Unassociated Document

10-Q 1 v186359_10q.htm Unassociated Document

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to __________

COMMISSION FILE NUMBER: 001-34113

CHINA INSONLINE CORP.

(Exact name of registrant as specified in its charter)

Delaware	74-2559866
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

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

(Address of principal executive offices)

(011) 00852-25232986

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 o No o

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

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer o

Smaller Reporting Company x

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

As of May 14, 2010, there are 40,000,000 shares of common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION	1

ITEM 1. FINANCIAL STATEMENTS.		1

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.		2

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.		20

ITEM 4. CONTROLS AND PROCEDURES.		20

PART II OTHER INFORMATION		21

ITEM 1. LEGAL PROCEEDINGS.		21

ITEM 1A. RISK FACTORS.		21

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.		21

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.		21

ITEM 5. OTHER INFORMATION.		21

ITEM 6. EXHIBITS		22

SIGNATURES		24

EXHIBIT 31.1

EXHIBIT 31.2

EXHIBIT 32.1

EXHIBIT 32.2

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA INSONLINE CORP.

AND

SUBSIDIARIES

Condensed Consolidated Financial Statements

For The Three And Nine Months Ended March 31, 2010 and 2009

(Unaudited)

CHINA INSONLINE CORP.

AND

SUBSIDIARIES

TABLE OF CONTENTS
	Page

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2010 (UNAUDITED) AND JUNE 30, 2009		F-2

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)		F-3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)		F-4

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009 (UNAUDITED)		F-5 – F-17

F-1

CHINA INSONLINE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2010 (Unaudited)		June 30, 2009
ASSETS
Cash and cash equivalents	$	422,475	$	1,217,085
Accounts receivable, net of allowance for doubtful accounts of $910,511 and $26,302 at March 31, 2010 and June 30, 2009, respectively		4,627		7,764,537
Prepayments and deposits		20,471,091		5,428,848
Other receivables		585,511		2,385
Deferred taxes		749,394		466,828
Total Current Assets		22,233,098		14,879,683

Fixed assets, net		146,032		212,591
Software, net		9,649,170		2,963,136
Prepayments for software		-		6,981,952
Goodwill		4,473,787		4,473,787
Deposits		2,926		78,093
Deferred taxes		129,277		65,447
Total Long-Term Assets		14,401,192		14,775,006

TOTAL ASSETS	$	36,634,290	$	29,654,689

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	-	$	150,514
Other payables and accrued liabilities		514,600		638,169
Business tax payable		2,719,834		2,097,456
Amount due to director		680,302		253,506
Income taxes payable		8,321,743		6,260,070
Deferred taxes		48,108		90,644
Total Current Liabilities		12,284,587		9,490,359

COMMITMENTS AND CONTINGENCY

SHARHOLDERS’ EQUITY
Common stock, $.001 par value; 100,000,000 shares authorized; 40,000,000 shares issued and outstanding as of March 31, 2010 and June 30, 2009, respectively		40,000		40,000
Additional paid-in capital		86,360		86,360
Retained earnings (restricted portion of $1,055,584 at March 31, 2010 and June 30, 2009)		23,491,705		19,291,210
Accumulated other comprehensive income		731,638		746,760
Total Shareholders’ Equity		24,349,703		20,164,330

TOTAL LIABILITIES AND SHARHOLDERS’ EQUITY	$	36,634,290	$	29,654,689

See accompanying notes to condensed consolidated financial statements

F-2

CHINA INSONLINE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2010			2009			2010			2009

REVENUES, NET	$	670,232		$	3,989,716		$	9,454,739		$	13,047,434

COST OF SALES		463,434			390,206			1,695,881			1,182,668
GROSS PROFIT		206,798			3,599,510			7,758,858			11,864,766

Selling expenses		4,113			62,082			36,861			228,409
Advertising expenses		-			90			-			1,906,559
General and administrative expenses		283,024			558,814			956,286			1,299,047
Allowance for doubtful accounts		-			-			884,018			934,987

(LOSS) INCOME FROM OPERATIONS		(80,339	)		2,978,524			5,881,693			7,495,764

Loss on sale of fixed assets		-			-			(5,307	)		-
Interest (expense) income, net		(17	)		1,448			32			24,332

(LOSS) INCOME FROM OPERATIONS BEFORE INCOME TAXES		(80,356	)		2,979,972			5,876,418			7,520,096

Income taxes		24,739			785,778			1,675,923			2,072,274

NET (LOSS) INCOME		(105,095	)		2,194,194			4,200,495			5,447,822

OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)		3,113			(10,681	)		(15,122	)		14,149
COMPREHENSIVE (LOSS) INCOME	$	(101,982	)	$	2,183,513		$	4,185,373		$	5,461,971

NET (LOSS) INCOME PER SHARE

- BASIC AND DILUTED	$	0.00		$	0.05		$	0.11		$	0.14

WEIGHTED AVERAGE SHARES OUTSTANDING

- BASIC AND DILUTED		40,000,000			40,000,000			40,000,000			40,000,000

See accompanying notes to condensed consolidated financial statements

F-3

CHINA INSONLINE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended March 31, 2010			Nine Months Ended March 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,200,495		$	5,447,822
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		59,901			78,400
Amortization		1,023,039			311,554
Loss on sale of fixed assets		5,307			-
Deferred taxes		(388,932	)		(387,788	)
Allowance for doubtful accounts		883,906			934,987
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable		6,876,004			(2,568,904	)
Other receivables		(583,126	)		1,015,347
Prepayments and deposits		(14,967,076	)		1,168,190
Accounts payable		(150,514	)		138,265
Other payables and accrued liabilities		(123,569	)		114,799
Business tax payable		622,378			716,629
Income taxes payable		2,061,673			2,467,397
Deferred revenue		-			(63,583	)
Net cash (used in) provided by operating activities		(480,514	)		9,373,115

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiary, net of cash acquired		-			(5,715,919	)
Acquisition of equipment		(1,840	)		(119,727	)
Acquisition of software		(725,431	)		(731,433	)
Prepayment for software		-			(6,921,547	)
Proceeds from sale of fixed assets		3,189			-
Net cash used in investing activities		(724,082	)		(13,488,626	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Advance from a director		426,796			-
Repayment to a director		-			(28,602	)
Net cash provided by (used in) financing activities		426,796			(28,602	)

NET DECRESASE IN CASH AND CASH EQUIVALENTS		(777,800	)		(4,144,113	)
Effect of exchange rate changes on cash		(16,810	)		14,901
Cash and cash equivalents, at beginning of the period		1,217,085			4,567,853
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	422,475		$	438,641

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

See accompanying notes to condensed consolidated financial statements

F-4

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

1. Organization and Principal Activities

China INSOnline Corp. (“CHIO”) was incorporated on December 23, 1988 as a Delaware corporation and commenced operations on January 1, 1989.

CHIO and subsidiaries (collectively, the “Company”) is an Internet service and media company focusing on the People’s Republic of China (the “PRC”) insurance industry. With localized websites targeting Greater China, the Company primarily provides, through Beijing ZYTX Technology Co., Ltd (“ZYTX”), a network portal through its industry website, www.soobao.cn, to insurance companies, agents and consumers for advertising, online inquiry, news circulation, online transactions, statistic analysis and software development. The Company is also a licensed online motor vehicle, property and life insurance agent generating revenues through sales commissions from customers in the PRC

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

On April 2, 2009, Zhi Bao Da Tong (Beijing) Technology Co., Ltd changed its name into New Fortune Associate (Beijing) Information Technology Co., Ltd. (“NFA”).

In July 2009, the Financial Accounting Standards Board (“FASB”) launched the “FASB Accounting Standards Codification” (the “ASC”) as the single source of authoritative nongovernmental U.S. GAAP. The FASB ASC did not change current U.S. GAAP, but simplified user access to all authoritative U.S. GAAP by organizing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents were superseded and all other accounting literature not included in the FASB ASC is now considered nonauthoritative. The FASB ASC was effective for the Company’s financial statements for the quarter ended September 30, 2009. The adoption of the FASB ASC did not have an impact on the Company’s consolidated financial statement.

2. Basis of Presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to Quarterly Reports on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The condensed consolidated balance sheet information as of June 30, 2009 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report.

F-5

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

3. Principles of Consolidation

The condensed consolidated financial statements included the accounts of CHIO and the following subsidiaries:

a)	Rise & Grow – 100% subsidiary of CHIO;

b)	ETI – 100% subsidiary of CHIO;

c)	NFA – 100% subsidiary of Rise & Grow;

d)	RZYC – 100% subsidiary of ETI;

e)	ZYTX – a Variable Interest Entity (“VIE”) of NFA. It does this by controlling ZYTX, through an Exclusive Technical Consulting and Service Agreement (the “Consulting Agreement”) and related transaction documents dated as of September 28, 2007 (collectively, the “Service Agreements”).

According to the Consulting Agreement, NFA has the exclusive right to provide technical consulting and other services to ZYTX, effectively restricting and controlling the operations of ZYTX. Pursuant to Clause 1.3 of the Consulting Agreement, NFA, “shall be the sole and exclusive owner of all right, title and interests to any and all intellectual property rights arising from the performance of this Agreement (including but not limited to, copyrights, patent, know-how, commercial secrets and others), no matter whether it is developed by NFA or by ZYTX based on NFA’s intellectual property rights.” Thus, NFA could substantially, solely and exclusively possess all intellectual property of ZYTX which comprise the core value and assets of ZYTX (ultimately, solely and exclusively possessed by the Company); and

f)	GHIA – 100% subsidiary of Rise & Grow through ZYTX to act as legal owner in China.

ZYTX and GHIA are the major components of the Company’s condensed consolidated financial statements, representing over 99% of the assets and liabilities of the Company.

Inter-company accounts and transactions have been eliminated in consolidation.

4. Summary of Significant Accounting Policies

(a) Economic and Political Risks

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

(b) Use of Estimates

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

F-6

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

4. Summary of Significant Accounting Policies (Continued)

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

The Company adopted Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (formerly Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements) on January 1, 2008 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC 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. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

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

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

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

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

The Company’s financial instruments include accounts receivable, prepayment and deposits, other receivables, accounts payable, other payables and accrued liabilities, business tax payable, amount due to director, income tax payable and deferred taxes. We estimated that the carrying amount approximates fair value due to their short-term nature.

F-7

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

4. Summary of Significant Accounting Policies (Continued)

(d) Revenue Recognition

Advertising

Advertising revenues are derived mainly from online advertising arrangements, which allow advertisers to place advertisements on particular areas of the Company’s web sites, in particular formats and over particular periods of time. Such arrangements have generally included some combination of the following: website construction service, web site advertising and website maintenance services. In accordance with ASC 605-25, Multiple-Element Arrangement (formerly Emerging Issues Task Force (“EITF”) No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables), advertising arrangements involving multiple deliverables are broken down into single-element arrangements based on their relative fair value for revenue recognition purposes, when possible.

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

·	Website construction service, which is usually included in new advertising contract, mainly consist fee for design and computer coding of the new web site. The service fee is recognized when the web site is completed.

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

·	Website maintenance service is providing technically support and maintenance for the customers’ web sites. Such services are generally on contract basis with service period for one year. Revenue is recognized ratably over the contact period.

Under the guidance of ASC 985-605, Software Revenue Recognition (formerly the Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions), the Company determines vendor-specific objective evidence (“VOSE”) based on actual prices charged when the service is sold on a standalone basis.

Software Development

Software development revenue is recognized in accordance with ASC 985-605, when the outcome of a contract for software development can be estimated reliably, contract revenue and costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date, as measured by the proportion that costs incurred to date bear to estimated total costs for each contract. When the outcome of a contract cannot be estimated reliably, contract costs are recognized as an expense in the period in which they are incurred. Contract revenue is recognized to the extent of contract costs incurred that it is probable will be recoverable. Where it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

F-8

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

4. Summary of Significant Accounting Policies (Continued)

(e) Revenue Recognition (Continued)

Insurance Commissions

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

In accordance with ASC 605-50-25, Vendor’s Accounting for Consideration Given to a Customer, (formerly EITF No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Product), cash consideration given to customers or resellers, for which the Company does not receive a separately identifiable benefit or cannot reasonably estimate fair value, are accounted for as a reduction of revenue rather than as an expense.

Cash consideration includes discounts and other offers that entitle a customer to receive a reduction in the price of a product. For the nine months ended March 31, 2010 and 2009, the Company recognized $33,585 and $465,520, respectively, as a reduction of revenue for the discount offered to its customers.

(f) Foreign Currency Translation

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

	March 31, 2010		June 30, 2009		March 31, 2009
Period end RMB: US$ exchange rate		6.8361		6.83191		-
Period average RMB: US$ exchange rate		6.8377		-		6.8283
Period end HKD: US$ exchange rate		7.7647		7.7501		-
Period average HKD: US$ exchange rate		7.7554		-		7.7694

(g) Earnings (Loss) Per Share

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

(h) Goodwill

In accordance with ASC 805, Business Combination (formerly SFAS No.141, Business Combination), the total purchase price in a business combination is allocated to their fair value of assets acquired and liabilities assumed based on their fair values at the acquisition date, with amounts exceeding the fair values at the acquisition date, being recorded as goodwill. In accordance with ASC 350, Intangibles – Goodwill and Other (formerly SFAS No.142, Goodwill and Other Intangible Assets), goodwill is not amortized. Instead, it is tested for impairment on an accrual basis or more frequently whenever events or changes in circumstances indicate that goodwill may be impaired. For the period ended March 31, 2010, the Company did not identify any potential impairment related to its goodwill.

F-9

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

5. Recent Accounting Pronouncements

In December 2007, ASC 810-10-65, Noncontrolling Interests in Consolidated Financial Statements (formerly SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51) changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. The adoption of ASC 810-10-65 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB approved ASC 820-10-65-4 (formerly FASB Staff Position (“FSP”) FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly and FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairment).

ASC 820-10-65-4 provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased. ASC 820-10-65-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. We are required to adopt this FSP for our interim and annual reporting periods ending after June 15, 2009. This FSP does not require disclosures for periods presented for comparative purposes at initial adoption. This FSP requires comparative disclosures only for periods ending after initial adoption.

In March 2008, the FASB issued ASC 815, Derivative and Hedging, (formerly SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities), which expands disclosures to include information about the fair value of derivatives, related credit risks and a company’s strategies and objectives for using derivatives. The adoption of ASC 815 did not have a material impact on its consolidated financial statements.

In June 2008, the FASB issued ASC 815-10-65-3, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (formerly EITF No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock), which is effective for fiscal years beginning after December 15, 2008. ASC 815-10-65-3 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as a scope exception under ASC 815, Derivatives and Hedging (formerly SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities). ASC 815-10-65-3 was effective for the financial statements issued for fiscal years beginning after December 15, 2009. The Company adopted ASC 815-10-65-3 and determined that no balance sheet reclassifications were necessary.

In April 2009, the FASB issued ASC 825-10-65, Interim Disclosures about Fair Value of Financial Instruments, (formerly FSP FAS 107-1 and ABP 28-1, Interim Disclosures about Fair Value of Financial Instruments), which requires disclosures about fair value of financial instruments in interim and annual reporting periods. The adoption of ASC 825-10-65 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued ASC 320-10-65-1, Recognition and Presentation of Other-Than-Temporary Impairments (formerly FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to modify the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The adoption of ASC 320-10-65-1 did not have a material impact on the Company’s consolidated financial statements.

F-10

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

5. Recent Accounting Pronouncements (Continued)

In May 2009, the FASB issued ASC 855, Subsequent Events (formerly SFAS 165, Subsequent Events), which establishes accounting and disclosure requirements for events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855 requires disclosure of the date through which the Company has evaluated subsequent events for recognition or disclosure. ASC 855 also requires events that provide additional evidence about conditions that existed at the date of the balance sheet and the related estimates to be recognized in the financial statements. Events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date but before the financial statements are issued or available to be issued should not be recognized, but should be disclosed if material. The adoption of ASC 855 did not have a material impact on the Company’s consolidated financial statements.

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

In October 2009, the FASB’s EITF revised its guidance on Revenue Recognition for Multiple-Deliverable Revenue Arrangements. The revised guidance will enable companies to separately account for multiple revenue-generating activities (deliverables) that they perform for their customers.

Existing U.S. GAAP requires a company to use Vendor-Specific Objective Evidence (“VSOE”) or third party evidence of selling price to separate deliverables in a multiple-deliverable arrangement. The revised guidance will allow the use of an estimated selling price, if neither VSOE nor third-party evidence is available. The revised guidance will require additional disclosures of information about an entity’s multiple-deliverable arrangements. The requirements of the revised guidance may be applied prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, although early adoption is permitted. The Company is currently evaluating the impact of the update on its financial position and results of operations and does not plan to early or retroactively adopt the new guidance.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. This guidance is effective for the Company beginning March 1, 2010. The adoption of this guidance did not have an impact on its consolidated financial position or results of operations.

In April 2009, the FASB updated guidance related to fair-value measurements to clarify the guidance related to measuring fair-value in inactive markets, to modify the recognition and measurement of other-than-temporary impairments of debt securities, and to require public companies to disclose the fair values of financial instruments in interim periods. This updated guidance became effective for the Company beginning June 1, 2009. The adoption of this guidance did not have an impact on the Company’s consolidated financial position or results of operations.

F-11

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

6. Prepayments and Deposits

Prepayments and deposits represent the following:

	March 31, 2010		June 30, 2009
	(Unaudited)
Electronic products	$	20,435,629	$	5,386,497
Financial consultant		30,000		30,000
Rents		2,829		12,351
Other		2,633		-
	$	20,471,091	$	5,428,848

On October 15, 2009, the Company amended an agreement for the purchase of electronic products for the promotion of the insurance agency business amounting to $20,479,514 (RMB140,000,000). For the nine months ended March 31, 2010, the Company made a 99% prepayment for the products of $20,435,629 (RMB139,700,000). As part of the business restructuring, the Company is planning to sell its subsidiary ZYTX to potential buyer, which will include the prepayment of electronic products in ZYTX’s balance sheet. Also see Notes 10 and 13.

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

7. Other Receivables

On January 22, 2010, the Company advanced an unsecured loan of $585,129 (RMB4,000,000) to an unrelated party at an interest rate of 4.86% per annum and it is repayable on August 22, 2010.

8. Software

Software consists of the following by segment:

	March 31, 2010		June 30, 2009
At cost:	(Unaudited)
Online insurance advertising	$	8,012,630	$	2,115,712
Insurance agency		3,242,085		1,429,929
		11,254,715		3,545,641
Less: Accumulated amortization
Online insurance advertising		414,193		300,242
Insurance agency		1,191,352		282,263
		1,605,545		582,505

Software, net	$	9,649,170	$	2,963,136

There were five software packages and three software packages used in the Company’s two segments as of March 31, 2010 and June 30, 2009, respectively. Amortization expense for the nine months ended March 31, 2010 and 2009 was $1,023,039 and $311,554, respectively.

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

Year ending June 30,	Amount
2010	$	620,778
2011		1,241,556
2012		1,241,556
2013		1,241,556
2014		1,241,556
Thereafter		4,062,168
Total	$	9,649,170

F-12

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

9. Taxes

(a) Corporation Income Tax (“CIT”)

The Company has not recorded a provision for U.S. federal income taxes for the period ended March 31, 2010 due to the net operating loss carry forward in the United States.

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

Of the $8,321,743 of income taxes payable at March 31, 2010, $8,315,463 represents the amount of income taxes payable by NFA. Of the $8,315,463 of income taxes payable by NFA, $4,508,167 was due on April 30, 2009 and $3,807,296 was due on April 30, 2010. The Company has been negotiating with the tax authorities to defer the payment of CIT due on April 30, 2009 and April 30, 2010 without interest or penalties, and the Company is awaiting the final ruling from the tax authorities.

ZYTX, a VIE of the Company, enjoys a favorable tax rate of 15% as it is considered as a high technology company by the Chinese government. ZYTX is also entitled to a full exemption from CIT for the first two years from January 1, 2007 to December 31, 2008. Starting from January 1, 2009, the CIT rate of ZYTX is 15%. ZYTX is exempted from CIT for the six months period from July 1, 2008 to December 31, 2008 and for 15% for the twelve months period from January 1, 2009 to December 31, 2009. For the nine months ended March 31, 2010, the CIT for ZYTX was $0 as ZYTX has transferred all its net income to its primary beneficiary, NFA.

The applicable CIT rate for GHIA is 25%. For the nine months ended March 31, 2010, the CIT for GHIA was $6,280, which should be payable on April 30, 2010. The Company has been negotiating with the tax authorities to defer the payment of CIT due on April 30, 2010 without interest or penalties, and the Company is awaiting the final ruling from the tax authorities.

Some of the tax concession granted to eligible companies prior to the new CIT law is grand fathered. The new CIT Law has an impact on the deferred tax assets and liabilities of the Company. The Company adjusted deferred tax balances as of March 31, 2010 and June 30, 2009 based on the current applicable tax rate and will continue to assess the impact of such new law in the future. Effects arising from the enforcement of the new CIT Law were reflected into the accounts by best estimates.

Pursuant to the Inland Revenue Ordinance of Hong Kong, Rise & Grow is subject to Hong Kong Profits Tax at 16.5% for the period ended March 31, 2010 and the year ended June 30, 2009. As Rise & Grow has no assessable profits for the nine months ended March 31, 2010 and the year ended June 30, 2009, no provision for profits tax has been made.

Computed “expected” expense of the Company was calculated using 25% income tax rate for the nine and three months ended March 31, 2010 and 2009, respectively.

Income tax expense is summarized as follows:

	Three Months Ended March 31,					Nine Months Ended March 31,
	2010			2009		2010		2009
	(Unaudited)			(Unaudited)		(Unaudited)		(Unaudited)
Computed “expected” expense	$	(20,089	)	$	744,993	$	1,469,105	$	1,880,024
Favorable tax rate effect		12,977			6,323		120,404		157,769
Permanent differences		31,851			34,462		86,414		34,481
Income tax expense	$	24,739		$	785,778	$	1,675,923	$	2,072,274

F-13

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

9. Taxes (Continued)

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

Provision for income tax expense is summarized as follows:

	Three Months ended March 31,						Nine Months ended March 31,
	2010			2009			2010			2009
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Current	$	64,981		$	830,346		$	2,065,036		$	2,412,907
Deferred		(40,242	)		(44,568	)		(389,113	)		(340,633	)
Income tax expense	$	24,739		$	785,778		$	1,675,923		$	2,072,274

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

	March 31, 2010		June 30, 2009
Deferred tax assets:	(Unaudited)
Social welfare expenses	$	39,668	$	39,693
Consumable expenses		2,792		6,271
Discounts allowed		1,489		1,490
Business tax		472,054		358,915
Allowance for doubtful accounts		136,577		3,945
Tax loss		86,964		56,500
Amortization		7,040		-
Depreciation		705		-
Other		2,091		14
Total current deferred tax assets		749,380		466,828

Amortization		125,829		56,727
Depreciation		3,448		8,720
Total long-term deferred tax assets		129,277		65,447

Total deferred tax assets		878,657		532,275

Deferred tax liabilities:
Commission income		5,446		5,449
Rental income		-		21,053
Disposal income		-		38,786
Consultancy fee		4,506		4,509
Amortization		38,070		18,997
Depreciation		-		1,764
Other		86		86
Total current deferred tax liabilities		48,108		90,644


Net deferred tax assets	$	830,549	$	441,631

The Company adopted ASC 740, Income Tax (formerly FIN 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109), on January 1, 2007. The Company did not have any material unrecognized tax benefits and there was no effect on its financial condition or results of operations as a result of implementing ASC 740.

F-14

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

9. Taxes (Continued)

(b)	Business Tax

Pursuant to the relevant PRC tax laws, the Company is subject to business tax at 5% of the gross sales, excluding software development income. For the periods ended March 31, 2010 and 2009, the Company incurred a total business tax of $598,608 and $1,038,636, respectively, which is included in the cost of sales in the accompanying condensed consolidated statement of income and comprehensive income.

The business tax payable is $2,719,834 and $2,097,456 at March 31, 2010 and June 30, 2009, respectively. Of the $2,719,834 of business tax payable at March 31, 2010, $1,495,788 was due on April 30, 2009 and $1,224,046 was due on April 30, 2010. The Company has been negotiating with the tax authorities to defer the payment of business tax which was due on April 30, 2009 and April 30, 2010 without interest or penalties, and the Company is awaiting the final ruling from the tax authorities.

10. Commitments and Contingency

(a) Lease Commitments

The Company occupies office spaces leased from third parties. For the nine months ended March 31, 2010 and 2009, the Company recognized $86,846 and $252,499, respectively, as rental expense for these spaces. As of March 31, 2010, the Company has outstanding commitments with respect to non-cancelable operating leases as follows:

Year Ending June 30,	Amount
2010	$	7,898
2011		18,428
	$	26,326

(b) Purchase of Electronic Products

As of March 31, 2010, the Company has outstanding commitments of $43,885 (Rmb300,000) with respect to the purchase of electronic products of $20,479,514 (Rmb140,000,000) due within one year as follows:

Payment Due Dates	Amount

After the receipt of the last shipment of product	$	43,885

Subject to the request from the supplier on May 10, 2010, the Company agreed to extend the delivery dates for the electronic products as below:

Expected Product Delivery Dates	Units

July 31, 2010		40,000
August 31, 2010		30,000
		40,000

F-15

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

10. Commitments and Contingency (Continued)

Mr. Zhengyu Wang, a significant shareholder, entered into a loan agreement dated January 8, 2010 with Argyll Investments, LLC, and pledged 2,000,000 common stock of the Company to secure a personal loan of $554,400 at an interest rate of 4% per annum for 36 months.

Mr. Zhengyu Wang, a significant shareholder, entered into a loan agreement dated February 16, 2010 with Argyll Investments, LLC, and pledged 2,000,000 common stock of the Company to secure a personal loan of $705,600 at an interest rate of 4% per annum for 36 months.

11. Certain Risks and Concentrations

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

The Company has $316,227 and $1,207,171 in bank deposits in the banks in China, which constitutes about 98.9% and 99.9% of its total cash and cash equivalents as of March 31, 2010 and June 30, 2009, respectively. Historically, deposits in Chinese banks are secured due to the state policy on protecting depositors’ interests. However, China promulgated a new Bankruptcy Law in August 2006, which came into effect on June 1, 2007. The new Bankruptcy Law contains a separate article expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks. Under the new Bankruptcy Law, a Chinese bank may go bankrupt. In addition, since China’s concession to World Trade Organization, foreign banks have been gradually permitted to operate in China and have been severe competitors against Chinese banks in many aspects, especially since the opening of RMB businesses to foreign banks in late 2006.

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

As of March 31, 2010, accounts receivable consist primarily of insurance agency of 100%. As of June 30, 2009, accounts receivable consist primarily of software development clients and insurance agents of online insurance advertising, approximately 15% and 84%, respectively. Regarding the Company’s online advertising and insurance agency operations, no individual customer accounted for more than 10% of total net revenues for the nine months ended March 31, 2010 and year ended June 30, 2009.

The concentration of sales for the nine months ended March 31, 2010 and 2009, and accounts receivable at March 31, 2010 and June 30, 2009 are summarized as follows:

	Sales						Accounts Receivable
	March 31, 2010			March 31, 2009			March 31, 2010			June 30, 2009
Software Development	(Unaudited)			(Unaudited)			(Unaudited)
Company A		60	%		-			-			-
Company B		12	%		-			-			-
Company C		-			10	%		-			-
Company D		-			10	%		-			-
Company E		-			4	%		-			-
Company F		-			-			-			10	%
Company G		-			-			-			5	%
		72	%		24	%		0	%		15	%

Online Insurance Advertising		27	%		75	%		0	%		84	%

Insurance Agency		1	%		1	%		100	%		1	%

Total		100	%		100	%		100	%		100	%

F-16

CHINA INSONLINE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

12. Segment Information

Based on criteria established by ASC 280, Segment Reporting, (formerly SFAS 131, Disclosures about Segments of an Enterprise and Related Information), the Company operates three business segments for the three and nine months ended March 31, 2010 and 2009, which are software development, online insurance advertising and insurance agency within the PRC. The following is the summary information by segment as of March 31, 2010 and June 30, 2009 and for the three and nine months ended March 31, 2010 and 2009:

	Software Development		Online Insurance Advertising		Insurance Agency			Administra-tion			Total
Nine Months Ended March 31, 2010	(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)
Revenue, net	$	6,815,157	$	2,596,156	$	32,890		$	10,536		$	9,454,739
Cost of sales		57,699		378,530		807,619			452,033			1,695,881
Gross profit (loss)	$	6,757,458	$	2,217,626	$	(774,729	)	$	(441,497	)	$	7,758,858

Three Months Ended March 31, 2010
Revenue, net	$	-	$	658,280	$	4,700		$	7,252		$	670,232
Cost of sales		-		111,960		334,719			16,755			463,434
Gross profit (loss)	$	-	$	546,320	$	(330,019	)	$	(9,503	)	$	206,798

March 31, 2010
Long-lived assets	$	29,537	$	7,024,917	$	7,140,006		$	206,732		$	14,401,192
Current assets	$	-	$	-	$	20,468,215		$	1,764,883		$	22,233,098

Nine Months Ended March 31, 2009
Revenue, net	$	3,254,893	$	9,790,377	$	2,164		$	-		$	13,047,434
Cost of sales		35,502		614,158		60,580			472,428			1,182,668
Gross profit (loss)	$	3,219,391	$	9,176,219	$	(58,416	)	$	(472,428	)	$	11,864,766

Three Months Ended March 31, 2009
Revenue, net	$	1,318,584	$	2,672,412	$	(1,280	)	$	-		$	3,989,716
Cost of sales		3,174		173,788		23,135			190,109			390,206
Gross profit (loss)	$	1,315,410	$	2,498,624	$	(24,415	)	$	(190,109	)	$	3,599,510

June 30, 2009
Long-lived assets	$	53,592	$	1,817,578	$	12,648,168		$	255,668		$	14,775,006
Current assets	$	1,214,889	$	6,528,069	$	92,470		$	7,044,255		$	14,879,683

13. Subsequent Event

On May 18, 2010, the Board of the Company approved an internal restructure plan which would lead the Company to concentrate its resources on the online insurance agency business. NFA and ZYTX that include all assets from the software development and online insurance advertising segments, and plan to sell the Company's Subsidiaries at market price. The Company is currently identifying potential buyers for these Subsidiaries.

F-17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

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

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

Acquisition of Rise & Grow

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

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

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

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

Organizational Structure of Rise & Grow, NFA, ZYTX, GHIA, Ever Trend and Run Ze Yong Cheng

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

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

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

On January 14, 2010, the Company acquired a Hong Kong limited company, Ever Trend Investment Limited (“ETI”), for investment holding purpose.

On March 25, 2010, Run Ze Yong Cheng (Beijing) Technology Co. Limited (“RZYC”), a company registered in the PRC, was established and incorporated by ETI as a wholly foreign owned enterprise for future business development purposes. According to the relevant regulation the registered capital of RMB100,000 should be injected on or before September 24, 2010. ETI’s sole business is to act as a holding company for RZYC.

Business of the Company

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

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

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

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

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

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

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

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

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

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

On April 2, 2009, Zhi Bao Da Tong (Beijing) Technology Co., Ltd changed its name into New Fortune Associate (Beijing) Information Technology Co., Ltd.

On January 14, 2010, the Company acquired a Hong Kong limited company, Ever Trend Investment Limited (“ETI”), for investment holding purpose.

Restructuring of the Business Operation

On May 18, 2010, the Board of the Company approved an internal restructure plan which would lead the Company to concentrate its resources on the online insurance agency business. NFA and ZYTX and their operating segments, including all assets from the software development and online insurance advertising segments, may be sold to third parties at market price. The Company is currently identifying potential buyers for these segments.

After the restructuring, the Company would retain the online insurance agency business and focus on its products and services in the following areas:

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

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

Employees

With the anticipated business restructuring as discussed above, the Company will be keeping its current employees and do not plan to employ any significant amounts of employees in the following year. The Company reviews this plan from time and will adjust it accordingly as necessary.

Cash Requirements

As of the date of this report, all of our capital is equity capital and we do not have any debt financing with any bank or other financial institutions, except for the advance from our director. As our business develops, the Company considers raising additional funds if conditions are suitable.

Summary of Significant Accounting Policies

Use of Estimates

Fair Value of Financial Instruments

The Company adopted Accounting Standards Codification (“ASC”) 820 Fair Value Measurements (formerly Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements) on January 1, 2008 for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

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

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

Revenue Recognition

Advertising

Advertising revenues are derived mainly from online advertising arrangements, which allow advertisers to place advertisements on particular areas of the Company’s websites, in particular formats and over particular periods of time. Such arrangements have generally included some combination of the following: website construction services, website advertising and website maintenance services. In accordance with ASC 605-25, “Multiple-Element Arrangement” (formerly Emerging Issues Task Force (“EITF”) No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables), advertising arrangements involving multiple deliverables are broken down into single-element arrangements based on their relative fair value for revenue recognition purposes, when possible.

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

·	Website construction services, which are usually included in new advertising contracts, mainly consist of fees for design and computer coding of the new website. The service fee is recognized when the website is completed and wired in the server.

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

·	Website maintenance service is providing technically support and maintenance for the customers’ websites. Such services are generally on contract basis with service period for one year. Revenue is recognized ratably over the contact period.

Under the guidance of ASC 985-605 Software Revenue Recognition (formerly the Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions), the Company determines vendor-specific objective evidence (“VOSE”) based on actual prices charged when the service is sold on a standalone basis.

Software Development

Insurance Commissions

Cash consideration includes discounts and other offers that entitle a customer to receive a reduction in the price of a product. For the nine (9) months ended March 31, 2010 and 2009, the Company recognized $33,585 and $465,520, respectively, as a reduction of revenue for the discount offered to its customers.

Goodwill

In accordance with ASC 805 Business Combination (formerly SFAS No.141, Business Combination), the total purchase price in a business combination is allocated to their fair value of assets acquired and liabilities assumed based on their fair values at the acquisition date, with amounts exceeding the fair values at the acquisition date being recorded as goodwill. In accordance with ASC 350, Intangibles – Goodwill and Other (formerly SFAS No.142, Goodwill and Other Intangible Assets), goodwill is not amortized. Instead, it is tested for impairment on an accrual basis or more frequently whenever events or changes in circumstances indicate that goodwill may be impaired. For the period ended March 31, 2010, the Company did not identify any potential impairment related to its goodwill.

Recent Accounting Pronouncements

Existing U.S. GAAP requires a company to use VSOE or third party evidence of selling price to separate deliverables in a multiple-deliverable arrangement. The revised guidance will allow the use of an estimated selling price, if neither VSOE nor third-party evidence is available. The revised guidance will require additional disclosures of information about an entity’s multiple-deliverable arrangements. The requirements of the revised guidance may be applied prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, although early adoption is permitted. The Company is currently evaluating the impact of the update on its financial position and results of operations and does not plan to early or retroactively adopt the new guidance.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. This guidance is effective for the Company beginning March 1, 2010. The Company does not expect the adoption will have an impact on its consolidated financial position or results of operations.

Results of Operations For the Three (3) Months Ended March 31, 2010 Compared To the Three (3) Months Ended March 31, 2009

Our operating results are presented on a condensed consolidated basis for the three (3) months ended March 31, 2010, as compared to the three (3) months ended March 31, 2009.

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our consolidated statements of income for the three (3) months ended March 31, 2010 and 2009:

	2010					2009				Variance

REVENUES	$	670,232		100	%	$	4,091,607	103	%	$	(3,421,375	)	(84	%)
DISCOUNT ALLOWED		-		0	%		101,891	3	%		(101,891	)	(100	%)
REVENUES, NET		670,232		100	%		3,989,716	100	%		(3,319,484	)	(83	%)
COST OF SALES		463,434		69	%		390,206	10	%		73,228		19	%
GROSS PROFIT		206,798		31	%		3,599,510	90	%		(3,392,712	)	(94	%)
Selling expenses		4,113		1	%		62,082	2	%		(57,969	)	(93	%)
Advertising expenses		-		0	%		90	1	%		(90	)	(100	%)
General and administrative expenses		283,024		42	%		558,814	13	%		(275,790	)	(49	%)
(LOSS)INCOME FROM OPERATIONS		(80,339	)	(12	%)		2,978,524	75	%		(3,058,863	)	(102	%)
Interest (expense) income, net		(17	)	0	%		1,448	0	%		(1,465	)	(101	%)
(LOSS) INCOME BEFORE TAXES		(80,356	)	(12	%)		2,979,972	75	%		(3,060,328	)	(103	%)
Income taxes		24,739		4	%		785,778	20	%		(761,039	)	(97	%)
NET (LOSS) INCOME	$	(105,095	)	(16	%)	$	2,194,194	55	%	$	(2,299,289	)	(105	%)

Revenues

The Company’s consolidated revenues were $670,232 for the three (3) months ended March 31, 2010, which represents a $3,421,375 or 84% decrease from $4,091,607 for the three (3) months ended March 31, 2009. This decrease was primarily the result of a decline in our online advertising income and software development income.

	2010					2009				Variance
Software development	$	-	0	%	$	1,318,585	33	%	$	(1,318,585	)	(100	%)
Online insurance advertising		658,280	98	%		2,672,412	65	%		(2,014,132	)	(75	%)
Insurance agency		4,700	1	%		100,610	2	%		(95,910	)	(95	%)
Others		7,252	1	%	-		0	%		7,252		100	%
Total Revenues	$	670,232	100	%	$	4,091,607	100	%	$	(3,421,375	)	(84	%)

Online insurance advertising revenue decreased by 75%, or $2,014,132, to $658,280 during the three (3) months ended March 31, 2010 from $2,672,412 during the three (3) months ended March 31, 2009. This decrease is due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

Software development revenues decreased by $1,318,585, or 100%, to $0 during the three (3) months ended March 31, 2010 from $1,318,585 during the three (3) months ended March 31, 2009. This significant decrease was primarily due to the fact that we were temporarily unable to obtain purchase orders from certain customers in our software development market during the fiscal quarter ended March 31, 2010. We expect that our business will resume to normal levels during the next few fiscal quarters.

Revenue from our insurance agency services during the three (3) months ended March 31, 2010 decreased by $95,910, or 95%, to $4,700 from $100,610 during the same period in 2009. This decrease is mainly due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

Cost of Sales

The Company’s consolidated cost of sales (“COS”) during the three (3) months ended March 31, 2010 increased by $73,228, or 19%, from $390,206 or 10% of our net revenues to $463,434 or 69% of net revenues. This increase is primarily attributable to the significant increase in amortization of $402,282, or 100%, due to amortization of the application software for revenue earning activities that occurred during the three (3) months ended March 31, 2010.

	2010				2009				Variance

Business tax and levies	$	53,226	11	%	$	342,625	87	%	$	(289,399	)	(84	%)
Salaries and allowances		3,951	1	%		38,057	10	%		(34,106	)	(90	%)
Depreciation		3,110	1	%		3,522	1	%		(412	)	(12	%)
Amortization		402,282	87	%	-		0	%		402,282		100	%
Other		865	0	%		6,002	2	%		(5,137	)	(86	%)
Total Cost of Sales	$	463,434	100	%	$	390,206	100	%	$	73,228		19	%

Gross Profit

The Company’s consolidated gross profit during the three (3) months ended March 31, 2010 decreased by $3,392,712, or 94%, to $206,798 from $3,599,510 during the three (3) months ended March 31, 2009. This decrease is attributable to the significant decrease in revenue and also increase in amortization of our software system.

Selling Expenses

Selling expenses decreased by $57,969 or 93%, to $4,113 for the three (3) months ended March 31, 2010, as compared to $62,082 for the three (3) months ended March 31, 2009. This decrease is primarily attributable to our efforts of reducing operating costs and reducing employee headcount in order to maintain our competitiveness in a turbulent market.

	2010				2009				Variance

Salaries and allowances	$	3,350	82	%	$	58,964	95	%	$	(55,614	)	(94	%)
Depreciation		743	18	%		721	1	%		22		3	%
Office expenses	-		0	%		1,188	2	%		(1,188	)	(100	%)
Other		20	0	%		1,209	2	%		(1,189	)	(98	%)
	$	4,113	100	%	$	62,082	100	%	$	(57,969	)	(93	%)

Advertising Expenses

No advertising and promotion expenses were incurred during the three (3) months ended March 31, 2010, as compared to $90, or 1% of our net revenue, during the three (3) months ended March 31, 2009. This 100% decrease is attributable to the suspension of our advertising and promotion campaign during the three (3) months ended March 31, 2010 in light of the global financial crisis and our belief that such campaign would not have yielded a significant improvement in sales.

General and Administrative Expenses

General and administrative (“G&A”) expenses were $283,024, or 42% of our net revenues, during the three (3) months ended March 31, 2010 as compared to $558,814, or 14% of our net revenues, during the three (3) months ended March 31, 2009. This decrease of $275,790 or 49% is mainly attributable to the decrease of amortization of our software system, which was classified into COS during the three (3) months ended March 31, 2010, and the decrease in the allowance for doubtful accounts.

	2010				2009				Variance

Salaries and allowances	$	79,031	27	%	$	160,732	28	%	$	(81,701	)	(51	%)
Rental		28,048	10	%		96,271	17	%		(68,223	)	(71	%)
Building management fee	-		0	%		17,178	3	%		(17,178	)	(100	%)
Depreciation		7,849	3	%		20,444	4	%		(12,595	)	(62	%)
Amortization		-	0	%		109,708	20	%		(109,708	)	(100	%)
Travel & accommodations		58,058	21	%		11,859	2	%		46,199		390	%
Legal & professional fees		82,652	29	%		88,036	16	%		(5,384	)	(6	%)
Others		27,386	10	%		54,586	10	%		(27,200	)	(50	%
	$	283,024	100	%	$	558,814	100	%	$	(275,790	)	(49	%)

Legal and professional fees were a major component of our G&A expenses, representing 29% and 16% of our total G&A expenses during the three (3) months ended March 31, 2010 and 2009, respectively. Legal and professional fees decreased by $5,384, or 6%, during the three (3) months ended March 31, 2010. This decrease was due to the decrease in reimbursement expenses from the professional.

Interest Income (Expense), Net

Net interest expense during the three (3) months ended March 31, 2010 was $17, which represents a $1,465 or 101% decrease from $1,448 of net interest income during the three (3) months ended March 31, 2009.

Income Taxes

Income taxes during the three (3) months ended March 31, 2010 decreased by $761,039, or 97%, to $24,739 from $785,778 during the three (3) months ended March 31, 2009. This decrease is attributable to the decrease in the operating income of the Company during the three (3) months ended March 31, 2010.

Net (Loss) Income

Net loss for the three (3) months ended March 31, 2010 was $105,095, which represents a $2,299,289 or 105% decrease from $2,194,194 of net income during the three (3) months ended March 31, 2009. This decrease is attributable to the decrease in the operating income of the Company during the three (3) months ended March 31, 2010.

Results by Segment

The Company determined that there were three (3) reportable business segments during the three (3) months ended March 31, 2010 and 2009 within the PRC, which are software development, online insurance advertising and insurance agency. Each segment is described below.

Software Development

	2010			2009				Variance

Revenues, net	$	-	-	$	1,318,585	100	%	$	(1,318,585	)	(100	%)
COS		-	-		3,174	1	%		(3,174	)	(100	%)
Gross profit	$	-	-	$	1,315,411	99	%	$	(1,315,411	)	(100	%)

Revenues from software development during the three (3) months ended March 31, 2010 decreased by $1,318,585, or 100%, to $0 from $1,318,585 during the three (3) months ended March 31, 2009. This decrease is attributable to no new project started during the three (3) months ended March 31, 2010.

	2010			2009				Variance

Salaries and allowances	$	-	-	$	-	0	%	$	-		-
Depreciation		-	-		3,174	100	%		(3,174	)	(100	%)
Other		-			-	0	%		-		-
	$	-	-	$	3,174	100	%	$	(3,174	)	(100	%)

Online Insurance Advertising

	2010				2009				Variance

Revenues, net	$	658,280	100	%	$	2,672,412	100	%	$	(2,014,132	)	(75	%)
COS		111,960	17	%		173,788	7	%		(61,828	)	(36	%)
Gross profit	$	546,320	83	%	$	2,498,624	93	%	$	(1,952,304	)	(78	%)

Revenues from our online insurance advertising segment during the three (3) months ended March 31, 2010 decreased by $2,014,132, or 75%, to $658,280 from $2,672,412 during the three (3) months ended March 31, 2009. This decrease is due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

The Company GP ratio decreased to 83% for the three (3) months ended March 31, 2010 from 93% for the three months (3) ended March 31, 2009. This decrease is attributable to the reduction of revenue for the three (3) months ended March 31, 2010, even through the COS was decreased by 36% or $61,828, to $111,960 for the three (3) months ended March 31, 2010, from $173,788 for the three (3) months ended March 31, 2009.

	2010				2009				Variance

Business tax and levies	$	36,206	32	%	$	146,982	85	%	$	(110,776	)	(75	%)
Salaries and allowances		-	-			20,677	11	%		(20,677	)	(100	%)
Depreciation		-	-			127	1	%		(127	)	(100	%)
Amortization		75,754	68	%		-				75,754		100	%
Other		-	-			6,002	3	%		(6,002	)	(100	)
	$	111,960	100	%	$	173,788	100	%	$	(61,828	)	(36	%)

Amortization was the major component of COS for online advertising income during the three (3) months ended March 31, 2010, which increased by $75,754, or 100%, to $75,754 as compared with $0 during the three (3) months ended March 31, 2009.

Insurance Agency

	2010					2009						Variance

Revenues	$	4,700		100	%	$	100,610			(7854	%)	$	(95,910	)	(95	%)
Discounts allowed		-		0	%		101,891			(7954	%)		(101,891	)	(100	%)
Revenues, net		4,700		100	%		(1,281	)		100	%		5,981		(467	%)
COS		334,719		7122	%		23,135			(1806	%)		311,584		1347	%
Gross loss	$	(330,019	)	(7022	%)	$	(24,416	)	1906		%	$	(305,603	)	1252	%

Our insurance agency revenue for the three (3) months ended March 31, 2010 decreased by $95,910, or 95%, to $4,700 from $100,610 during the three (3) months ended March 31, 2009. This decrease is due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

Revenue from our insurance agency business has been subject to business tax and levies during the three (3) months ended March 31, 2010 and 2009. The COS mainly consists of business tax and levies of 5.5% of gross revenue, net of returned commissions for cancelled policies, amounting to $266 for the three (3) months ended March 31, 2010, compared with $5,534 for the three (3) months ended March 31, 2009.

As the income from our insurance agency business has developed, the COS and GP ratios for both the three (3) months ended March31, 2010 and 2009 fluctuated.

	2010				2009				Variance

Business tax and levies	$	265	1	%	$	5,534	24	%	$	(5,269	)	(95	%)
Salaries and allowances		3,951	1	%		17,380	75	%		(13,429	)	(77	%)
Depreciation		3,110	1	%		221	1	%		2,889		1306	%
Amortization		326,528	96	%		-	0	%		326,528		100	%
Other		865	1	%		-	0	%		865		100	%
	$	334,719	100	%	$	23,135	100	%	$	311,584		1347	%

Except for business tax and levies, amortization was a major component of COS for the three (3) months ended March 31, 2010. As we commenced our usage of our new application software, amortization on such software was charged to COS.

Administration

	2010					2009					Variance

Revenues	$	7,252		76	%	$	-		0	%	$	7,252		100	%
COS		16,755		(176	%)		190,109		100	%		(173,354	)	(91	%)
Gross loss	$	(9,503	)	(100	%)	$	(190,109	)	(100	% )	$	(180,606	)	(95	%)

Administration revenues included the inter-company service income from ZYTX to NFA and non-recurring supporting services to customers. The inter-company service income from ZYTX to NFA was eliminated in consolidation. Under relevant PRC tax laws, service income of NFA was subject to business tax and levies of 5.5% on revenue, which was recognized as a COS of administration.

Results of Operations For the Nine (9) Months Ended March 31, 2009 Compared To the Nine (9) Months Ended March 31, 2009

Our operating results are presented on a condensed consolidated basis for the nine (9) months ended March 31, 2010, as compared to the nine (9) months ended March 31, 2009.

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our consolidated statements of income for the nine (9) months ended March 31, 2010 and 2009:

	2010					2009				Variance

REVENUES	$	9,488,324		100	%	$	13,512,954	104	%	$	(4,024,630	)	(30	%)
DISCOUNT ALLOWED		33,585		0	%		465,520	4	%		(431,935	)	(93	%)
REVENUES, NET		9,454,739		100	%		13,047,434	100	%		(3,592,695	)	(28	%)
COST OF SALES		1,695,881		18	%		1,182,668	9	%		513,213		43	%
GROSS PROFIT		7,758,858		82	%		11,864,766	91	%		(4,105,908	)	(35	%)
Selling expenses		36,861		0	%		228,409	2	%		(191,548	)	(84	%)
Advertising expenses		-		0	%		1,906,559	15	%		(1,906,559	)	(100	%)
General and administrative expenses		956,286		10	%		1,299,047	10	%		(342,761	)	(26	%)
Allowance for doubtful accounts		884,018		9	%		934,987	7	%		(50,969	)	(5	%)
INCOME FROM OPERATIONS		5,881,693		62	%		7,495,764	57	%		(1,614,071	)	(22	%)
Loss on disposal of fixed assets		(5,307	)	0	%		-				(5,307	)	100	%
Interest income, net		32		0	%		24,332	0	%		(24,300	)	(100	%)
INCOME BEFORE TAXES		5,876,418		62	%		7,520,096	58	%		(1,643,678	)	(22	%)
Income taxes		1,675,923		18	%		2,072,274	16	%		(396,351	)	(19	%)
NET INCOME	$	4,200,495		44	%	$	5,447,822	42	%	$	(1,247,327	)	(23	%)

Revenues

The Company’s consolidated revenues were $9,488,324 for the nine (9) months ended March 31, 2010, which represents a $4,024,630 or 30% decrease from $13,512,954 for the nine (9) months ended March 31, 2009. This decrease was primarily the result of a decline in our online advertising income, offset by the increase in our software development income.

	2010				2009				Variance

Software development	$	6,815,157	72	%	$	3,254,893	25	%	$	3,560,264		109	%
Online insurance advertising		2,596,156	27	%		9,790,377	72	%		(7,194,221	)	(73	%)
Insurance agency		66,476	1	%		467,684	3	%		(401,208	)	(86	%)
Others		10,535	0	%		-	0	%		10,535		100	%
Total Revenues	$	9,488,324	100	%	$	13,512,954	100	%	$	(4,024,630	)	(30	%)

Online insurance advertising revenue decreased by 73%, or $7,194,221, to $2,596,156 during the nine (9) months ended March 31, 2010 from $9,790,377 during the nine (9) months ended March 31, 2009. This decrease is due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

Software development projects increased by $3,560,264, or 109%, to $6,815,157 during the nine (9) months ended March 31, 2010 from $3,254,893 during the nine (9) months ended March 31, 2009. This significant increase was primarily due to our newly developed software packages that were successfully delivered and tested by our customers during the nine (9) months ended March 31, 2010.

Revenue from our insurance agency services during the nine (9) months ended March 31, 2010 decreased by $401,208, or 86%, to $ 66,476 from $467,684 during the same period in 2009. This decrease is mainly due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

Cost of Sales

The Company’s consolidated cost of sales (“COS”) during the nine (9) months ended March 31, 2010 increased by $513,213, or 43%, from $1,182,668 or 9% of our net revenues to $1,695,881 or 18% of net revenues. This increase is primarily attributable to the significant increase in amortization of $1,023,039, or 100%, due to amortization of the application software for revenue earning activities that occurred during the nine (9) months ended March 31, 2010.

	2010				2009				Variance

Business tax and levies	$	598,608	35	%	$	1,038,636	87	%	$	(440,028	)	(42	%)
Salaries and allowances		35,394	2	%		104,936	9	%		(69,542	)	(66	%)
Depreciation		9,795	1	%		9,331	1	%		464		5	%
Amortization		1,023,039	60	%	-		0	%		1,023,039		100	%
Others		29,045	2	%		29,765	3	%		(720	)	(2	%)
Total Cost of Sales	$	1,695,881	100	%	$	1,182,668	100	%	$	513,213		43	%

Gross Profit

The Company’s consolidated gross profit during the nine (9) months ended March 31, 2010 decreased by $4,105,908, or 35%, to $7,758,858 from $11,864,766 during the nine (9) months ended March 31, 2009. This decrease is primarily attributable to the significant decrease in revenue and also increase in amortization of our software system.

Selling Expenses

Selling expenses decreased by $191,548 or 84%, to $36,861 for the nine (9) months ended March 31, 2010, as compared to $228,409 for the nine (9) months ended March 31, 2009. This decrease is primarily attributable to our efforts of reducing operating costs and reducing employee headcount in order to maintain our competitiveness in a turbulent market.

	2010				2009				Variance

Salaries and allowances	$	26,767	73	%	$	195,010	85	%	$	(168,243	)	(86	%)
Depreciation		2,228	6	%		2,000	1	%		228		11	%
Office expenses	-		0	%		17,014	7	%		(17,014	)	(100	%)
Others		7,866	21	%		14,385	7	%		(6,519	)	(45	%)
	$	36,861	100	%	$	228,409	100	%	$	(191,548	)	(84	%)

Advertising Expenses

No advertising and promotion expenses were incurred during the nine (9) months ended March 31, 2010, as compared to $1,906,559, or 15% of our net revenue, during the nine (9) months ended March 31, 2009. This 100% decrease is attributable to the suspension of our advertising and promotion campaign during the nine (9) months ended March 31, 2010 in light of the global financial crisis and our belief that such campaign would not have yielded improved significant improvement in sales.

General and Administrative Expenses

General and administrative (“G&A”) expenses were $956,286, or 10% of our net revenues, during the nine (9) months ended March 31, 2010 as compared to $1,299,047, or 10% of our net revenues, during the nine (9) months ended March 31, 2009. This decrease of $342,761 or 26% is mainly attributable to the decrease of amortization of our software system, which was classified into COS during the nine (9) months ended March 31, 2010, and the decrease in the allowance for doubtful accounts.

	2010				2009				Variance

Salaries and allowances	$	208,257	22	%	$	296,867	23	%	$	(88,610	)	(30	%)
Rental		86,846	9	%		251,825	19	%		(164,979	)	(66	%)
Building management fee	26,368		3	%		45,738	4	%		(19,370	)	(42	%)
Depreciation		47,878	5	%		67,069	5	%		(19,191	)	(29	%)
Amortization	-		0	%		311,554	24	%		(311,554	)	(100	%)
Travel & accommodations		270,494	28	%		78,069	6	%		192,425		246	%
Legal & professional fees		189,703	20	%		98,535	8	%		91,168		93	%
Others		126,740	13	%		149,390	11	%		(22,650	)	(15	%)
	$	956,286	100	%	$	1,299,047	100	%	$	(342,761	)	(26	%)

Legal and professional fees were a major component of our G&A expenses, representing 20% and 8% of our total G&A expenses during the nine (9) months ended March 31, 2010 and 2009, respectively. Legal and professional fees increased by $91,168, or 93%, during the nine (9) months ended March 31, 2010. This increase was due to the increase in legal expenses in the United States by our management for consultation of operating activities.

Travel and accommodations have been a major component of our G&A expenses, representing 28% and 6% of our total G&A expenses during the nine (9) months ended March 31, 2010 and 2009, respectively. Travel and accommodations increased by $192,425, or 246%, during the nine (9) months ended March 31, 2010. This increase was due to the increase in travel to and from the United States by our management for investor relations activities.

Rental expense also decreased by $164,979, or 66%, to $86,846 during the nine (9) months ended March 31, 2010 from $251,825 during the same period in 2009. This decrease is attributable to the reduction in rent for office space in the Beijing area.

Allowance for Doubtful Accounts

There was an allowance for doubtful accounts of $884,018 and $934,987 during the nine (9) months ended March 31, 2010 and 2009, respectively. This decrease is attributable to the outstanding receivable over 90 days resulted from the impact of the global financial crisis also reducing. The Company will improve its credit control to reduce this in the future.

Interest Income, Net

Net interest income during the nine (9) months ended March 31, 2010 was $32, which represents a $24,300 or 100% decrease from $24,332 of net interest income during the nine (9) months ended March 31, 2009.

Income Taxes

Income taxes during the nine (9) months ended March 31, 2010 decreased by $396,351, or 19%, to $1,675,923 from $2,072,274 during the nine (9) months ended March 31, 2009. This decrease is attributable to the decrease in the operating income of the Company during the nine (9) months ended March 31, 2010.

Net Income

Net income for the nine (9) months ended March 31, 2010 decreased by $1,247,327, or 23%, to $4,200,495 from $5,447,822 for the nine (9) months ended March 31, 2009. This decrease is attributable to the decrease in the operating income of the Company during the nine (9) months ended March 31, 2010.

Results by Segment

The Company determined that there were three (3) reportable business segments during the nine (9) months ended March 31, 2010 and 2009 within the PRC, which are software development, online insurance advertising and insurance agency. Each segment is described below.

Software Development

	2010				2009				Variance

Revenues, net	$	6,815,157	100	%	$	3,254,893	100	%	$	3,560,264	109	%
COS		57,699	1	%		35,502	1	%		22,197	63	%
Gross profit	$	6,757,458	99	%	$	3,219,391	99	%	$	3,538,067	110	%

Revenues from software development during the nine (9) months ended March 31, 2010 increased by $3,560,264, or 109%, to $6,815,157 from $3,254,893 during the nine (9) months ended March 31, 2009. This increase is attributable to the completion of eight (8) projects during the nine (9) months ended March 31, 2010.

Gross profit during the nine (9) months ended March 31, 2010 increased by $3,538,067 or 110% as a result of our increase in revenue. Details of COS are summarized as below:

	2010				2009				Variance

Salaries and allowances	$	31,444	54	%	$	24,055	68	%	$	7,389		31	%
Depreciation		4,374	8	%		8,369	24	%		(3,995	)	(48	%)
Other		21,881	38	%		3,078	9	%		18,803		611	%
	$	57,699	100	%	$	35,502	100	%	$	22,197		63	%

Salaries and allowances were major components of COS for software development income for both the nine (9) months ended March 31, 2010 and 2009. Salaries and allowances increased by $7,389, or 31%, to $31,444 during the nine (9) months ended March 31, 2010 as compared to $24,055 during the nine (9) months ended March 31, 2009.

Our Software Development segment is the only segment not subject to business tax and levies under existing PRC tax laws. As a result, no business tax and levy expenses were incurred during the nine (9) months ended March 31, 2010 and 2009.

Online Insurance Advertising

	2010				2009					Variance

Revenues, net	$	2,596,156	100	%		$	9,790,377	100	%	$	(7,194,221	)	(73	%)
COS		378,530	15	%			614,158	6	%		(235,628	)	(38	%)
Gross profit	$	2,217,626	85	%		$	9,176,219	94	%	$	(6,958,593	)	(76	%)

Revenues from our online insurance advertising segment during the nine (9) months ended March 31, 2010 decreased by $7,194,221, or 73%, to $2,596,156 from $9,790,377 during the nine (9) months ended March 31, 2009. This decrease is due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

The Company maintained stable COS and GP ratios during March 31, 2010 and 2009.

	2010				2009				Variance

Business tax and levies	$	142,789	37	%	$	538,471	87	%	$	(395,682	)	(73	%)
Salaries and allowances		-	0	%		48,659	8	%		(48,659	)	(100	%)
Depreciation		2,312	1	%		341	0	%		1,971		577	%
Amortization		227,207	60	%		-	0	%		227,207		100	%
Other		6,222	2	%		26,687	5	%		(20,465	)	(77	%)
	$	378,530	100	%	$	614,158	100	%	$	(235,628	)	(38	%)

Amortization was the major component of COS for online advertising income during the nine (9) months ended March 31, 2010, which increased by $227,207, or 100%, to $227,207 as compared with $0 during the nine (9) months ended March 31, 2009.

Insurance Agency

	2010					2009					Variance

Revenues	$	66,476		202	%	$	467,684		21612	%	$	(401,208	)	(86	%)
Discounts allowed		33,585		102	%		465,520		21512	%		(431,935	)	(93	%)
Revenues, net		32,891		100	%		2,164		100	%		30,727		1420	%
COS		807,619		2455	%		60,580		2799	%		747,039		1233	%
Gross profit	$	(774,728	)	(2355	%)	$	(58,416	)	(2699	%)	$	(716,312	)	1226	%

Our insurance agency revenue for the nine (9) months ended March 31, 2010 decreased by $401,208, or 86%, to $66,476 from $467,684 during the nine (9) months ended March 31, 2009. This decrease is due to the fact that we were temporarily unable to obtain purchase orders from certain insurance agencies and insurance serving companies during the fiscal quarter ended March 31, 2010. Purchase orders from the insurance agencies and insurance serving companies during the first part of the fiscal quarter ended June 30, 2010 have increased compared with the purchase orders we received during the fiscal quarter ended March 31, 2010 and we expect that our business will resume to normal levels during the next few fiscal quarters.

Revenue from our insurance agency business has been subject to business tax and levies during the nine (9) months ended March 31, 2010 and 2009. The COS mainly consists of business tax and levies of 5.5% of gross revenue, net of returned commissions for cancelled policies, amounting to $3,797 for the nine (9) months ended March 31, 2010, compared with $27,737 for the nine (9) months ended March 31, 2009.

As the income from our insurance agency business has developed, the COS and GP ratios for both the nine (9) months ended March 31, 2010 and 2009 fluctuated.

	2010				2009				Variance

Business tax and levies	$	3,797	1	%	$	27,737	46	%	$	(23,940	)	(86	%)
Salaries and allowances		3,950	1	%		32,223	53	%		(28,273	)	(88	%)
Depreciation		3,109	1	%		620	1	%		2,489		401	%
Amortization		795,832	97	%		-	0	%		795,832		100	%
Other		931	0	%		-	0	%		931		100	%
	$	807,619	100	%	$	60,580	100	%	$	747,039		1,233	%

Except for business tax and levies, amortization was a major component of COS for the nine (9) months ended March 31, 2010. As we commenced our usage of our new application software, amortization on such software was charged to COS.

Administration

	2010					2009				Variance

Revenues	$	10,535		2	%	$	-	0	%	$	10,535		100	%
COS		452,033		100	%		472,428	100	%		(20,395	)	4	%
Gross loss	$	(441,498	)	(100	%)	$	472,428	(100	%)	$	30,930		7	%

Material Commitments

Lease Commitments

Year Ending June 30,	Amount

2010	$	7,898
2011		18,428
	$	26,326

Purchase of Electronic Products

Payment Due Dates	Amount

After the receipt of the last shipment of product	$	43,885

Subject to the request from the supplier on May 10, 2010, the Company agreed to extend the delivery dates for the electronic products as below:

Expected Product Delivery Dates	Units

July 31, 2010		40,000
August 31, 2010		30,000
		70,000

The Company subsequently approved a restructuring plan on May 18, 2010, which might lead to a sales of the Company's Subsidiaries NFA and ZYTX. The right of receiving the electronic products is included in ZYTX and might eventually sale to potential buyer.

Off-Balance Sheet Arrangements

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

Liquidity and Capital Resources

As of March 31, 2010, the Company had $417,153 in bank deposits with a bank in China, which constituted approximately 98.7% of its total cash and cash equivalents.

Set forth below is a summary of our Statement of Cash Flows during the nine (9) months ended March 31, 2010:

	2010			2009			Variance

Net cash (used in) provided by
Operating activities	$	(480,514	)	$	9,373,115		$	9,853,629		105	%
Investing activities		(724,082	)		(13,488,626	)		12,764,544		(94	%)
Financing activities		426,796			(28,602	)		455,398		1,592	%
Net change in cash and cash equivalents		(777,800	)		(4,144,113	)		3,366,313		81	%

Effect of exchange rate changes on cash and cash equivalents		(16,810	)		14,901			31,711		(212	%)

Cash and cash equivalents at beginning of period		1,217,085			4,567,853			(3,350,768	)	(73	%)

Cash and cash equivalents at end of period	$	422,475		$	438,641		$	16,166		3	%

Cash flows used in operating activities during the nine (9) months ended March 31, 2010 were equal to $480,514, representing a decrease of $9,853,629 or 105%, as compared with cash flows provided by operating activities of $9,373,115 during the nine (9) months ended March 31, 2009. The major decrease in cash flows from operating activities was primarily due to the prepayment for electronic products that will be inventoried upon receipt.

Cash flows used in investing activities was $724,082 during the nine (9) months ended March 31, 2010, which represented a decrease of $12,764,544 or 94%, as compared to $13,488,626 at March 31, 2009. This decrease is mainly attributable to our acquisition of GHIA during the nine (9) months ended March 31, 2009.

For the nine (9) months ended March 31, 2010, cash provided by financing activities was $426,796, which represented an increase of $455,398, or 1,592%, as compared with cash flows used in financing activities of $28,602 during the nine (9) months ended March 31, 2009. This amount represented an advance from a director to the Company for operating expenses of the Company.

Liquidity

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

Taxation

Of the $2,719,834 of business tax payable at March 31, 2010, $1,495,788 was due on April 30, 2009 and $1,224,046 was due on April 30, 2010. The Company has been negotiating with the tax authorities to defer the payment of business tax which was due on April 30, 2009 and April 30, 2010 without interest or penalties, and the Company is awaiting the final ruling from the tax authorities.

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

Commitments

As of March 31, 2010, the Company had outstanding commitments equal to $43,885 (Rmb300,000) with respect to the purchase of electronic products of $20,479,514 (Rmb140,000,000) due within one year and the details are stated in the “Material Commitments” subsection above.

If the Company is unable to fulfill its contractual commitment to purchase electronic products, this would cause a loss on prepayments made.

On Januray 8, 2010, Mr. Zhengyu Wang, a significant shareholder, entered into a loan agreement with Argyll Investments, LLC, and pledged 2,000,000 common stock of the Company under his name to secure a personal loan of $554,400 at interest rate of 4% per annum. The loan is repayable with 36 months.

On February 16, 2010, Mr. Zhengyu Wang, a significant shareholder, entered into a loan agreement with Argyll Investments, LLC, and pledged 2,000,000 common stock of the Company under his name to secure a personal loan of $705,600 at interest rate of 4% per annum. The loan is repayable with 36 months.

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

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

As of March 31, 2010, all of our capital is equity capital and we have not made any debt financing with any bank or other financial institutions. We believe our capital is sufficient to satisfy our cash requirements for the next twelve (12) months. As for our business development, the Company may consider raising additional funds for the following future business plans if conditions are suitable:

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

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

·	To expand our online insurance sales supermarket; and

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

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

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, principally our chief financial officer and chief executive officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report in order to determine whether the information required to be disclosed by us in our reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding disclosure. Based on that evaluation, our management concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective. We have identified as a material weakness in that there is a lack of sufficient accounting staff at the Company which results in a lack of effective controls which are necessary for a good system of internal control over financial reporting.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) for the Company. Although there were no changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, management had assessed its controls for its financial reporting as of June 30, 2009 and had identified the following material weaknesses, which continue to exist as of March 31, 2010:

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

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

Management’s Plan for Remediation of Material Weaknesses

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

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

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

We will begin implementing additional oversight and review of certain accounts and postings, and also financial reporting on or before June 30, 2010.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In the normal course of business, we are named as a defendant in lawsuits in which claims are asserted against us. In our opinion, the liabilities, if any, which may ultimately result from such lawsuits, are not expected to have a material adverse effect on our financial position, results of operations or cash flows. As of September 30, 2009, there was no such outstanding litigation.

ITEM 1A. RISK FACTORS.

As a small reporting company, we are not required to provide information required by this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the quarter ended March 31, 2010, the Company had no unregistered sales of equity securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 5. OTHER INFORMATION.

N/A.

ITEM 6. EXHIBITS

(a) Exhibits:

EXHIBIT NO.	DESCRIPTION	LOCATION
3.1	Certificate of Incorporation (as amended) of Dexterity Surgical, Inc.	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

3.2	Certificate of Amendment to the Company’s Certificate of Incorporation, dated February 26, 2008	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008

3.3	Amended and Restated Bylaws of the Company	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008

3.4	Certificate of Incorporation of Rise and Grow Limited	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

3.5	Certificate of Incorporation of ZBDT (Beijing) Technology Co., Ltd.	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

3.6	Company Charter of ZBDT (Beijing) Technology Co., Ltd.	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.1	Share Exchange Agreement, dated December 17, 2007, by and among Dexterity Surgical, Inc., Rise and Grow Limited and Newise Century Inc.	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.2	Exclusive Technology Consultation Service Agreement, dated September 28, 2007, by and between ZBDT and ZYTX	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.3	Exclusive Interest Purchase Agreement, dated September 28, 2007, by and between ZBDT and Zhenyu Wang	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.4	Exclusive Interest Purchase Agreement, dated September 28, 2007, by and between ZBDT and Junjun Xu	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.5	Equity Interest Pledge Agreement, dated September 28, 2007, by and between ZBDT and Zhenyu Wang	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.6	Equity Interest Pledge Agreement, dated September 28, 2007, by and between ZBDT and Junjun Xu	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.7	Power of Attorney, dated September 28, 2007, executed by Zhenyu Wang in favor of ZBDT	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.8	Power of Attorney, dated September 28, 2007, executed by Junjun Xu in favor of ZBDT	Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007

10.9	Share Purchase Agreement, effective as of October 28, 2008, by and among Rise and Grow Limited, ZYTX Technology Co., Ltd., Bian Yong and Li Zhong	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on November 3, 2008

14.1	Code of Ethics	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on September 29, 2008

16.1	Auditor’s Letter	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on September 29, 2008

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

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

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

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

99.1	Audit Committee Charter of the Company	Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on February 27, 2008

99.2	Compensation Committee Charter of the Company	Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on February 27, 2008

99.3	Corporate Governance and Nominating Committee Charter of the Company	Incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K as filed with the SEC on February 27, 2008

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 27, 2010	By:	/s/ Junjun Xu
	Name:	Junjun Xu
	Its:	Chief Executive Officer


Date: May 27, 2010	By:	/s/Mingfei Yang
	Name:	Mingfei Yang
	Its:	Chief Financial Officer and
		Principal Accounting Officer