convertible debt and equity securities. The classification of investment securities is based on the Company’s intent, which is re-evaluated at each balance sheet date, with respect to those securities. Investment securities other than trading securities and held-to-maturity securities are classified as available-for-sale. Available-for-sale are carried at fair value with unrealized gains and losses, net of income tax as a separate component of accumulated other comprehensive income within the consolidated statements of changes in equity (deficit). A decline in the fair value of an available-for-sale that is deemed to be other-than-temporary results is an impairment to reduce the carrying amount to fair value. Realized gains and losses and impairment, which are judged to be other than temporary, if any, are recognized in the consolidated statements of comprehensive income (loss). In computing realized gains and losses on available-for-sale securities, the Company determines cost based on amounts paid, including direct costs to acquire the security.

As at December 31, 2014, all of the Company’s investment securities are classified as available-for-sale investments.

(p) Operating Leases

The Company leases premises for offices under non-cancellable operating leases. Leases with escalated rent provisions are recognized on a straight-line basis commencing with the beginning of the lease term. There are no capital improvement funding, other lease concessions or contingent rent in the lease agreements.

The Company subleases a portion of the leased premises to a third party. Income from subleases is recognized on a straight-line basis over the term of the lease and recognized as a reduction of gross rental expenses.

(q) Revenue Recognition

Revenue is recognized when all of the following conditions are met: persuasive evidence of an agreement exists, delivery has occurred or service has been rendered, the price is fixed or determinable and collectability is reasonably assured. The Company evaluates whether it is appropriate to record the gross amount of its revenues and related costs by considering a number of factors, including, among other things, whether the Company is the primary obligor under the arrangement, has inventory risk, and has latitude in establishing prices.

These criteria as they relate to each of the following major revenue generating activities are described below.

Mobile Application Products and Services Revenue

The Company develops and sells mobile application products, including GO Series applications and themes and widgets that can be used in the application through online application stores such as Google Play. Mobile phone users can access those stores and download the mobile application products by making payment through the payment agents authorized by the relative stores.

For the sale of mobile application products, when no free updates or other PCS are provided, revenues are recognized upon the delivery of the mobile application products and the other revenue recognition criteria are met at time of delivery.

The Company began to sell a mobile application product in December 2012 for which free upgrades were provided on a when-and-if-available basis for an unspecified period, which is considered PCS. Since the Company was not able to establish vendor-specific objective evidence (“VSOE”) of the fair value of the PCS, the Company recognized revenue from the sale of the mobile application ratably over the estimated life of the mobile application during the year ended December 31, 2012.

In June 2013, the Company’s management having the relevant authority established the selling price or VSOE of the PCS. The sales term of the mobile application product was modified by explicitly stating separate sales prices for the mobile application and the one-year free upgrades, as well as the annual renewal rate for upgrades after the one year period. The Company believes the annual renewal rate for the upgrades is substantive because the renewal rate is within the Company’s normal pricing practice and the expected life of mobile application product is more than two years.

F-14

The separate sales prices for the mobile application with the one-year free upgrades, and the annual renewal rate were introduced to the marketplace within 30 days after they were established by the Company’s management having the relevant authority and did not change from the prices established by management having the relevant authority.

Therefore, for the years ended December 31, 2013 and 2014, upon the sale of the mobile application, the consideration attributable to the fair value of the PCS is initially deferred and recognized as revenue on a straight-line basis over the one year service period with the remaining or residual consideration recognized as revenue. The Company does not sell the mobile application product without PCS.

The Company also offers advertising service on its mobile application products. The Company’s revenue recognition policy for the provision of advertising services on the Company’s mobile application products is the same as the revenue recognition policy for the provision of advertising services on the Company’s portal websites described below.

The majority of the Company’s revenues for mobile application products and services are derived from countries outside of China.

Mobile Reading Revenue

Service provided directly to users

The Company generates revenue from the sale of online premium literature contents to the users. The users purchase the content by chapter or by book and cannot cancel the purchase once made.

The content sold to the users usually has no expiry period unless otherwise stated. The revenue from the sale of online content or other community tools (such as votes and gifts for an author) is recognized at the time of sale as the Company does not have any further obligation after providing the content to the user upon sale and all other criteria for revenue recognition are met.

Service provided to users through third parties

The Company also derives revenues by providing its literature contents to third parties, primarily mobile operators. The Company uploads the literature content to wireless platforms of the mobile operators and the royalty right resides with the Company. The mobile operators charge a fee from its wireless users when they access the Company’s literature contents through the mobile operator’s wireless platform via their wireless devices (such as mobile handsets). Such fee is charged either on a monthly subscription basis under which users can access the variety of contents offered on the mobile operators’ platform or per usage basis based on the number of books or chapters of the Company’s literature content accessed by the users. The Company receives an agreed percentage of the fee from the mobile operators.

For the per usage basis arrangement, the Company has access to the information on the content accessed by the wireless users from a platform operated by the mobile operator on a monthly basis. With respect to the monthly subscription basis arrangement, the Company relies on the monthly billing statements generated by the mobile operator each month to determine its share of the fees. There is normally time lag of 3 to 4 months until the Company receives the billing statements from the mobile operator and the Company has no visibility into these revenues prior to receipts of the billing statements.

•

Under the per usage basis, since the Company has timely access to usage information, revenues are recognized in the period in which the content has been provided that no significant obligation remains, collection of the receivable is reasonably assured and the amounts can be reliably estimated. The revenue is measured based on Company’s analysis of the usage information for the month provided by the mobile operators and the contractual rates with the mobile operators. Based on revenues amounts subsequently confirmed by the mobile operators, there were no significant adjustments between the Company’s analysis of the usage information and the mobile operators’ statements received during the periods presented.

•

Under the monthly subscription basis, since the Company does not have timely access to usage information, revenue is recognized in the period when the billing statements for the related service have been received.

The revenues recognized under the arrangements with the mobile operators represent only the Company’s share of the revenues to be received from the operators since the Company is not the primary obligor in the arrangement.

F-15

Mobile Portal Marketing Revenue

The Company offers customers to advertise on its portal websites in particular formats and over particular periods of time. The portal advertising formats primarily include banners, links, logos, buttons, pop-up windows, jump-out boxes, floating signs, and rich media. Portal advertising agreements are entered into with various third-party advertising agencies representing their customers and with advertising customers directly. For certain advertising agreements, the Company is required to pay certain percentages of revenues to the advertising agencies as rebates. The Company has two pricing models offered to advertisers, consisting of a fixed price pricing model and a cost per action pricing model.

Under the fixed price pricing model, the Company charges advertisers a fixed fee to advertise over a period of time. Mobile portal marketing revenue, net of agency cash rebates, is recognized ratably over the period in which the advertisement is displayed and only if collection of the resulting receivable is reasonably assured.

Under the cost per action pricing model, the advertisers pay the Company only when a user clicks on or downloads one of their advertisements or installs or activates the products advertised. The Company recognizes revenue on the fees charged to advertisers each time a user clicks on or downloads one of the advertisements or installs or activates the products advertised that appear on the Company’s portal websites.

Other Revenues

Other revenues are primarily derived from fee received from third parties for the sale of digital products and services such as paid content, picture download, and access to game or music files, that are provided by third parties or developed by ourselves. The Company recognizes the fee as revenue once the products are delivered or the services are rendered.

Revenue concentration

Revenue from a customer that individually exceeds 10% of the Company’s total revenues is from a mobile operator. Revenue derived from this customer is as follows:


	2012					2013					2014
	RMB		%			RMB		%			RMB		%
Customer A		54,564,962		29	%		68,220,511		21	%		78,951,174		21	%

Customers accounting for 10% or more of accounts receivable, net are as follows:


	December 31,
	2013					2014
	RMB		%			RMB		%
Customer A		16,397,159		19	%		24,162,975		33	%
Customer B		15,800,361		19	%		—		—

Business Tax and Value Added Tax (“VAT”)

Revenue is net of business taxes at the rate of 3-5% of gross revenues or VAT at the rate of 6% of gross revenues. Business tax and VAT collected from customers, net of VAT paid for purchases, are recorded as liabilities in the consolidated balance sheets until it is paid to the tax authorities.

(r) Cost of Revenues

Costs of revenues consist primarily content acquisition cost, such as copyright fees for online literature, fees paid to third parties for developing themes, distribution fee, which is the amount paid or payable to third parties that direct customers to access the Company’s products or services, processing fees paid to mobile application stores, custody and bandwidth costs, office rental fees, depreciation expense, salaries and benefits, share-based compensation and other expenses of those departments directly involved in the provision of the Company’s services and the sale of mobile application products.

F-16

(s) Research and Development Expenses

Research and development expenses primarily consist of software developed for internal use and mobile application products developed for sale.

Software developed for internal use

The Company expenses all costs that are incurred in connection with the planning and implementation phases of the development of software. Costs incurred in the development phase are capitalized and amortized over the estimated product life. No costs were capitalized for any of the periods presented.

Mobile application products developed for sale

Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior to technological feasibility being established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Technological feasibility is established upon completion of all the activities that are necessary to substantiate that the software product can be produced in accordance with its design specifications, including functions, features, and technical performance requirements. No costs were capitalized for any of periods presented.

(t) Government Grant

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be received. Government grants for the purpose of giving financial support to the Company for a specific project with future related costs are recognized as a deduction to the project cost when incurred in the Company’s consolidated statements of comprehensive income (loss). Government grants that compensate the acquisition cost of an asset are deducted from the carrying amount of the asset and effectively recognized in profit or loss over the useful life of the asset by way of reducing depreciation expense. Government grants for the purpose of giving immediate financial support with no future costs or obligations are recognized as a deduction to general and administrative expenses when received in the Company’s consolidated statements of comprehensive income (loss).

Government grants received in advance is recorded in accrued expenses and other current liabilities or non-current liabilities in the consolidated balance sheet based on the expected period of usage of the government grants.

(u) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or tax laws is recognized in the consolidated statements of comprehensive income (loss) in the period the change in tax rates or tax laws is enacted. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion or all of the deferred income tax assets will not be realized.

The Company recognizes in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to an unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of comprehensive income (loss).

F-17

(v) Employee Benefit Plans

As stipulated by the regulations of the PRC, the Company’s consolidated PRC subsidiaries and VIEs are required to contribute to various defined contribution plans, organized by municipal and provincial governments on behalf of their employees. The contributions to these plans are based on certain percentages of the employee’s standard salary base as determined by the local social security bureau. The Company has no other obligation for the payment of employee benefits associated with these plans beyond the annual contributions described above.

Employee benefit expenses recognized under these plans for the years ended December 31, 2012, 2013 and 2014 are allocated to the following items:


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Cost of revenues		3,040,042		3,188,742		2,786,334
Research and development expenses		3,622,003		4,520,663		6,594,053
Selling and marketing expenses		4,174,193		4,379,517		3,464,992
General and administrative expenses		2,034,011		2,592,891		2,411,533

Total employee benefit expenses		12,870,249		14,681,813		15,256,912

(w) Share-based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. The amount of cost recognized is adjusted to reflect the expected forfeiture prior to vesting. When no future services are required to be performed by the employee in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the award is expensed on the grant date. The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date.

(x) Earnings (Loss) per Share

Basic earnings (loss) per Class A and Class B ordinary share is computed by dividing net income (loss) attributable to Class A and Class B ordinary shareholders by the weighted average number of Class A and Class B ordinary shares outstanding during the year using the two-class method. Under the two-class method, net income (loss) is allocated between Class A and Class B ordinary shares and other participating securities based on participating rights in undistributed earnings. The Company’s redeemable convertible preferred shares are participating securities since the holders of these securities participate in dividends on the same basis as Class A and Class B ordinary shareholders. These participating securities are not included in the computation of basic loss per Class A and Class B ordinary share in periods when the Company reports net loss, taking into consideration of the accretion of redeemable convertible preferred shares, because these participating security holders have no obligation to share in the loss of the Company based on the contractual rights and obligations of these participating securities.

Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to Class A and Class B ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of Class A and Class B ordinary and dilutive Class A and Class B ordinary equivalent shares outstanding during the year. Class A and Class B ordinary equivalent shares consist of Class A and Class B ordinary shares issuable upon the exercise of outstanding share options (using the treasury stock method). Potential dilutive securities are not included in the calculation of dilutive earnings (loss) per Class A and Class B share if the impact is anti-dilutive.

(y) Segment Reporting

The Company uses the management approach in determining reportable operating segments. The management approach considers the internal reporting used by the Company’s chief operating decision maker for making operating decisions about the allocation of resources of the segment and the assessment of its performance in determining the Company’s reportable operating segments. Management has determined that the Company has one operating segment, which is the mobile internet related business.

F-18

(z) Variable Interest Entities

The Company’s sales are conducted through VIEs, in order to comply with the PRC laws and regulations which prohibit foreign investments in companies that are engaged in mobile internet related business. The equity interests of VIEs are legally held by individuals who act as nominee equity holders of the VIEs on behalf of the Parent.

A series of contractual agreements, including loan agreements, master exclusive service agreements, business cooperation agreements, exclusive option agreements, proxy agreements and powers of attorney, equity pledge agreements and spousal consent letters (collectively, the “VIE Agreements”) were entered among the Parent, Jiubang Computer, the VIEs, and the nominee equity holders of the VIEs. Through these agreements, the nominee equity holders have granted all their legal rights including voting rights and disposition rights of their equity interests in the VIEs to the Parent and Jiubang Computer. Accordingly, the nominee equity holders of the VIEs do not participate significantly in income and loss and do not have the power to direct the activities of the VIEs that most significantly impact their economic performance.

In accordance with ASC 810-10-25-38A, the Parent has a controlling financial interest in the VIEs because the Parent has (i) the power to direct activities of the VIEs that most significantly impact the economic performance of the VIEs; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIEs that could potentially be significant to the VIEs.

Under the terms of the VIE Agreements, the Parent has (i) the right to receive economic benefits that could potentially be significant to the VIEs in the form of service fees under the master exclusive service agreements when such services are provided; (ii) the right to receive all dividends declared by the VIEs and the right to all undistributed earnings of the VIEs; (iii) the right to receive the residual benefits of the VIEs through its exclusive option to acquire 100% of the equity interests in the VIEs, to the extent permitted under PRC law. Accordingly, the financial statements of the VIEs are consolidated in the Parent’s consolidated financial statements.

Under the terms of the VIE Agreements, the VIEs’ nominee equity holders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Parent. All of the equity (net assets) or deficits (net liabilities) and net income (loss) of the VIEs are attributed to the Parent.

The key terms of these VIE Agreements, as amended and restated, are as follows:

Loan agreements: Jiubang Computer lent to the VIEs’ nominee equity holders interest free loans in the amount of RMB14,600,000 for the sole purpose of their contribution of the VIEs’ registered capital. The loans can only be repaid with the proceeds derived from the sale of the VIEs’ equity interests to Jiubang Computer or its designated representatives pursuant to the exclusive option agreements. Each of the loan agreements has an indefinite term until the full repayment of the loan thereunder.

Master exclusive service agreements: The VIEs irrevocably appoint and designate Jiubang Computer as their exclusive service provider to provide services, including but not limited to technology development service, technical consulting service, network development service and market research and consulting service to the VIEs. The service fees are determined based on certain objective criteria such as the technical difficulty and complexity of the services provided by Jiubang Computer and the actual labor costs incurred by Jiubang Computer for providing the services during the relevant period. The term of this agreement is 10 years, and the agreement may be automatically extended upon the expiration. Jiubang Computer may terminate the agreements at any time with a 30-day prior written notice to VIEs, whereas none of VIEs can terminate this agreement.

Business cooperation agreements: The Parent, Jiubang Computer, the VIEs and their nominee equity holders agreed that the VIEs may not enter into any transaction that could materially affect the assets, obligation, right or operations of the VIEs, without prior written consent from Jiubang Computer. In addition, directors or other senior management of the VIEs must be appointed by the Parent and the Jiubang Computer. To ensure sufficient cash flow required by the business operations of the VIEs, the Parent agrees that it shall, to the extent permissible under PRC law, through itself or any party designated by it, provide financial support to the VIEs. The agreements shall be in effect as long as VIEs exists. None of VIEs or VIEs’ nominee equity holders can terminate these agreements. Jiubang Computer may terminate the agreements by providing a 30-day prior written notice to VIEs and VIEs’ nominee equity holders.

F-19

Exclusive option agreements: Through the exclusive option agreements entered into among the Parent, the VIEs and their nominee equity holders, Jiubang Computer or any other party designated by the Parent, has an exclusive purchase option to acquire all of the equity interest or assets in the VIEs from their nominee equity holders at any time when permitted by applicable Chinese laws and regulations. The proceeds from the exercise of the call options will be applied to repay the loans under the loan agreements described above. The Parent has the sole discretion as to when to exercise such options, either in part or in full. Without the Parent’s prior written consent, VIEs’ nominee equity holders shall not transfer their equity interests in VIEs, and VIEs shall not transfer its assets. The transfer price will be the minimum amount of consideration permitted under PRC law at the time of such share transfer. The agreements will remain effective as long as VIEs exist. The Parent and Jiubang Computer may terminate the agreements at any time with a 10-day prior written notice to VIEs and their nominee equity holders, whereas none of VIEs and their nominee equity holders can terminate the agreements.

Proxy agreements and powers of attorney: The VIEs’ nominee equity holders signed proxy agreements and powers of attorney, with the Parent and Jiubang Computer to exclusively assign their rights as equity holders of the VIEs to the Parent, including voting right, right to transfer any or all equity interest in the VIEs and right to appoint director and executive management. VIEs’ nominee equity holders further covenants and undertakes that, if nominee equity holder receives any dividends, interest, any other forms of capital distributions, residual assets upon liquidation, or proceeds or consideration from the transfer of equity interest as a result of, or in connection with, such equity interests in VIEs, the VIEs’ nominee equity holders shall, to the extent permitted by applicable laws, remit all such dividends, interest, capital distributions, assets, proceeds or consideration to Jiubang Computer or the Parent, to the extent permitted by law, without any compensation. The proxy agreements and powers of attorney will remain effective as long as VIEs exist. VIEs’ nominee equity holders do not have the right to terminate the agreements and powers of attorney without the prior written consent of the Parent.

Equity pledge agreements: To guarantee VIEs’ performance of their obligations under the master exclusive service agreements, business cooperation agreements, loan agreements and the exclusive option agreements, the VIEs’ nominee equity holders have pledged their entire equity interests in the VIEs to Jiubang Computer. The equity pledges under the equity pledge agreements were registered with the relevant local authority on July 26, 2013. Neither the nominee equity holders of the VIEs will create or allow any encumbrance on the pledged equity interests. The share pledge agreement can only be terminated upon the termination of the master exclusive service agreements, business cooperation agreements, loan agreements and exclusive option agreements.

Spousal consent letters: The spouses of each of nominee equity holders signed spousal consent letters to consent that certain equity interests in the VIEs held by and registered in the name of the respective nominee equity holders will be disposed of pursuant to the VIE agreements. These spouses undertake not to take any action to interfere with the disposition of such equity interests, including, without limitation, claiming that such equity interests constitute communal property of marriage. These spouses also waive unconditionally and irrevocably any rights or entitlements whatsoever to such equity interest that may be granted to them according to any applicable laws.

Risks and uncertainties of the VIE Agreements: The Parent, through Jiubang Computer, relies on the VIE Agreements to operate and control the VIEs. However, these contractual arrangements may not be as effective as direct equity ownership in providing the Parent with control over the VIEs. Any failure by the VIEs or their nominee equity holders to perform their obligations under the VIE Agreements would have a material adverse effect on the Company’s consolidated financial position and financial performance. All the VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the Parent’s or Jiubang Computer’s ability to enforce these contractual arrangements. In addition, if the legal structure and the VIE Agreements were found to be in violation of any existing or future PRC laws and regulations, the Company may be subject to fines or other legal or administrative sanctions.

F-20

In the opinion of management, based on the legal opinion obtained from the Company’s PRC legal counsel, the above contractual arrangements are legally binding and enforceable and do not violate current PRC laws and regulations. However, there are uncertainties regarding the interpretation and application of existing and future PRC laws and regulations.

Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and the VIE Agreements are found to be in violation of any existing or future PRC laws and regulations, the PRC government could:

•

levy fines on the Company or confiscate income of the Company;

•

revoke or suspend Jiubang Computer or VIEs’ business or operating licenses;

•

shut down VIEs’ servers or block VIEs’ website, and discontinue or place restrictions or onerous conditions on VIE’s operations;

•

require the Company to discontinue their operations in the PRC;

•

require the Company to undergo a costly and disruptive restructuring;

•

take other regulatory or enforcement actions that could be harmful to the Company’s business.

If the imposition of any of these government actions, or any inability to enforce the contractual arrangements upon a breach, causes the Parent to lose its ability to direct the activities of the VIEs and to receive substantially all the economic benefits and residual returns from the VIEs, the Parent would no longer be able to consolidate the financial results of the VIEs. Total assets, total liability, equity, revenues, net income (loss) and cash flows of the Company would be significantly less than the reported amount in the consolidated financial statements of the Company. In the opinion of management, the likelihood of loss resulting from the VIE Agreements is remote based on current facts and circumstances.

The equity interests of the VIEs are legally held by Deng Yuqiang, the Company’s chief executive officer and director, Chang Yingming, the Company’s chief operating officer and director, and Zhang Xiangdong, former president and former director of the Company (nominee equity holders). Deng Yuqiang, Chang Yingming and Zhang Xiangdong each holds 20.54%, 0.55% and 4.39% of the Parent’s total ordinary shares issued and outstanding as of December 31, 2014, respectively. The Company cannot assure that when conflicts of interest arise, any of the nominee equity holders will act in the best interests of the Company or such conflicts will be resolved in the Company’s favor. Currently, the Company does not have any arrangements to address potential conflicts of interest between the nominee equity holders and the Company, except that the Parent could exercise the purchase option under the exclusive option agreements with the nominee equity holders to request them to transfer all of their equity ownership in the VIEs to the Parent, Jiubang Computer or a third party designated by the Parent. The Company relies on the nominee equity holders, two of whom are the Parent’s directors and owe a fiduciary duty to the Parent, to comply with the terms and conditions of the contractual arrangements. Such fiduciary duty requires directors to act in good faith and in the best interests of the Parent and not to use their positions for personal gains. If the Company cannot resolve any conflict of interest or dispute between the Company and the nominee equity holders of the VIEs, the Company would have to rely on legal proceedings, which could result in disruption of the Company’s business and subject the Company to substantial uncertainty as to the outcome of any such legal proceedings.

On January 19, 2015, Ministry of Commerce of PRC (“MOFCOM”) published a draft of the PRC law on Foreign Investment (Draft for Comment), of the Draft Foreign Investment Law, which was open for public comments until February 17, 2015. At the same time, MOFCOM published an accompanying explanatory note of the Draft Foreign Investment Law, or the Explanatory Note, which contains important information about the Draft Foreign Investment Law, including its drafting philosophy and principles, main content, plans to transition to the new legal regime and treatment of business in China controlled by foreign invested enterprises, or “FIEs”, primarily through contractual arrangements. The Draft Foreign Investment Law is intended to replace the current foreign investment legal regime consisting of three laws: the Sino-Foreign Equity Joint Venture Enterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-Invested Enterprise Law, as well as detailed implementing rules. The Draft Foreign Investment Law proposes significant changes to the PRC foreign investment legal regime and may have a material impact on Chinese companies listed or to be listed overseas. The proposed Draft Foreign Investment Law is to regulate FIEs the same way as PRC domestic entities, except for those FIEs that operate in industries deemed to be either “restricted” or “prohibited’ in a “Negative List.” Because the Negative List has yet to be published, it is unclear whether it will differ from the current list of industries subject to restrictions or prohibitions on foreign investment. The Draft Foreign Investment Law also provides that only FIEs operating in industries on the Negative List will require entry clearance and other approvals that are not required of PRC domestic entities. As a result of the entry clearance and approvals, certain FIE’s operating in industries on the Negative List may not be able to continue to conduct their operations through contractual arrangements.

F-21

There is substantial uncertainty regarding the Draft Foreign Investment Law, including, among others, what the actual content of the law will be as well as the adoption and effective date of the final form of the law. While such uncertainty exists, the Company cannot assure that the new foreign investment law, when it is adopted and becomes effective, will not have a material and adverse effect on the Company’s ability to control the VIEs through the contractual arrangements.

F-22

The Company’s involvement with the VIEs under the VIE Agreements affected the Company’s consolidated financial position, results of operations and cash flows as indicated below.

The assets and liabilities of the VIEs as of December 31, 2013 and 2014 and the revenues, net income (loss) and cash flows for the years ended December 31, 2012, 2013 and 2014 are as follows:


	December 31,
	2013		2014
	RMB		RMB
Cash and cash equivalents		52,345,013		49,749,804
Short-term investment		1,500,000		20,000,000
Accounts receivable, net		68,544,138		65,394,402
Amounts due from related parties		114,891,133		78,123,131
Prepaid expenses and other current assets		11,747,964		13,029,323
Deferred income tax assets		11,902,908		9,365,253

Total current assets		260,931,156		235,661,913

Property and equipment, net		8,902,848		15,436,416
Intangible assets, net		2,070,778		15,779,468
Equity method investments		—		17,991,306
Investment securities		—		621,270
Deferred income tax assets		—		1,959,905
Other non-current assets		4,354,820		6,314,243

Total assets		276,259,602		293,764,521

Accounts payable		9,291,942		8,241,139
Accrued expenses and other current liabilities		44,224,588		60,283,606
Amounts due to related parties		158,443,366		150,846,323
Income tax payable		7,860,663		13,410,026

Total current liabilities		219,820,559		232,781,094

Deferred income tax liabilities		—		2,502,636

Total liabilities		219,820,559		235,283,730


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Revenues		184,887,591		313,398,188		289,123,486
Net income		17,517,799		102,669,162		2,041,748


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB
Net cash provided by (used in) operating activities		(2,669,330	)		23,575,560			69,032,991
Net cash provided by (used in) investing activities		(9,714,048	)		(33,227,083	)		(83,009,375	)
Net cash provided by (used in) financing activities		(5,840,000	)		13,950,000			11,381,174

Amounts due from/to related parties represent the amounts due from/to the Parent’s subsidiaries, which are eliminated on consolidation, and a receivable of RMB6,366,986 due from a related party.

All of the assets of the VIEs can be used only to settle obligations of VIEs. None of the assets of the VIEs has been pledged or collateralized. The creditors of the VIEs do not have recourse to the general credit of the Parent or its consolidated subsidiaries.

F-23

(aa) Recently Issued Accounting Standards

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for annual reporting periods beginning after December 15, 2016. The Company will implement the provisions of ASU 2014-09 as of January 1, 2017. The Company has not yet determined the impact of the new standard on its current policies for revenue recognition.

3 BUSINESS COMBINATION

On February 7, 2014, the Company acquired 100% equity interest of GetJar, a privately held mobile advertising network based in California, United States, and certain intellectual properties and trademark owned by GetJar Networks Limited. This acquisition was made to support the Company’s mobile advertising research and development initiatives. The results of GetJar’s operations have been included in the Company’s consolidated financial statements since February 7, 2014.

Among the total purchase consideration, cash consideration, net of acquisition cost of approximate RMB27.0 million or US$4.4 million was paid upon the consummation of the acquisition and RMB3.0 million or US$0.5 million was deposited in an escrow account in case of any breach of the representations and warranties made upon the acquisition or indemnifiable loss incurred, if any, such as claims, damages or penalties. In addition, an aggregate of 1,443,074 Class A ordinary shares, which closing price was US$3.44 per Class A ordinary share on February 7, 2014, are issuable to the seller of GetJar by May 2016 if certain performance targets for 2014 are achieved. The Company has evaluated the fair value of contingent consideration to be nil at the acquisition date. The performance targets were not met as of December 31, 2014 and no contingent consideration will be paid.

With the assistance of an independent third party valuation firm with income approach applied for intangible assets, the Company has completed the valuations necessary to assess the fair values of the tangible and intangible assets acquired, liabilities assumed and contingent consideration, resulting from which the amount of goodwill was determined and recognized as of the acquisition date.

The Company measured the fair value of acquired intangible assets using “relief from royalty” valuation methods. These acquired intangible assets are considered Level 3 assets because the Group used unobservable inputs, such as royalty rate, forecast financial performance of the acquired business and discount rate of 25%, to determine the fair value of these acquired assets.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed and contingent consideration as of February 7, 2014, the date of acquisition:


	RMB
Cash consideration, net of acquisition cost		29,953,053
Contingent shares consideration		—
Total fair value of total consideration		29,953,053
Net assets acquired, excluding intangible assets and the related deferred income tax liabilities		1,657,271
Intangible assets, net		18,447,492
Deferred income tax liabilities		(1,389,116	)
Goodwill		11,237,406

The Company has evaluated the fair value of the acquired intangible assets and has assigned the following value and estimated useful life to those intangible assets: intellectual properties of RMB14,959,879 with a useful life of 3 years, and trademark of RMB3,487,613 with a useful life of 1 year.

Goodwill, which is not tax deductible, is primarily attributable to synergies expected to be achieved from the acquisition. The synergies mainly come from the enhancement of the Company’s position on the rapidly emerging mobile area, especially the distribution of applications for mobile devices, which could better promote the Company’s products, reduce costs and expenses by sharing the infrastructure, distribution channel and common research and development results, and further foster an ecosystem with better user experience for mobile products, stronger user loyalty, and greater value for both customers and developers that enhance the Company’s monetization ability on the emerging mobile markets.

F-24

The Company recognized RMB2,322,060 of acquisition related costs which were included in general and administrative expenses in the year ended December 31, 2014.

The amount of revenue and net loss of GetJar included in the Company’s consolidated statements of comprehensive income (loss) from the acquisition date to December 31, 2014 were RMB45,614,626 and RMB27,716,781, respectively. RMB7,780,910 of amortization of intangible assets acquired in connection with the acquisition was included in the amount of net loss. The net loss was before elimination adjustment of cost paid by Getjar to inter-companies of RMB27,437,971 of inter-company transactions.

F-25

The following unaudited pro forma consolidated financial information for the years ended December 31, 2013 and 2014 are presented as if the acquisition had occurred at the beginning of the periods presented. These pro forma results have been prepared for comparative purpose only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on the date indicated.

Unaudited pro forma consolidated statements of comprehensive income (loss):


	Year Ended December 31,
	2013		2014
	RMB		RMB
	(Unaudited)		(Unaudited)
Revenues		347,257,286		371,959,104
Net income (loss)		36,467,462		(49,049,297	)

These amounts have been derived after applying the Company’s accounting policies and adjusting the results of GetJar to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2013. The pro forma results have reflected the elimination of inter-company transactions applied from January 1, 2013.

4 ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:


	December 31,
	2013		2014
	RMB		RMB
Accounts receivable		84,344,499		73,720,191
Allowance for doubtful accounts		—		(1,154,066	)

Accounts receivable, net		84,344,499		72,566,125

The activity in the allowance for doubtful accounts for accounts receivable for the years ended December 31, 2012, 2013 and 2014 is as follows:


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Beginning allowance for doubtful accounts		—		—		—
Additions charged to provision for doubtful accounts		—		—		1,636,604
Write-off of accounts receivable		—		—		(482,538	)

Ending allowance for doubtful accounts		—		—		1,154,066

F-26

5 PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


			December 31,
			2013		2014
			RMB		RMB
Interest receivables				—		11,843,990
Prepaid bandwidth fees				4,920,581		6,163,840
Prepaid rental expenses				1,124,781		3,308,099
Advances to employees				1,434,600		1,207,902
Prepaid insurance expense				2,027,219		—
Others	(i	)		5,038,607		6,232,230

Total				14,545,788		28,756,061

(i)

Others mainly represent office rental deposits and prepaid content fees. The office rental deposits of RMB3,896,937 and RMB3,633,575 as of December 31, 2013 and 2014, respectively, that are expected to be collected after one year of the balance sheet date are presented as other non-current assets in the consolidated balance sheets.

6 SHORT-TERM INVESTMENT

As of December 31, 2013, the Company held an investment in a financial product managed by a PRC bank. The financial product had a contractual life of 10 years and is redeemable any time during the ten-year period. In 2014, the Company invested in an additional RMB90,000,000 in this financial product. Principal of RMB102,500,000 was redeemed in 2014 and the Company recognized investment income of RMB1,106,466. As of December 31, 2014, all the balance of this investment was redeemed.

In December 2014, the Company invested RMB20,000,000 in a financial product managed by a bank in PRC. The financial product matures in January 2015 and provides the Company a fixed return of RMB98,000, which was received by the Company in January 2015.

7 EQUITY METHOD INVESTMENT

In May 2010, the Company made a 49% equity interest investment in Chengdu Baimo Technology Co., Ltd. (“Baimo”), a mobile game developer based in the PRC. The Company accounted for the investment under the equity method. As of December 31, 2011, the carrying value of the investment was nil. In August 2013, the Company disposed Baimo for a nominal amount.

In October 2010, the Company acquired 60% equity interest in Fengmingxuan Network Co., Ltd. (“Fengmingxuan”), an online reading service provider based in the PRC. The Company accounted for its investment in Fengmingxuan using the equity method because the other 40% equity holders have substantive participating rights in (i) selecting, terminating, and setting the compensation of management responsible for implementing Fengmingxuan’s policies and procedures; and (ii) establishing operating and capital decisions of Fengmingxuan, including budgets, in the ordinary course of business. As of December 31, 2011, the carrying value of the investment was nil. Currently, the Company is seeking a buyer to sell its equity interest in Fengmingxuan and does not expect to receive significant proceeds from the disposal.

In February 2011, Jiubang Digital made a 33% equity interest investment in Zhuhai Zhengdian Technology Co., Ltd. (“Zhuhai Zhengdian”), a mobile security software developer based in the PRC. The 33% equity interest was held by Zhuhai Changsheng Computer Technology Co., Ltd. (“Zhuhai Changsheng”) on behalf of the Company through a loan agreement. Pursuant to the loan agreement, (1) the Company lent to Zhuhai Changsheng interest free loan in the amount of RMB4,000,000 for the sole purpose of its contribution of the Zhuhai Zhengdian’s 33% registered capital; (2) Zhuhai Changsheng assigned its 33% voting right and profit distribution right to the Company; and (3) Zhuhai Changsheng pledged 33% equity interests in the Zhuhai Zhengdian to the Company. In substance, through the loan agreement, Zhuhai Changsheng held the equity investment in Zhuhai Zhengdian on behalf of the Company.

F-27

Zhuhai Changsheng is a related party of the Company, and is wholly owned by Hu Xiaomei, who is the spouse of Deng Yuqiang. The investment was accounted for under equity method. On May 1, 2012 (date of disposal), Zhuhai Changsheng entered into Equity Transfer Agreement on behalf of the Company with an independent third party for the sale of 33% equity interest in Zhuhai Zhengdian for a total cash consideration of US$1,000,000 (equivalent to RMB6,400,000). A gain of RMB4,182,485 was recognized from disposal of Zhuhai Zhengdian upon completion of the sale in May 2012. The gain was measured as the difference between cash consideration to be received and the carrying amount of the investment at the time of completion of the sale. The cash consideration of the disposal transaction was received in full by the Company on February 18, 2013.

The Company’s share of losses from equity investment in Zhuhai Zhengdian was RMB1,072,946 for the years ended December 31, 2012. The summarized income statement data of Zhuhai Zhengdian is as follows:


Income statement data	Year Ended December 31,
	2012^(a)
	RMB
Revenues		—
Gross profit		—
Operating loss		3,251,349
Net loss		3,251,349

(a)	For the period from January 1, 2012 to May 1, 2012 (date of disposal).

The summarized income statement data of Baimo and Fengmingxuan is as follows:


	Year Ended December 31,
Income statement data	2012
	RMB
Revenues		3,133,900
Gross profit		1,964,361
Operating loss		1,696,790
Net loss		1,686,296

In April 2014, the Company made a 40% equity interest investment in Guangzhou Woshou Information Technology Co., Ltd. (“Woshou”), a software service company based in the PRC, through investing an intangible asset, which book value was nil. The Company recognized a gain of RMB6,407,465 for the exchange of the intangible asset for the equity interest investment, which is recorded in other income in the consolidated statements of comprehensive income (loss) for the year ended December 31, 2014. The Company accounted for the investment under the equity method. As of December 31, 2014, the carrying value of the investment was RMB5,811,430. The Company recognized its share of losses from this equity investment of RMB596,035 for the year ended December 31, 2014. As of December 31, 2014, the carrying amount of this investment exceeded the Company’s share of net assets in Woshou by RMB3,042,579, which was the embedded goodwill.

In May 2014, the Company made a 49% equity interest investment in GO Launcher Korea Co., Ltd. (“GO Korea”), a joint venture company in Republic of Korea for developing a business related to mobile products and services in Korea and other contents business in China, by paying cash of RMB1,376,024. The Company accounted for the investment under the equity method. As of December 31, 2014, the carrying value of the investment was RMB1,169,274. The Company recognized its share of losses from this equity investment of RMB206,750 for the year ended December 31, 2014. As of December 31, 2014, the carrying amount of this investment equaled to the Company’s share of net assets in Go Korea.

In November 2014, the Company made a 49% equity interest investment in Guangzhou Jiucai Information Technology Co., Ltd. (“Jiucai”), a lottery service company based in the PRC, by paying cash of RMB12,000,000. The other shareholder of Jiucai is Chang Yingming, the Company’s co-chief operating officer, who owns 51% of Jiucai’s equity interest. The Company accounts for the investment under the equity method. As of December 31, 2014, the carrying value of the investment was RMB12,179,876. The Company recognized its share of gain from this equity investment of RMB179,876 for the year ended December 31, 2014. As of December 31, 2014, the carrying amount of this investment equaled to the Company’s share of net assets in Jiucai.

F-28

8 INVESTMENT SECURITIES

As at December 31, 2014, all the investment securities held by the Company are classified as available-for-sale investments. The aggregate cost, interest income, gross unrealized holding gains, foreign exchange translation adjustments, and aggregate fair value of available-for-sale investments at December 31, 2014 were as follows:


	Aggregate cost basis		Interest income		Gross unrealized holding gains		Foreign currency translation adjustments			Aggregate fair value
	RMB		RMB		RMB		RMB			RMB
Corporate convertible notes		9,237,000		307,140		982,848		(63,498	)		10,463,490
Redeemable convertible preferred shares		52,751,569		—		10,230,475		(323,484	)		62,658,560

Total		61,988,569		307,140		11,213,323		(386,982	)		73,122,050

On April 17, 2014, the Company purchased 290,000 shares of Weibo Corporation “Weibo”, a Cayman Islands company with operations substantially in PRC, at Weibo’s initial public offering price of US$17.00 per share or US$4,930,000 in aggregate. On September 12 and September 16, 2014, the Company sold 200,600 shares and 89,400 shares at average price of US$21.67 per share and US$21.60 per share, respectively, or US$6,277,098 in aggregate. The Company recognized a realized gain of RMB8,274,923 representing the difference between the cost and the proceeds, which is included in “investment income” in the consolidated statement of comprehensive income (loss) for the year ended December 31, 2014.

On May 1, 2014, the Company entered into a note purchase agreement with Quettra, Inc. (“Quettra”), a Delaware private corporation, which focuses on mobile internet services, whereby the Company purchased from Quettra an unsecured convertible promissory note in the aggregate principal amount of US$1,500,000 (RMB9,237,000). The outstanding principal amount of and all accrued but unpaid interest on the note shall be due and payable at any time on or after November 1, 2015. In the event that a change of control of Quettra is consummated prior to repayment or conversion of the notes, the notes shall become due and payable immediately prior to the closing of the change of control and receive in payment thereof an amount equal to 150% of the outstanding principal amount of the Notes, plus all accrued by unpaid interest thereon. The embedded feature of change of control is an embedded derivative separately accounted for from the host contract. As at December 31, 2014, the fair value of the embedded derivative was nil, as the Company believes that the possibility of a change of control is remote. The convertible note bears simple interest at the rate of five percent per annum from the date of issuance until repayment or conversion of the convertible note. For the year ended December 31, 2014, RMB307,140 was recognized as interest income in consolidated statements of comprehensive income (loss). The investment is classified as available-for-sale securities and is measured at fair value as of the balance sheet date. Unrealized holding gains and losses are excluded from earnings and are reported in other comprehensive income (loss) until realized. Unrealized holding gain RMB982,848 were reported in other comprehensive income for the year ended December 31, 2014.

On October 2, 2014, the Company acquired 11,500,000 of Series A redeemable convertible preferred shares and 14,931,945 of Series B redeemable convertible preferred shares issued by MobileWoo Technology Holdings Limited (“MobileWoo”), a private company, that provides mobile products and services. The Company paid cash consideration of US$8,574,005 or RMB52,751,569 for the redeemable convertible preferred shares, which is equivalent to a 46.02% equity ownership interest in MobileWoo. At the option of the Company, MobileWoo shall be required to redeem the outstanding redeemable convertible preferred shares at the date on or after 24 October 2016. The investment is classified as available-for-sale securities and is measured at fair value as of the balance sheet date. Unrealized holding gains and losses are excluded from earnings and are reported in other comprehensive income (loss) until realized. An unrealized holding gain of RMB10,230,475 were recognized in other comprehensive income for the year ended December 31 2014.

F-29

9 FAIR VALUE DISCLOSURE

The following tables present the placement in the fair value hierarchy of assets that are measured at fair value on a recurring basis at December 31, 2014:

Fair value disclosure or measurement at

December 31, 2014 using

December 31, 2014

Level 1

Level 2

Level 3

RMB

Available-for-sale investments:

Corporate convertible notes

10,463,490

—

10,463,490

Redeemable convertible preferred shares

62,658,560

—

62,658,560

Total

73,122,050

—

73,122,050

The corporate convertible notes do not have a quoted market rate. The Company adopted probability expected return method (“PWERM”) to estimate the fair value of the convertible notes. Under this method, fair value of convertible notes are based upon the probability weighted present value of expected future investment returns, considering each of possible future outcomes available to the subject company and rights of convertible note holders. The future outcomes considered in this valuation include conversion upon completion of next round of financing and redemption upon maturity. In applying PWERM, the Company makes certain assumptions and estimates regarding to the subject company, including discount rate that reflects the credit risk of the Company and probabilities of the future outcomes. The assumptions are inherently uncertain and subjective. Specifically, PWERM included a discount rate to be 14%, which is implied by bond yield rate and the probabilities of conversion upon next round of financing to be 50%.

The redeemable convertible preferred shares do not have a quoted market rate. The Company adopted a discounted cash flow method under the income approach, which take into consideration a number of factors that include expected future cash flows, growth rates and discount rates from publicly traded companies in the industry and requires the Company to make certain assumptions and estimates regarding industry economic factors and future profitability. The assumptions are inherently uncertain and subjective. The expected future cash flows for MobileWoo were based on discrete eight years financial forecasts developed by management for planning purposes. Cash flows beyond the forecasted period were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends and considered long-term earnings growth rates for publicly traded comparable companies. Specifically, the income approach valuations included a cash flow discount rate of 23%, and a terminal value growth rate of 3%.

The following tables present a roll-forward of the fair value of Level 3 (significant unobservable inputs) assets for the year ended December 31, 2014, which only contains available-for-sale securities:


	Corporate convertible notes			Redeemable convertible preferred shares			Total
	RMB			RMB			RMB
Beginning balance as of January 1, 2014		—			—			—
Purchases		9,237,000			52,751,569			61,988,569
Total gain or losses:
Included in earnings		307,140			—			307,140
Included in other comprehensive income		982,848			10,230,475			11,213,323
Foreign currency translation adjustment		(63,498	)		(323,484	)		(386,982	)

Ending balance as of December 31, 2014		10,463,490			62,658,560			73,122,050

F-30

The carrying amounts of cash, time deposits, short-term investment, accounts receivable, amount due from a related party, accounts payable, and accrued expenses and other current liabilities, as of December 31, 2013 and 2014, approximate fair value because of the short maturity of these instruments.

10 PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:


	December 31,
	2013			2014
	RMB			RMB
Computer equipment		14,869,429			27,703,983
Office equipment and furniture		2,473,596			2,903,971
Motor vehicles		616,649			1,989,323
Leasehold improvements		13,967,382			5,149,963

Total property and equipment		31,927,056			37,747,240
Less: accumulated depreciation		(22,712,318	)		(20,895,704	)

Property and equipment, net		9,214,738			16,851,536

Depreciation expense was RMB6,954,376, RMB5,622,443 and RMB5,642,074 for the years ended December 31, 2012, 2013 and 2014, respectively.

During the years ended December 31, 2013 and 2014, the Company recognized loss on impairment of leasehold improvements amounting to RMB1,750,000 and RMB1,333,333, respectively, that was recorded in general and administrative expenses. The factor leading to the impairment loss was due to the Company’s relocation of its leased office premise.

11 GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The changes in the carrying amount of goodwill were as follows:


	2014
	RMB
Balance as of January 1		—
Goodwill acquired		11,237,406
Foreign currency translation adjustment		18,579

Balance as of December 31		11,255,985

F-31

Intangible Assets


	December 31, 2014
	Gross carrying amount		Accumulated amortization			Net carrying amount		Weighted Average Amortization Period
	RMB		RMB			RMB		Years
Copyrights		14,865,606		(3,286,108	)		11,579,498		3
Intellectual properties		14,984,612		(4,578,645	)		10,405,967		3
License		4,412,458		(321,270	)		4,091,188		10
Trademark		3,493,380		(3,202,265	)		291,115		1
Others		526,901		(183,945	)		342,956		5

Total intangible assets		38,282,957		(11,572,233	)		26,710,724


	December 31, 2013
	Gross carrying amount		Accumulated amortization			Net carrying amount		Weighted Average Amortization Period
	RMB		RMB			RMB		Years
Copyrights		5,174,694		(3,276,499	)		1,898,195		3
Others		317,500		(144,917	)		172,583		5

Total intangible assets		5,492,194		(3,421,416	)		2,070,778

Amortization expense was RMB1,358,152, RMB1,324,667 and RMB10,517,771 for the years ended December 31, 2012, 2013 and 2014, respectively. The copyrights are amortized over the contractual period, which ranges from 12 months to 120 months. The Company has no intention to renew the copyrights and trademark after the contractual period.

The estimated aggregate amortization expense for each of the next five years is as follows:


December 31,	Amount
	RMB
2015		9,157,707
2016		8,506,716
2017		3,298,735
2018		2,337,222
2019		1,617,313

Total		24,917,693

F-32

12 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


			December 31,
			2013		2014
			RMB		RMB
Accrued payroll and employee benefits				19,763,943		31,236,009
Content fee and distribution fee payable				11,013,500		18,957,595
Promotion fee payable				—		18,482,917
Other tax payables	(i	)		4,519,394		4,889,211
Deferred revenue	(ii	)		6,722,544		8,917,621
Government grants				—		3,520,000
IPO cost payable				6,026,669		—
Accrued bandwidth fee				487,187		—
Other accrued expenses	(iii	)		2,264,144		3,617,661

Total accrued expenses and other current liabilities				50,797,381		89,621,014

(i)	Other tax payable mainly includes VAT payable, business tax payable and surcharges.

(ii)

Deferred revenue mainly consists of payments received in advance from customers relating to mobile reading and mobile portal marketing services and the consideration allocated for postcontract customer support (“PCS”) relating to mobile application, which are expected to be provided by the Company within one year.

(iii)

Other accrued expenses mainly represent accrued office expenses and other operating costs.

13 REVENUES

Revenues consist of the following:


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Mobile application products and services		34,056,890		153,363,875		186,879,488
Mobile reading services		72,766,802		99,791,329		85,007,148
Mobile portal marketing services		57,506,160		52,211,716		55,423,444
Other revenues		20,888,829		23,476,398		41,909,903

Total revenues		185,218,681		328,843,318		369,219,983

The following summarizes the Company’s revenue from the following geographic areas (based on the location of customers):

Year Ended December 31,

2012

2013

2014

RMB

PRC (excluding HK SAR and Macau)

154,029,436

198,896,271

223,070,609

United States of America

14,312,392

60,358,124

95,452,613

Others

16,876,853

69,588,923

50,696,761

Total revenues

185,218,681

328,843,318

369,219,983

F-33

14 INCOME TAXES

Cayman Islands and British Virgin Islands

Under the current laws of Cayman Island and the British Virgin Islands (“BVI”), the Parent and its subsidiary in Cayman Islands and BVI are not subject to tax on its income or capital gains.

Hong Kong

For the period from its inception to December 31, 2014, the Parent’s subsidiary in Hong Kong did not have any assessable profits arising in or derived from HK SAR and therefore no provision for Hong Kong Profits Tax was required. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

United States

GO Portal Inc. (“GO Portal”), a subsidiary of the Jiubang Digital, is incorporated in the State of Delaware of the United States and its principal business activities are conducted in the State of California. GO Portal is subject to a federal corporation tax rate of 34% and a state corporation tax rate of 8.84%, resulting in an aggregate income tax rate of approximately 39.83%.

GetJar, a subsidiary acquired in February 2014, is incorporated in the State of Delaware of the United States and its principal business activities are conducted in the State of California. GetJar is subject to a federal corporation tax rate of 34% and a state corporation tax rate of 8.84%, resulting in an aggregate income tax rate of approximately 39.83%.

United Kingdom

GO Mobile Technology Limited (“GO Mobile”), a subsidiary established in 2014 in the United Kingdom, and its principal business activities are conducted in the United Kingdom.

People’s Republic of China

The Parent’s consolidated PRC subsidiaries and VIEs file separate income tax returns in the PRC. On March 16, 2007, the National People’s Congress passed the new EIT Law. The statutory income tax rate under the new EIT Law is 25% effective from January 1, 2008. According to the new EIT Law, entities that qualify as “high-and-new technology enterprises eligible for key support from the State” (“HNTE”) are entitled to a preferential income tax rate of 15%.

The Parent’s consolidated PRC subsidiaries and VIEs are subject to income tax at 25%, unless otherwise specified.

In 2008, Jiubang Digital received the approval from the tax authority that it qualified as an HNTE. The certificate entitled Jiubang Digital to the preferential income tax rate of 15% effective retroactively from January 1, 2008 to December 31, 2010. In 2011, Jiubang Digital received the approval from the tax authority on its renewal as an HNTE which entitled it to the preferential income tax rate of 15% effective retroactively from January 1, 2011 to December 31, 2013. In 2014, Jiubang Digital received the approval from the tax authority on its renewal as an HNTE which entitled it to the preferential income tax rate of 15% effective retroactively from January 1, 2014 to December 31, 2016.

Jiubang Computer and Hengye Software qualified as eligible software enterprises in 2013 and 2014, respectively, which entitled each of them to a two-year full tax exemption followed by a three-year 50% tax exemption, commencing from the year in which its accumulated taxable income is greater than zero.

The components of income (loss) before income taxes are as follows:


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB
PRC, excluding HKSAR		8,760,488			112,936,180			43,535,268
Cayman Islands and BVI		(481,547	)		(20,986,291	)		(51,077,743	)
HKSAR		(14,478	)		(615,633	)		(380,901	)
United Kingdom		—			—			(2,256,839	)
United States		—			(1,176,177	)		(23,814,234	)

Total income (loss) before income taxes		8,264,463			90,158,079			(33,994,449	)

F-34

The Company’s income tax expense (benefit) recognized in the consolidated statements of comprehensive income (loss) consists of the following:


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB
Current income tax expense		—			7,860,663			8,457,613
Deferred income tax expense (benefit)		(6,903,561	)		(9,517,476	)		5,216,108

Total income tax expense (benefit)		(6,903,561	)		(1,656,813	)		13,673,721

The actual income tax expense (benefit) reported in the consolidated statements of comprehensive income (loss) for each of the years ended December 31, 2012, 2013 and 2014 differs from the amount computed by applying the PRC statutory income tax rate to income (loss) before income taxes due to the following:


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB
Computed expected income tax expense (benefit)		2,066,116			22,539,520			(8,498,612	)
Tax rate differential for entities in non-PRC jurisdictions		166,310			5,226,054			12,329,147
Research and development expenses bonus deduction		(3,188,028	)		(4,932,333	)		(4,932,452	)
Non-deductible expenses
—Entertainment expense		253,351			322,430			302,498
—Other		300,571			20,348			16
Preferential income tax rate		—			(5,240,442	)		266,688
Tax rate differential		(1,810,791	)		(3,531,610	)		2,104,805
Tax holiday		—			—			(1,871,138	)
Change in valuation allowance		(4,691,090	)		(16,060,780	)		13,972,769

Actual income tax expense (benefit)		(6,903,561	)		(1,656,813	)		13,673,721

F-35

If the tax holidays were not available, income taxes provision and net income (loss) per share would have been affected as follows:


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Tax holiday effect		—		—		(1,871,138	)
Basic net income (loss) per share effect		—		—		(0.01	)
Diluted net income (loss) per share effect		—		—		(0.01	)

The principal components of deferred income tax assets and deferred income tax liabilities are as follows:


	December 31,
	2013			2014
	RMB			RMB
Tax loss carryforwards		10,646,904			18,944,967
Accrued expenses and other current liabilities		8,221,083			10,163,943
Bad debt provision		—			249,088
Advertising expense		—			18,475
Impairment loss on an equity method investment		425,000			425,000
Impairment loss on property and equipment		437,500			275,417

Total gross deferred income tax assets		19,730,487			30,076,890
Valuation allowance		(3,309,450	)		(17,388,482	)

Deferred income tax assets, net		16,421,037			12,688,408
Intangible assets		—			1,106,754
Share of gain from an equity method investment		—			26,981
Gain from exchange of an intangible assets for an equity method investment, net of share of losses		—			1,452,858

Deferred income tax liabilities		—			2,586,593

Net deferred income tax assets		16,421,037			10,101,815

The movements of the valuation allowance are as follows:


	December 31,
	2012			2013			2014
	RMB			RMB			RMB
Balance as of January 1		30,450,912			20,628,460			3,309,450
Acquisition of a subsidiary		—			—			265,797
Additions		6,933,591			4,753,930			15,088,887
Deduction		(4,721,120	)		(8,584,922	)		(69,698	)
Reversal		(6,903,561	)		(11,159,024	)		(1,046,420	)
Expiration of tax loss		(5,131,362	)		(1,258,230	)		(124,898	)
Change in tax rate		—			(1,070,764	)		—
Foreign exchange translation adjustments		—			—			(34,636	)

Balance as of December 31		20,628,460			3,309,450			17,388,482

As of December 31, 2012, 2013 and 2014, valuation allowances were provided against the deferred income tax assets of certain subsidiaries, which were at cumulative loss positions. In assessing the realization of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or utilizable. Management considers projected future taxable income and tax planning strategies in making this assessment.

F-36

As of December 31, 2014, for U.S. federal income tax purposes, the Company had tax loss carryforwards of US$4,223,513 (RMB25,843,676), which would expire by 2034, if unused. For PRC income tax purposes, the Company had tax loss carryforwards of RMB33,064,011, of which RMB258,154, RMB4,379,964, RMB2,193,356, RMB5,887,888 and RMB20,344,649 will expire, if unused, by 2015, 2016, 2017, 2018 and 2019, respectively.

F-37

The new EIT Law and its implementation rules impose a withholding income tax at 10%, unless reduced by a tax treaty or arrangement, on the amount of dividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulated beginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding income tax. Due to the plan to indefinitely reinvest its earnings in the PRC, the Company has not provided for deferred income tax liabilities on undistributed earnings of RMB52,432,644 and RMB93,393,764 as of December 31, 2013 and 2014, respectively. It is not practicable to estimate the unrecognized deferred income tax liabilities thereof.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2012, 2013 and 2014 is as follows:


	December 31,
	2012		2013			2014
	RMB		RMB			RMB
Balance as of January 1		594,402		5,905,726			18,380,952
Increase related to current year tax positions		5,311,324		16,230,858			6,861,792
Settlement		—		(3,755,632	)		(7,639,360	)

Balance as of December 31		5,905,726		18,380,952			17,603,384

Included in the balances of unrecognized tax benefits as of December 31, 2013 and 2014 were potential benefits of RMB18,380,952 and RMB17,603,384 that, if recognized, would affect the effective tax rate. Nil interest and penalty expenses were recorded for the years ended December 31, 2012, 2013 and 2014. The unrecognized tax benefits were presented as a reduction of the deferred income tax asset for tax loss carry forwards or an addition to income tax payable, if any, since the uncertain tax position would either reduce the tax loss carry forwards or increase the taxable income under the tax law. The unrecognized tax benefits mainly represent the estimated income tax expense the Company would be required to pay should its revenue for tax purposes be recognized in accordance with new EIT law and regulations. Management believes that it is reasonably possible that approximately RMB17,603,384 of the unrecognized tax benefits as of December 31, 2014 will be recognized in the next twelve months as a result of settlement.

According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing issues, the statute of limitation is 10 years. There is no statute of limitation in the case of tax evasion. The income tax returns of the Parent’s consolidated PRC subsidiaries and VIEs for the years from 2009 to 2014 are open to examination by the PRC tax authorities.

F-38

15 ORDINARY SHARES, REDEEMABLE CONVERTIBLE PREFERRED SHARES AND STATUTORY RESERVE

Ordinary Shares and redeemable convertible preferred shares

Upon incorporation, the Parent’s authorized ordinary shares were 50,000 shares with a par value of US$1 per share. On May 15, 2005 and May 27, 2010 the Parent approved an 100-for-1 stock split, respectively.

In August 2013, the Parent repurchased and cancelled 575,300 ordinary shares at a total cost of RMB2,500,354 from the shareholder. The excess of the repurchase price over par value of RMB2,499,940 was charged to additional paid-in capital for the year ended December 31, 2013.

Upon the completion of the Company’s IPO in the NASDAQ Stock Market on November 22, 2013, all of the Parent’s outstanding ordinary shares before the IPO were redesignated as Class B ordinary shares. The Parent increased its authorized ordinary shares from US$50,000 to US$100,000, which were divided into 850,000,000 Class A ordinary shares and 150,000,000 Class B ordinary shares, par value of US$0.0001. Holders of Class A ordinary shares and Class B ordinary shares have the same rights, except for voting rights and conversion rights. Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to ten votes per share. Class B ordinary shares may be converted into the same number of Class A ordinary shares by the holders thereof at any time, while Class A ordinary shares cannot be converted into Class B ordinary shares under any circumstances. The impact of dividing of Class A and Class B ordinary shares has been retroactively reflected in the Company’s capital structure in the consolidated financial statements.

In connection with its IPO, the Parent issued 48,300,000 Class A ordinary shares with par value of US$0.0001 each, at a price of US$1.87 per share to investors. Net proceeds from such issuance amounted to RMB493,654,481 (net of issuance costs of RMB60,729,250), of which RMB29,647 and RMB493,624,834 were recorded in the Class A ordinary shares and additional paid-in capital, respectively.

Concurrently upon the completion of the Company’s IPO, the Parent issued 8,021,390 and 2,673,796 Class A ordinary shares to Qihoo 360 Technology Co. Ltd. and Kingsoft Internet Software Holdings Limited, respectively, in a private placement at a price of US$1.87 per share. Proceeds from such issuance of ordinary shares were RMB122,766,552, of which RMB6,564 and RMB122,759,988 were recorded in the Class A ordinary shares and additional paid-in capital, respectively.

In connection with its IPO, all issued and outstanding Series A, Series B and Series C redeemable convertible preferred shares were converted to 86,678,104 Class B ordinary shares.

During the year ended December 31, 2014, 1,370,496 Class A common shares were issued for exercise of share options and restricted share vested.

During the year ended December 31, 2014, 18,262,710 Class B common shares were converted to Class A common shares.

On August 12, 2014, the Company announced a share repurchase plan. Under the plan, the Company is approved to repurchase up to US$20.0 million worth of its outstanding ADSs representing the Company’s ordinary shares on the open market at prevailing market prices, in block trades or otherwise. In the year ended December 31, 2014, the Company repurchased a total of 2,157,962 ADSs from the open market at an average price of $7.18 per ADS pursuant to this share repurchase program. 2,065,251 ADSs of the ADSs repurchased were cancelled as at December 31, 2014.

Statutory Reserves

Under PRC rules and regulations, the Parent’s consolidated PRC subsidiaries and VIEs are required to appropriate 10% of their current year net profit after offsetting prior year accumulated loss, as determined in accordance with PRC accounting rules and regulations, to a statutory surplus reserve until the reserve balance reaches 50% of their registered capital. The appropriation to this statutory surplus reserve must be made before distribution of dividends to the Parent can be made.

For the year ended December 31, 2012, 2013 and 2014, the Company’s PRC subsidiaries and VIEs made appropriation to the reserve fund of nil, RMB8,927,264 and RMB1,787,406, respectively. As of December 31, 2013 and 2014, the accumulated balance of the statutory surplus reserve was nil, RMB8,927,264 and RMB10,714,670, respectively.

F-39

16 SHARE-BASED COMPENSATION

2006 Share Incentive Plan

In June 2006, the Parent adopted a share incentive plan (the “2006 Plan”), pursuant to which the Parent is authorized to issue options to officers, employees, directors and consultants of the Company to purchase up to 11,507,900 of its ordinary shares (being retroactively adjusted to reflect the effect of the share split). The 2006 Plan expires in ten years. In October 2013, the Board of Directors decreased the number of options issuable under the 2006 Plan to 5,224,126 ordinary shares.

2010 Share Incentive Plan

In June 2010, the Parent adopted a share incentive plan (the “2010 Plan”), pursuant to which the Parent is authorized to issue options and other stock-based awards to officers, employees, directors and consultants of the Company to purchase up to 13,196,337 of its ordinary shares. In October 2013, the Board of Directors decreased the number of options issuable under the 2010 Plan to 5,373,659 ordinary shares.

2013 Share Incentive Plan

In October 2013, the Parent adopted a share incentive plan (the “2013 Plan”), pursuant to which the Parent is authorized to issue options and other stock-based awards to officers, employees, directors and consultants of the Company to purchase up to 4,243,070 of its ordinary shares. In July 2014, the Board of Directors increased the number of options issuable under the 2013 Plan to 7,317,073 ordinary shares.

During the year ended December 31, 2013 and 2014, the Company extended the exercise period of one director and officer and nine employees’ vested share options and continued the vesting of their unvested share options upon their resignation. The modifications resulted in additional compensation costs of RMB3,761,265 and RMB21,454,635 recognized in the general and administrative expenses for the year ended December 31, 2013 and 2014, respectively.

F-40

A summary of share options activities for the years ended December 31, 2012, 2013 and 2014 is as follows:


	Number of shares			Weighted average exercise price US$		Weighted remaining contractual years		Aggregate intrinsic value US$
Outstanding as of January 1, 2012		9,722,728			0.66
Granted		381,553			1.90
Exercised		—			0.00
Forfeited		(409,864	)		1.43
Expired		—			0.00

Outstanding as of December 31, 2012		9,694,417			0.67
Granted		21,620,012			0.82
Exercised		(3,452,400	)		0.0001
Forfeited		(2,710,235	)		0.90
Expired		(56,466	)		1.29
Modification		(166,857	)		—

Outstanding as of December 31, 2013		24,928,471			0.88
Granted		7,959,300			0.88
Exercised		(229,038	)		1.13
Forfeited		(7,143,734	)		0.77
Expired		(50,401	)		1.55

Outstanding as of December 31, 2014		25,464,598			0.92		8.52		1,607,253

Vested and expected to vest as of December 31, 2014		24,721,617			0.92		8.51		1,602,726

Exercisable as of December 31, 2014		6,484,180			0.97		7.87		390,494

The total intrinsic value of options exercised in the years ended December 31, 2012, 2013 and 2014 are nil, USD5,868,735 and USD243,165, respectively.

For the year ended December 31, 2012 and 2013, the Company calculated the fair value of the share options on the grant dates using the Binomial option-pricing valuation model. The assumptions used in the valuation model are summarized in the following table.


	Awards granted in
	2012		2013
Expected dividend yield		0%		0%
Expected volatility		60% - 63%		54% - 60%
Risk-free interest rate		2.02% - 2.77%		1.72% - 2.97%
Exercise multiple		2.2		2.2
Estimated fair value of underlying ordinary shares (per share)		US$0.64 - 0.84		US$1.65 - 1.87

Because the Company’s ordinary shares did not have a trading history at the time the options were issued, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in the similar industry.

The estimated fair value of the underlying ordinary shares on each date of grant was determined by management based on a retrospective valuation conducted by American Appraisal. The Company first determined its enterprise value by using income approach, which requires the estimation of future cash flows, and the application of an appropriate discount rate with reference to comparable listed companies engaged in the similar industry to convert such future cash flows to a single present value, and then allocated the enterprise value between the ordinary shares and preferred shares.

F-41

For the year ended December 31, 2014, the Company calculated the fair value of the share options on the grant date using the Black-Scholes-Merton pricing valuation model. The assumptions used in the valuation model are summarized as follows:


	Awards granted in
	2014
Expected dividend yield		0%
Expected volatility		49% - 62%
Expected term		1.05-6.75
Risk-free interest rate (per annum)		0.12% - 2.04%

The expected volatility was based on the historical volatilities of the Company and comparable publicly traded companies engaged in the similar industry. The expected term was related to the period of time the options are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the United States treasury yield curve in effect at the time of grant.

The fair values of the options granted of the Company for the years ended December 31, 2012, 2013 and 2014 are as follows:


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Weighted average grant date fair value of option (per share)		2.21		7.33		4.78
Aggregate grant date fair value of options		843,121		158,567,632		38,031,795

As of December 31, 2014, there were unrecognized compensation costs of approximately RMB109,935,629 related to unvested share options. The unrecognized compensation costs are expected to be recognized over the remaining weighted-average vesting period of 2.9 years.

During the year ended December 31, 2014, the Company granted a total of 1,162,926 restricted shares to certain directors, officers and employees. All of these restricted shares were vested during the year ended December 31, 2014. The total fair value of these restricted shares was US$1,795,587.

F-42

The amount of compensation costs recognized for share options and restricted shares for the years ended December 31, 2012, 2013 and 2014 are as follows:


	Year Ended December 31,
	2012		2013		2014
	RMB		RMB		RMB
Cost of revenues		76,111		639,246		2,633,316
Research and development expenses		164,374		1,944,824		5,410,007
Sales and marketing expenses		124,850		728,459		2,559,662
General and administrative expenses		60,748		14,510,015		54,368,924

Total share-based compensation costs		426,083		17,822,544		64,971,909

No income tax benefit was recognized in the consolidated statements of comprehensive income (loss) for these share options and restricted shares as such compensation expenses were not tax deductible.

17 EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per ordinary share is calculated as follows:


	Year Ended December 31,
	2012			2013			2014
	RMB			RMB			RMB
Numerator:
Net income (loss) applicable to common stock		(43,064,771	)		41,103,510			(47,163,433	)
Earnings allocated to participating redeemable convertible preferred shares		—			(21,903,467	)		—

Net income (loss) for basic earnings per Class A and Class B share		(43,064,771	)		19,200,043			(47,163,433	)

Denominator:
Weighted average number of Class A and Class B ordinary shares outstanding		51,880,468			67,653,340			199,508,989

Basic earnings (loss) per Class A and Class B ordinary share		(0.83	)		0.28			(0.24	)

Numerator:
Net income (loss) allocated to Class A and Class B ordinary shareholders as reported in basic earnings (loss) per Class A and Class B ordinary share		(43,064,771	)		19,200,043			(47,163,433	)

Denominator:
Weighted average shares of Class A and Class B ordinary shares outstanding as reported in basic earnings (loss) per Class A and Class B ordinary share		51,880,468			67,653,340			199,508,989
Dilutive effect of outstanding share options		—			3,296,870			—

		51,880,468			70,950,210			199,508,989

Diluted earnings (loss) per Class A and Class B ordinary share		(0.83	)		0.27			(0.24	)

The following table summarizes potential ordinary shares outstanding excluded from the calculation of diluted earnings (loss) per Class A and Class B ordinary share for the years ended December 31, 2012, 2013 and 2014, because their effect is anti-dilutive:

Year Ended December 31,

2012

2013

2014

Shares issuable under share options

9,694,417

3,829,315

25,464,598

F-43

18 RELATED PARTY TRANSACTIONS

Deng Yuqiang and Zhang Xiangdong, borrowed RMB3,511,093 and RMB1,265,454, respectively from the Company in 2012. Part of the loan provided to Deng Yuqiang was offset by an equivalent amount of RMB1,470,258 due to him. The outstanding amounts due from Deng Yuqiang and Zhang Xiangdong as of December 31, 2012 were non-interest bearing and subsequently received by the Company in cash on August 21, 2013. Zhang Xiangdong borrowed an additional RMB517,500 from the Company in 2013, and Zhang Xiangdong subsequently repaid the amount to the Company in cash in August 2013.

As of December 31, 2014, a receivable of RMB6,366,986 was due from Jiucai represented the net balance the Company paid on behalf of Jiucai from November 25, 2014 (date of incorporation of Jiucai) to December 31, 2014 and net assets related to lottery business sold to Jiucai at the Company’s net book value.

19 COMMITMENTS AND CONTINGENCY

Future minimum lease payments under non-cancelable operating lease agreements and subleased rent income as of December 31, 2014 are as follows. The Company’s leases do not contain any contingent rent payment terms.


	Minimum rentals		Less: Sublease rental income			Total
	RMB		RMB			RMB
Years ending December 31,
2015		10,246,776		(2,150,000	)		8,096,776
2016		6,982,165		—			6,982,165
2017		1,643,156		—			1,643,156

Total		18,872,097		(2,150,000	)		16,722,097

Rental expense incurred under operating leases, net of sublease rental income of nil, RMB430,000 and RMB5,160,000, was RMB13,374,000, RMB17,429,306, and RMB11,890,563 for the years ended December 31, 2012, 2013 and 2014, respectively.

F-44

20 Sungy Mobile Limited (Parent Company)

The following presents condensed financial information of the Parent Company only.

Condensed balance sheets


	December 31,
	2013			2014
	RMB			RMB
Cash and cash equivalents		705,047,599			72,705,962
Time deposits		—			424,000,000
Prepaid expenses and other current assets		2,234,180			13,516,856
Intangible assets		—			234,174
Investment in and amounts due from subsidiaries		236,814,824			263,560,893
Equity method investment		—			1,169,274
Investment securities		—			72,500,780
Other non-current assets		—			3,266,784

Total assets		944,096,603			850,954,723

Accrued expenses and other current liabilities		3,320,945			9,235,109
Amounts due to subsidiaries		105,785,121			66,749,022
Other non-current liabilities		—			2,257,528

Total liabilities		109,106,066			78,241,659

Ordinary shares		133,483			126,722
Treasury shares		—			(2,852,216	)
Additional Paid-in Capital		1,111,259,393			1,084,368,371
Accumulated other comprehensive income		45,021,487			59,657,446
Accumulated deficit		(321,423,826	)		(368,587,259	)

Total shareholders’ equity		834,990,537			772,713,064

Commitments and contingencies		—			—

Total liabilities and shareholders’ equity		944,096,603			850,954,723

F-45

Condensed statements of comprehensive income (loss)


	2012			2013			2014
	RMB			RMB			RMB
Revenues		—			—			—
Cost of revenues		—			—			—

Gross profit		—			—			—
Operating expenses		(460,046	)		(20,844,955	)		(79,164,026	)

Operating loss		(460,046	)		(20,844,955	)		(79,164,026	)
Share of losses of an equity method investment		—			—			(206,750	)
Investment income		—			—			8,274,923
Interest income		—			—			25,584,157
Share of earnings of subsidiaries		15,628,070			112,659,847			1,231,556

Income (loss) before income taxes		15,168,024			91,814,892			(44,280,140	)

Income tax expense		—			—			(2,883,293	)

Net income (loss)		15,168,024			91,814,892			(47,163,433	)

Unrealized gains on available-for-sale investments, net of nil income tax		—			—			11,213,323
Foreign currency translation adjustment, net of nil income taxes		1,334,554			4,686,070			3,422,636

Comprehensive income (loss)		16,502,578			96,500,962			(32,527,474	)

F-46

Condensed statements of cash flows


	2012			2013			2014
	RMB			RMB			RMB
Net cash provided by (used in) operating activities		(157,634	)		(7,591,906	)		9,705,578

Investing activities:
Cash contribution into a subsidiary		(15,738,400	)		—			—
Proceeds from disposal of an available-for-sale investment		—			—			38,582,907
Purchase of intangible assets		—			—			(251,877	)
Acquisition of a subsidiary, net of acquisition costs		—			—			(26,740,168	)
Investment in time deposits		—			—			(424,000,000	)
Purchase of available-for-sale investments		—			—			(91,677,961	)
Investment in an equity method investment		—			—			(1,497,457	)

Net cash used in investing activities		(15,738,400	)		—			(505,584,556	)

Financing activities:
Cash received on behalf of subsidiaries and variable interest entities		16,055,569			73,410,999			8,761,525
Cash received from a subsidiary		—			—			9,828,357
Cash repaid to subsidiaries and variable interest entities		—			—			(58,749,259	)
Payment of issuance cost of ordinary shares in connection with IPO		—			(9,444,448	)		(850,546	)
Proceeds from issuance of ordinary shares upon IPO, net of underwriting discounts and commissions of RMB39,307,514		—			515,076,220			—
Proceeds from concurrent private placement issuance of ordinary shares in connection with IPO		—			122,766,552			—
Payment for repurchase of ordinary shares		—			(2,500,354	)		(96,621,376	)
Proceeds from exercise of share options		—			2,123			1,598,330

Net cash provided by (used in) financing activities		16,055,569			699,311,092			(136,032,969	)

Effect of foreign currency exchange rate changes on cash		(36,877	)		(793,317	)		(429,690	)
Net increase (decrease) in cash		122,658			690,925,869			(632,341,637	)
Cash at beginning of year		13,999,072			14,121,730			705,047,599

Cash at end of year		14,121,730			705,047,599			72,705,962

F-47

21 SUBSEQUENT EVENTS

The Company has received a preliminary non-binding proposal letter, dated April 13, 2015, from Mr. Yuqiang Deng, Chairman and chief executive officer, and Mr. Zhi Zhu, co-chief operating officer of the Company. According to the proposal letter, Mr. Deng and Mr. Zhu are interested in acquiring all of the Company’s outstanding ordinary shares that are not currently beneficially owned by them, including ordinary shares represented by the Company’s American depositary shares or “ADSs” (each representing six Class A ordinary shares of the Company), at a price of $4.90 in cash per ADS (or approximately $0.82 in cash per ordinary share).

F-48

Exhibit 4.36

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED

SHARES PURCHASE AGREEMENT

THIS SHARES PURCHASE AGREEMENT (this “Agreement”) is made as of October 2, 2014 by and among:

(A)	Northern Light Venture Capital II, Ltd., a company organized and existing under the laws of the Cayman Islands (“Northern Light”);

(B)	Sina Hong Kong Ltd., a company organized and existing under the laws of Hong Kong (“Sina”);

(C)	MobileWoo Technology Holdings Limited, a company organized and existing under the laws of the Cayman Islands (the “Company”);

(D)	MobileWoo Technology Limited, a company organized and existing under the laws of the British Virgin Islands (the “Founders’ BVI Holding Entity”);

(E)	MobileWoo (China) Technology Development Limited , a company organized and existing under the laws of Hong Kong (the “HK Sub”);

(F)	Beijing MobileWoo Technology Co., Ltd. , a company organized and existing under the laws of the People’s Republic of China (the “PRC”, which for the purpose of this Agreement shall exclude Hong Kong, Taiwan and Macau) (the “WFOE”);

(G)	Beijing MobileWo Information Technology Co., Ltd. , a company organized and existing under the laws of the PRC (“Beijing M15”);

(H)	Beijing MobileWu Information Technology Co., Ltd. , a company organized and existing under the laws of the PRC (“Beijing MobileWu”, together with Beijing M15, each a “Domestic Company”, and collectively, the “Domestic Companies”);

(I)	Shenzhen Taoshenbian Electronic Commerce Co., Ltd. , a company organized and existing under the laws of the PRC (“Shenzhen Taoshenbian”, together with the WFOE and the Domestic Companies, each a “PRC Group Company”, and together, the “PRC Group Companies”);

(J)	Mr. Zhi Zhu , a PRC citizen, holding PRC resident identification card number 362527197705190039 (“Mr. Zhu”, together with the Company, the Founders’ BVI Holding Entity, the HK Sub and the PRC Group Companies, each a “Warrantor”, and together, the “Warrantors”); and

(K)	Sungy Mobile Limited, a company organized and existing under the laws of the Cayman Islands (the “Purchaser”).

The Company, the HK Sub and the PRC Group Companies are collectively referred to as the “Group Companies”, and each, a “Group Company”. Northern Light and Sina are collectively referred to as the “Selling Shareholders”, and each, a “Selling Shareholder”. The Selling Shareholders, the Group Companies, the Founders’ BVI Holding Entity, Mr. Zhu and the Purchaser are collectively referred to as the “Parties”, and each, a “Party”.

1. RECITALS

A. The Company holds 100% equity interest in the HK Sub;

B. The HK Sub holds 100% equity interest in the WFOE;

C. The WFOE entered into a series of contractual arrangements with the Domestic Companies;

D. Beijing M15 holds 80% equity interest in Shenzhen Taoshenbian; and

E. The Selling Shareholders and the Company desire to sell to the Purchaser, and the Purchaser desires to purchase from the Selling Shareholders and the Company, certain number of Series A Preferred Shares and Series B Preferred Shares on the terms and conditions set forth in this Agreement.

2. PURCHASE AND SALE

A. Sale and Purchase of the Shares. Upon the terms and subject to the conditions of this Agreement, at the Closing (defined below):

(i)

each Selling Shareholder agrees to sell and transfer to the Purchaser, and the Purchaser agrees to purchase from such Selling Shareholder, such number of Series A Preferred Shares and Series B Preferred Shares (as applicable) of the Company as set out opposite the name of such Selling Shareholder in Schedule 1 (collectively, the “Sale Shares”) and together with all rights attaching thereto including the right to receive all dividends and distributions (the “Share Transfer”);

(ii)

the Company agrees to sell and issue to the Purchaser, and the Purchaser agrees to purchase from the Company, 3,445,833 Series B Preferred Shares of the Company (the “New Shares”, together with the Sale Shares, the “Shares”) (the “Share Subscription”)

B. Redemption. At the Closing, the Company shall redeem 3,445,833 Ordinary Shares of the Company (the “Redemption Shares”) from the Founders’ BVI Holding Entity (the “Redemption”).

C. Capitalization Table. The capitalization table of the Company immediately after the Closing is set forth in Schedule 2 hereto.

D. Closing. The consummation of the Share Transfer, the Share Subscription and the Redemption shall concurrently take place by way of exchange of documents and signatures between the Parties as soon as practicable, but in no event later than five (5) Business Days (defined below) following the satisfaction of the Conditions Precedent (defined below), or at such other date, time or place or by other means as the Purchaser, the Company and the Selling Shareholders may mutually agree (the “Closing”). The date on which the Closing occurs shall be the “Closing Date”. Subject to the terms and conditions of this Agreement, at the Closing:

(i)

The Purchaser shall pay to each of the Selling Shareholders and the Company the purchase price (the “Purchase Price”) as set out opposite the name of such Selling Shareholder or the Company in Schedule 1 as payment in full for the Shares, by wire transfer of immediately available fund in US$ to the applicable bank accounts designated by such Selling Shareholder or the Company;

(ii)

The Company shall, and the Selling Shareholders shall cause the Company to, deliver to the Purchaser

(a) a copy of the updated register of members of the Company certified by the registered agent of the Company, reflecting the Share Transfer, the Share Subscription and the Redemption;

(b) a copy of the updated register of directors of each of the Company and the HK Sub certified by the registered agent of the Company and the HK Sub respectively, reflecting the appointment of one (1) director nominated by the Purchaser (the “Preferred Director”) to, and the removal of two (2) directors nominated by the Selling Shareholders from, the board of directors of the Company (the “Board” or “Board of Directors”) and the HK Sub respectively; and

E. Conditions of the Parties’ Obligations at Closing.

(i)

The Purchaser’s obligation to purchase the Shares at the Closing is subject to the satisfaction of the following conditions (the “Conditions Precedent”):

(a) Representations and Warranties and Covenants. The representations and warranties made by the Selling Shareholders and the Warrantors in Section 3 hereof shall be true and correct in all material respects as of the date of the Closing, except for representations and warranties made expressly as of another date, which representations and warranties shall be true and correct in all material respects on and as of such date. The Selling Shareholders and the Warrantors shall have performed all covenants, obligations and conditions herein required to be performed or observed by it on or prior to the Closing.

(b) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in form and substance to the Purchaser, and the Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request.

(c) Consents and Waivers. Each Group Company shall have obtained all consents and waivers necessary for consummation of the transactions contemplated by this Agreement, including, but not limited to, (i) all permits, authorizations, approvals, consents or permits of any governmental authority or regulatory body, and (ii) the waiver by the existing shareholders of each Group Company (as applicable) of any anti-dilution rights, rights of first refusal, preemptive rights and all similar rights in connection with the issuance or sale of the Shares and the Redemption.

(d) Memorandum and Articles of Association. The Third Amended and Restated Memorandum of Association of the Company (the “Amended Memorandum”) and the Third Amended and Restated Articles of Association of the Company (the “Amended Articles”), in substantially the form attached hereto as Exhibit A, shall have been adopted by the special resolution of the members of the Company and shall be in full force and effect.

(e) Members Agreement. The Group Companies, the Purchaser, the Founders (as defined in the Members Agreement, the “Founders”) and the Founder’s BVI Holding Entity shall have entered into the Amended and Restated Members Agreement, in substantially the form attached hereto as Exhibit B.

(f) Right of First Refusal and Co-Sale Agreement. The Group Companies, the Purchaser, the Founders and the Founder’s BVI Holding Entity shall have entered into the Second Amended and Restated Right of First Refusal and Co-Sale Agreement, in substantially the form attached hereto as Exhibit C.

(g) Voting Agreement. The Company, the Purchaser, the Founders and the Founder’s BVI Holding Entity shall have entered into the Second Amended and Restated Voting Agreement, in substantially the form attached hereto as Exhibit D.

(h) Restricted Share Agreement. The Company, the Purchaser, the Founders and the Founder’s BVI Holding Entity shall have entered into the Amended and Restated Restricted Share Agreement (“Restricted Share Agreement”), in substantially the form attached hereto as Exhibit E.

(i) Indemnification Agreements. The Company shall have entered into an indemnification agreement, in substantially the form attached hereto as Exhibit F, with the Preferred Director.

(j) Board of Directors of the Company and the HK Sub. Effective as of the Closing Date, the authorized size of the board of directors of each of the Company and the HK Sub shall be four (4), and Mr. Zhu, Wei Zhang, Xue Guo and Yuqiang Deng LOGO shall be the initial members of the board of directors (each a “Director”).

(k) ESOP. The Company shall have adopted, and its shareholders and the Board shall have approved, a stock option plan with 5,777,777 shares of Ordinary Shares, and the Board shall have approved the issuance of such 5,777,777 shares of Ordinary Shares to Mr. Zhu pursuant to the approved stock option plan (the “ESOP Issuance”).

(l) Compliance Certificate. The Warrantors shall have delivered to the Purchaser a certificate dated as of the Closing Date, signed by Mr. Zhu certifying that the Conditions Precedent have been satisfied.

(m) No Material Adverse Change. There is no material adverse change on the business, operation, assets, liabilities or the financial conditions of the Group Companies prior to the Closing.

(n) Certificate of Good Standing. The Company shall deliver to the Purchaser a Certificate of Good Standing from the registrar of companies of the Cayman Islands with respect to the Company dated within ten (10) days prior to the Closing.

(o) Due Diligence. The Purchaser shall have completed their legal, financial, technical and business due diligence investigation of the Group Companies as well as the Founders to their reasonable satisfaction.

(ii)

The Selling Shareholders’ and the Company’s obligation to sell the Shares to the Purchaser at the Closing is, subject to the fulfillment of the following conditions:

(a) Representations and Warranties. The representations and warranties made by the Purchaser in Section 4 hereof shall be true and correct in all material respects on the date of the Closing and the Purchaser shall have performed all covenants, obligations and conditions herein required to be performed or observed by it on or prior to the date of the Closing.

(b) Performance. The Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS AND THE WARRANTORS

A. Each of the Selling Shareholders and the Warrantors hereby severally but not jointly represents and warrants to the Purchaser that the following statements are all true, correct and complete in all material respects as of the date hereof and as of the Closing:

(i)

Capacity and Authority. It/he has full right, power and authority and (if applicable) has duly authorized its authorized representative to be the signatories of this Agreement to execute and deliver this Agreement, to perform its obligations hereunder, to consummate the transactions contemplated hereby. It is not insolvent and no receiver has been appointed over any part of its assets and no such appointment has been threatened.

(ii)

Authorization and Validity of Agreements. This Agreement has been duly authorized, executed and delivered by it/him and is the legal, valid and binding obligation of it/him, enforceable in accordance with its terms. It/he has taken all actions required to approve the execution and delivery by it of this Agreement.

B. Each Selling Shareholder hereby further severally but not jointly represents and warrants to the Purchaser that the following statements are all true, correct and complete in all material respects as of the date hereof and as of the Closing:

(i)

Share. The Sale Shares to be sold by such Selling Shareholder are fully and validly issued, fully paid and non-assessable. Such Selling Shareholder has full legal and beneficial ownership and right to its Sale Shares, free from any liens, charges, encumbrances, security interests, claims, or third party rights (the “Encumbrances”) except for any restrictions on transfer under applicable securities laws, the Articles of Association, the Memorandum of Association, the Members Agreement and/or the Right of First Refusal and Co-Sale Agreement of the Company, and there is no agreement to give or create any Encumbrance over such Sale Shares. Upon sale and delivery of the Sale Shares of such Selling Shareholder to the Purchaser, the Purchaser shall acquire good legal and beneficial title to and complete ownership of such Sale Shares, free from any Encumbrances, except for any restrictions on transfer under applicable securities laws, the Articles of Association, the Memorandum of Association, the Members Agreement and/or the Right of First Refusal and Co-Sale Agreement of the Company.

(ii)

Approvals. Other than the necessary consents of the shareholders and the board of directors of such Selling Shareholder to the sale of the Shares which shall have been obtained as of the Closing Date, no consent or approval of any person is required under any contract binding upon such Selling Shareholder, or constitutional documents, instrument, judgment, order, writ, decree, statute, rule, or regulation applicable to such Selling Shareholder or under any applicable law, to permit the execution, delivery and performance of this Agreement by such Selling Shareholder.

(iii)

Exempt Offering. The sale and delivery of the Sale Shares by such Selling Shareholder pursuant to this Agreement are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) and from the registration or qualification requirements of any other applicable securities laws and regulations.

C. Each Warrantor further severally and jointly represents and warrants to the Purchaser that the statements as set out in Part One of Schedule 3, subject to the disclosure letter (the “Disclosure Letter”) set out in Part Two of Schedule 3, are all true, correct and complete in all material respects as of the date hereof and as of the Closing. The disclosure of any matter in the Disclosure Letter or in the documents referred to, in or attached to the Disclosure Letter shall be effective only for the purposes of qualifying the representation or warranty to which the disclosure specifically refers to, and not for the purpose of qualifying any other representation or warranty.

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

A. The Purchaser hereby represents and warrants to the other Parties that the following statements are all true, correct and complete in all material respects as of the date hereof and as of the Closing:

(i)

Capacity and Authority. It has full right, power and authority and has duly authorized its authorized representative to be the signatories of this Agreement to execute and deliver this Agreement, to perform its obligations hereunder, to consummate the transactions contemplated hereby. It is not insolvent and no receiver has been appointed over any part of its assets and no such appointment has been threatened.

(ii)

Authorization and Validity of Agreements. This Agreement has been duly authorized, executed and delivered by it and is the legal, valid and binding obligation of it, enforceable in accordance with its terms. It has taken all actions required to approve the execution and delivery by it of this Agreement.

(iii)

Purchase for Own Account. The Shares to be purchased hereunder from the Company and the Selling Shareholders are being acquired for investment for the Purchaser’s own account, not as a nominee or agent.

5. ADDITIONAL COVENANTS

A. Each Warrantor, jointly and severally, shall indemnify, defend and hold the Purchaser and its respective officers, directors, members, partners, affiliates, employees, agents and representatives (collectively, the “Indemnitees”) harmless against all liability, loss, and damage (including taxes thereon) together with all reasonable costs and expenses related thereto (including reasonable legal fees and expenses), relating to or arising from (i) the untruth, inaccuracy or breach in any material respect of any of the representations, warranties, covenants or agreements of the Warrantors under the Transaction Agreements (defined in Schedule 3), (ii) the execution or delivery of any such agreement or any other agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto (other than the Purchaser) of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, and (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing (including as may be commenced by third parties), whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; and provided that none of Mr. Zhu’s assets other than the Ordinary Shares held either directly or indirectly by him shall in any respect be used to satisfy any of his indemnity obligations hereunder. In the event that any Indemnitee claims any such right of indemnification, such Indemnitee shall provide to the Warrantors prompt written notice thereof, together with reasonable detail regarding such claims and in the event that such claim involves third party claims, allow the Group Companies, as applicable, at its expense to defend such claim(s) on the Indemnitee’s behalf.

B. Within thirty (30) Business Days after the Closing, the Warrantors shall procure that each PRC Group Company shall have successfully completed the registrations with the competent administration and commerce for the appointment of the Preferred Director as a director of such PRC Group Company.

C. The Company shall use its reasonable best endeavors to seek a Qualified IPO (as defined in the Amended Articles) on a recognized stock exchange within five (5) years after the Closing, and the Warrantors other than the Company shall use their reasonable endeavors to procure such Qualified IPO.

D. From the Closing, each Group Company shall appoint a Purchaser-designated CPA firm as auditor of such Group Company subject to approval of the Board (including affirmative vote of the Preferred Director).

E. Each Group Company will restrict its free cash to short-term, liquid deposits at sound financial institutions.

F. Within thirty (30) days after the Closing, the Warrantors shall procure that a domestic company nominated by the Purchaser shall have become a duly registered shareholder of each Domestic Company holding such percentage of equity interest equaling to the Purchaser’s ownership percentage in the Company on a fully diluted basis (the “Onshore Restructuring”). The aggregate purchase price to be paid for such equity interest in the Domestic Companies under the Onshore Restructuring shall be RMB621,270 in total.

G. Within ten (10) days after the completion of the Onshore Restructuring, the Warrantors shall procure that the WFOE, the Domestic Companies and the registered shareholders of the Domestic Companies shall have entered into a series of controlling agreements (the “New Controlling Agreements”) in substantially the form attached hereto as Exhibit G.

H. Within thirty (30) days after the execution of the New Controlling Agreements, the Warrantors shall procure that the WFOE, the Domestic Companies and the registered shareholders of the Domestic Companies shall have successfully completed the registrations with the competent administration and commerce for the share pledge pursuant to the New Controlling Agreements.

I. Within thirty (30) days after the Closing, the Warrantors shall procure that each person who directly or indirectly owns any shares in the Company and who is subject to SAFE Circular 37 (defined below) shall have completed the amendment registration required under such regulation with respect to the transactions contemplated under this Agreement.

6. MISCELLANEOUS

A. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of Hong Kong without regard to principles of conflicts of laws.

B. Dispute Resolution. Each of the Parties hereto irrevocably (i) agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall first be subject to resolution through consultation of the parties to such dispute, controversy or claim. Such consultation shall begin within seven (7) days after one Party hereto has delivered to the other Parties involved a written request for such consultation. If within thirty (30) days following the commencement of such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any Party with notice to the other Parties. The arbitration shall be held in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “HKIAC”); (ii) waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such arbitration, and (iii) submits to the exclusive jurisdiction of HKIAC in any such arbitration. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. The Parties to the arbitration shall each pay an equal share of the costs and expenses of such arbitration, and each Party shall separately pay for its respective counsel fees and expenses; provided, however, that the prevailing party in any such arbitration shall be entitled to recover from the non-prevailing party its reasonable costs and attorney fees.

C. Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Nothing in this Agreement, express or implied, is intended to confer upon any Party other than the Parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

D. Counterparts. This Agreement may be executed in five (5) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any counterpart or other signature delivered by facsimile shall be deemed for all purposes as being good and valid execution and delivery of this Agreement by that Party.

E. Headings. The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

F. Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by 15 days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 6F). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two (2) days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

G. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Parties.

H. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid, legal, and enforceable under all applicable laws. If, however, any provision of this Agreement shall be invalid, illegal, or unenforceable under any such applicable law in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law, or, if for any reason it is not deemed so modified, it shall be invalid, illegal, or unenforceable only to the extent of such invalidity, illegality, or limitation on enforceability without affecting the remaining provisions of this Agreement, or the validity, legality, or enforceability of such provision in any other jurisdiction.

I. Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the Parties with respect to the subject matter of this Agreement. Any prior or contemporaneous agreement, discussion, understanding or correspondence among the Parties (including any prior representations or warranties given by the parties) regarding the subject matter of this Agreement is superseded by this Agreement.

J. Further Assurances. From and after the date hereof, the Parties hereto shall execute and deliver such instruments, documents or other writings, and shall take such further actions, as may be reasonably necessary or desirable to carry out and to effectuate fully the intent and purpose of this Agreement.

K. Rights Cumulative. Each and all of the various rights, powers and remedies of a Party hereto will be considered to be cumulative with and in addition to any other rights, powers and remedies which such Party may have at law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such Party.

L. Interpretation. Unless a provision hereof expressly provides otherwise: (i) the term “or” is not exclusive; (ii) words in the singular include the plural, and words in the plural include the singular; (iii) the terms “herein” “hereof” and other similar words refer to this Agreement as a whole and not to any particular section, subsection, paragraph, clause, or other subdivision; (iv) the term “including” will be deemed to be followed by “, but not limited to,”; (v) the masculine, feminine, and neuter genders will each be deemed to include the others; (vi) the terms “shall,” “will,” and “agrees” are mandatory, and the term “may” is permissive; (vii) the term “day” means “calendar day”, (viii) all references to dollars are to currency of the United States of America, and (ix) “Business Days” means any day other than a Saturday, a Sunday or public holiday on which commercial banks in Hong Kong are open for business.

M. No Waiver. Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof will not be deemed a waiver of such term, covenant, or condition, nor will any waiver or relinquishment of, or failure to insist upon strict compliance with, any right, power or remedy power hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or times.

N. No Presumption. The Parties acknowledge that any applicable law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived. If any claim is made by a Party relating to any conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any Party or its counsel.

O. Specific Performance. Each of the Parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other Party to sustain damage for which it would not have an adequate remedy at law for money damages, and therefore each of the Parties hereto agrees that in the event of any such breach the aggrieved Party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity.

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


The Selling Shareholder:

NORTHERN LIGHT VENTURE CAPITAL II, LTD.

By:		/s/ Jeffrey Lee
Print Name of Authorized Signatory: Jeffrey Lee
Title of Authorized Signatory: Managing Director

Mail Address of Northern Light Venture Capital II, Ltd.: Suite 1720, Hutchison House 10 Harcourt Road, Central Hong Kong

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


The Selling Shareholder:

SINA HONG KONG LTD.

By:		/s/ Charles Chao
Print Name of Authorized Signatory: Charles Chao
Title of Authorized Signatory: Chairman of the Board

Mail Address of Sina Hong Kong Ltd.: Unit 1-3, 20/F, Futura Plaza, 111-113 How Ming Street, Kwun Tong, Kowloon, Hong Kong

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


The Company:

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


Founders’ BVI Holding Entity:

MOBILEWOO TECHNOLOGY LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Limited: LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


HK Sub:

MOBILEWOO (CHINA) TECHNOLOGY DEVELOPMENT LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo (China) Technology Development Limited LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


WFOE:

BEIJING MOBILEWOO TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWoo Technology Co., Ltd. LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


Beijing M15:

BEIJING MOBILEWO INFORMATION TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWo Information Technology Co., Ltd. LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


Beijing MobileWu:

BEIJING MOBILEWU INFORMATION TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWu Information Technology Co., Ltd. LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


Shenzhen Taoshenbian:

SHENZHEN TAOSHENBIAN ELECTRONIC COMMERCE CO., LTD.

By:		/s/ Wei Zhang
Print Name of Authorized Signatory: Wei Zhang
Title of Authorized Signatory: Legal Representative

Mail Address of Shenzhen Taoshenbian Electronic Commerce Co., Ltd. LOGO LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


Mr. Zhu:

ZHI ZHU

By:		/s/ Zhi Zhu

Mail Address of Zhi Zhu LOGO

Signature Page to Share Purchase Agreement

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.


The Purchaser:

SUNGY MOBILE LIMITED

By:		/s/ Yuqiang Deng
Print Name of Authorized Signatory: Yuqiang Deng
Title of Authorized Signatory: Chairman and Chief Executive Officer

Mail Address of Sungy Mobile Limited: LOGO LOGO

Signature Page to Share Purchase Agreement

Schedule 1

Schedule of the Shares and the Purchase Price


No.	Seller	Purchaser	Number of Shares	Purchase Price (USD)
1	Northern Light Venture Capital II, Ltd.	Sungy Mobile Limited	11,500,000 Series A Shares		1,220,085
1	Northern Light Venture Capital II, Ltd.		5,743,056 Series B Shares		4,035,000
2	Sina Hong Kong Ltd.		5,743,056 Series B Shares		2,035,000
3	The Company		3,445,833 Series B Shares		1,182,942

	Total:		26,431,945		8,473,027

Schedule 2

Capitalization Table of the Company after immediately the Closing


Shareholders	Number of Ordinary Shares		Number of Series A Preferred Shares		Number of Series B Preferred Shares		Number of Total Shares		Shareholding Percentage
Zhi Zhu (including the shares indirectly held through the Founders’ BVI Holding Entity)		26,331,944		0		0		26,331,944		45.85	%
Xue Guo (indirectly held through the Founders’ BVI Holding Entity)		1,555,556		0		0		1,555,556		2.71	%
Wei Yang (indirectly held through the Founders’ BVI Holding Entity)		1,555,556		0		0		1,555,556		2.71	%
Jian Chen (indirectly held through the Founders’ BVI Holding Entity)		1,555,556		0		0		1,555,556		2.71	%
The Purchaser		0		11,500,000		14,931,945		26,431,945		46.02	%

Total:		30,998,612		11,500,000		14,931,945		57,430,557		100	%

Schedule 3

Part One Further Representations and Warranties of the Warrantors

For purposes of this Schedule 3, any reference to a party’s “knowledge” means such party’s best knowledge after due and diligent inquiries of officers, directors, and other employees of such party reasonably believed to have knowledge of the matter in question.

1. Incorporation, Organization, Good Standing and Qualification

A. The Company is an exempted company limited by shares duly incorporated, validly existing and in good standing under the Companies Law of the Cayman Islands. The Company has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted. The Company is qualified to do business and is in good standing in each jurisdiction as now conducted or presently proposed to be conducted.

B. The HK Sub is duly organized, validly existing and in good standing under, and by virtue of, the laws of Hong Kong. The HK Sub is duly qualified to transact business and is in good standing in each jurisdiction as now conducted or presently proposed to be conducted. Since its incorporation to date, the HK Sub’s activities have been confined solely to passive investment holding and it has not commenced business or entered into any contracts or commitments since incorporation other than those of a routine administrative nature.

C. Each PRC Group Company is a company duly organized and existing under the laws of the PRC, and has all powers and all governmental licenses, permits, authorizations, consents and approvals required to carry on its business as now conducted and as presently proposed to be conducted. Each PRC Group Company has paid all such governmental fees, taxes and stamp duty required to be paid by it under applicable PRC and other laws prior to or upon Closing. Copies of the business license, articles of association, and other organizational documents of the PRC Group Companies, as amended to date, have been delivered to the Purchaser and are true, correct and complete and are in full force and effect.

2. Due Authorization. All corporate action on the part of each Warrantors, its respective officers, directors and shareholders (as applicable) necessary for the authorization, execution and delivery of this Agreement and documents executed and delivered in connection with the transactions contemplated hereby (the “Transaction Agreements”), the authorization, issuance, reservation for issuance and delivery of all of the New Shares, the Redemption, the performance of its or his respective obligations under the Transaction Agreements, has been taken or will be taken prior to the Closing. The Transaction Agreements are valid and binding obligations of each Warrantor, enforceable in accordance with their respective terms, subject, subject to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles. The New Shares are not subject to any preemptive rights, rights of first refusal, or Encumbrances of any kind except for rights imposed under the Transaction Agreements.

3. Capitalization.

A. A complete and current list of all registered equity holders of each Group Company as of the date hereof is set forth in the Disclosure Letter, indicating the amount of equity interest held by each such equity interest holder.

B. The authorized share capital of the Company is and as of the Closing will be US$8,100.00. The authorized share capital of the Company consists, or will consist of the following immediately prior to the Closing:

(i)

58,013,888 Ordinary Shares, of par value US$0.0001 per share (the “Ordinary Shares”), of which 28,666,667 shares are issued and outstanding; 5,777,777 shares of Ordinary Shares reserved for issuance to employees pursuant to its employee stock option plan adopted by the Board, under which no options to purchase shares are issued and outstanding as of the date of this Agreement.

(ii)

11,500,000 Series A preferred shares, of par value US$0.0001 per share, all of which are designated as Series A Preferred Shares (the “Series A Preferred Shares”), all of which are issued and outstanding;

(iii)

11,486,112 Series B preferred shares, of par value US$0.0001 per share, all of which are designated as Series B Preferred Shares (the “Series B Preferred Shares”, together with the Series A Preferred Shares, the “Preferred Shares”), all of which are issued and outstanding. The Ordinary Shares and the Preferred Shares shall have the rights, preferences, privileges and restrictions set forth in the Amended Articles.

(iv)

The outstanding shares have been duly authorized and validly issued in compliance with applicable laws, and are fully paid and nonassessable.

(v)

The Company has reserved:

(a) the New Shares for issuance pursuant to this Agreement;

(b) 26,431,945 shares of Ordinary Shares (as may be adjusted in accordance with the provisions of the Amended Articles) for issuance upon conversion of the Preferred Shares (together, the “Conversion Shares”); and

(c) 5,777,777 shares of Ordinary Shares authorized for issuance to employees pursuant to its employee stock option plan as adopted by the Board, under which no options to purchase shares are issued and outstanding as of the date of this Agreement.

(vi)

The rights, preferences, privileges and restrictions of the Shares are as stated in the Amended Articles. The Shares are convertible into Ordinary Shares on a one-for-one basis as of the date hereof, and the consummation on the transactions contemplated hereunder will not result in any anti-dilution adjustment or other similar adjustment to the outstanding shares of Preferred Shares.

(vii)

At the date of the Closing the outstanding shares of Ordinary Shares and Preferred Shares are respectively owned by the shareholders and in the numbers specified in Schedule 2.

(viii)

Except as provided in the Restricted Share Agreement and unless otherwise approved by the Board of Directors (including the Preferred Director), no share plan, share purchase, share option or other agreement or understanding between the Company and any holder of any equity securities or rights to purchase equity securities provides for acceleration or other changes in the vesting provisions or other terms of such agreement or understanding as the result of (i) termination of employment (whether actual or constructive); (ii) any merger, consolidated sale of shares or assets, change in control or any other transaction(s) by the Company; or (iii) the occurrence of any other event or combination of events.

(ix)

The Sale Shares are, and the New Shares when issued and delivered and paid for in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable. The Conversion Shares have been duly and validly reserved and, when issued in compliance with the provisions of this Agreement, the Amended Articles and applicable law, will be validly issued, fully paid and nonassessable. Except as set forth in the Transaction Agreements, the Shares and the Conversion Shares will be free of any Encumbrances; provided, however, that the Shares and the Conversion Shares are subject to restrictions on transfer under the securities laws of PRC, U.S. state and/or federal and other jurisdictions. Except as set forth in the Transaction Agreements, the Shares and the Conversion Shares are not subject to any preemptive rights or rights of first refusal.

(x)

Except for the conversion privileges of the Preferred Shares, and the rights provided pursuant to the Transaction Agreements, there are no options, warrants or other rights to purchase any of the Company’s authorized and unissued capital shares.

4. PRC Group Companies.

A. The registered capital of each PRC Group Company is fully paid as required and one hundred percent (100%) duly vested in the respective shareholders of such entity in accordance with applicable PRC rules and regulations. There are no outstanding rights, or commitments made by the PRC Group Companies or any of its investors, joint venture partners and owners, to issue, purchase or sell any equity interest in the PRC Group Companies.

B. The Disclosure Letter contains a complete list of the real properties used or maintained by the PRC Group Companies. Except as disclosed in the Disclosure Letter, none of the PRC Group Companies maintains any office or branch or other real properties.

C. The WFOE, the Domestic Companies and the Founders have entered into a serious controlling agreements (the “Controlling Agreements”) to establish effective control over the business and operation of the Domestic Companies by a captive structure, and the Controlling Agreements are valid and in full force.

D. All share transfer transactions with regard to each of the PRC Group Companies are valid. The constitutional documents relating to each of the PRC Group Companies are valid and have been duly approved or issued (as applicable) by the appropriate PRC authorities and are valid and in full force.

E. All consents, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings with any governmental authority, permits or licenses (the “Governmental Authorizations”) required under PRC laws for the due and proper establishment and operation of each of the PRC Group Companies as currently operated, or contemplated to be operated, have been duly obtained from the appropriate PRC authorities and are in full force and effect.

F. All filings and registrations with the PRC authorities required in respect of each of the PRC Group Companies and its operations, including the registrations with the Ministry of Commerce, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the State Administration of Foreign Exchange, tax bureau, customs authorities, product registration authorities, health regulatory authorities and the local counterpart of each of the aforementioned governmental authorities, as applicable, have been duly completed in accordance with the relevant rules and regulations.

G. None of the PRC Group Companies has received any letter or notice from any relevant authority notifying it of the revocation of any Governmental Authorization, permit or license issued to it for non-compliance or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly by it.

H. With respect to any land use right, building, property and investment held or leased by each of the PRC Group Companies, it has exclusive, full and unimpaired legal and beneficial ownership of its rights, leasehold interests, property and investments free from any mortgages or security interests of any nature, third party rights, conditions, orders or other restrictions and has obtained all necessary approvals and effected all necessary registrations with government authorities with respect thereto.

I. All requisite formalities in respect of the importation of machinery, equipment, parts, tools and materials by the PRC Group Companies have been and will be complied with in accordance with the relevant PRC laws and regulations.

J. Each of the PRC Group Companies has been conducting its business activities within its respective permitted scope of business or is otherwise operating its business in full compliance with all relevant legal requirements, including producing, processing and/or distributing products with all requisite licenses, permits and approvals granted by competent PRC authorities.

K. Each of the PRC Group Companies does not have any reason to believe that any Governmental Authorization, license or permit requisite for the conduct of any part of its business which are subject to periodic renewal will not be granted or renewed by the relevant PRC authorities.

L. With regard to employment and labor matters, each of the PRC Group Companies has complied with all applicable PRC laws and regulations, including laws and regulations pertaining to welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions and the like.

M. Each of the PRC Group Companies owns all properties and assets, including proprietary rights, necessary for its respective operations as presently conducted.

5. Valid Issuance of Shares. All presently outstanding Ordinary Shares of the Company are duly and validly issued, fully paid and non-assessable and free of any Encumbrances, and such Ordinary Shares, and all outstanding shares, options and other securities of the Company, have been issued in full compliance with the requirements of all applicable securities laws and regulations, including the Securities Act, and all other anti-fraud and other provisions of applicable securities laws and regulations.

6. Financial Statements. The Disclosure Letter contains the balance sheets of each PRC Group Company as of 31 March 2014, and the cash flow statements and the income statements of each PRC Group Company for the one month period then ended 31 March 2014 (all such financial statements being collectively referred to herein as the “Financial Statements”). Such Financial Statements (a) accord with the books and records of each PRC Group Company, (b) are true, correct and complete and present fairly the financial condition and state of affairs of each PRC Group Company at the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with accounting principles generally accepted in the PRC (the “PRC GAAP”), except, as to the unaudited financial statements, for the omission of notes thereto and normal year-end audit adjustments. Specifically, but not by way of limitation, the respective balance sheets included in the Financial Statements disclose all of each PRC Group Company’s debts, liabilities and obligations of any nature in all material respects, whether due or to become due, as of their respective dates (including absolute, accrued, and contingent liabilities) to the extent such debts, liabilities and obligations are required to be disclosed in accordance with the PRC GAAP, and each PRC Group Company has good and marketable unencumbered title in any material respect to all assets set forth on the balance sheets included in the respective Financial Statement.

7. Liabilities. No Group Company has any indebtedness for borrowed money that it has directly or indirectly created, incurred, assumed, or guaranteed, or with respect to which the Group Company has otherwise become directly or indirectly liable, except (i) as reflected on the Financial Statements, (ii) trade or business liabilities incurred in the ordinary course of business, and (iii) other liabilities that do not exceed US$10,000 in the aggregate. None of the Group Companies is unable to pay its debts as and when they fall due or is subject to any insolvency proceedings or has had a receiver, liquidator or administrator appointed over its assets.

8. Title to Properties and Assets. Each Group Company has good and marketable title to all respective properties and assets reflected on the Financial Statements, in each case subject to no Encumbrance or claims of any party. With respect to the property and assets it leases, each Group Company and the lessor are in compliance in all material respects with such leases and the Group Company holds valid leasehold interests in such assets free of any Encumbrances or claims of any party other than the lessors of such property and assets.

9. Activities Since 31 March 2014. Since 31 March 2014 and until Closing, except as contemplated by this Agreement, none of the following events has occurred with respect to any Group Company:

A. any declaration or payment of any dividend, or authorization or payment of any distribution upon or with respect to any class or series of its capital shares or any other equity interest;

B. any incurrence of indebtedness for money borrowed or any other liabilities, except for the obligations or liabilities incurred in the ordinary course of business;

C. any loans or advances to any person except for those incurred in the ordinary course of business;

D. any sale, exchange, assignment, or other disposition of any material assets or rights (including any proprietary rights or other intangible assets) or creation of any Encumbrance on any of its material assets or rights;

E. any agreements or transactions with any of its officers, directors or employees or any entity controlled by any of such individuals or with its shareholders or persons related to such shareholders, or any agreement on transaction with any other party that is outside the ordinary course of business;

F. any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting its assets, properties, financial condition, operating results, prospects or business as presently conducted and as presently proposed to be conducted;

G. any waiver of a valuable right or of a debt owed to it;

H. any satisfaction or discharge of any claim or Encumbrance or payment of any obligation, except for those made in the ordinary course of business;

I. any material change or amendment to a contract or arrangement by which any Group Company is bound or subject except in the ordinary course of business;

J. any material change in any compensation arrangement or agreement with any present employee, contractor or director;

K. any resignation or termination of any of its directors or key officers; or

L. any other event or condition of any character which would materially affect its assets, properties, financial condition, operating results or business.

10. Intellectual Property; Status of Proprietary Rights.

A. Each Group Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”) necessary to the business of each Group Company as presently conducted, the lack of which could reasonably be expected to have a Material Adverse Effect (defined below), without any conflict with or infringement of the rights of others. For purpose of this Agreement, a “Material Adverse Effect” means any change, event or effect (the “Effect”) that, individually or in the aggregate, would or would reasonably be expected to be materially adverse to the condition (financial or otherwise), business, operations, assets, results of operations or business prospects of the Group Companies as a whole, or to the ability of Company to consummate timely the transactions contemplated hereby (regardless of whether or not such adverse effect or change can be cured at any time or whether the Purchaser has knowledge of such effect or change on the date hereof), including any adverse change, event, development, or effect, provided that in no event shall any of the following be deemed, either alone or in combination, to constitute, nor shall any of the following be taken into account in determining whether there has been, a Material Adverse Effect: (x) any Effect that results from changes in general economic conditions or changes generally affecting industries in which any member of the Group Company operates which does not disproportionately impact the Group Company; or (y) any matter that has been disclosed in the Disclosure Schedule to the extent so disclosed; or (z) changes in applicable laws or in generally accepted accounting principles or accounting standards, or changes in general legal, regulatory or political conditions, in each case, which do not disproportionately impact the Group Companies. The Disclosure Letter contains a complete list of the patents, trademarks, copyrights and domain names and pending patent, trademark and copyright applications for each Group Company. Except for agreements with its own employees or consultants, standard end-user license agreements, standard marketing agreements and agreements entered in the ordinary course of each Group Company’s business, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and none of the Group Companies is bound by or is a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity. No Group Company has received any written communication alleging that any Group Company has violated or, by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is any Group Company aware of any basis therefor. No Group Company is obligated to make any payment by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the conduct of its business as presently conducted. To the knowledge of the Warrantors, there are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which any Group Company is a party or by which it is bound which involve indemnification by any Group Company with respect to infringements of Intellectual Property.

B. No Breach by Employees. No Group Company is aware that any of its employees and the Founders is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of such Group Company or that would conflict with such Group Company’s business as presently conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of any Group Company’s business by the employees of such Group Company, nor the conduct of any Group Company’s business as presently conducted, will, to the knowledge of the Warrantors, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. None of the Group Companies believe it is or will be necessary to use any inventions of any of its employees made prior to their employment by the Group Companies, except for inventions that have been validly and properly assigned or licensed to such member of the Group Companies as of the date hereof.

11. Contracts.

A. Material Contracts and Obligations. All agreements, contracts, leases, licenses, instruments, commitments (oral or written), indebtedness, liabilities and other obligations to which any Group Company is a party or by which it is bound that (i) are material to the conduct and operations of its business and properties; (ii) involve any of the officers, consultants, directors, employees or shareholders of any Group Company; or (iii) obligate any Group Company to share, license or develop any product or technology are listed in the Disclosure Letter and have been provided to the Purchaser and its counsel. For purposes of this Section 11, “material” shall mean any agreement, contract, indebtedness, liability, arrangement or other obligation either (i) having an aggregate value, cost, liability or amount of US$100,000 or more, or (ii) not terminable upon no more than thirty (30) days notice without penalty or obligation.

B. Validity and Status. All the material contracts listed on the Disclosure Letter are legally valid and binding, in full force and effect, and enforceable in accordance with their respective terms against the parties thereto, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other remedies in the nature of equitable remedies. To the best knowledge of the Warrantors, there is no existing default or breach by any party thereto and no Group Company has received any notice or claim or allegation of default or breach thereof from any party thereto.

12. Litigation. There is no action pending or currently threatened against any Group Company, any Group Company’s activities, properties or assets or against any officer, director or employee of any Group Company in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, any Group Company. There is no factual or legal basis for any such action. To the knowledge of the Warrantors, no Group Company is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality and there is no action by any Group Company currently pending or which it intends to initiate.

13. Governmental Consents. All Governmental Authorizations on the part of each Group Company required in connection with the consummation of the transactions contemplated herein have been obtained and are currently effective. The Founders have caused each shareholder holding Ordinary Shares of the Company being a PRC resident that is subject to the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Investment and Financing and Roundtrip Investment via Special Purpose Vehicles LOGO (“SAFE Circular 37”) issued by the PRC State Administration of Foreign Exchange (“SAFE”) on 4 July 2014 and any of the implementing measures or supplementing guidelines have completed any registration required thereby.

14. Compliance with Other Instruments. To the knowledge of the Warrantors, no Group Company is in, nor will the conduct of business of any Group Company as proposed to be conducted result in, any violation, breach or default of any constitutional document of any Group Company, or in any material respect of any term or provision of any mortgage, indenture, contract, agreement or instrument to which any Group Company is a party or by which it may be bound, or of any provision of any judgment, decree, order, statute, law, rule or regulation applicable to or binding upon any Group Company. The execution, delivery and performance of and compliance with the Transaction Agreements and the consummation of the transactions contemplated hereby will not result in any such violation, breach or default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a default under any such constitutional documents, any such contract, agreement or instrument or to the knowledge of the Warrantors, a violation of any statutes, laws, regulations or orders, or an event which results in the creation of any charge or Encumbrance upon any asset of any Group Company.

15. Rights of Registration and Voting Rights. Except as provided in the other Transaction Agreements, no Group Company is under any obligation to register under the Securities Act or any other applicable securities laws, any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. Except as contemplated in the other Transaction Agreements, no shareholder of any Group Company has entered into any agreements with respect to the voting of shares in the capital of the Company. Except as contemplated by or disclosed in the Transaction Agreements, none of the Warrantors is a party to or has any knowledge of any agreements, written or oral, relating to the acquisition, disposition, registration under the Securities Act, or voting of the shares or securities of any Group Company.

16. Tax Matters. The provisions for taxes in the respective Financial Statements are sufficient for the payment of all accrued and unpaid applicable taxes of each Group Company, whether or not assessed or disputed as of the date of each such balance sheet. There have been no extraordinary examinations or audits of any tax returns or reports by any applicable governmental agency, and none are threatened or pending. Each Group Company has duly filed all tax returns required to have been completed and filed by it and paid all taxes shown to be due on such returns in a timely manner. There are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

17. Obligations of Management. Each employee of each Group Company is identified in the Disclosure Letter, and to the knowledge of the Warrantors, each such employee is currently devoting one hundred percent (100%) of his or her working time to the conduct of the business of a Group Company. No Group Company is aware that any such employee is planning to work less than full time at a Group Company in the future. To the knowledge of the Warrantors, no such employee is currently working for a competitive enterprise, whether or not such person is or will be compensated by such enterprise.

18. Confidentiality, Invention Assignment and Non-Competition Agreement. Each current employee of each Group Company (including the Founders other than Jian Chen) has entered into an agreement regarding confidentiality, invention assignment and non-competition (the “Confidentiality and Non-Competition Agreement”) substantially in the form attached hereto as Exhibit H, containing at a minimum, to the extent applicable and permitted under the applicable law, a two (2) year post termination non-competition and non-solicitation covenant, with the relevant Group Company in a form approved by the Purchaser.

19. Interested Party Transactions. No officer or director of a Group Company or any affiliate of any such person has any agreement, understanding, or proposed transaction with, or is indebted to, any Group Company, nor is any Group Company indebted (or committed to make loans or extend or guarantee credit) to any of them, except with regard to the employment contracts. To the knowledge of the Warrantors, no officer or director of a Group Company has any direct or indirect ownership interest in any firm or corporation with which a Group Company is affiliated or with which a Group Company has a business relationship, or any firm or corporation that competes, directly or indirectly, with a Group Company, except that any of the foregoing persons may have record ownership interest in the Company or own shares in publicly traded companies that may compete with a Group Company. No affiliate of any officer or director of a Group Company is directly or indirectly interested in any material contract with a Group Company. To the knowledge of the Warrantors, no officer or director of a Group Company or any affiliate of any such person has had, either directly or indirectly, any interest in: (a) any person or entity which purchases from or sells, licenses or furnishes to a Group Company any goods, property, intellectual or other property rights or services; or (b) any contract or agreement to which a Group Company is a party or by which it may be bound or affected.

20. Restricted Share Agreement. Prior to or at the Closing, The Restricted Share Agreement remain in full force and effect, and the Company has furnished to the Purchaser true and complete copies of the forms of the Restricted Share Agreement at the Closing.

21. Minute Books. The minute books of each Group Company made available to the Purchaser contain a complete summary of all meetings and actions taken by directors and shareholders or owners of each Group Company since their respective time of formation, and reflect all transactions referred to in such meetings and actions accurately in all material respects.

22. Disclosure. No representation or warranty in this Agreement or in any written statement or certificate furnished or to be furnished to the Purchaser pursuant to any Transaction Agreements contain any untrue statement of a material fact or omits to state any fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading in any way. Each of the Group Companies has fully provided the Purchaser with all the information that the Purchaser has requested for deciding whether to purchase the Shares.

23. Labor Agreement and Actions; Employee Compensation. No Group Company is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or has sought to represent any of the employees, representatives or agents of a Group Company. To the knowledge of the Warrantors, there is no strike or other labor dispute involving a Group Company pending or threatened (nor has there been since the incorporation of each Group Company), nor is any Group Company aware of any labor organization activity involving its employees. To the knowledge of the Warrantors, none of the officers or key employees, or any group of key employees, intends to terminate his, her or their employment with a Group Company, nor does such Group Company have a present intention to terminate the employment of any of the foregoing individuals. Each Group Company has complied in all respects with all applicable national, provincial, local or municipal equal employment opportunity and other laws related to employment. No Group Company is a party to or bound by any currently effective employment contract that provides for compensation exceeding three (3) months’ average remuneration of that employee upon termination (except for as required by applicable laws), deferred compensation agreement, severance agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement, or other employee compensation agreement.

24. Employment Agreements; Consulting Agreements. Each employee, officer and consultant (including the Founders other than Jian Chen) of the Company has entered into an employment agreement or consulting agreement, as applicable, substantially in the form attached hereto as Exhibit I. Such employment agreements or consulting agreements are valid and in full force. A complete and current list of the compensation package of each of the Founders other than Jian Chen is set forth in the Disclosure Letter.

25. Option Agreements. Each person who, pursuant to any benefit, bonus or incentive plan of the Company, holds any option, warrant or right to acquire Ordinary Shares or other securities of the Company, has entered into or is otherwise bound by an agreement granting the Company (a) the right to repurchase any unvested shares for the original purchase price, or to cancel the unvested option, warrant or right, in the event the holder’s employment or services with the Company terminate for any reason, subject to release of such repurchase or cancellation right on terms and conditions specified by the Board (including the Preferred Director), and (b) a right of first refusal with respect to all such shares. Such Ordinary Shares are also subject to the customary market standoff restrictions. The Company has furnished to the Purchaser true and complete copies of the forms of all option agreements.

26. Tax Representations. No Group Company is, or will be immediately after the Closing, a “Controlled Foreign Corporation” (“CFC”) as defined in the Internal Revenue Code of 1986, as amended (or any successor thereto) (the “Code”) with respect to the shares held by Purchaser. No Group Company is, or will be immediately after the Closing, a “Passive Foreign Investment Company” (“PFIC”) within the meaning of Section 1297 of the Code. Each Group Company shall take such actions, including making an election to be treated as a corporation or refraining from making an election to be treated as a partnership, as may be required to ensure that at all times, each Group Company is treated as a corporation for United States federal income tax purposes. In the event that the Purchaser’s interest in any Group Company is determined by counsel or accountants to be subject to the reporting requirements of either or both of Sections 6038 and 6038B, each Group Company agrees, upon a request from the Purchaser, to provide such information to the Purchaser as may be necessary to fulfill the Purchaser’s obligations thereunder.

27. Compliance with Laws; Consents and Permits. Each Group Company has not conducted any activity in material violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties. All consents, permits, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings by or with any governmental authority and any third party which are required to be obtained or made by each Group Company in connection with the consummation of the transactions contemplated hereunder (including without limitation those contemplated under the other Transaction Agreements) shall have been obtained or made prior to and be effective as of the Closing. Each Group Company has all material approvals, franchises, permits, licenses and any similar authority necessary for the conduct of its business. No Group Company is in default under any of such approvals, permits, licenses or other similar authority, nor is it in receipt of any letter or notice from any relevant authority notifying revocation of any such approvals, permits or licenses issued to it for non-compliance or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly by each Group Company. In respect of approvals, licenses or permits requisite for the conduct of any part of the business of each Group Company which are subject to periodic renewal by any governmental or administrative authorities, no Group Company has any reason to believe that such requisite renewals will not be granted by the relevant authorities. No consent, approval, order or authorization of or registration, qualification, designation, declaration or filing with, any governmental authority is required on the part of the Warrantors is required in connection with the valid execution, delivery and consummation of the transactions contemplated hereunder, or the offer, sale, issuance or reservation for issuance of the Preferred Shares and the Ordinary Shares.

28. Brokers or Finders. The Company has not incurred, and will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any of the transactions contemplated hereby.

29. Safety Laws. None of the Group Companies is in violation of any applicable statute, law, or regulation relating to occupational health and safety, and to the knowledge of the Warrantors, no material expenditures are or will be required in order to comply with any such existing statute, law, or regulation.

30. Exempt Offering. The sale and delivery of the New Shares by the Company pursuant to this Agreement are exempt from the registration requirements of the Securities Act and from the registration or qualification requirements of any other applicable securities laws and regulations.

31. FCPA Compliance. None of the Group Companies and, to the Warrantors’ knowledge, any of their directors, administrators, officers, board of directors (supervisory and management) members or employees have made, directly or indirectly, any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to (a) any foreign official (as such term is defined in the FCPA) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a governmental authority, or (b) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, in the case of both (a) and (b) above in order to assist any Group Company to obtain or retain business for, or direct business to any Group Company, as applicable, subject to applicable exceptions and affirmative defenses. None of the Group Companies and any of their respective directors, administrators, officers, board of directors (supervisory and management) members and employees has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation subject to applicable exceptions and affirmative defenses.

32. OFAC Compliance To the Warrantors’ knowledge, neither the Company nor any Group Company or any directors, administrators, officers, board of directors (supervisory and management) members or employees of the Company or any Group Company is an OFAC Sanctioned Person (as defined below). To the Warrantors’ knowledge, the Group Companies and their directors, administrators, officers, administrators, board of directors (supervisory and management) members or employees are in compliance with, and have not previously violated, the USA Patriot Act of 2001, and all other applicable United States and PRC anti-money laundering laws and regulations. To the knowledge of the Warrantors, none of (i) the purchase and sale of the Shares, (ii) the execution, delivery and performance of the Transaction Agreements, or (iii) the consummation of any transaction contemplated hereby or thereby, or the fulfillment of the terms hereof or thereof, will result in a violation by the shareholder of a Group Company or any of its employees, of any of the OFAC Sanctions or of any anti-money laundering laws of the United States, the PRC or any other jurisdiction.

For the purpose of this Section 32, “OFAC Sanctions” means any sanctions program administered by the Office of Foreign Control of the United States Department of the Treasury (“OFAC”) under authority delegated to the Secretary of the Treasury (the “Secretary”) by the President of the United States or provided to the Secretary by statute, and any order or license issued by, or under authority delegated by, the President or provided to the Secretary by statute in connection with a sanctions program ths administered by OFAC. For ease of reference, and way of limitation, OFAC Sanctions programs are described on OFAC’s website at eas.gov/ofac.

Exhibit 4.37

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED

SECOND AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

This Second Amended and Restated Right of First Refusal and Co-Sale Agreement (the “Agreement”) is made as of October 14, 2014 by and among:

(A) MobileWoo Technology Holdings Limited, a Cayman Islands company (the “Company”);

(B) MobileWoo (China) Technology Development Limited LOGO , a company organized and existing under the laws of Hong Kong (the “HK Sub”);

(C) Beijing MobileWoo Technology Co., Ltd. , a company organized and existing under the laws of the People’s Republic of China (the “PRC”, which for the purpose of this Agreement shall exclude Hong Kong, Taiwan and Macau) (the “WFOE”);

(D) Beijing MobileWo Information Technology Co., Ltd. LOGO , a company organized and existing under the laws of the PRC (“Beijing M15”);

(E) Beijing MobileWu Information Technology Co., Ltd. LOGO , a company organized and existing under the laws of the PRC (“Beijing MobileWu”, together with Beijing M15, each a “Domestic Company” and collectively, the “Domestic Companies”);

(F) Shenzhen Taoshenbian Electronic Commerce Co., Ltd. LOGO , a company organized and existing under the laws of the PRC (“Shenzhen Taoshenbian”, together with the WFOE and the Domestic Companies, each a “PRC Group Company” and together, the “PRC Group Companies”);

(G) the Purchaser as set forth on Exhibit A hereto (the “Purchaser” or the “Investor”);

(H) MobileWoo Technology Limited, a company incorporated in the British Virgin Islands, (the “Founders’ BVI Holding Entity”); and

(I) the individuals listed on Exhibit B hereto (the “Founders”).

The Company, the HK Sub and the PRC Group Companies are collectively referred to as the “Group Companies” and each a “Group Company”.

RECITALS

A. Pursuant to an Amended and Restated Right of First Refusal and Co-sale Agreement dated October 24, 2011 by and among the Company, the Founders’ BVI Holding Entity, the Founders and certain other parities, the parties thereto set forth certain rights to the holders of the Company’s Series A Preferred Shares and Series B Preferred Shares, with respect to the other shareholders of the Company (the “Former Agreement”).

B. The Group Companies, Mr. Zhu Zhi , the Founders’ BVI Holding Entity, the Purchaser and other parties entered into the MobileWoo Technology Holdings Limited Shares Purchase Agreement on October 2, 2014 (the “Purchase Agreement”) pursuant to which the Purchaser will purchase certain number of Series A Preferred Shares and Series B Preferred Shares of the Company.

C. In connection with the consummation of the transactions contemplated by the Purchase Agreement, the parties hereto desire to enter into this Agreement to terminate, supersede and replace in its entirety the Former Agreement and to waive any and all rights they may have thereunder in exchange for their rights hereunder.

D. Pursuant to the Purchase Agreement, it is a condition to the closing (the “Closing”) of the transactions contemplated by the Purchase Agreement that the parties hereto enter into this Agreement.

E. The Group Companies, the Founders, the Founders’ BVI Holding Entity and the Purchaser all desire that the transactions contemplated by the Purchase Agreement be consummated.

NOW, THEREFORE, in consideration of the foregoing premises and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

(Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement)

1. Certain Definitions. For purposes of this Agreement, the following terms have the following meanings:

(a) “Eligible Investor” shall mean the Investor so long as it, along with the Investor’s affiliates, related individuals or entities, at the time in question, hold at least 100,000 Preferred Shares and/or Ordinary Shares issued upon conversion of Preferred Shares (as may be adjusted from time to time for share splits, share dividends, recapitalizations and the like).

(b) “IPO” shall mean the Company’s first firm commitment underwritten public offering of any of its securities to the general public pursuant to (a) a registration statement filed under the Securities Act, or (b) the securities laws applicable to an offering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally-recognized securities exchange.

(c) “Ordinary Shares” means the Ordinary Shares of the Company with par value of US$0.0001 each, with the rights as described in the Third Amended and Restated Articles of Association.

(d) “Permitted Transferee” any transferee of Shares in a transaction excluded from the definition of Transfer pursuant to Sections 1(m)(i), and (ii).

(e) “Preferred Shares” means the Series A Preferred Shares and the Series B Preferred Shares of the Company.

(f) “Qualified IPO” shall mean an IPO in the United States by an internationally recognized investment bank approved by the Board (including the Sungy Director) covering the offer and sale of Ordinary Shares to the public at a public offering price per share corresponding to a pre-IPO valuation of the Company of not less than US$200,000,000.00 with gross proceeds to the Company equals or exceeds US$50,000,000.00 (excluding underwriting discounts, commissions and expenses) or a substantially similar public offering of securities in a jurisdiction and on an internationally recognized securities exchange outside the United States approved by the Board (including the Sungy Director), providing such public offering price, offering proceeds and regulatory approval is reasonably equivalent to the aforementioned public offering in the United States.

(g) “Right of Co-Sale” means the right of co-sale provided to the Eligible Investors in Section 4 of this Agreement.

(h) “Right of First Refusal” means the right of first refusal provided to the Company in Section 3 of this Agreement.

(i) “Seller” means any of the Founders or the Founders’ BVI Holding Entity proposing to Transfer Shares.

(j) “Series A Preferred Shares” shall mean the series A preferred shares of the Company with par value of US$0.0001 each, with the rights as described in the Third Amended and Restated Articles of Association.

(k) “Series B Preferred Shares” shall mean the series B preferred shares of the Company with par value of US$0.0001 each, with the rights as described in the Third Amended and Restated Articles of Association.

(l) “Shares” means and includes all Ordinary Shares and Preferred Shares.

(m) “Transfer” means and includes any direct or indirect sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by bequest, devise or descent, or other transfer or disposition of any kind, including but not limited to transfers to receivers, levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law, directly or indirectly, except:

(i) any Transfer of the Shares by a Seller, if a Seller is a natural person, to Seller’s spouse, parents, lineal descendants or antecedents or trusts for the benefit of the Seller or the Seller’s spouse, parents or lineal descendants or antecedents for bona fide estate planning purpose; provided, that, in all cases, the transferee or other recipient executes a counterpart copy of this Agreement and becomes bound thereby as was the Seller; and

(ii) any Transfer of Shares by a Seller to the Company pursuant to a repurchase right or right of first refusal held by the Company in the event of a termination of employment of such Seller.

2. Restrictions on Transfer.

(a) General. Before a Seller may Transfer any Shares as adjusted for any share dividends, share splits, recapitalizations and the like, the Company or its assignee(s) shall have a Right of First Refusal, and each Eligible Investor or its assignee(s) shall have a Secondary Refusal Right (as defined below), to purchase the Shares which such Seller desires to transfer on the terms and conditions set forth herein.

(b) Notice of Proposed Transfer by Seller. Not later than forty-five (45) days prior to the Seller Transferring any of his or her Shares, the Seller shall deliver to the Company and each Eligible Investor a written notice (the “Transfer Notice”) stating: (i) the Seller’s bona fide intention to Transfer such Shares (the “Offered Shares”); (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the aggregate number of Offered Shares to be Transferred to each Proposed Transferee; (iv) the bona fide cash price or other consideration for which the Seller proposes to Transfer the Offered Shares (the “Offered Price”); and (v) the Company’s right to exercise its Right of First Refusal and the Eligible Investor’s right to exercise its Secondary Refusal Right (as defined below) with respect to the Offered Shares.

(c) Investor. Subject to applicable laws, each Eligible Investor shall be entitled to apportion Offered Shares to be purchased among its affiliates, provided that such Eligible Investor notifies the Company and the Seller in writing. For the avoidance of doubt, the Investor may freely Transfer any Shares of the Company now or hereafter owned or held by it without limitation; provided that (i) such Transfer is effected in compliance with all applicable laws and (ii) the transferee shall execute and deliver such documents and take such other actions as may be necessary for the transferee to join in and be bound by the terms of this Agreement as an “Investor” (if not already a Party hereto) and the Members Agreement as an “Investor” (if not already a party thereto) upon and after such Transfer. The Company will update its register of members upon the consummation of any such permitted Transfer.

(d) No Indirect Transfers. Each Founder and the Founders’ BVI Holding Entity agrees not to circumvent or otherwise avoid the transfer restrictions set forth in this Agreement, whether by holding the equity securities of the Company indirectly through another person or entity (including the Founders’ BVI Holding Entity and MobileWoo Holdings Limited) or by causing or effecting, directly or indirectly, the Transfer or issuance of any equity securities by any such person or entity (including the Founders’ BVI Holding Entity and MobileWoo Holdings Limited), or otherwise.

(e) Each Founder who is a shareholder of any Domestic Company agrees that he or she shall not, and shall cause any other person not to, directly or indirectly, Transfer through one or a series of transactions any equity securities held or controlled by him or her in the Domestic Companies to any person without the prior written consent of the Investor. Any Transfer of equity securities of the Domestic Companies in violation of this Agreement shall be void. The Domestic Companies shall not, and each Founder shall cause the Domestic Companies not to, issue to any person any equity securities of the Domestic Companies.

3. Right of First Refusal.

(a) Exercise by the Company. The Company has the Right of First Refusal to purchase all or any part of the Offered Shares, if the Company gives written notice of the exercise of such right to the Seller within thirty (30) days (the “Company’s Refusal Period”) after the date on which the Transfer Notice is given to the Company. Any Offered Shares purchased by the Company pursuant to its exercise of the Right of First Refusal shall be cancelled.

(b) Exercise by the Eligible Investors.

(i) Subject to the limitations of this Section 3(b), upon the earlier to occur of (a) the termination of the Company’s Refusal Period, and (b) the time when the Seller has received written confirmation from the Company regarding its exercise of its Right of First Refusal, the Company shall be deemed to have made its election with respect to the Offered Shares. In the event that the Company elects not to purchase all or any portion of the Offered Shares, each Eligible Investor shall have the Secondary Refusal Right (as defined below) to purchase the remaining shares (the “Remaining Shares”).

(ii) Within five (5) days after the Company is deemed to have made its election pursuant to (i) above not to purchase all of the Offered Shares, the Seller shall give written notice (the “Second Transfer Notice”) to each of the Eligible Investors stating (a) the number of the Remaining Shares; (b) the name of each Proposed Transferee; and (c) the number of Remaining Shares to be Transferred to each Proposed Transferee.

(iii) Each Eligible Investor shall have an option for a period of fifteen (15) business days (the “Investors’ Refusal Period”) from the receipt of the Second Transfer Notice to submit notice of its irrevocable commitment to elect to purchase all or any portion of its respective pro rata share of the Remaining Shares subject to the same material terms and conditions as described in the Transfer Notice (the “Secondary Refusal Right”).

(iv) Each Eligible Investor may exercise its Secondary Refusal Right and thereby, purchase all or any portion of its pro rata share (with any re-allotments as provided below) of the Remaining Shares, by notifying the Seller in writing, before expiration of the Investors’ Refusal Period as to the number of such Remaining Shares which it wishes to purchase (including any re-allotment). For the purposes of this subsection (iv), each Eligible Investor’s “pro rata” share of the Remaining Shares shall be a fraction of such Remaining Shares, of which the number of Shares (on an as-converted basis) owned by such Eligible Investor on the date of the Second Transfer Notice shall be the numerator and the total number of Shares (on an as-converted basis) held by all Eligible Investors on the date of the Second Transfer Notice shall be the denominator.

(v) If any Eligible Investor fails to exercise its right to purchase its full pro rata share of the Remaining Shares, the Seller shall deliver written notice within five (5) days after the expiration of the Investors’ Refusal Period to any Exercising Investor (as defined below) specifying the number of unpurchased Remaining Shares. Each Eligible Investor that exercises in full its right of first refusal under subsection (iv) above (an “Exercising Investor”) shall have a right of re-allotment, and may exercise an additional right to purchase such unpurchased Remaining Shares by notifying the Seller in writing within ten (10) days after receipt of the notice by the Seller pursuant to the prior sentence of this subsection (v); provided, however, that if the Exercising Investors desire to purchase in aggregate more than the number of such unpurchased Remaining Shares, then such unpurchased Remaining Shares will be allocated to the extent necessary among the Exercising Investors in accordance with their relative pro rata shares.

(c) Confirmation Notice. Within five (5) days after the Seller’s receipt of the Company’s written confirmation on purchase of all Offered Shares pursuant to Section 3(a), or if applicable, the Eligible Investors’ written confirmation on purchase of the Remaining Shares and, as the case may be, its re-allotment pursuant to Section 3(b), or in the event no Eligible Investor purchases any Offered Shares within five (5) days after the expiration of the Investors’ Refusal Period, the Seller shall give written notice to the Company and the Eligible Investors specifying the number of Offered Shares that was subscribed by the Company exercising its Right of First Refusal and/or the Eligible Investor(s) exercising its Secondary Refusal Right, (the “Confirmation Notice”).

(d) Purchase Price. The purchase price for the Offered Shares to be purchased by the Company or by the Eligible Investors exercising its Right of First Refusal or Secondary Refusal Right, as applicable, under this Agreement will be the Offered Price and will be payable as set forth in Section 3(d) hereof. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration will be determined by the Board of Directors of the Company in good faith, which determination will be binding upon the Company, the Eligible Investors (if applicable), and the Seller, absent fraud or error.

(e) Payment. Payment of the purchase price for the Offered Shares purchased by the Company or by the Eligible Investors exercising its Right of First Refusal or Secondary Refusal Right, as applicable, will be made within fifteen (15) days after the delivery of the Confirmation Notice. Payment of the purchase price will be made, at the option of the Company or the exercising Eligible Investors, as applicable, (i) in cash (or by check), (ii) by cancellation of all or a portion of any outstanding indebtedness of the Seller to the Company or the Eligible Investors, as the case may be, or (iii) by any combination of the foregoing.

(f) Application of Co-Sale Rights. If the Eligible Investors have not elected to purchase all of the Offered Shares, then the sale of the Remaining Shares will become subject to the co-sale rights set forth in Section 4 below.

(g) Prohibited Transfer. Any Transfer in violation of this Section 3 shall be null and void and shall not confer on any Proposed Transferee any rights whatsoever, and the Company shall not recognize such Transfer and will not effect the Transfer on the Company’s share register or other records.

4. Right of Co-Sale.

(a) Initial Exercise by the Eligible Investors. All Eligible Investors that have not exercised the Secondary Refusal Right with respect to the Remaining Shares pursuant to Section 3 hereof (the “Co-Sale Eligible Investors”) shall have the right to participate in such sale of Offered Shares pursuant to Section 3(f) on the same terms and conditions as specified in the Transfer Notice subject to the terms of this Section 4 (the “Right of Co-Sale”), exercisable upon written notice to the Seller, the Company and each other Eligible Investor (the “Co-Sale Notice”) within seven (7) days after receipt of the Confirmation Notice (the “Co-Sale Period”). The Co-Sale Eligible Investor who delivers the Co-Sale Notice pursuant to the preceding sentence (the “Selling Investor”) may sell, pursuant to the Selling Investor’s Right of Co-Sale, up to that number of Ordinary Shares held by it (on an as-converted basis) that is equal to the product obtained by multiplying (x) the aggregate number of the Offered Shares subject to the Right of Co-Sale hereunder by (y) a fraction, the numerator of which is the number of Ordinary Shares (on an as-converted basis) owned by such Selling Investor at the time of the sale or transfer and the denominator of which is the number of all Ordinary Shares (on an as-converted basis) owned by the Seller and all Co-Sale Eligible Investors entitled to exercise their Right of Co-Sale hereunder. The Selling Investor shall indicate the number of Shares it wishes to sell pursuant to this Section 4(a) (the “Selling Investor Shares”). The sale of the Selling Investor Shares shall occur within twenty-five (25) days from the beginning of the Co-Sale Period (the “Closing”). This Right of Co-Sale shall not apply with respect to Offered Shares sold or to be sold to the Company or Eligible Investor under the Right of First Refusal.

(b) Consummation of Co-Sale. The Selling Investor may exercise the Right of Co-Sale by delivering to the Seller at or before the Closing, one or more certificates, properly endorsed for Transfer, representing a number of shares not to exceed the number of shares to which the Selling Investor is entitled in Section 4(a), representing such Shares to be Transferred by the Seller on behalf of the Selling Investor. If the Selling Investor does not hold a certificate in that series, class or type of shares representing the number of securities owned and to be sold by such Selling Investor pursuant to this Section 4, then the Company shall, in accordance with the conversion provision and other relevant provisions of the Company’s Memorandum and Articles of Association then in effect, promptly issue a certificate representing the proper number of shares to be sold pursuant to this Right of Co-Sale. Following the Closing, the Company shall deliver a certificate for the remaining balance of the securities held by the Selling Investor, if any, to such Selling Investor. At the Closing, such certificates or other instruments will be Transferred and delivered to the Proposed Transferee as set forth in the Transfer Notice in consummation of the Transfer of the Offered Shares pursuant to the terms and conditions specified in the Transfer Notice, and the Seller will remit, or will cause to be remitted, to the Selling Investor, within ten (10) days after such Closing, the proceeds of the Transfer to which the Selling Investor is entitled by reason of the Selling Investor’s participation in such Transfer pursuant to the Right of Co-Sale.

(c) Restrictions on Right of Co-Sale. The Investor shall not transfer any Shares to any of the Competitors, unless such transfer of Shares to a certain Competitor is otherwise with the prior written consent of not less than a majority of the holders of the Shares other than the Investor or the Proposed Transferee of a Transfer of Shares in which the Investor exercises its Right of Co-sale is such Competitor (for the purpose of this Agreement, the “Competitors” shall mean any person or entity engaging in any principal business which is in direct or indirect competition with the Company and/or its subsidiaries).

(d) Sellers’ Right to Transfer. If the Company and the Eligible Investors have not elected to purchase all or any portion of, or participate in the sale of the Offered Shares, then the Seller may Transfer such portion of the Offered Shares that the Company and, if applicable, the Eligible Investors have not elected to purchase or sell, to any Proposed Transferee named in the Transfer Notice, at the Offered Price or at a higher price; provided that any such Transfer (i) is consummated within ninety (90) days after the end of the Co-Sale Period, in the case of Transfers of Offered Shares, (ii) is on terms no more favorable to the Proposed Transferee, than the terms proposed in the Transfer Notice, and (iii) is in accordance with all the terms of this Agreement. If the Offered Shares are not so Transferred during such ninety (90) day period, then the Seller may not Transfer any of such Offered Shares without complying again in full with the provisions of the Sections 3 and 4.

5. Restrictive Legend and Stop-Transfer Orders.

(a) Legend. The Founders understand and agree that the Company will cause the legend set forth below, or a legend substantially equivalent thereto, to be placed upon any certificate(s) or other documents or instruments evidencing ownership of Shares by the Founders:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH CERTAIN RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT ENTERED INTO BY THE HOLDER OF THESE SHARES, THE COMPANY AND CERTAIN SHAREHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE ARE BINDING ON TRANSFEREES OF THESE SHARES.

(b) Stop Transfer Instructions. In order to ensure compliance with the restrictions referred to herein, each Seller agrees that the Company may issue appropriate “stop transfer” certificates or instructions to its transfer agent.

(c) Transfers. No Shares shall be Transferred unless (i) such Shares have fully vested, (ii) such Transfer is made in compliance with the terms of this Agreement and applicable laws, including applicable federal and state securities laws, and (iii) prior to such Transfer, the transferee or transferees, who prior to such Transfer are not already parties to this Agreement, sign a counterpart to this Agreement pursuant to which it or they agree to be bound by the terms of this Agreement.

6. Termination.

The restrictions on change of capitalization of the Eligible Investors’ Right of First Refusal and Right of Co-Sale will terminate upon the earliest to occur of (i) immediately prior to the effectiveness of the registration statement for the Company’s IPO, and (ii) the date on which this Agreement is terminated by a writing executed by the Eligible Investors.

7. Miscellaneous Provisions.

(a) Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by 15 days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 7(a)). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two (2) days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

(b) Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors and administrators.

(c) Severability. If any provision of this Agreement shall be determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(d) Waivers and Amendment. With the written consent of the Company and the Eligible Investors, the rights and obligations of the Company, the Founders and the Eligible Investors under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely). Upon the effectuation of each such waiver, consent, agreement, amendment or modification, the Company shall promptly give written notice thereof to the record holders of the Preferred Shares and/or Ordinary Shares issued upon conversion of the Preferred Shares who have not previously consented thereto in writing. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, except by a signed statement in writing. Any waiver or amendment effected in accordance with this subsection (d) shall be binding upon all parties hereto.

Notwithstanding anything to the contrary in this Section 7(d), no waiver or amendment which waives or amends the express rights of holder of Preferred Shares explicitly set forth in this Agreement in a manner that is materially and adversely different from the effect thereof on the comparable express rights of another holder of Preferred Shares explicitly set forth in this Agreement, shall be effective against such adversely affected holder of Preferred Shares without its written consent.

(e) Continuity of Other Restrictions. Any Offered Shares not purchased by the Eligible Investors under their Right of First Refusal hereunder will continue to be subject to all other restrictions imposed upon such Shares by law, including any restrictions imposed under the Company’s Memorandum of Association and Articles of Association.

(f) Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of Hong Kong without regard to principles of conflicts of laws.

(g) Dispute Resolution. Each of the parties hereto irrevocably (i) agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall first be subject to resolution through consultation of the parties to such dispute, controversy or claim. Such consultation shall begin within seven (7) days after one Party hereto has delivered to the other parties involved a written request for such consultation. If within thirty (30) days following the commencement of such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any party with notice to the other parties. The arbitration shall be held in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “HKIAC”); (ii) waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such arbitration, and (iii) submits to the exclusive jurisdiction of HKIAC in any such arbitration. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. The parties to the arbitration shall each pay an equal share of the costs and expenses of such arbitration, and each party shall separately pay for its respective counsel fees and expenses; provided, however, that the prevailing party in any such arbitration shall be entitled to recover from the non-prevailing party its reasonable costs and attorney fees.

(h) Other Remedies; Specific Enforcement. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof as permitted by Rule 43 of the Rules, this being in addition to any other remedy to which they are entitled at law or in equity.

(i) Binding Nature of Exercise. Any exercise of the Right of First Refusal or Right of Co-Sale will be binding upon the party so exercising, and may not be withdrawn without the written consent of the Company or the Seller as to whom it is given, as the case may be, except that such exercise may be withdrawn unilaterally by the exercising party if there is any legal prohibition as to a party’s consummation of its purchase or sale hereunder.

(j) Counterparts. This Agreement may be executed in any number of counterparts, including electronic or facsimile transmissions, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

(k) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

(l) Delays and Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Investors, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Investor of any breach or default under this Agreement, or any waiver by the Investors of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to the Investor, shall be cumulative and not alternative.

(m) Share Splits. All references to the number of shares in this Agreement shall be appropriately adjusted to reflect any share split, share dividend or other change in the capital stock which may be made by the Company after the Closing (as defined in the Purchase Agreement).

(n) Aggregation. All shares of the Preferred Shares held or acquired by affiliated entities or persons of an Investor (including but not limited to: (i) a constituent partner or a retired partner of an Investor that is a partnership; (ii) a parent, subsidiary or other affiliate of an Investor that is a corporation; (iii) an immediate family member living in the same household, a descendant, or a trust therefore, in the case of an Investor who is an individual; or (iv) a member of an Investor that is a limited liability company); or (v) any affiliated persons or entities managed by affiliates of such Investor, shall be aggregated together for the purpose of determining the availability of any rights under this Agreement which are triggered by the beneficial ownership of a threshold number of shares of the Company’s capital shares.

(o) Entire Agreement. This Agreement and the other Transaction Agreements (as defined in the Purchase Agreement) constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and shall supersede any and all other written or oral agreements relating to the subject matter hereof and thereof between the parties hereto upon the consummation of the Closing. Without limiting the generality of the foregoing, this Agreement, upon the consummation of the Closing, shall supersede and replace the Former Agreement in its entirety.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


The Company:

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


HK Sub:

MOBILEWOO (CHINA) TECHNOLOGY DEVELOPMENT LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo (China) Technology Development Limited LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


WFOE:

BEIJING MOBILEWOO TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWoo Technology Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Beijing M15:

BEIJING MOBILEWO INFORMATION TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWo Information Technology Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Beijing MobileWu:

BEIJING MOBILEWU INFORMATION TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWu Information Technology Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Shenzhen Taoshenbian:

SHENZHEN TAOSHENBIAN ELECTRONIC COMMERCE CO., LTD.

By:		/s/ Wei Wang
Print Name of Authorized Signatory: Wei Zhang
Title of Authorized Signatory: Legal Representative

Mail Address of Shenzhen Taoshenbian Electronic Commerce Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


The Purchaser:

SUNGY MOBILE LIMITED

By:		/s/ Yuqiang Deng
Print Name of Authorized Signatory: Yuqiang Deng
Title of Authorized Signatory: Chairman and Chief Executive Officer

Mail Address of Sungy Mobile Limited: LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Founders’ BVI Holding Entity:

MOBILEWOO TECHNOLOGY LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Limited: LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

The Founders

/s/ Zhi Zhu

Zhi Zhu

/s/ Wei Zhang

Wei Zhang

/s/ Xue Guo

Xue Guo

/s/ Jian Chen

Jian Chen

Mail Address of the Founders: LOGO

SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

EXHIBIT A

Schedule of Investor


Purchaser	Number of Shares	Purchase Price (USD)
Sungy Mobile Limited	11,500,000 Series A Shares (purchased from Northern Light Venture Capital II, Ltd.)		1,220,085
	5,743,056 Series B Shares (purchased from Northern Light Venture Capital II, Ltd.)		4,035,000
	5,743,056 Series B Shares (purchased from Sina Hong Kong Ltd.)		2,035,000
	3,445,833 Series B Shares (purchased from the Company)		1,182,942

Total:	26,431,945		8,473,027

EXHIBIT B

Schedule of Founders


Name of Founder		Number of Shares of the Company
Zhi Zhu		26,331,944 (including the shares indirectly held through the Founders’ BVI Holding Entity)
Wei Zhang		1,555,556 (indirectly held through the Founders’ BVI Holding Entity)
Xue Guo		1,555,556 (indirectly held through the Founders’ BVI Holding Entity)
Jian Chen		1,555,555 (indirectly held through the Founders’ BVI Holding Entity)

TOTAL		30,998,611

Exhibit 4.38

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED

SECOND AMENDED AND RESTATED MEMBERS AGREEMENT

This Second Amended and Restated Members Agreement (the “Agreement”) is made as of October 14, 2014, by and among:

(A) MobileWoo Technology Holdings Limited, a Cayman Islands company (the “Company”);

(B) MobileWoo (China) Technology Development Limited LOGO LOGO , a company organized and existing under the laws of Hong Kong (the “HK Sub”);

(D) Beijing MobileWo Information Technology Co., Ltd. LOGO , a company organized and existing under the laws of the PRC (“Beijing M15”);

(E) Beijing MobileWu Information Technology Co., Ltd. , a company organized and existing under the laws of the PRC (“Beijing MobileWu”, together with Beijing M15, each a “Domestic Company” and collectively, the “Domestic Companies”);

(G) the Purchaser as set forth on Exhibit A hereto (the “Purchaser” or the “Investor”);

(H) MobileWoo Technology Limited, a company incorporated in the British Virgin Islands, (the “Founders’ BVI Holding Entity”); and

(I) the individuals listed on Exhibit B hereto (the “Founders”).

The Company, the HK Sub and the PRC Group Companies are collectively referred to as the “Group Companies” and each a “Group Company”. The Purchaser, the Founders’ BVI Holding Entity and the Founders are each sometimes referred to herein as a “Member” and, collectively, the “Members”.

RECITALS

A. The Group Companies, Mr. Zhi Zhu , the Founders’ BVI Holding Entity, the Purchaser and other parties entered into the MobileWoo Technology Holdings Limited Shares Purchase Agreement on October 2, 2014 (the “Purchase Agreement”) pursuant to which the Purchaser will purchase a certain number of Series A Preferred Shares (as defined below) and Series B Preferred Shares (as defined below) of the Company.

B. Pursuant to the Purchase Agreement, it is a condition to the closing (the “Closing”) of the transactions contemplated by the Purchase Agreement that the parties hereto enter into this Agreement.

C. The Group Companies, the Founders, the Founders’ BVI Holding Entity and the Purchaser all desire that the transactions contemplated by the Purchase Agreement be consummated.

(Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement)

1.	Covenants of the Company and the Investor.

1.1 Financial Information; Inspection Rights.

(a) Financial Information. The Company will mail the following reports (in accordance with the provisions set forth in Section 4.8 hereof) to the Investor so long as it, together with its affiliates, related individuals or entities, continues to hold Preferred Shares (as defined below) and/or Ordinary Shares (as defined below) issued upon conversion of the Preferred Shares (appropriately adjusted for Recapitalizations (as defined below)).

(i) As soon as practicable after the end of each fiscal year, and in any event within sixty (60) days thereafter, audited annual consolidated financial statements (including a balance sheet, income statement and cash flow statement) of the Group Companies, if any, for or as of the end of such fiscal year, prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) by an accredited accounting firm of international standing selected by the Board of Directors, including the Sungy Director (as defined in the Articles (as defined below)) and accepted by the Investor.

(ii) As soon as practicable, and in any event within twenty (20) days after the end of each quarterly accounting period in each fiscal year of the Company, unaudited quarterly consolidated financial statements (including a balance sheet, income statement and cash flow statement) of the Company.

(iii) As soon as practicable, and in any event within fifteen (15) days, after the end of each month, unaudited monthly consolidated financial statements (including a balance sheet, income statement and cash flow statement) of the Company.

(iv) As soon as practicable, and in any event at least forty-five (45) days prior to the beginning of each fiscal year, an annual budget and business plan for such fiscal year.

(b) Inspection Rights. The Company will afford to the Investor, and to the Investor’s accountants, counsel and other representatives reasonably acceptable to the Company, reasonable access during normal business hours to all of the Company’s respective properties, books and records. The Investor shall have such other access to management and information as is necessary for it to comply with applicable laws and regulations and reporting obligations. The Company shall not be required to disclose details of contracts with or work performed for specific customers and other business partners where to do so would violate confidentiality obligations to those parties. An Investor may exercise its rights under this Section 1.1(b) only for purposes reasonably related to its interests under this Agreement and related agreements.

(c) An Investor’s rights under this Section 1.1 may be assigned to (i) a transferee or assignee in connection with any transfer or assignment by such Investor of Preferred Shares and/or Ordinary Shares issued upon conversion of the Preferred Shares, (ii) any partner or retired partner of any such Investor which is a partnership (or any member or retired member of any such Investor which is a limited liability company), (iii) any affiliated fund of any such Investor, or (iv) any family member or trust for the benefit of any such Investor which is an individual, provided in each case that: (A) such transfer may otherwise be effected in accordance with applicable securities laws, and (B) the Company is given prompt written notice of the transfer, (C) such assignee or transferee agrees to be bound by the terms of this Agreement.

1.2 Stock Options. Options to purchase Ordinary Shares shall be granted from time to time under such arrangements, contracts or plans as approved by the Board of Directors (including the Sung Director). Each recipient of an option to purchase Ordinary Shares under the Company’s stock option plan (the “Plan”) shall enter into an option agreement with the Company. Unless otherwise expressly approved by the Board of Directors, including the Sungy Director, Ordinary Shares purchased upon exercise of options to purchase Ordinary Shares of the Company issued after the Closing to employees of the Company under the Plan or otherwise, shall be subject to standard restrictions including but not limited to right of first refusal upon transfer and market stand-off, and upon exercise of such options, each optionee shall, if required by the Company, sign an Adoption Agreement to adopt this Agreement and the Right of First Refusal and Co-Sale Agreement entered into by and among the Group Companies, the Founders’ BVI Holding Entity, the Investor and the Founders dated as of even date herewith. Furthermore, unless otherwise expressly approved by the Board of Directors, including the Sungy Director, options to purchase Ordinary Shares of the Company issued to employees of the Company under the Plan or otherwise, shall also be subject to four (4) year vesting provisions as follows: twenty-five percent (25%) of the shares subject to such options shall vest on the first anniversary of the issuance of such options and one forty-eighth (1/48th) of the shares subject to such options shall vest monthly over the next three (3) years. Unless otherwise expressly approved by the Board of Directors, including the Sungy Director, there shall be no acceleration of the vesting of shares subject to options granted under the Plan. The Company shall have a repurchase option on any unvested shares at the lower of the original purchase price of such shares paid by such optionee and the fair market value of such shares at the time the Company exercises its right to repurchase. The Company shall exercise this repurchase option unless otherwise approved by the Board of Directors, including the Sungy Director.

1.3 Option to Repurchase Founders’ Shares.

Ordinary Shares of the Company held by each Founder through the Founders’ BVI Holding Entity shall be subject to two (2) year vesting provisions as follows: fifty percent (50%) of the shares shall vest immediately upon the first anniversary of the Closing, and one over twenty-four (1/24) of the shares shall vest monthly over the next one (1) year; provided, however, that each Founder shall acquire a fully vested interest in all Ordinary Shares held by him (i) in the event that he is terminated by the Company without Cause, (ii) upon the occurrence of a Change of Control (as defined below) at no fault of the Founder and the Founder is terminated without Cause, or (iii) upon the closing of the Qualified IPO (as defined below). Unless otherwise approved by the Board of Directors, including the Sungy Director, the Company shall exercise its option to repurchase all unvested shares pursuant to the Share Restriction Agreement among the Company, each Founder and other parties listed therein dated October 2, 2014, at cost of the Company pursuant to the terms listed therein. For the purposes of the Agreement, “Cause” shall mean (i) gross negligence or willful misconduct in the performance of the Founder’s duties to any of the Group Companies (other than as a result of a disability) resulting in material and adverse effect to the operation of any of the Group Companies; (ii) repeated and continued failure to perform his substantial duties and responsibilities to any of the Group Companies (including, but not limited to his compliance with any written policy of any of the Group Companies) in good faith after having been offered proper training or reasonable opportunity and time to cure such failure; (iii) commission of any act of fraud or violation of any applicable laws, rules and regulations with respect to any of the Group Companies, which has resulted in material harm to the business affairs or reputation of any of the Group Companies in the reasonable determination of the Board of Directors; or (iv) conviction of a felony or a crime involving moral turpitude if such felony or crime could cause material harm to the business affairs or reputation of to any of the Group Companies in the reasonable determination of the Board of Directors.

1.4 Articles of Association.

The Company shall abide by, and take all actions necessary to achieve the economic effect of, all of its obligations under the Company’s Third Amended and Restated Memorandum of Association and the Articles (as defined below), including, but not limited to, the provisions related to the conversion of the Preferred Shares, the adjustment to the conversion prices of the Preferred Shares, the declaration and payment of dividends, the winding up of the Company and payment of liquidation preferences on the Preferred Shares.

1.5 Incorporation of Certain Provisions from the Articles.

(a) The following provisions of the Articles shall be incorporated by reference into this Agreement and shall be enforceable as if such provisions were part of this Agreement.

(i) Article 11 (Variation of Rights of Shares);

(ii) Articles 12 – 17 (Conversion of Preferred Shares);

(iii) Articles 18 – 23 (Adjustments to Conversion Prices);

(iv) Articles 30 – 31 (General Meeting);

(v) Article 32 (Notice of General Meetings);

(vi) Articles 33 – 41 (Proceedings at General Meetings); and

(vii) Articles 59 – 66 (Directors; Proxies);

(viii) Articles 67 – 71 (Powers and Duties of Directors);

(ix) Article 72 (Protective Provisions);

(x) Articles 74 – 83 (Proceedings of Board of Directors);

(xi) Article 84 (Appointment and Removal of Directors);

(xii) Articles 85 – 89 (Director Resignation, Removals and Vacancies);

(xiii) Articles 93 – 100 (Dividends);

(xiv) Articles 113-115 (Winding Up); and

(xv) Article 116 (Indemnity).

(b) Notwithstanding anything to the contrary in this Agreement, (i) any amendment or waiver of any of the foregoing provisions of the Articles may be effected in accordance with the terms of the Articles and applicable law without regard to any terms of this Agreement (including without limitation the amendment or waiver provisions of this Agreement), (ii) no amendment or waiver of any provision of the Articles shall result in an amendment or waiver of any provision of this Agreement (except that in the case of an amendment or waiver of any of the foregoing provisions of the Articles, such provisions (as amended or waived) shall automatically be incorporated by reference herein as so amended or waived without the necessity of any further action or approval of the parties to this Agreement) and (iii) no amendment or waiver of any provision of this Agreement (including without limitation this Section 1.5) shall be deemed to effect an amendment or waiver of any provision of the Articles.

1.6 Passive Foreign Investment Company. Upon a determination by the Company, if any Investor or any taxing authority that the Company or any direct or indirect subsidiary has been or is likely to become a “passive foreign investment company” (“PFIC”) as defined in Section 1297 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company will promptly notify the Investor of such determination and will provide as soon as practicable (but in no event later than ninety (90) days following the end of each taxable year) the Investor with all information reasonably available to the Company or any of its subsidiaries to permit such Investor to (i) accurately prepare all tax returns and comply with any reporting requirements as a result of such determination, (ii) make any election (including, without limitation, a “qualified electing fund” election under Section 1295 of the Code), with respect to the Company or any of its direct or indirect subsidiaries, and comply with any reporting or other requirements incident to such election, and (iii) file a “protective statement” pursuant to Section 1295 of the Code with respect to the Company or any of its direct or indirect subsidiaries, and comply with any reporting or other requirements incident to such statement. The Company agrees, if requested by the Investor, to cooperate with the Investor, including providing any documentation reasonably requested by the Investor, to determine annually whether the Company and each of the entities in which the Company owns or proposes to acquire an equity or ownership interest (directly or indirectly) is or may become a PFIC (including whether any exception to PFIC status may apply). The Company will promptly notify each Investor of any assertion by the Internal Revenue Service that the Company or any of its subsidiaries is, or is likely to become, a PFIC.

1.7 Controlled Foreign Corporation. The Company will provide prompt written notice to the Investor if at any time the Company becomes aware that it or any subsidiary has become a “controlled foreign corporation” (as defined in the Code). Upon request of the Investor from time to time, subject to obtaining the consent of its shareholders to release such information, the Company will promptly provide in writing such information in its possession concerning its shareholders and, to the Company’s actual knowledge, the direct and indirect interest holders in each shareholder reasonably sufficient for the Investor to determine that the Company is not a “controlled foreign corporation.” The Company shall provide the Investor with reasonable access to such other Company information as the Company may then have available to it as may reasonably be required by the Investor to determine the Company’s status as a “controlled foreign corporation” to determine whether such Investor is required to report its pro rata portion of the Company’s “Subpart F income” (as defined in the Code) on its United States federal income tax return, or to allow the Investor to otherwise comply with applicable United States federal income tax law. The parties hereto shall use commercially reasonable efforts to prevent any future issuance of securities by the Company to the extent that such issuance would result in such shareholder or any direct or indirect investor in such shareholder being considered a “United States shareholder” of the Company within the meaning of Section 951(b) of the Code (a “United States Shareholder”). Without limiting the Company’s obligations as set forth in this Section 1.7, for the avoidance of doubt, neither the Company nor the Founders are responsible for any tax filings of the Investor or for any associated or related costs incurred in connection with such tax filings.

1.8 Control of Subsidiaries. The Company shall institute and shall keep in place arrangements reasonably satisfactory to the Board of Directors (including the Sungy Director) such that the Company (i) will control the operations of any direct or indirect subsidiary of, or entity controlled by, the Company and (ii) will be permitted to properly consolidate the financial results of any direct or indirect subsidiary in the consolidated financial statements for the Company. The composition of the board of directors of each subsidiary of, or entity controlled by, the Company, whether now in existence or formed in the future, shall be reasonably acceptable to the Board of Directors (including the Sungy Director). The Company shall, and shall cause any direct or indirect subsidiaries or entities it controls, to comply with the U.S. Foreign Corrupt Practices Act, as amended. The Company shall take all necessary actions to maintain any direct or indirect subsidiary or entity controlled by the Company, whether now in existence of formed in the future, as is necessary to conduct the Company’s business as conducted or as proposed to be conducted. The Company shall use commercially reasonable efforts to cause each direct or indirect subsidiary of, or entity controlled by, the Company whether now in existence or formed in the future, to comply in all material respects with all applicable laws, rules and regulations.

1.9 Directors and Officers Liability Insurance. If, in a future round of financing, upon reasonable request from the Investor, the Company shall obtain and keep directors liability insurance in the minimum amount of US$250,000 if such coverage is available at commercially reasonable rates. Such coverage will apply only to representative(s) of the Investor and be kept in place for so long as any representative of the Investor serves on the Board of Directors.

1.10 Drag Along.

At any time after the Closing, if the holder(s) of a majority of the Series A Preferred Shares and the Series B Preferred Shares (voting as a single class on as-converted basis) of the Company and the holders of a majority of the Ordinary Shares of the Company (the “Selling Holders”), voting as separate classes, approve a Sales Transaction (as defined below) which values the Company at no less than US$100,000,000, the Selling Holders shall have the right to require the remaining Members of the Company, and upon receipt of a written request from the Selling Holders, the remaining Members of the Company shall have the obligation, to vote all of its shares of the Company held by such remaining Members in favor of such Sales Transaction, or to sell, transfer, convey or assign its Shares (on a pro-rata basis where appropriate) on the same terms and conditions, as the case maybe, so as to give effect to, such bona fide third party’s offer.

For purposes of this Agreement, a “Sales Transaction” shall mean, unless waived by the Investor: (i) any merger, consolidation, tender offer or other business combination in which the shareholders owning a majority of the voting securities of the Company prior to such transaction do not own a majority of the voting securities of the surviving entity, (ii) a voluntary sale of voting securities by the shareholders of the Company to any person in which the shareholders of the Company do not own a majority of the voting securities of the surviving entity (including, without limitation, the ultimate parent company); (iii) a sale of all or substantially all of the assets of the Company; or (iv) a sale or licensing of all or substantially all of the intellectual properties of the Company.

1.11 Termination of Covenants. The covenants set forth in Sections 1.1 to 1. 9 shall terminate and be of no further force or effect immediately prior to the earliest of: (i) the effectiveness of the registration statement for an Qualified IPO; or (ii) with respect to Section 1.1, the date on which the Company is required to file reports with the Commission (as defined below) pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.

2.	Registration Rights.

2.1 Restrictions on Transferability. The Preferred Shares and the Conversion Shares (as defined below) shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Section 2, which conditions are intended to ensure compliance with the provisions of the Securities Act (as defined below). Each holder of Preferred Shares will cause any proposed purchaser, assignee, transferee or pledgee of any such shares held by such holder to agree in writing to take and hold such securities subject to the provisions and upon the conditions specified in this Section 2.

2.2 Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

(a) “Articles” means the Company’s Articles of Association, as amended from time to time.

(b) “Change of Control” shall mean a Sale of Assets, Loss of Control or an Acquisition Transaction (as defined in the Articles).

(c) “Commission” shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

(d) “Conversion Shares” means the Ordinary Shares issued or issuable pursuant to conversion of the Preferred Shares.

(e) “Founders” shall mean the individuals listed on Exhibit B hereto.

(f) “Founders’ Shares” shall mean the Ordinary Shares held on record and/or beneficially by the Founders as of the date of this Agreement as set forth on Exhibit B hereto or subsequently acquired by the Founders.

(g) “Holder” shall mean (i) any Investor holding Registrable Securities, and (ii) any person holding Registrable Securities to whom the rights under this Section 2 have been transferred in accordance with Section 2.13 hereof; provided, however, that for purposes of this Agreement, a holder of Preferred Shares shall be deemed to be a Holder of the Registrable Securities issuable upon conversion of such Preferred Shares, as the case may be, and that Holders of Registrable Securities shall not be required by this Agreement to convert their Preferred Shares into Ordinary Shares in order to exercise registration rights hereunder, until immediately prior to the closing of the relevant offering to which the registration relates.

(h) “Initiating Holders” shall mean any Holders who in the aggregate hold at least ten percent (10%) of the outstanding Registrable Securities.

(i) “IPO” shall mean the Company’s first firm commitment underwritten public offering of any of its securities to the general public pursuant to (a) a registration statement filed under the Securities Act, or (b) the securities laws applicable to an offering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally-recognized securities exchange.

(j) “Ordinary Shares” shall mean Ordinary Shares of the Company with par value of US$0.0001 each, with the rights as described in the Articles.

(k) “Preferred Shares” shall mean the Series A Preferred Shares and Series B Preferred Shares of the Company.

(l) “Qualified IPO” shall mean an IPO in the United States by an internationally recognized investment bank approved by the Board (including the Sungy Director) covering the offer and sale of Ordinary Shares to the public at a public offering price per share corresponding to a pre-IPO valuation of the Company of not less than US$200,000,000.00 with gross proceeds to the Company equals or exceeds US$50,000,000.00 (excluding underwriting discounts, commissions and expenses) or a substantially similar public offering of securities in a jurisdiction and on an internationally recognized securities exchange outside the United States approved by the Board (including the Sungy Director), providing such public offering price, offering proceeds and regulatory approval is reasonably equivalent to the aforementioned public offering in the United States.

(m) “Recapitalizations” shall mean any share split, share dividend, share combination or consolidation, recapitalization, reclassification or other similar event in relation to the shares of the Company.

(n) “Registrable Securities” means the Conversion Shares and any Ordinary Shares of the Company issued or issuable in respect of such Conversion Shares upon Recapitalizations or any Ordinary Shares otherwise issuable with respect to such Conversion Shares; provided, however, that Ordinary Shares shall only be treated as Registrable Securities if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold or are available for sale in a single sale in the opinion of counsel for the Company in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

(o) “Registrable Securities then outstanding” (and similar expressions herein) shall mean the number of Ordinary Shares that are Registrable Securities that are then (1) issued and outstanding, or (2) issuable pursuant to the conversion of then outstanding Preferred Shares.

(p) The terms “register,” “registered” and “registration” refer to (i) a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement, or (ii) in the context of a public offering in a jurisdiction other than the United States, a registration, qualification or filing under the applicable securities laws of such other jurisdiction.

(q) “Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 2.5, 2.6 and 2.7 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration and the reasonable fees and disbursements of one counsel for all Holders, but excluding Selling Expenses.

(r) “Restricted Securities” shall mean the securities of the Company required to bear the legend set forth in Section 2.3 hereof.

(s) “Securities Act” shall mean the United States Securities Act of 1933, as amended.

(t) “Selling Expenses” shall mean all underwriting discounts, selling commissions and share transfer taxes applicable to the securities registered by the Holders and, except as included in the definition of Registration Expenses above, all fees and disbursements of counsel for any Holder.

(u) “Series A Preferred Shares” shall mean the series A preferred shares of the Company with par value of US$0.0001 each, with the rights as described in the Articles.

(v) “Series B Preferred Shares” shall mean the series B preferred shares of the Company with par value of US$0.0001 each, with the rights as described in the Articles.

2.3 Restrictive Legend. Each certificate representing (i) Preferred Shares, (ii) Conversion Shares, and (iii) any other securities issued in respect of the Preferred Shares or the Conversion Shares upon any share split, share dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Section 2.4 below) be stamped or otherwise imprinted with legends substantially in the following form (in addition to any legend required under applicable federal, state, local or non-United States law):

(a) “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR (B) PURSUANT TO RULE 144, OR (C) IN THE OPINION OF THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.”

(b) “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.”

The Investor and Holders consent to the Company making a notation on its records and giving instructions to any transfer agent of the Preferred Shares or the Ordinary Shares in order to implement the restrictions on transfer established in this Section 2.

2.4 Notice of Proposed Transfers. The holder of each certificate representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 2.4. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities (other than (i) a transfer not involving a change in beneficial ownership, (ii) in transactions involving the distribution without consideration of Restricted Securities by the holder to any of its partners, members, or retired partners or members, or to the estate of any of its partners or members or retired partners or members, (iii) in transactions in compliance with Rule 144 promulgated under the Securities Act (“Rule 144”), or (iv) transfers by members that are entities to affiliated entities or funds (United States based or non-United States based) (or deemed affiliated entities or funds as set forth on Exhibit A hereto)), unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give prompt written notice to the Company of such holder’s intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and if reasonably requested by the Company, shall be accompanied, at such holder’s expense, by either (i) a written opinion of legal counsel who shall be, and whose legal opinion shall be, reasonably satisfactory to the Company addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, or (ii) a “no action” letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the holder to the Company. The transferees shall be bound by the obligations of the transferor in this Agreement and other shareholder agreements, including the Market Standoff (as defined in paragraph 2.14) below. Each certificate evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to Rule 144, the appropriate restrictive legends set forth in Section 2.3 above, except that such certificate shall not bear such restrictive legends if in the opinion of counsel for such holder and the Company such legend is not required in order to establish compliance with any provision of the Securities Act.

2.5 Requested Registration.

(a) Request for Registration. In case the Company, at any time after the earlier of (i) three (3) years after the date of this Agreement, and (ii) six (6) months following a Qualified IPO, shall receive from Initiating Holders a written request that the Company effect any registration, qualification or compliance with an anticipated aggregate offering price of at least US$3,000,000.00, the Company will:

(i) promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and

(ii) as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2.5:

(1) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(2) (A) In any jurisdiction other than the jurisdiction(s) in which the Company has already effected a registered public offering of its equity securities, or (B) if either (i) the Initiating Holders are precluded from exercising their rights under this Section 2.5 by reason of Section 2.5(a)(ii)(5), or (ii) the Company has not effected a registered public offering of its equity securities in any jurisdiction;

(3) During the period starting with the date sixty (60) days prior to the Company’s estimated date of filing of, and ending on the date six (6) months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a transaction under Rule 145 promulgated under the Securities Act (“Rule 145”) or with respect to an employee benefit plan), provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective;

(4) After the Company has used its best efforts to effect two (2) such registrations pursuant to this subparagraph 2.5(a);

(5) If the Initiating Holders may dispose of shares of Registrable Securities pursuant to a registration statement on Form S-3 or Form F-3 under the Securities Act as in effect on the date hereof or any successor form under the Securities Act (“Form S-3/F-3”) pursuant to a request made under Section 2.7 hereof;

(b) Underwriting. In the event that a registration pursuant to Section 2.5 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 2.5(a)(i). In such event, the right of any Holder to registration pursuant to this Section 2.5 shall be conditioned upon such Holder’s participation in the underwriting arrangements required by this Section 2.5, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited to the extent provided herein.

The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company, but subject to reasonable approval of a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 2.5, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all holders of Registrable Securities and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated, among all Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders at the time of filing the registration statement, provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all securities that are not Registrable Securities are first entirely excluded from the underwriting and registration. No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

If any Holder of Registrable Securities disapproves of the terms of the underwriting, such Holder shall be excluded therefrom by written notice to the Holder from the Company. The Registrable Securities and/or other securities so excluded shall also be excluded from registration, and such Registrable Securities shall not be transferred in a public distribution prior to ninety (90) days after the effective date of such registration, or such other shorter period of time as the underwriters may require.

2.6 Company Registration.

(a) Notice of Registration. If at any time or from time to time the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Rule 145 transaction, the Company will:

(i) promptly give to each Holder written notice thereof; and

(ii) use its commercially reasonable efforts to include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by any Holder.

(b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.6(a)(i). In such event the right of any Holder to registration pursuant to this Section 2.6 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 2.6, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit on a pro rata basis the number of Registrable Securities to be included in such registration and underwriting, provided, that there shall first be excluded from such registration all securities that are not Registrable Securities. No such reduction shall reduce the amount of securities of the selling Holders included in the registration below twenty-five percent (25%) of the total amount of securities included in such registration. Notwithstanding the foregoing, if such offering is the Qualified IPO, any or all of the Registrable Securities of the Holders may be excluded in accordance with this Section 2.6(b) provided that any and all securities of the Company to be sold by other selling shareholders are also excluded. The Company shall so advise all Holders and other holders distributing their securities through such underwriting and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all the Holders in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holder at the time of filing the Registration Statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder or holder to the nearest 100 shares. If any Holder or holder disapproves of the terms of any such underwriting, such Holder shall be excluded therefrom by written notice to the Holder from the Company. Any securities excluded from such underwriting shall be excluded from such registration, and shall not be transferred in a public distribution prior to ninety (90) days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require.

(c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.6 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. Registration Expenses of such withdrawn registration shall be borne by the Company.

2.7 Registration on Form S-3/F-3.

(a) If any Holder or Holders who in the aggregate hold at least ten percent (10%) of the outstanding Registrable Securities (“S-3/F-3 Initiating Holders”) request that the Company file a registration statement on Form S-3/F-3 (or any successor form to Form S-3/F-3) for a public offering of shares of the Registrable Securities for which the reasonably anticipated aggregate price to the public would exceed US$3,000,000.00 and the Company is a registrant entitled to use Form S-3/F-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form and to cause such Registrable Securities to be qualified in such jurisdictions as such Holder or Holders may reasonably request, provided, however, that the Company shall not be required to effect more than two (2) registrations pursuant to this Section 2.7 in any twelve (12) month period. The Company shall inform other Holders of the proposed registration and offer them the opportunity to participate. The substantive provisions of Section 2.5(b) shall be applicable to each registration initiated under this Section 2.7.

(b) Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 2.7: (i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; or (ii) during the six (6) month period following the effective date of any registration statement pertaining to any underwritten registration of securities of the Company in which Holders have piggyback registration rights under Section 2.6 (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan).

2.8 Expenses of Registration. All Registration Expenses shall be borne by the Company, provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.5 hereof if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 2.5 hereof, provided, further, however, that if the requested registration is withdrawn and at the time of such withdrawal the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses or to forfeit their right to one demand registration and shall retain their rights pursuant to Section 2.5 hereof. All Selling Expenses incurred in connection with all registrations pursuant to Sections 2.5, 2.6 and 2.7 hereof shall be borne by the Holders of the securities so registered pro rata on the basis of the number of their shares so registered.

2.9 Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Section 2, the Company will keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will use its commercially reasonable efforts to:

(a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for ninety (90) days or until the distribution described in the Registration Statement has been completed, whichever is shorter;

(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

(c) furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; and

(d) cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed.

2.10 Indemnification.

(a) To the maximum extent permitted by law, the Company will indemnify each Holder, each of its officers, directors, trustees and partners and any underwriter (as defined in the Securities Act) for such Holder, and each person controlling such Holder or underwriter within the meaning of Section 15 of the Securities Act (each an “Indemnified Person”), with respect to which registration, qualification or compliance has been effected pursuant to this Section 2, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of the Securities Act, the Exchange Act or any other federal, state or foreign securities law or any rule or regulation promulgated thereunder applicable to the Company in connection with any such registration, qualification or compliance, and the Company will reimburse each such Indemnified Person and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action; provided, that the Company will not be liable to any specific Indemnified Person in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished to the Company by such Indemnified Person for use therein. The foregoing indemnity agreement of the Company and Holders is subject to the condition that, insofar as they relate to any violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question becomes effective or the amended prospectus is filed with the Commission pursuant to Rule 424(b) of the Securities Act (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any Holder if a copy of the Final Prospectus was timely furnished to the party seeking indemnification and was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. It is agreed that the indemnity agreement contained in this Section 2.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

(b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, trustees, directors, partners, legal counsel, accountants and any underwriter (as defined in the Securities Act) for such Holder and each person controlling such Holder or underwriter within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such other Holders, such directors, officers, trustees, persons, partners, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company provided for use therein, provided, however, that the indemnity agreement contained in this Section 2.10(b) shall not apply to amounts paid in settlement of any such claim, loss, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the liability of each Holder under this subsection (b) shall be limited to an amount equal to the proceeds of the shares sold by such Holder in the applicable registration out of which the claims arises, less any applicable underwriting discounts and commissions, except in the case of willful fraud by such Holder.

(c) Each party entitled to indemnification under this Section 2.10 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnifying Party shall have the option to assume the defense of any such claim or any litigation resulting therefrom, provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and, provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2.10 unless the failure to give such notice is materially prejudicial to an Indemnifying Party’s ability to defend such action and, provided, further, that the Indemnifying Party shall not assume the defense for matters as to which there is a conflict of interest or separate and different defenses. No claim may be settled without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld). No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

(d) If the indemnification provided for in this Section 2.10 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations, provided, that in no event shall any contribution by a Holder under this Subsection 2.10(d) exceed the net proceeds from the public offering received by such Holder. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

2.11 Information by Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 2.

2.12 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the public without registration, after such time as a public market exists for the Ordinary Shares of the Company, the Company agrees to use its commercially reasonable efforts to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act.

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);

(c) So long as an Investor owns any Restricted Securities, to furnish to such Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public in the United States), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as an Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing the Investor to sell any such securities without registration.

2.13 Transfer of Registration Rights. The rights to cause the Company to register securities granted Holder under Sections 2.5, 2.6 and 2.7 may be assigned to a transferee or assignee in connection with any transfer or assignment of Registrable Securities by the Holder, provided that, (i) such transfer may otherwise be effected in accordance with applicable securities laws, (ii) the Company is given prompt notice of the transfer, and (iii) such assignee or transferee agrees to be bound by the terms of this Agreement.

2.14 Standoff Agreement. In connection with an IPO, each Member shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Ordinary Shares (or other securities) of the Company held by such Member (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for a period of one hundred eighty (180) days from the effective date of such registration (the “Standoff Period”), provided, that all officers and directors of the Company and holders of at least ten percent (10%) of the Company’s outstanding voting securities enter into similar agreements (the “Market Standoff”). Notwithstanding the foregoing, if the Company or the underwriter shall release from the terms of the foregoing Market Standoff or such agreements any Ordinary Shares (or other securities) (any such amount released, the “Released Amount”), the Company shall immediately so notify all other Holders in writing and each such Holder shall automatically be released from the Market Standoff provided for in this Section 2.14 that amount of such Holder’s Ordinary Shares (or other securities) subject thereto equal to such Holder’s pro rata share of the Released Amount, determined according to the amount of Registrable Securities held by such Holder (the “Market Standoff Release”). The Company shall use commercially reasonable efforts to require the underwriters to provide for the foregoing Market Standoff provision in any market standoff agreement between the Members of the Company and the underwriters. Each Member agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto.

2.15 Delay. If the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its members for a registration statement to be filed in the near future, then the Company’s obligation to use its best efforts to register, qualify or comply under Sections 2.5 or 2.7 shall be deferred for a period not to exceed one hundred and twenty (120) days from the date of receipt of the written request from the Initiating Holders or S-3/F-3 Initiating Holders (as the case may be), provided, however, that the Company may not exercise its rights under this Section 2.15 more than once in a twelve-month period.

2.16 No Injunction. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.17 Limitation on Subsequent Registration Rights. The Company shall not, without the prior written consent of the Holders holding a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to have registration rights of such securities that are senior to the registration rights of the Holders as set forth in this Section 2.

2.18 Termination. No Holder shall be entitled to exercise any right provided for in this Section 2 (except Sections 2.10 and 2.14) after the earlier of (i) as to a particular Holder, such time as such Holder is able to dispose of all of the Registrable Securities then outstanding held by such Holder in one three-month period pursuant to Rule 144, and (ii) as to all Holders, five (5) years after the closing of the Qualified IPO.

3.	Right of First Offer.

3.1 Right of First Offer. Subject to the terms and conditions specified in this Section 3.1, the Company hereby grants to the holder(s) of Preferred Shares (the “Right Holder”) a right of first offer (the “Right of First Offer”) to purchase its Pro Rata Share (as hereinafter defined) (in whole or in part) with respect to future sales by the Company of New Securities (as hereinafter defined).

Subject to Section 3.1(d), each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its shares (“New Securities”), the Company shall first make an offering of such New Securities to each Right Holder in accordance with the following provisions:

(a) In the event that the Company proposes to undertake an issuance of New Securities (in a single transaction or a series of related transactions), it shall give to each Right Holder written notice of its intention to issue New Securities (the “First Participation Notice”), describing the amount and type of New Securities, the price and the general terms upon which the Company proposes to issue such New Securities. Each Right Holder shall have ten (10) Business Days from the date of receipt of any such First Participation Notice to agree in writing to purchase such Right Holder’s Pro Rata Share (as defined below) of such New Securities for the price and upon the terms and conditions specified in the First Participation Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed such Right Holder’s Pro Rata Share). If any Right Holder fails to so agree in writing within such ten (10) Business Day period to purchase such Right Holder’s full Pro Rata Share of an offering of New Securities, then such Right Holder shall forfeit the right hereunder to purchase that part of its Pro Rata Share of such New Securities that it did not agree to purchase. An Right Holder’s “Pro Rata Share” for purposes of Right of First Offer under this Section 3.1 is the ratio of (a) the number of Ordinary Shares (calculated on a fully-diluted and as-converted basis) held by such Right Holder, to (b) the total number of Ordinary Shares (calculated on a fully-diluted and as-converted basis) then outstanding immediately prior to the issuance of New Securities giving rise to the Right of First Offer under this Section 3.1.

(b) If any Right Holder fails or declines to exercise its right under this Section 3.1 in accordance with subsection 3.1(a) above, the Company shall promptly give notice (the “Second Participation Notice”) to other Right Holders who exercised in full their Right of First Offer (the “Right Participants” and each, a “Right Participant”) in accordance with subsection 3.1(a) above. Each Right Participant shall have five (5) Business Days from the date of the Second Participation Notice (the “Second Participation Period”) to notify the Company of its desire to purchase more than its Pro Rata Share of the New Securities, stating the number of the additional New Securities it proposes to buy (the “Additional Number”). Such notice may be made by telephone if confirmed in writing within two (2) Business Days. If, as a result thereof, such oversubscription exceeds the total number of the remaining New Securities available for purchase, each oversubscribing Right Participant will be cut back by the Company with respect to its oversubscription to that number of remaining New Securities equal to the lesser of (x) the Additional Number and (y) the product obtained by multiplying (i) the number of the remaining New Securities available for subscription by (ii) a fraction, the numerator of which is the number of Ordinary Shares (calculated on a fully-diluted and as-converted basis) held by such oversubscribing Right Participant and the denominator of which is the total number of Ordinary Shares (calculated on a fully-diluted and as-converted basis) held by all the oversubscribing Right Participants. Each Right Participant shall be obligated to buy such number of New Securities as determined by the Company pursuant to this Section 3.1 and the Company shall so notify the Right Participants within fifteen (15) Business Days following the date of the Second Participation Notice.

(c) Upon the expiration of the Second Participation Period, or in the event no Right Holder exercises the Right of First Offer within ten (10) Business Days following the issuance of the First Participation Notice, the Company shall have sixty (60) days thereafter to sell the New Securities described in the First Participation Notice (with respect to which the Right of First Offer hereunder were not exercised) at the same or higher price and upon non-price terms not materially more favorable to the purchasers thereof than specified in the First Participation Notice. In the event that the Company has not issued and sold such New Securities within such 60 day period, then the Company shall not thereafter issue or sell any New Securities without again first offering such New Securities to the Right Holders pursuant to this Section 3.1.

(d) Notwithstanding the foregoing, New Securities does not include Ordinary Shares, Options (as defined in the Articles), Convertible Securities (as defined in the Articles) or other equity securities of the Company issued or issuable (or deemed to be issued or issuable pursuant to Article 19 of the Articles):

(i) upon conversion of Preferred Shares;

(ii) upon exercise of options or warrants to purchase Ordinary Shares issued from time to time to employees, officers, directors or consultants of the Company approved by the Board of Directors, which approval includes the approval of the Sungy Director;

(iii) pursuant to Recapitalizations; and

(iv) in an IPO.

3.2 Termination of Right. The right of first offer granted hereunder shall expire immediately prior to the closing of the IPO.

4.	Miscellaneous.

4.1 Term and Termination. This Agreement shall become effective as of the date of this Agreement. Section 1 shall terminate in accordance with Section 1.11; the registration rights granted pursuant to Section 2 shall terminate in accordance with Section 2.18; and Section 3 shall terminate in accordance with Section 3.2.

4.2 Waivers and Amendments. With the written consent of the Company, the Founders and the Investor, the obligations and rights of the Company, the Founders and the Investor under this Agreement may be amended and any of its terms may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) and any amendments or waivers so approved shall be binding as to all parties. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in writing. Notwithstanding anything to the contrary in this Section 4.2, no waiver or amendment which would have the effect of substantially prejudicing the rights and obligations of the Founders in relation to the rights and obligations of the Investor shall be effective against the Founders without the consent of holders of a majority of the then outstanding Founders’ Shares. Upon the effectuation of each such waiver, consent, agreement, amendment or modification, the Company shall promptly give written notice thereof to the record holders of the Preferred Shares, Conversion Shares or Founders’ Shares who have not previously consented thereto in writing.

4.3 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of Hong Kong without regard to principles of conflicts of laws.

4.4 Dispute Resolution.

Each of the parties hereto irrevocably (i) agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall first be subject to resolution through consultation of the parties to such dispute, controversy or claim. Such consultation shall begin within seven (7) days after one party hereto has delivered to the other parties involved a written request for such consultation. If within thirty (30) days following the commencement of such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any party with notice to the other parties. The arbitration shall be held in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “HKIAC”); (ii) waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such arbitration, and (iii) submits to the exclusive jurisdiction of HKIAC in any such arbitration. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. The parties to the arbitration shall each pay an equal share of the costs and expenses of such arbitration, and each party shall separately pay for its respective counsel fees and expenses; provided, however, that the prevailing party in any such arbitration shall be entitled to recover from the non-prevailing party its reasonable costs and attorney fees.

4.5 Other Remedies; Specific Performance.

Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof as permitted by Rule 43 of the Rules, this being in addition to any other remedy to which they are entitled at law or in equity.

4.6 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors and administrators.

4.7 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof, and any and all other written or oral agreements relating to the subject matter hereof existing between the parties hereto are expressly canceled upon the consummation of the Closing. Without limiting the generality of the foregoing, this Agreement, upon the consummation of the Closing, shall supersede and replace the previous Members Agreement of the Company in its entirety.

4.8 Notices, etc. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by 15 days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 4.8). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two (2) days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

4.9 Severability. If any provision of this Agreement shall be determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

4.10 Information Confidential. Each Member will hold in strict confidence and will not disclose, except for purposes of enforcing their rights under and making investment decisions relating to this Agreement, any confidential information about the Company (which shall include, but is not limited to, any information provided to Members pursuant to Section 1.1 hereof) or its business received from the Company except information (i) which the Company authorizes the Members to use or disclose, (ii) which is known to the Members prior to its disclosure by the Company, (iii) which becomes generally known in the industry through no fault of the Members, (iv) which was independently developed (as evidenced by written records) without any use of the Company’s confidential information, or (v) which Members are compelled by law to reveal. Any Member that is a partnership shall be allowed to disclose confidential information received from the Company about the Company or its business to any former or current partner, limited partner, general partner or management company of such Member (or any employee or representative of any of the foregoing) (each of the foregoing, a “Permitted Disclosee”) or legal counsel, accountants or representatives for such Member or Permitted Disclosee on a confidential basis to the extent necessary to meet its existing obligations to such recipient and provided such recipient complies with the confidentiality provisions of this Section 4.10.

4.11 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

4.12 Counterparts. This Agreement may be executed in any number of counterparts, including electronic or facsimile transmissions, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

4.13 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Investor, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Investor of any breach or default under this Agreement, or any waiver by the Investor of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, or by law or otherwise afforded to the Investor, shall be cumulative and not alternative.

4.14 Share Splits. All references to the number of shares in this Agreement shall be appropriately adjusted to reflect any Recapitalizations, which may be made by the Company after the Closing.

4.15 Aggregation of Stock. All shares of the Company held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


The Company:

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


HK Sub:

MOBILEWOO (CHINA) TECHNOLOGY DEVELOPMENT LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo (China) Technology Development Limited LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


WFOE:

BEIJING MOBILEWOO TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWoo Technology Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Beijing M15:

BEIJING MOBILEWO INFORMATION TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWo Information Technology Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Beijing MobileWu:

BEIJING MOBILEWU INFORMATION TECHNOLOGY CO., LTD.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Legal Representative

Mail Address of Beijing MobileWu Information Technology Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Shenzhen Taoshenbian:

SHENZHEN TAOSHENBIAN ELECTRONIC COMMERCE CO., LTD.

By:		/s/ Wei Wang
Print Name of Authorized Signatory: Wei Zhang
Title of Authorized Signatory: Legal Representative

Mail Address of Shenzhen Taoshenbian Electronic Commerce Co., Ltd. LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


The Purchaser:

SUNGY MOBILE LIMITED

By:		/s/ Yuqiang Deng
Print Name of Authorized Signatory: Yuqiang Deng
Title of Authorized Signatory: Chairman and Chief Executive Officer

Mail Address of Sungy Mobile Limited: LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


Founders’ BVI Holding Entity:

MOBILEWOO TECHNOLOGY LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Limited: LOGO LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

The Founders

/s/ Zhi Zhu

Zhi Zhu

/s/ Wei Zhang

Wei Zhang

/s/ Xue Guo

Xue Guo

/s/ Jian Chen

Jian Chen

Mail Address of the Founders: LOGO

SIGNATURE PAGE TO MEMBERS AGREEMENT

Exhibit A

Purchaser


Purchaser	Number of Shares	Purchase Price (USD)
Sungy Mobile Limited	11,500,000 Series A Shares (purchased from Northern Light Venture Capital II, Ltd.)		1,220,085
	5,743,056 Series B Shares (purchased from Northern Light Venture Capital II, Ltd.)		4,035,000
	5,743,056 Series B Shares (purchased from Sina Hong Kong Ltd.)		2,035,000
	3,445,833 Series B Shares (purchased from the Company)		1,182,942

Total:	26,431,945		8,473,027

Exhibit B

Schedule of Founders


Name of Founder		Number of Shares of the Company
Zhi Zhu		26,331,944 (including the shares indirectly held through the Founders’ BVI Holding Entity)
Wei Zhang		1,555,556 (indirectly held through the Founders’ BVI Holding Entity)
Xue Guo		1,555,556 (indirectly held through the Founders’ BVI Holding Entity)
Jian Chen		1,555,555 (indirectly held through the Founders’ BVI Holding Entity)

TOTAL		30,998,611

Exhibit 4.39

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED

SECOND AMENDED AND RESTATED VOTING AGREEMENT

THIS SECOND AMENDED AND RESTATED VOTING AGREEMENT (this “Agreement”) is made and entered into as of October 14, 2014, by and among MobileWoo Technology Holdings Limited, a Cayman Islands company (the “Company”), MobileWoo Technology Limited, a company incorporated in the British Virgin Islands, (the “Founders’ BVI Holding Entity”), the entity set forth on Exhibit A hereto (the “Investor”), and each of the persons listed on Exhibit B hereto (each a “Founder,” and collectively, the “Founders”). The Investor, the Founders’ BVI Holding Entity and the Founders are sometimes collectively referred to herein as the “Members”.

RECITALS

A. Pursuant to a Voting Agreement dated October 24, 2011 by and among the Company, the Founders’ BVI Holding Entity, the Founders and certain other parities, the parties thereto set forth certain rights to the holders of the Company’s Series A Preferred Shares and Series B Preferred Shares, with respect to the other shareholders of the Company (the “Former Voting Agreement”).

B. The Group Companies, Mr. Zhi Zhu LOGO , the Founders’ BVI Holding Entity, the Investor and other parties entered into the MobileWoo Technology Holdings Limited Shares Purchase Agreement on October 2, 2014 (the “Purchase Agreement”) pursuant to which the Investor will purchase a certain number of Series A Preferred Shares and Series B Preferred Shares of the Company.

C. In connection with the consummation of the transactions contemplated by the Purchase Agreement, the parties hereto desire to enter into this Agreement to terminate, supersede and replace in its entirety the Former Voting Agreement and to waive any and all rights they may have thereunder in exchange for their rights hereunder.

D. The Company’s Third Amended and Restated Articles of Association (the “Amended Articles”) provides that the Investor shall be entitled to appoint one (1) Director (the “Sungy Director”) , and the holders of the Ordinary Shares of the Company (the “Ordinary Shares”) shall be entitled to elect three (3) directors (the “Ordinary Share Directors”).

E. The Investor wishes to provide for the future voting of its Preferred Shares with respect to the election of the Sungy Director to be appointed by the Investor.

F. The Founders wish to provide for the future voting of their Ordinary Shares with respect to the election of the three (3) Ordinary Share Directors to be elected by holders of the Ordinary Shares.

G. Pursuant to the Purchase Agreement, it is a condition to the closing of the transactions contemplated by the Purchase Agreement that the parties hereto enter into this Agreement.

H. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement.

AGREEMENT

1. Definitions. As used herein, the following terms shall have the following meanings:

(a) “Acquisition Transaction” means any reorganization, consolidation, merger, sale or transfer of the Company’s outstanding shares, amalgamation, acquisition, tender offer, business combination, or similar transaction in which Members immediately prior to such reorganization, merger or consolidation, sale or transfer of shares or similar transaction do not (by virtue of their ownership of securities of the Company immediately prior to such transaction) beneficially own shares possessing a majority of the voting power of the surviving company or companies or acquiring entity, as the case may be, immediately following such transaction.

(b) “Board Designee” means any individual who is designated for election to the Company’s Board of Directors pursuant to Section 3 of this Agreement.

(d) “Loss of Control” shall mean any termination of, unapproved amendment to or breach of any contracts among the Group Companies designed to provide the Company with control over, and the ability to consolidate the financial statements of, direct or indirect subsidiaries and/or controlled entities.

(e) “Members Agreement” means that certain Members Agreement, dated as of the date hereof, by and among the Group Companies, the Investor, the Founders’ BVI Holding Entity and the Founders.

(f) “Sale of Assets” means any sale of all or substantially all of the Company’s assets, including the exclusive licensing of all or substantially all of any Group Company’s intellectual property.

2. Agreement to Vote. Each Member hereby agrees to hold all voting shares of the Company registered in their respective names or beneficially owned by them as of the date hereof and any and all other securities of the Company legally or beneficially acquired by them after the date hereof (the “Shares”) subject to, and to vote such Shares in accordance with, the provisions of this Agreement. Upon the failure of any Member to vote its Shares in accordance with the terms of this Agreement, such Member hereby grants to a shareholder designated by the Board of Directors of the Company a proxy coupled with an interest in all Shares owned by such Member, which proxy shall be irrevocable until this Agreement terminates pursuant to Section 2 or is amended to remove such grant of proxy in accordance with Section 14 hereof, to vote all such Shares in the matter provided in Sections 3 and 4 hereof.

3. Designation of Directors. Each of the Members shall vote at any regular or special meeting of members such number of Shares as may be necessary, or in lieu of any such meeting, shall give such Member’s written consent with respect to such number of Shares as may be necessary, to appoint the Directors as follows:

(a) as the Sungy Director, the holders of a majority of Series A Preferred Shares and Series B Preferred Shares (voting as a single class on as-converted basis) shall be entitled elect one (1) Sungy Director, and such Sungy Director shall be the Board Designee nominated by the Investor or its affiliates holding any Preferred Shares or Ordinary Shares issued upon conversion thereof (collectively, “Sungy”), initially Yuqiang Deng.

(b) as the Ordinary Share Directors, the holders of a majority of the Ordinary Shares shall be entitled to elect three (3) Directors, one of which shall be the current Chief Executive Officer of the Company, initially Zhi Zhu, Xue Guo and Wei Zhang.

4. Removal and Filling of Vacancies. From time to time during the term of this Agreement, the Designator may, in its sole discretion:

(a) choose to remove from the Board any incumbent Board Designee who occupies a Board seat for which such Designator then is entitled to designate the Board Designee under Section 3 above; and/or

(b) designate a new Board Designee for election to a Board seat for which such Designator is then entitled to designate the Board Designee under Section 3, above (whether to replace a prior Board Designee or to fill a vacancy in such Board seat).

In the event of such removal and/or designation, each Member agrees to vote its Shares as necessary under Section 3 above to cause the removal from the Board of any Board Designee so designated for removal by the appropriate Designator and the election to the Board of any new Board Designee so designated for election to the Board by the then appropriate Designator.

5. Legend on Share Certificates. Each certificate representing any Shares held by any party to this Agreement shall be endorsed by the Company with a legend in substantially the following form:

“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT.”

6. Binding Effect. The provisions of this Agreement shall be binding upon the successors in interest to any of the Shares. The Company shall not permit the transfer of any of the Shares on its books or issue a new certificate representing any of the Shares unless and until the person to whom such security is to be transferred shall have executed a written agreement, substantially in the form of this Agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person were an Investor or Founder, as applicable, hereunder.

7. Execution by the Company. The Company, by its execution in the space provided below, agrees that it will cause the certificates evidencing the Shares to bear the legend required by Section 5 herein, and it shall supply, free of charge, a copy of this Agreement to any holder of a certificate evidencing Shares containing such legend upon written request from such holder to the Company at its principal office. The parties hereto do hereby agree that the failure to cause the certificates evidencing the appropriate Shares to bear the legend required by Section 5 herein and/or failure of the Company to supply, free of charge, a copy of this Agreement as provided under this Section 7 shall not affect the validity or enforcement of this Agreement.

8. Specific Enforcement. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof as permitted by Rule 43 of the Commercial Arbitration Rules and Mediation Procedures (including Procedures for Large, Complex Commercial Disputes) of the American Arbitration Association (the “Rules”), this being in addition to any other remedy to which they are entitled at law or in equity.

9. Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

10. Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by 15 days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 10). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two (2) days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

11. Term. This Agreement shall terminate and be of no further force or effect on the earliest of immediately prior to the earlier of: (i) the effectiveness of the registration statement for the Company’s first firm commitment underwritten public offering registered under the Securities Act of 1933, as amended or pursuant to the securities laws applicable to an offering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally-recognized securities exchange, and (ii) the closing of a Sale of Assets, Loss of Control or an Acquisition Transaction.

12. Manner of Voting. The voting of shares pursuant to this Second Amended and Restated Voting Agreement may be effected in person, by proxy, by written consent, or in any other manner permitted by applicable law.

13. Aggregation. All Shares of the Company held or acquired by affiliated entities or persons of a Member (including but not limited to: (i) a constituent partner or a retired partner of a Member that is a partnership; (ii) a parent, subsidiary or other affiliate of a Member that is a corporation; (iii) an immediate family member living in the same household, a descendant, or a trust therefore, in the case of a Member who is an individual; (iv) a member of a Member that is a limited liability company; or (v) any affiliated persons or entities managed by affiliates of such Member) (each, an “Affiliated Entity”), shall be aggregated together for the purpose of determining the availability of any rights under this Agreement which are triggered by the beneficial ownership of a threshold number of shares of the Company’s capital shares.

14. Amendments and Waivers. With the written consent of the Company, the Founders and the Investor, the obligations and rights of the Company, the Founders and the Investor under this Agreement may be amended and any of its terms may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) and any amendments or waivers so approved shall be binding as to all parties. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in writing.

15. Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law otherwise affording to any party, shall be cumulative and not alternative.

16. Share Splits, Share Dividends, etc. All references to the number of shares in this Agreement shall be appropriately adjusted to reflect any share split, share dividend or other change in the capital stock which may be made by the Company after the Closing (as defined in the Purchase Agreement). In the event of any issuance of any shares of capital stock or other securities of the Company issued on, or in exchange for, any of the Shares by reason of a share split, share dividend, recapitalization, reorganization, or the like, such shares or securities shall be deemed to be Shares for purposes of this Agreement and shall be endorsed with the legend set forth above.

17. Severability. If any provision of this Agreement shall be determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

18. Successors. Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, assigns, administrators and executors.

19. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of Hong Kong without regard to principles of conflicts of laws.

20. Dispute Resolution. Each of the parties hereto irrevocably (i) agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall first be subject to resolution through consultation of the parties to such dispute, controversy or claim. Such consultation shall begin within seven (7) days after one Party hereto has delivered to the other parties involved a written request for such consultation. If within thirty (30) days following the commencement of such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any party with notice to the other parties. The arbitration shall be held in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “HKIAC”); (ii) waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such arbitration, and (iii) submits to the exclusive jurisdiction of HKIAC in any such arbitration. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. The parties to the arbitration shall each pay an equal share of the costs and expenses of such arbitration, and each party shall separately pay for its respective counsel fees and expenses; provided, however, that the prevailing party in any such arbitration shall be entitled to recover from the non-prevailing party its reasonable costs and attorney fees.

21. Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

22. Counterparts. This Agreement may be executed in any number of counterparts, including electronic or facsimile transmissions, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

23. Entire Agreement. This Agreement and the other Transaction Agreements (as defined in the Purchase Agreement) constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and shall supersede any and all other written or oral agreements relating to the subject matter hereof and thereof between the parties hereto upon the consummation of the Closing (as defined in the Purchase Agreement). Without limiting the generality of the foregoing, this Agreement, upon the consummation of the Closing, shall supersede and replace the Former Voting Agreement in its entirety.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.


The Company:

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO LOGO

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.


The Investor:

SUNGY MOBILE LIMITED

By:		/s/ Yuqiang Deng
Print Name of Authorized Signatory: Yuqiang Deng
Title of Authorized Signatory: Chairman and Chief Executive Officer

Mail Address of Sungy Mobile Limited: LOGO

IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the day and year first above written.


Founders’ BVI Holding Entity:

MOBILEWOO TECHNOLOGY LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Limited: LOGO LOGO

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

The Founders

/s/ Zhi Zhu

Zhi Zhu

/s/ Wei Zhang

Wei Zhang

/s/ Xue Guo

Xue Guo

/s/ Jian Chen

Jian Chen

Mail Address of the Founders: LOGO

Exhibit A

List of Investor


Purchaser	Number of Shares	Purchase Price (USD)
Sungy Mobile Limited	11,500,000 Series A Shares (purchased from Northern Light Venture Capital II, Ltd.)		1,220,085
	5,743,056 Series B Shares (purchased from Northern Light Venture Capital II, Ltd.)		4,035,000
	5,743,056 Series B Shares (purchased from Sina Hong Kong Ltd.)		2,035,000
	3,445,833 Series B Shares (purchased from the Company)		1,182,942

Total:	26,431,945		8,473,027

Exhibit B

Schedule of Founders


Name of Founder		Number of Shares of the Company
Zhi Zhu		26,331,944 (including the shares indirectly held through the Founders’ BVI Holding Entity)
Wei Zhang		1,555,556 (indirectly held through the Founders’ BVI Holding Entity)
Xue Guo		1,555,556 (indirectly held through the Founders’ BVI Holding Entity)
Jian Chen		1,555,555 (indirectly held through the Founders’ BVI Holding Entity)

TOTAL		30,998,611

Exhibit 4.40

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED

AMENDED AND RESTATED RESTRICTED SHARE AGREEMENT

This Amended and Restated Restricted Share Agreement (this “Agreement”) is made as of October 14, 2014 (the “Effective Date”), among MobileWoo Technology Holdings Limited, an exempted company duly incorporated and validly existing under the laws of the Cayman Islands (the “Company”), MobileWoo Technology Limited, a company incorporated in the British Virgin Islands (the “Holding Entity”), MobileWoo Holdings Limited, a company incorporated in the British Virgin Islands (the “Legal Holder”) and each of the Beneficial Holders listed on the Schedule A attached hereto (each a “Founder” and together, the “Founders”).

RECITALS

WHEREAS, the Company and the purchaser (the “Purchaser”) of the Company’s Series A Preferred Shares, par value of US$0.0001 per share (the “Series A Preferred Shares”), and the Company’s Series B Preferred Shares, par value of US$0.0001 per share (the “Series B Preferred Shares”, together with the Series A Preferred Shares, the “Preferred Shares”) are parties to that certain Shares Purchase Agreement dated October 2, 2014 (the “Purchase Agreement”);

WHEREAS, the Founders are beneficial owners of certain number of ordinary shares of a par value of US$0.0001 each of the Company (the “Shares”) set forth opposite their names on Schedule A, which are directly or indirectly held by the Founders through the Holding Entity and/or the Legal Holder as set forth on Schedule A;

WHEREAS, the Purchaser has indicated that a necessary condition to the purchase of the Preferred Shares would be for the Holding Entity and the Founders to enter into a share restriction agreement covering the repurchase by the Company of up to 26,331,944 (“Zhi Zhu’s Restricted Shares”), 1,555,556 (“Wei Zhang’s Restricted Shares”), 1,555,556 (“Xue Guo’s Restricted Shares”) and 1,555,555 (“Jian Chen’s Restricted Shares”) respectively, of the Shares (the “Restricted Shares”) on the terms set forth in this Agreement; and

WHEREAS, the Holding Entity, the Legal Holder and Founders have agreed to enter into this Agreement as a further inducement for the purchase of the Preferred Shares by the Purchaser.

NOW THEREFORE, in consideration of the mutual covenants and representations herein set forth, the Company, Holding Entity and each of the Founders agree as follows:

AGREEMENTS

1. Repurchase Option: In the event of the any termination of a Founder’s service to the Company as an employee, consultant, advisor or director (a “Service Provider”) before all of the Restricted Shares attributed to such Founder are released from the Company’s Repurchase Option (as defined below), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company) have an irrevocable, exclusive option (the “Repurchase Option”) for a period of six (6) months from such date to repurchase for cancelation any portion of the Unreleased Shares (as defined in Section 2 hereof) at such time at the price per share equal to par value of such Shares. The Repurchase Option shall be exercised by the Company by written notice to the Holding Entity and such Founder (with a copy to the Escrow Holder, as defined in Section 5 hereof) and, at the Company’s option, by delivery to the Holding Entity and such Founder or his executor with such notice of a check in the amount of the purchase price for the Restricted Shares being repurchased (the “Repurchase Shares”). Upon delivery of such notice and the payment of the purchase price, the Repurchased Shares shall be canceled by operation of Cayman Islands law.

Each Founder hereby confirms and agrees that in the event of the exercise of the Repurchase Option by the Company pursuant to this Agreement, the shares of the Holding Entity shall all be corrspondingly adjusted to reflect the proportional beneficial ownership of each Founder in the Company.

2. Release of Restricted Shares from Repurchase Option; Vesting.

(a) For so long as Zhi Zhu remains as a Service Provider to the Company, fifty (50)% of the Restricted Shares held by Zhi Zhu directly or through the Holding Entity and Legal Holder shall vest immidately upon the first anniversary of the Closing (as defined in the Purchase Agreement) and the remainder portion of Zhi Zhu’s Restricted Shares shall vest in twelve (12) equal and continuous monthly installments for each subsequent monthly period of continuous service following such date until all of the Zhi Zhu’s Restricted Shares have fully vested.

(b) For so long as Wei Zhang remains as a Service Provider to the Company, fifty (50)% of the Restricted Shares held by Wei Zhang through the Holding Entity shall vest immidately upon the first anniversary of the Closing, and the remainder portion of Wei Zhang’s Restricted Shares shall vest in twelve (12) equal and continuous monthly installments for each subsequent monthly period of continuous service following such date until all of Wei Zhang’s Restricted Shares have fully vested.

(c) For so long as Xue Guo remains as a Service Provider to the Company, fifty (50)% of the Restricted Shares held by Xue Guo through the Holding Entity shall vest immidately upon the first anniversary of the Closing, and the remainder portion of Xue Guo’s Restricted Shares shall vest in twelve (12) equal and continuous monthly installments for each subsequent monthly period of continuous service following such date until all of Xue Guo’s Restricted Shares have fully vested.

(d) For so long as Jian Chen remains as a Service Provider to the Company, fifty (50)% of the Restricted Shares held by Jian Chen through the Holding Entity shall vest immidately upon the first anniversary of the Closing, and the remainder portion of Jian Chen’s Restricted Shares shall vest in twelve (12) equal and continuous monthly installments for each subsequent monthly period of continuous service following such date until all of Jian Chen’s Restricted Shares have fully vested.

For purpose of this Agreement, the term “vest” or “vesting” shall mean, with respect to any Restricted Shares, that such Restricted Shares are released from and no longer subject to the Company’s Repurchase Option.

(e) Any of the Restricted Shares which have not yet been released from the Company’s Repurchase Option are referred to herein as “Unreleased Shares.”

(f) Notwithstanding the foregoing, (i) in the event that any Founder is teminated as the Service Provider by the Company without any Cause (as defined below), (ii) upon the occurrence of Change of Control (as defined below) at no fault of the Founder and the Founder is terminated without Cause, or (iii) upon the closing of the Qualified IPO (as defined in the Members Agreement dated hereof), one hundred percent (100%) of the Unreleased Shares held by any Founder shall be immediately released from the Repurchase Option. For the purposes of the Agreement, “Cause” shall mean (i) gross negligence or willful misconduct in the performance of the Founder’s duties to any of the Group Companies (other than as a result of a disability) resulting in material and adverse effect to the operation of any of the Group. Companies (as defined in the Purchase Agreement); (ii) repeated and continued failure to perform his substantial duties and responsibilities to any of the Group Companies (including, but not limited to his compliance with any written policy of any of the Group Companies) in good faith after having been offered proper training or reasonable opportunity and time to cure such failure; (iii) commission of any act of fraud or violation of any applicable laws, rules and regulations with respect to any of the Group Companies, which has resulted in material harm to the business affairs or reputation of any of the Group Companies in the reasonable determination of the Board of Directors; or (iv) conviction of a felony or a crime involving moral turpitude if such felony or crime could cause material harm to the business affairs or reputation of any of the Group Companies in the reasonable determination of the Board of Directors.

For purposes of this Agreement, a “Change of Control” means either: (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, amalgamation consolidation, tender offer, business combination or stock transfer or scheme thereof, but excluding any such transaction effected primarily for the purpose of changing the domicile of the Company), unless the Company’s stockholders of record immediately prior to such transaction or series of related transactions hold, immediately after such transaction or series of related transactions, at least 50% of the voting power of the surviving or acquiring entity (provided that the sale by the Company of its securities for the purposes of raising additional funds shall not constitute a Change of Control hereunder); or (ii) a sale of all or substantially all of the assets of the any Group Company (as defined in the Purchase Agreement), including but not limited to by means of the exclusive licensing of all or substantially all of any Group Company’s intellectual property.

(g) In the event of Qualified IPO or Change of Control within two (2) years of

the Closing date, and the Founders have agreed to continue their full employment and service relation with the Company for at least two (2) years from the Closing date, the Founders are entitiled to obtain their relevant share of the proceeds as a result of such event subject to the terms and conditions of the transaction documents in connection with such event.

3. Restriction on Transfer. Each Founder, severally and not jointly, hereby makes the investment representations listed on Exhibit A to the Company as of the date of this Agreement, and agrees that such representations are incorporated into this Agreement by this reference. Except for (1) the escrow described in Section 4 hereof, (2) a Founder’s spouse, lineal descendant or antecedent, or to a trust or trusts for the exclusive benefit of such Founder or those members of the Founder’s family specified in this Section 3, for bona fide estate planning purpose; and (3) otherwise approved by the Borad of Directors, including the director designated by the Purchaser, none of the Restricted Shares or any beneficial interest therein shall be, directly or indirectly, transferred, encumbered or otherwise disposed of in any way by the Holding Entity and/or the Legal Holder or the Founder until the release of such Restricted Shares from the Company’s repurchase option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution. In the event that any Founder attempts to transfer, encumber or dispose of the Unreleased Shares whether directly or through the Holding Entity and/or the Legal Holder in violation of this Agreement, such transfer shall be null and void and the Company shall be entitled to instruct the transfer agent to put a stop order on any such transfer.

4. Escrow of Restricted Shares.

(a) The Restricted Shares shall be held by the Secretary of the Company or his designee (the “Escrow Holder”), along with the Assignment Separate from Certificate attached hereto as Exhibit B executed by the direct shareholder of the Restricted Shares until the expiration of the Company’s option to repurchase such Restricted Shares as set forth above. However, any of the Restricted Shares which have been released from the Company’s Repurchase Option shall be no longer subject to the escrow hereunder.

(b) The Escrow Holder is hereby directed to permit transfer of the Restricted Shares only in accordance with this Agreement . In the event further instructions are desired by the Escrow Holder, it shall be entitled to rely upon directions executed by a majority of the authorized number of the Company’s Board of Directors. The Escrow Holder shall have no liability for any act or omission hereunder while acting in good faith in the exercise of his own judgment.

(c) If the Company or any assignee exercises its repurchase option hereunder, the Escrow Holder, upon receipt of written notice of such option exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer.

(d) When the Repurchase Option has been exercised or expires or a portion of the Restricted Shares have been released from such Repurchase Option, upon any Founder’s request, the Escrow Holder shall promptly cause a new certificate to be issued for such released Restricted Shares and shall deliver such certificate to the Holding Entity.

(e) Subject to the terms hereof, the Founders and the Holding Entity shall have all the rights of a beneficial owner with respect to the Restricted Shares while they are held in escrow, including, without limitation, the right to vote the Restricted Shares and receive any cash dividends or distributions declared thereon. If, from time to time during the term of the Company’s repurchase option, there is (i) any share dividend, share split or other change in the Restricted Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Founder is entitled by reason of his beneficial ownership of the Restricted Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as Restricted Shares for purposes of this Agreement and the Company’s repurchase option. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid upon the exercise of the Repurchase Option, provided that the aggregate purchase price payable for the Restricted Shares shall remain the same.

5. Adjustment for Share Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any share split, share dividend or other change in the Shares which may be made by the Company after the date of this Agreement.

6. Lock-Up Period. Each of the Founders, Legal Holder and Holding Entity hereby agree that any Founder, and Founders will cause the Holding Entity, not to sell, offer, pledge, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, grant any right or warrant to purchase, lend or otherwise transfer or encumber, directly or indirectly, any Shares or other securities of the Company, nor shall the Founders, the Holding Entity and the Legal Holder enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Shares or other securities of the Company, during the 180-day period (or such other shorter period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) following the effective date of the first registration statement of the Company filed under the Securities Act or another governmental or regulatory authority for the registration in a jurisdiction other than the United States that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act or another governmental or regulatory authority for the registration in a jurisdiction other than the United States. The Founders, the Holding Entity and the Legal Holder further agree, if so requested by the Company or any representative of its underwriters, to enter into such underwriter’s standard form of “lockup” or “market standoff” agreement in a form satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period.

7. General Provisions.

(a) Entire Agreement. This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this Agreement shall be binding unless in writing and signed by duly authorized representatives of the parties hereto.

(b) Governing Law; Severability. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of Hong Kong without regard to principles of conflicts of laws.

(c) Dispute Resolution. Each of the parties hereto irrevocably (i) agrees that any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “HKIAC”), (ii) waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such arbitration, and (iii) submits to the exclusive jurisdiction of HKIAC in any such arbitration. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. The parties to the arbitration shall each pay an equal share of the costs and expenses of such arbitration, and each party shall separately pay for its respective counsel fees and expenses; provided, however, that the prevailing party in any such arbitration shall be entitled to recover from the non-prevailing party its reasonable costs and attorney fees.

(d) Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below the signature of such Party on the signature page of this Agreement (or at such other address as such Party may designate by 15 days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 7(d)). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two (2) days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

(e) Successors and Assigns. The rights and benefits of the Company under this Agreement shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. The rights and obligations of the Founders, the Holding Entity and/or the Legal Holders under this Agreement may only be assigned with the prior written consent of the Company.

(f) Waiver. Any party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of such provision or provisions, nor prevent that party thereafter from enforcing each and every other provisions of this Agreement. The rights granted the parties herein are cumulative and shall not constitute a waiver of any party’s right to assert all other legal remedies available to it under the circumstances.

(g) Counterparts. This Agreement may be executed in several counterparts, each of which will be deemed an original, but all of which together shall constitute one and the same agreement.

(h) Further Instruments. Each of Founder, the Holding Equity and/or the Legal Holder agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement.

(i) Acknowledgment. Each of Founder, the Holding Equity and/or the Legal Holder acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.


The Company:

MOBILEWOO TECHNOLOGY HOLDINGS LIMITED.

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO LOGO

SIGNATURE PAGE TO SHARE RESTRICTION AGREEMENT

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.

Holding Entity:

MOBILEWOO TECHNOLOGY LIMITED


By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO

LOGO

Legal Holder:


MOBILEWOO HOLDINGS LIMITED

By:		/s/ Zhi Zhu
Print Name of Authorized Signatory: Zhi Zhu
Title of Authorized Signatory: Director

Mail Address of MobileWoo Technology Holdings Limited: LOGO

LOGO

SIGNATURE PAGE TO SHARE RESTRICTION AGREEMENT

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first set forth above.

The Founders

/s/ Zhi Zhu

Zhi Zhu LOGO

/s/ Wei Zhang

Wei Zhang LOGO

/s/ Xue Guo

Xue Guo LOGO

/s/ Jian Chen

Jian Chen LOGO

Mail Address of the Founders: LOGO

SIGNATURE PAGE TO SHARE RESTRICTION AGREEMENT

SCHEDULE A

FOUNDERS


Holding Entity	Legal Holder	Beneficial Holder	Number of Shares Held
MobileWoo Technology Limited	MobileWoo Holdings Limited	Zhi Zhu	26,331,944 (held by Zhi Zhu directly or through Holding Entity and Legal Holder)
MobileWoo Technology Limited		Wei Zhang	1,555,556
MobileWoo Technology Limited		Xue Guo	1,555,556
MobileWoo Technology Limited		Jian Chen	1,555,555

EXHIBIT A

INVESTMENT REPRESENTATION STATEMENT

In connection with the restriction of the Shares, I, the undersigned Founder, represent to the Company as follows:

1. The Company May Rely on These Representations. I understand that the Company’s sale of the shares to me has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), because the Company believes, relying in part on my representations in this document, that an exemption from such registration requirement is available for such sale. I understand that the availability of this exemption depends upon the representations I am making to the Company in this document being true and correct.

2. I am Purchasing for Investment. I am purchasing the shares solely for investment purposes, and not for further distribution. My entire legal and beneficial ownership interest in the shares is being purchased and shall be held solely for my account, except to the extent I intend to hold the shares jointly with my spouse. I am not a party to, and do not presently intend to enter into, any contract or other arrangement with any other person or entity involving the resale, transfer, grant of participation with respect to or other distribution of any of the shares. My investment intent is not limited to my present intention to hold the shares for the minimum capital gains period specified under any applicable tax law, for a deferred sale, for a specified increase or decrease in the market price of the shares, or for any other fixed period in the future.

3. I Can Protect My Own Interests. I can properly evaluate the merits and risks of an investment in the shares and can protect my own interests in this regard, whether by reason of my own business and financial expertise, the business and financial expertise of certain professional advisors unaffiliated with the Company with whom I have consulted, or my preexisting business or personal relationship with the Company or any of its officers, directors or controlling persons.

4. I am Informed About the Company. I am sufficiently aware of the Company’s business affairs and financial condition to reach an informed and knowledgeable decision to acquire the shares. I have had opportunity to discuss the plans, operations and financial condition of the Company with its officers, directors or controlling persons, and have received all information I deem appropriate for assessing the risk of an investment in the shares.

5. I Recognize My Economic Risk. I realize that the purchase of the shares involves a high degree of risk, and that the Company’s future prospects are uncertain. I am able to hold the shares indefinitely if required, and am able to bear the loss of my entire investment in the shares.

6. I Know the Shares are Restricted Securities. I understand that the shares under the Securities Act in reliance upon an exemption for non-public offerings. are “restricted securities” in that the Company’s sale of the shares to me has not been registered In this regard, I also understand and agree that:

A. I must hold the shares indefinitely, unless any subsequent proposed resale by me is registered under the Securities Act, or unless an exemption from registration is otherwise available (such as Rule 144 of the Securities Act (“Rule 144”));

B. the Company is under no obligation to register any subsequent proposed resale of the shares by me; and

C. the certificate evidencing the shares will be imprinted with a legend which prohibits the transfer of the shares unless such transfer is registered or such registration is not required in the opinion of counsel for the Company.

7. I am Familiar With Rule 144. I am familiar with Rule 144 adopted under the Securities Act, which in some circumstances permits limited public resales of “restricted securities” like the shares acquired from an issuer in a non-public offering. I understand that my ability to sell the shares under Rule 144 in the future is uncertain and I understand that if I am an affiliate of the Company, or a non-affiliate who has held the shares less than two years after my purchase and full payment, that my ability to sell the shares under Rule 144 will depend upon, among other things: (i) the availability of certain current public information about the Company; (ii) the resale occurring more than one year after my purchase and full payment (within the meaning of Rule 144) for the shares; and (iii) (A) the sale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker, as said term is defined under the Securities Exchange Act of 1934, as amended, (B) the amount of shares being sold during any three month period not exceeding the specified limitations stated in Rule 144, and (C) timely filing of a notice of proposed sale on Form 144, if applicable. I understand that the requirements of Rule 144 may never be met, and that the shares may never be saleable.

8. I Know I May Have Tax Liability Due to the Uncertain Value of the Shares. I understand that the Board of Directors of the Company (the “Board”) believes its valuation of the shares represents a fair appraisal of their worth, but that it remains possible that, with the benefit of hindsight, the Internal Revenue Service (the “IRS”) may successfully assert that the value of the shares on the date of my purchase is substantially greater than the Board’s appraisal. I understand that any additional value ascribed to the shares by such an IRS determination will constitute ordinary income to me as of the purchase date, and that any additional taxes and interest due as a result will be my sole responsibility payable only by me, and that the Company need not and will not reimburse me for that tax liability. I understand that if such additional value represents more than 25% of my gross income for the year in which the value of the shares is taxable, the IRS will have 6 years from the due date for filing the return (or the actual filing date of the return if filed thereafter) within which to assess me the additional tax and interest due.

9. Residence. The address of my principal residence is set forth below my signature on the signature page to the Agreement.

EXHIBIT B

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED, the undersigned hereby assigns and transfers unto ( ) Ordinary Shares, US$0.0001 par value per share, of MobileWoo Technology Holdings Limited, an exempted company duly incorporated and validly existing under the Law of the Cayman Islands (the “Company”), represented by Share Certificate No. and does hereby irrevocably constitute and appoint the Secretary of the Company, or his other designees, to transfer the said shares on the books of the Company with full power of substitution in the premises.

Dated:


MobileWoo Technology Limited

Signature:

Name:

Title:

Exhibit 4.41

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made and entered into as of October 14, 2014 between MobileWoo Technology Holdings Limited, a Cayman Islands company (the “Company”) and Yuqiang Deng (the “Indemnitee”).

A. The Company and the Indemnitee recognize the continued difficulty in obtaining liability insurance for corporate directors, officers, employees, controlling persons, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance.

B. The Company and the Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, controlling persons, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited.

C. The Indemnitee does not regard the current protection available for the Company’s directors, officers, employees, controlling persons, agents and fiduciaries as adequate under the present circumstances, and the Indemnitee and other directors, officers, employees, controlling persons, agents and fiduciaries of the Company may not be willing to serve or continue to serve in such capacities without additional protection.

D. The Company: (i) desires to attract and retain the involvement of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, to induce the Indemnitee to be involved with the Company and (ii) wishes to provide for the indemnification and advancing of expenses to the Indemnitee to the maximum extent permitted by law.

NOW, THEREFORE, in consideration of the Indemnitee’s service to the Company, the parties hereto agree as follows:

1. Indemnity of Indemnitee. The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Memorandum and Articles of Association (as amended from time to time) or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule that expands the right of an exempted company of Cayman Islands to indemnify a member of its Board of Directors or an officer, employee, controlling person, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule that narrows the right of an exempted company of Cayman Islands to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder except as set forth in Section 3 hereof.

2. Additional Indemnity. Subject only to the limitations set forth in Section 3 hereof, the Company hereby further agrees to hold harmless and indemnify the Indemnitee:

(a) against any and all expenses (including attorneys’ fees), witness fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with any threatened, pending or completed action, claim, suit, arbitration, alternative dispute resolution mechanism, investigation or any other proceeding, whether civil, criminal, administrative or investigative (including any appeal therefrom and including an action by or in the right of the Company) to which the Indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that the Indemnitee is, was or at any time becomes a director, officer, employee or agent of the Company, or is or was serving or at any time serves at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (collectively, a “Proceeding”); and

(b) otherwise to the fullest extent as may be provided to the Indemnitee by the Company under the Company’s Memorandum and Articles of Association (as amended from time to time) and the Companies Law (2013 Revision) of the Cayman Islands (as amended from time to time).

3. Limitations on Additional Indemnity.

(a) No indemnity pursuant to Section 2 hereof shall be paid by the Company for any of the following:

(i) to indemnify the Indemnitee for any expenses incurred by the Indemnitee in connection with any Proceeding for which payment is actually made to the Indemnitee under a valid and collectible insurance policy purchased and maintained by the Company, except in respect of any excess beyond the amount of payment under such insurance; or for which the Indemnitee is indemnified by the Company otherwise than pursuant to this Agreement;

(ii) in respect to remuneration paid to the Indemnitee if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;

(iii) on account of any Proceeding in which judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

(iv) on account of any Proceeding initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under applicable law unless such Proceeding was authorized in the specific case by action of the Board of Directors;

(v) on account of the Indemnitee’s conduct that is the subject of any Proceeding described in Section 7(b)(ii) hereof; or

(vi) if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful (and, in this respect, both the Company and the Indemnitee have been advised that the United States Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication).

(b) In addition to those limitations set forth above in paragraph (a) of this Section 3, no indemnity pursuant to Section 2 hereof in an action by or in the right of the Company shall be paid by the Company for any of the following:

(i) in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to the Company in the performance of the Indemnitee’s duty to the Company and its stockholders, unless and only to the extent that the court in which such Proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for expenses and then only to the extent that the court shall determine;

(ii) of amounts paid in settling or otherwise disposing of a pending action without court approval if applicable;

(iii) on account of the Indemnitee’s acts or omissions that involve intentional misconduct or a knowing and culpable violation of law;

(iv) on account of acts or omissions that the Indemnitee believes to be contrary to the best interests of the Company or its stockholders or that involve the absence of good faith on the part of the Indemnitee;

(v) with respect to any transaction from which the Indemnitee derived an improper personal benefit;

(vi) on account of acts or omissions that show a reckless disregard for the Indemnitee’s duty to the Company or its stockholders in circumstances in which the Indemnitee was aware, or should have been aware, in the ordinary course of performing such duties, of a risk of serious injury to the Company or its stockholders; or

(vii) on account of acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the Indemnitee’s duty to the Company or its stockholders.

4. Contribution. If the indemnification provided in Sections 1 and 2 hereof is unavailable by reason of a court decision described in Section 3(a)(vi) hereof based on grounds other than any of those set forth in Sections 3(a)(ii) through (v) hereof or in Sections 3(b)(i) through (vii) hereof, then in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with the Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnitee in such proportion as is appropriate to reflect: (i) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such action, suit or proceeding arose and (ii) the relative fault of the Company on the one hand and of the Indemnitee on the other in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or any other method of allocation that does not take account of the foregoing equitable considerations.

5. Continuation of Obligations. All agreements and obligations of the Company contained herein shall continue during the period the Indemnitee is a director, officer, employee or agent of the Company (or is or was serving at the request of the Company as a director, officer employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue thereafter so long as the Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal or investigative, by reason of the fact that the Indemnitee was an officer or director of the Company or serving in any other capacity referred to herein.

6. Notification and Defense of Claim. Not later than thirty (30) days after receipt by the Indemnitee of notice of the commencement of any action, suit or proceeding, the Indemnitee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability that it may have to the Indemnitee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which the Indemnitee notifies the Company of the commencement thereof:

(a) the Company will be entitled to participate therein at its own expense;

(b) except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense thereof, the Company will not be liable to the Indemnitee under this Agreement for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. The Indemnitee shall have the right to employ its counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Indemnitee unless: (i) the employment of counsel by the Indemnitee has been authorized by the Company; (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of such action; or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of the Indemnitee’s separate counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which the Indemnitee shall have made the conclusion provided for in (ii) above; and

(c) the Company shall not be liable to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall be permitted to settle any action except that it shall not settle any action or claim in any manner that would impose any penalty or limitation on the Indemnitee without the Indemnitee’s written consent. Neither the Company nor the Indemnitee will unreasonably withhold its consent to any proposed settlement.

7. Advancement and Repayment of Expenses. If the Indemnitee employs his own counsel pursuant to Section 6(b)(i) through (iii) above, the Company shall advance to the Indemnitee, prior to any final disposition of any threatened or pending action, suit or proceeding, whether civil, criminal, administrative or investigative, any and all reasonable expenses (including legal fees and expenses) incurred in investigating or defending any such action, suit or proceeding within ten business days after receiving copies of invoices presented to the Indemnitee for such expenses; and

(a) The Indemnitee agrees that the Indemnitee will reimburse the Company for all reasonable expenses paid by the Company in defending any Proceeding in the event and only to the extent it shall be ultimately determined by a final judicial decision (from which there is no right of appeal) that the Indemnitee is not entitled, under applicable law, the Company’s Bylaws, this Agreement or otherwise, to be indemnified by the Company for such expenses. Such repayment obligation shall be unsecured and shall not bear interest. The Company shall not impose on Indemnitee additional conditions to advancement or require from Indemnitee additional undertakings regarding repayment.

(b) Notwithstanding the foregoing, the Company shall not be required to advance such expenses to the Indemnitee if the Indemnitee: (i) voluntarily initiated or brought, and not by way of defense, any Proceeding, except those brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under applicable law, unless such advance is specifically approved by a majority of the Board of Directors or (ii) is a party to an action, suit or proceeding brought by the Company and approved by a majority of the Board of Directors that alleges willful misappropriation of corporate assets by the Indemnitee, disclosure of confidential information in violation of the Indemnitee’s fiduciary or contractual obligations to the Company or any other willful and deliberate breach in bad faith of the Indemnitee’s duty to the Company or its stockholders.

8. Enforcement. If the Indemnitee brings any action to enforce rights or to collect moneys due under this Agreement and is successful in such action, the Company shall reimburse the Indemnitee for all of the Indemnitee’s reasonable fees and expenses in bringing and pursuing such action.

9. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

10. Non-Exclusivity of Rights. The rights conferred on the Indemnitee by this Agreement shall not be exclusive of any other right that the Indemnitee may have or hereafter acquire under any applicable law, provision of the Company’s Certificate of Incorporation or Articles, agreement, vote of stockholders or directors, or otherwise, both as to action in an official capacity and as to action in another capacity while holding office.

11. Survival of Rights. The rights conferred on the Indemnitee by this Agreement shall continue after the Indemnitee has ceased to be a director, officer, employee or other agent of the Company and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators.

12. Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given: (a) five (5) calendar days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid; (b) upon delivery, if delivered by hand; (c) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid; or (d) one (1) day after the business day of delivery by facsimile transmission, if deliverable by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to the Indemnitee, at Indemnitee’s address as set forth beneath the Indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices (attention: Chief Executive Officer) or at such other address as such party may designate by ten (10) calendar days’ advance written notice to the other party hereto.

13. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

14. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of Hong Kong, without regard to conflict of law provisions thereof.

15. Binding Effect. This Agreement shall be binding upon the Indemnitee and upon the Company, its successors and assigns, and shall inure to the benefit of the Indemnitee, the Indemnitee’s heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns.

16. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by all parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

17. Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

18. No Construction as Employment Agreement. Nothing contained in this Agreement shall be construed as giving the Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.


COMPANY:

MobileWoo Technology Holdings Limited

By:		/s/ Zhi Zhu

Name:		Zhi Zhu
Title:		Director

INDEMNITEE:

/s/ Yuqiang Deng

Yuqiang Deng

SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT

Exhibit 4.42

English Translation

INVESTMENT AGREEMENT

by and among

Guangzhou Jiubang Digital Technology Co., Ltd.

and

Yingming Chang

Guangzhou Jiucai Information Technology Co., Ltd.

Dated November 28, 2014

Investment Agreement

This agreement, dated November 28, 2014, is entered into in Guangzhou, Guangdong Province, China, by and among:

Party A: Guangzhou Jiubang Digital Technology Co., Ltd., (referred to as “Jiubang Digital”) a limited liability company incorporated and existing under the laws of the People’s Republic of China, having its registered address at Floor 17, Tower A, China International Center, No. 33 Zhongshan 3rd Road, Yuexiu District, GuangZhou 510055, China, whose legal representative is Yuqiang Deng;

Party B: Yingming Chang (ID card Number: 622425197409031610)

The Company: Guangzhou Jiucai information Technology Co., Ltd., incorporated and existing under the laws of the People’s Republic of China, having its registered address at Room 1601, Tower A, China International Center, No. 33 Zhongshan 3rd Road, Yuexiu District, GuangZhou 510055, China, whose the legal representative is Yingming Chang;

Party A, Party B and the Company shall be referred to collectively as the “Parties” and individually as a “Party”.

WHEREAS:

1. Party A is currently engaging in the Business;

2. Party A and Party B agree to jointly establish Guangzhou Jiucai Information Technology Co., Ltd. to operate the Business independently with Party B being the core management of the Company.

THEREFORE, upon full negotiation of the Parties and according to the Company Law of the People’s Republic of China, the Contract Law of the People’s Republic of China and other relevant laws and regulations, with respect to the incorporation of the Company, the Parties hereby agree as follows.

1. Definition

1.1 The following terms shall have the following meanings as used in this Agreement (unless otherwise required in the context)

“Related party”

(a) For an individual, it refers to:

(i) The spouse, parents and any child or stepchild of such person (hereinafter referred to as “family member”)

(ii) The person and/or his/her family member(s) directly or indirectly owns share capital equity of a company, with 50% or more of the voting rights of the general meeting, or with the most members of the board of directors of the company being controlled, and its subsidiaries or holding company or affiliated entity to the same holding company.

(b) For a company, it refers to 1) its subsidiary(s), holding company(s) and affiliated entities to the same holding company; or any company whose share capital equity is directly or indirectly owned by that company and/or other company collectively, with whose 50% or more of the voting rights of the general meeting being controlled or can be executed by the company and/or other company; or a company which can control the most members of its board of directors.

“Investment” refers to the incorporation of the Company by the Parties according to this Agreement.

“Contribution Percentage” refers to, with respect to each Party, the equity percentage held by such Party in the Company according to this Agreement.

“Confidential Information” refers to any practical technology information and business information of the Company and the Parties of this Agreement, which is exclusive and not known to the public, can bring economic benefits and has been restricted by the Party by taking confidentiality measures, including but not limited to: organizational structure, commercial activities (including financial information, client list and business policies), technologies, issued or unissued software and hardware products, any confidential information related to the market or promotion (including any extract, summary or other information in the form of derivatives) and information related to this transaction, no matter how it is stored and disseminated.

“Law” refers to the laws, administrative regulations, local laws and regulations, administrative rules, judicial interpretations of the People’s Republic of China (excluding Hong Kong SAR, Macao SAR and Taiwan).

“Related Party Transaction” refers to any transaction between the Company and any Party of this agreement, any of its director or Shareholder, or any other Related Party.

“Shareholder” refers to any person who holds the shares in the Company.

“Investment Amount of Party A” refers to RMB 12,000,000 that Party A contributes in the Company as investment amount in total.

“Intellectual Property of Party A” refers to the intellectual properties relevant to the Business registered under the name of Party A, including but not limited to the software copyrights and trademark rights listed in Appendix I.

“Business” refers to the business of lotteries, recommendation of lotteries, software and related information technology service which is operated by Party A prior to the Closing Date.

“Closing Date” refers to December 1st, 2014.

“Total Amount of Transactions” refers to the aggregate transaction amount generated from the Company’s Principal Business from January 1st, 2015 to December 31st, 2015.

“Principal business” refers to software and information technology service related to business of lotteries and recommendation of lotteries that the Company mainly engages in.

“Loss” refers to any loss, damage, and loss of prospect interest, cost and reasonable expense due to specific incidents.

2. Incorporation of the Company and Capital Increase

2.1 Incorporation of the Company

The initial registered capital of the Company is RMB 1,000,000 at its incorporation. The Parties agree, upon the signing of this Agreement, the registered capital of the company shall be increased to RMB 24,490,000, with the equity ratio and amount of contribution of the Parties as follow:


Shareholder	Equity Ratio			Amount of Contribution (ten thousand Yuan)		Form of Contribution
Guangzhou Jiubang Digital Technology Co., Ltd.		49	%		1,200	Cash
Yingming Chang		51	%		1,249	Intellectual property
		100	%		2,449

2.2 Payment of Registered Capital

(a) Within 30 days upon the signing of this Agreement, Party A shall pay the Company the Investment Amount of Party A.

(b) Prior to March 31st, 2015, Party B shall evaluate of its intellectual properties (including but not limited to copyrights of software and trademark) and contribute such intellectual properties into the Company. Party B shall transfer such intellectual properties to the Company within period prescribed above.

(c) If Party A and Party B fully pay their respective contribution according to this Agreement, the Parties shall share the profit and assume the risk and loss of the Company on a pro-rata basis (i.e. Party A: Party B = 49%: 51%, as provided under the Section 2.1 of this Agreement.

(d) If Party A or Party B fails to perform their obligations of capital contribution, or their amount of contribution does not meet the subscribed amount provided under this Agreement, such Party shall complement their amount of contribution within 15 working days upon the expiry date of the proposed contribution; if the subscribed amount cannot be complemented, such Party shall adjust its equity ratio according to the actual amount of contribution, and share the profit and assume the risk and loss of the Company according to the equity ratio after adjustment.

2.3 Capital Verification

The Company shall engage a qualified accounting firm to conduct capital verification on the paid-in capital of Party A and Party B, and submit capital verification report to Party A and Party B.

2.4 Company Registry

Within 30 days upon the signing of this Agreement, the Company shall complete the registration with the Administration of Industry and Commerce relating to the capital increase and equity transfer; and shall submit the new Articles of Association of the Company and the approval materials for such registration to Party A and Party B.

3. The Business, Assets and Personnel Delivery

3.1 Upon the Closing Date, unless otherwise agreed by the Company in writing, Party A undertakes that it shall suspend the Business, terminate any contact or communication related to the Business with relevant clients, suspend using any Intellectual Property of Party A. Party A shall neither participate in any business or service related to the Business or in any entity who has direct or indirect competitive relationship with the Business independently or in the form of joint venture, cooperation, joint operation, either in China or aboard, nor directly invest in any entity that have direct or indirect competitive relationship with the Business. The Business shall be conducted by the Company independently and the Company shall bear the corresponding risks and loss and have relevant benefits.

3.2 Within one year after the Closing Date, if Party A maintains the advertising placement for the promotion of lottery business at its current level, the Company shall pay Party A RMB 6,000,000 as promotion fee (Annual Promotion Expense of 2015) before December 31st, 2015. The promotion fee during the period between December 1st, 2015 and November 30th, 2016 and between December 1st, 2016 and November 30th, 2017 shall be separately determined depending on the promotion resource and position provided by Party A and the income generated from Party A’s original customers.

3.3 The period from the Closing Date to December 31st, 2014 is the business transitional period. During this period, due to the business operation, Party A shall assist the Company to collect the commission of lottery transaction and other income (“Transitional Period Income”), and the Transitional Period Income shall be confirmed before January 15th, 2015 and a Confirmation Letter shall be signed in the same form as the Appendix of this Agreement. The Transitional Period Income shall be directly deducted from the Annual Promotion Expense of 2015 and Party A does not need to pay the Company separately.

3.4 In order to make the business go smoothly for Party B, from the Closing Date to March 31st, 2015, Party A shall grant the Company, free of charge, the exclusive right of its intellectual properties related to the Principal Business that the Company may use when providing related services all over the world.

3.5 Upon the Closing Date, the labor cost of the employees who shall be transferred to the Company as a result of the Closing relating to the Business (“Accepted Employees”) shall be borne by the Company, unless otherwise agreed by the Parties.

3.6 Whereas the Accepted Employees have been working for Party A prior to the Closing Date, the total year-end bonus of RMB 200,000 of the Accepted Employees (“Year-End Bonus”) shall be borne by Party A. Such Year-End Bonus shall be directly ducted from the Annual Promotion Expense of 2015 and Party A does not need to pay any additional amount to the company separately.

4. Operation Target

4.1 Party B undertakes that the Company’s Total Amount of Transactions of 2015 shall reach RMB 120,000,000 (“Operation Target”). Party B and the Company shall use their best efforts to achieve and complete the best operation performance and ensure that the Operation Target of the Company will be achieved.

4.2 In order to motivate the team of Party B to create higher value for the Company, if the audited Total Amount of Transactions of 2015 is equal to or higher than the Operation Target, Party A agrees to reward Party B as follows:

The Current Market Value of the Company RMB 24,490,000 * Growth Rate of Total Amount of Transactions 24% = Amount of Share Award RMB 5,877,600

Party A and Party B agree that the reward shall be paid in form of the Shares held by Party A and the Shares payable shall be calculated according to the current stock value of the Company; namely, the Shares that Party A shall pay to Party B shall be:

Shareholding percentage = Share Incentive Amount RMB 5,877,600/Current Register Capital of the Company RMB 24,490,000

4.3 If the audited Total Amount of Transactions of 2015 is lower than RMB 120,000,000, the Section 4.2 shall not be binding upon the Parties and Party A is not obliged to pay Party B any reward in any form.

4.4 The Parties shall rely on the amount recorded in the audit report issued by a Chinese certified public accountant firm recognized by the Parties when determining the Total Amount of Transactions. The Parties shall engage a Chinese certified public accountant firm to conduct audit on the operation and financial condition of 2015 before March 31st, 2016 and issue an audit report. This audit report shall be the conclusive evidence to determine the actual Total Amount of Transactions of 2015. The audit expense shall be borne by the company.

4.5 The Parties agree that the Shares to be granted by Party A to Party B according to the Section 4.2 of this Agreement shall be transferred to Party B within 1 month after the audit report (as provided in Section 4.4) is issued. Party A shall use its best efforts to assist Party B to complete the share transfer registration and other administrative procedures with the Administration of Industry and Commerce. None of the Parties shall delay, obstruct or refuse the above–mentioned registration for any reason or in any form.

5. Representation and Warranty of the Parties

5.1 Representation and Warranty of Party A

(a) Party A assures that it is eligible and capable and has all necessary authority to enter into this Agreement and to carry out its obligations hereunder. The execution and performance by Party A of this Agreement will not conflict with or result in any violation of any applicable law or any provision of available contracts.

(b) Party A shall fully pay the Investment Amount of Party A in time according to this Agreement.

(c) Party A shall fully undertake liability and obligations arising out of the Business prior to the Closing Date, and undertake all economic losses to the Company resulted from the violation of its liability and/or obligation.

(d) Party A assures that it is the sole legal owner of the Business and Intellectual Property of Party A, and has full right and power. It will not violate any right of the third party for the Closing of the Business from Party A to the Company. From the Closing Date, the Company will not violate any intellectual property rights or other property rights of the third party for the use of the Intellectual Property of Party A.

(e) Prior to the Closing Date, there will be no significant unfavorable change happening to the financial condition, prospect or profit of the Business; there will be no incident, fact or matter happened or is going to happen under the rational expectations that could cause the above mentioned changes. The Business will be operated in its ordinary course.

5.2 Representation and Warranty of Party B and the Company

(a) Party B and the Company assure that each of them is eligible and capable and has all necessary authority to enter into this Agreement and to carry out their obligations hereunder. Once this Agreement is executed, it shall be legal, valid and binding on the Parties.

(b) Party B shall fully pay the registered capital in time according to this Agreement.

(c) The Company shall fully undertake liability and obligations arising out of the Business subsequent to the Closing Date, and undertake all economic losses for the Company resulted from the violation of its liability and/or obligation.

(d) Subsequent to the Closing Date, Party B and the Company shall procure the key employees to enter into various employment-related legal documents with the Company, which shall include relevant provisions on employment relationship, non-competition, non-solicitation, intellectual property transfer and non-disclosure obligations.

(e) Within 2 years upon the entering into this Agreement, unless otherwise agreed by Party A in writing in advance, Party B shall not engage in (either for itself or for others), at any place worldwide, any business that is identical with or similar to the Company’s Principal Business, and shall not, at any place worldwide, act as any position (including but not limited to employee, counsel, management, director) for any enterprises, public institutions, social organizations or entity that engages in the same or similar business with the Company or has competitive relation, supply and marketing or other interest relationship with the Company.

6. Shareholder’s Right

6.1 Seat of the Board of Directors

Party B and the Company undertake that, in the condition that Party A holds the Shares of the Company, if the Company establishes a Board of Directors, Party A shall be entitled to appoint one person to act as the director of the Company.

6.2 Right of Pre-emption

(a) If Party A or Party B desires to sell its all or part of Shares (“the Sale Shares”), the other Party shall have the right to purchase the Sale Shares under the same terms and at the same price.

(b) Each of Party A and Party B undertakes that each Party shall inform the other Party at least 10 working days prior to the sale of Sale Shares; and the other Party shall, within 10 working days, reply on whether to exercise the right of pre-emption or not. If the other Party does not reply within the above period, such right shall be deemed as waived.

6.3 Information Right

(a) Party A shall have the right to inspect the financial records, documents and other materials of the Company as a shareholder provided under the Company Law of the People’s Republic of China. Besides, the Company shall provide all shareholders with the following materials and documents:

(1) within 30 days after the end of every quarter, a consolidated quarterly financial statement;

(2) within 90 days after the end of every fiscal year, an annual financial statement audited by the accounting firm;

(3) 45 days prior to the end of every fiscal year, a unified budget for the next fiscal year;

(4) Any documents and statements submitted to other shareholders.

(b) If Party A has any queries on any information, it shall have the right to, upon the notification to the Company in a reasonable manner, inspect all financial materials of the Company to understand the financial operation condition of the Company. In addition to the annul audit, Party A shall have the right to engage an accounting form to conduct an audit on the Company. The Company shall assist with Party A to exercise the right hereunder.

7. Company Governance

7.1 Board of Shareholders

The Company shall establish a shareholders meeting which is consisted of all Parties. The shareholders meeting shall be convened and voted in accordance with the relevant Laws and the Articles of Association of the Company.

7.2 Executive Director

The Company shall appoint one (1) executive director who is served by the executive director.

7.3 Protective Provisions

In the condition that Party A holds more than 50% of the Shares of the Company, without the written consent of Party A, Party B shall not make or cause to make the Company, directly or indirectly, perform any of the following:

(1) merge, division, liquidation, dissolution or to discontinuation of the operation of business in any form;

(2) modify the Articles of Association of the Company, increase or reduce the registered capital, change the organizational form or the Principal Business;

(3) any form of transfer, lease, trust or contracting management in relation to the Company’s equity interests or Principal Business;

(4) the distribution of dividend, formulation, approval or implementation of any share incentive plan, share repurchase, share redemption, etc.;

(5) approval of any follow-up financing plan of the Company;

(6) review and approval of any listing plan, including time, place, price of listing, agency and etc.;

(7) approval of any equity investment in other entities in an amount of more than RMB 2,000,000;

(8) guaranty in any form;

(9) any Related Party Transaction except transactions with Party A;

(10) other substantial matters recognized by the Parties.

8. Dissolution, Liquidation and Termination of the Company

8.1 Upon the occurrence of any of the following events, the Company, with the approval of the shareholders, may be dissolved;

(1) The operation terms expires;

(2) A resolution of dissolution is approved by the board of shareholders;

(3) Dissolution as a result of merger or division of the Company;

(4) The business license is cancelled or revoked or the Company is ordered to be shut down according to Laws;

(5) Being unable to continue the business due to force majeure;

(6) Exceptional hardship in the operation and management of the Company, which results in the great loss to the shareholders and cannot be solved through other manners.

8.2 If the Company dissolves due to the Clause (1), (2), (4), (5), (6) of the Section 8.1 above, the shareholder shall constitute a liquidation committee and begin to liquidate within 15 days upon the dissolution. The remaining property after the liquidation available for distribution shall be allocated among the Parties on a pro-rata basis.

9. Non-disclosure

9.1 All Parties of this Agreement shall undertake obligation of non-disclosure for the execution and performance of this Agreement. Without prior written consent of the other Party, neither Party shall disclose the confidential information to any third party, nor use it for any purpose other than the capital increase of the Company provided under this Agreement. This section shall survive the termination and expiry of this Agreement.

9.2 Notwithstanding anything to the contrary herein, upon notification to the other Party within reasonable period, each Party shall have the right to:

(1) disclose to governmental authorities or correspondent banks according to Laws or requirements of internal operation procedures; and

(2) disclose to employees, lawyers, accountants and other counsels, provided that such disclosed party shall undertake non-disclosure obligations under the same requirements as the Parties.

10. Modification and Termination of the Agreement

10.1 Unless otherwise agreed, this Agreement shall not be modified or terminated without mutual written agreement by the Parties.

10.2 If any Party materially breaches any provision under this Agreement and results in failing to achieve the target of this Agreement, the other Party may, with prior notice in writing, unilaterally terminate this Agreement.

11. Liabilities for Breach of the Agreement

11.1 Any Party’s violation of the provisions of this Agreement and failure to timely perform any obligation under this Agreement shall constitute a breach of the Agreement.

11.2 If any Party violates the agreements, representations or warranties under this Agreement and therefore cause damage to the other Party, such party shall be liable for such damage to the non-defaulting party. The liability for damage shall include all direct and indirect damages and expense arising out of the claim of such damages.

12. Applicable Law and Dispute Resolution

12.1 The construction, validity, interpretation, performance and dispute resolution arising out of this Agreement shall be governed by laws, decrees, regulations and stipulations of People’s Republic of China.

12.2 Any relevant dispute and request in connection with the validity, interpretation, performance and termination of this Agreement shall be resolved through friendly negotiation. Each Party shall negotiate with the other Party immediately after receiving the written request of the other Party. If an agreement cannot be reached within 30 days, the dispute shall be submitted to Guangzhou Arbitration Committee for arbitration and the arbitration rules in force at that time shall apply.

12.3 The arbitral award made by the Arbitration Committee shall be final and binding upon the Parties; the court with jurisdiction of the arbitral award of related party or court where the assets of related parties of the arbitral award is in has the right to enforce the arbitral award according to law. The losing Party shall bear the arbitration cost and lawyer fee of the other Party, unless otherwise stipulated in the arbitral award.

12.4 The Parties shall cooperate with the other party to fully disclose all information and documents of the other party as required and supply the full approach to get the above mentioned information and documents. But it shall not affect their obligations of non-disclosure.

12.5 The arbitral clause shall be without prejudice to any Party’s right to apply to the court for preservative measures.

12.6 During the process of dispute resolution, except the part of dispute, other part of this Agreement shall remain in full force and shall be complied with and performed.

13. Notification

13.1 Any notification given by each Party of this Agreement shall be in writing, and sent by designated person, e-mail or pre-paid registered mail; if the notification is sent to the receivers at the following addresses or e-mail address, it shall be deemed as a delivered notification:


Name	Address	E-mail
Guangzhou Jiubang Digital Technology Co., Ltd.	Floor 17, Floor 16 Tower A, China International Center, No. 33 Zhongshan San Road, Yuexiu District, GuangZhou (post code: 510055)	dengyuqiang@sungymobile.com

Ying Ming Chang	Floor 17 Tower A, China International Center, No. 33 Zhongshan San Road, Yuexiu District, GuangZhou (post code: 510055)	bowenchang@sungymobile.com

Guangzhou Jiucai Information Technology Co., Ltd.	Room 1601, Tower A, China International Center, No. 33 Zhongshan San Road, Yuexiu District, GuangZhou

13.2 The notification sent via e-mail shall be deemed as being received as soon as it is sent. The notification sent via pre-paid registered mail shall be deemed as being received 48 hours after it is sent.

14. Supplementary Provisions

14.1 This Agreement shall take effect upon signing of the Parties and replace all prior agreements, proposals and memorandums, written or oral, in respect of the subject matter hereof.

14.2 This Agreement is made in triplicate with each parties holding one copy, and each copy shall have same legal effect.

14.3 The Parties agree that the shareholder’s rights, company governance and other relevant content of this Agreement shall have the same legal effect with the Articles of Associations and other organizational documents of the Company. If there are discrepancies among this Agreement, the Articles of Association and other organizational documents of the Company, unless otherwise provided that the other document has a higher effect, this Agreement shall prevail. Any Shareholder of the Company may at any time suggest adding the terms of this Agreement into (or modifying) the Articles of Association of the Company, and the other Shareholders shall vote for such suggestion in the shareholders meeting.

14.4 Any failure or deferral of exercise of the right under this Agreement does not waive any right hereunder. Any waiver of any provision of this Agreement shall not be deemed as a waiver of other provisions of this Agreement.

14.5 If any provision of this Agreement is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way and the invalid provision shall be modified and shall apply without violating the purpose of this Agreement.

[Signature Page Follows]

All parties of this Agreement has signed and delivered this Agreement on the date specified on the first page.

Party A: Guangzhou Jiubang Digital Technology Co., Ltd.


Legal representative (or authorized representative):		/s/ Yuqiang Deng

Seal: /seal/

Party B: Yingming Chang


Signature:		/s/ Yingming Chang

Company: Guangzhou Jiucai Information Technology Co., Ltd.


Legal representative (or authorized representative):		/s/ Yingming Chang

Seal: /seal/

Date: November 28, 2014

Appendix I

Intellectual Property List

1. Software Copyright

Software Name

Abbreviation
of Software

Version
Number

Certificate
Number

Copyright
Owner

Register Number

Date of Record

Lottery Purchase software for 3G Mobile Phone

Goucaitong

V2.0

RZD ZI No.

0282710

Jiubang

Digital

2011SR019036

Apr. 9, 2011

Lottery Purchase software for 3G Portal

Goucaitong

Software

V2.2

RZD ZI No.

0651822

Jiubang

Digital

2013SR146060

Dec. 14, 2013

1.	Trademark Right


Trademark Name	Type of Application	Application Number	Applicant	Trademark Acceptance	Legal Status
3G Portal Lottery	42	13519215	Jiubang Digital	Nov. 11, 2013	Under review

Exhibit 8.1

List of Significant Subsidiaries


Name	Jurisdiction of incorporation	Relationship with the registrant
Jiubang Computer Technology (Guangzhou) Co., Ltd.	PRC	Wholly-owned subsidiary

XMedia Technologies Ltd	Cayman Islands	Wholly-owned subsidiary

XMedia Technologies Limited	Hong Kong	Wholly-owned subsidiary

Beijing XMedia Science and Technology Co., Ltd.	PRC	Wholly-owned subsidiary

Sungy Technology Limited	British Virgin Islands	Wholly-owned subsidiary

Sungy Technology Corporation	the United States of America	Wholly-owned subsidiary

GetJar, Inc.	the United States of America	Wholly-owned subsidiary

Guangzhou Jiubang Digital Technology Co., Ltd.	PRC	Variable interest entity

Guangzhou Sanju Advertising Media Co., Ltd.	PRC	Variable interest entity

Guangzhou Hengye Software Technology Co., Ltd.	PRC	Variable interest entity

Guangzhou Zhiteng Computer Technology Co., Ltd.	PRC	Variable interest entity

Beijing Yunlei Cultural Communication Co., Ltd.	PRC	Variable interest entity

GO Portal, Inc.	the United States of America	Variable interest entity

Exhibit 12.1

Certification by the Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Yuqiang Deng, certify that:

1. I have reviewed this annual report on Form 20-F of Sungy Mobile Limited (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: April 16, 2015


By:		/s/ Yuqiang Deng
Name:		Yuqiang Deng
Title:		Chief Executive Officer

Signature page to CEO Section 302 Certification

Exhibit 12.2

Certification by the Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Longfei Zhou, certify that:

1. I have reviewed this annual report on Form 20-F of Sungy Mobile Limited (the “Company”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: April 16, 2015


By:		/s/ Longfei Zhou
Name:		Longfei Zhou
Title:		Chief Financial Officer

Signature page to CFO Section 302 Certification

Exhibit 13.1

Certification by the Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Sungy Mobile Limited (the “Company”) on Form 20-F for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yuqiang Deng, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 16, 2015


By:		/s/ Yuqiang Deng
Name:		Yuqiang Deng
Title:		Chief Executive Officer

Signature page to CEO Section 906 Certification

Exhibit 13.2

Certification by the Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Sungy Mobile Limited (the “Company”) on Form 20-F for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Longfei Zhou, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

(Signature page to follow)

Date: April 16, 2015


By:		/s/ Longfei Zhou
Name:		Longfei Zhou
Title:		Chief Financial Officer

Signature page to CFO Section 906 Certification

Exhibit 15.1


Our ref		SSY/683638-000001/7981924v1
Direct tel		+852 3690 7498
Email		sophie.yu@maplesandcalder.com

Sungy Mobile Limited

Floor 17, Tower A, China International Center

No. 33 Zhongshan 3rd Road

Yuexiu District, Guangzhou 510055

People’s Republic of China

16 April, 2015

Dear Sir

Re: Sungy Mobile Limited

We have acted as legal advisors as to the laws of the Cayman Islands to Sungy Mobile Limited, an exempted limited liability company registered in the Cayman Islands (the “Company”), in connection with the filing by the Company with the United States Securities and Exchange Commission of an annual report on Form 20-F for the year ended December 31, 2014.

We hereby consent to the reference of our name under the headings “Item 10. Additional Information – B. Memorandum and Articles of Association – Voting Rights” and “Item 10. Additional Information – B. Memorandum and Articles of Association – General Meetings of Shareholders” in the Form 20-F.

Yours faithfully

/s/ Maples and Calder

Maples and Calder

Exhibit 15.2

LOGO

FAGDA PARTNERS

LOGO

http://www.fangdalaw.com

LOGO

E-mail: email@fangdalaw.com

Tel.: 86-755-8256-0188

Fax: 86-755-8256-0189

Ref.: 15CF0086

14/F, Tower Two, Kerry Plaza

1 Zhong Xin Si Road

Futian District

Shenzhen 518048, China

April 16, 2015

To:

Sungy Mobile Limited

Floor 17, Tower A, China International Center

No. 33 Zhongshan 3 Road, Yuexiu District

Guangzhou 510055

The People’s Republic of China

Re: 2014 Annual Report on Form 20-F of Sungy Mobile Limited

Dear Sir/Madam,

We hereby consent to the reference to our firm and the summary of our opinion under the captions, “Item 3. Key Information—D. Risk Factors”, “Item 4. Information on the Company—B. Business Overview—PRC Regulation” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies”, included in the annual report of Sungy Mobile Limited on Form 20-F for the fiscal year ended December 31, 2014 (the “Annual Report”), which will be filed with the Securities and Exchange Commission in the month of April, 2015. We also consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report.

Yours Sincerely,

/s/ Fangda Partners

Fangda Partners

Exhibit 15.3

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Sungy Mobile Limited:

We consent to the incorporation by reference in the registration statement (No. 333-197416) on Form S-8 of Sungy Mobile Limited of our report dated April 15, 2015, with respect to the consolidated balance sheets of Sungy Mobile Limited as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income (loss), changes in equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 2014, which report appears in the December 31, 2014 annual report on Form 20-F of Sungy Mobile Limited.

/s/ KPMG Huazhen (SGP)

Beijing, China

April 15, 2015

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