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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

11/14/07  Cgen Digital Media Co Ltd         F-1                   48:1010                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: F-1         Registration Statement of a Foreign Private Issuer  HTML  2,158K 
 2: EX-3.1      Amended and Restated Memorandum and Articles of     HTML    332K 
                          Association of the Registrant                          
 3: EX-3.2      Amended and Restated Memorandum and Articles of     HTML    160K 
                          Association of the Registrant                          
 4: EX-4.2      Registrants Specimen Certificate for Ordinary       HTML     13K 
                          Shares                                                 
 5: EX-4.4      Share Purchase Agreement, Dated September 1, 2005   HTML    205K 
 6: EX-4.5      Share Purchase Agreement, Dated January 16, 2006    HTML    271K 
 7: EX-4.6      Share Purchase Agreement, Dated As of February 10,  HTML    261K 
                          2006                                                   
 8: EX-4.7      Share Restriction Agreement Dated As of February    HTML     55K 
                          10, 2006                                               
 9: EX-4.8      Share Repurchase Agreement Dated February 10        HTML     19K 
10: EX-4.9      Warrant Dated As of Novumber 1, 2006                HTML    275K 
11: EX-4.10     Bridge Loan Convertible Promissory Notes Dated As   HTML    207K 
                          of November 1, 2006                                    
12: EX-4.11     Share Purchase Agreement, Dated As of December 5,   HTML    340K 
                          2006                                                   
13: EX-4.12     Shareholders Agreement, Dated As of December 7,     HTML    170K 
                          2006                                                   
14: EX-4.13     Registration Rights Agreement, Dated As of          HTML     87K 
                          December 7, 2006                                       
15: EX-4.14     Tax Indemnity Agreement Dated December 7, 2006      HTML     49K 
16: EX-4.15     Credit Agreement, Dated As of September 7, 2007     HTML    150K 
17: EX-4.16     Warrant Purchase Agreement, Dated As of September   HTML     34K 
                          11, 2007                                               
18: EX-4.17     Warrant Dated As of September 6, 2007               HTML     37K 
19: EX-4.18     Guarantee by Registrant in Favor of Medley          HTML     80K 
                          Opportunity Fund Ltd                                   
20: EX-4.19     Debenture, by Registrant in Favor of Medley         HTML    163K 
                          Opportunity Fund Ltd                                   
21: EX-4.20     Debenture, by Cgen Hong Kong in Favor of Medley     HTML    162K 
                          Opportunity Fund Ltd                                   
22: EX-4.21     Charge Over Bank Account, Dated As of September     HTML    123K 
                          14, 2007                                               
23: EX-4.22     Charge Over Bank Account, Dated As of September     HTML    122K 
                          14, 2007                                               
24: EX-4.23     Share Mortgage Agreement, Dated As of September     HTML    201K 
                          14, 2007                                               
25: EX-4.24     Subordination Deed, Dated As of September 14, 2007  HTML    127K 
26: EX-5.1      Form of Opinion of Conyers Dill & Pearman           HTML     20K 
27: EX-8.1      Form of Opinion of Latham & Watkins Llp             HTML     30K 
28: EX-10.1     English Translation of 2006 Employee Share          HTML     57K 
                          Incentive Plan                                         
29: EX-10.2     English Translation of 2007 Employee Share          HTML     57K 
                          Incentive Plan                                         
30: EX-10.3     Form of Indemnification Agreement With the          HTML     51K 
                          Registrant's Directors                                 
31: EX-10.4     Form of Employment Agreement With the Registrant'   HTML     64K 
                          Executive Officers                                     
32: EX-10.5     English Translation of Exclusive Technology         HTML     30K 
                          Consulting and Service Agreement                       
33: EX-10.6     English Translation of Call Option Agreement Dated  HTML     41K 
                          As of January 16, 2006                                 
34: EX-10.7     English Translation of Supplementary Agreement      HTML     22K 
                          Dated As of July 25, 2007                              
35: EX-10.8     English Translation of Equity Pledge                HTML     40K 
                          Agreement,Dated As of January 16, 2006                 
36: EX-10.9     English Translation of Power of Attorney            HTML     22K 
37: EX-10.10    English Translation of Strategic Cooperation        HTML     45K 
                          Contract Dated December 12, 2006                       
38: EX-10.11    Amended and Restated Video Information System       HTML     75K 
                          Cooperation Contract                                   
39: EX-10.12    English Translation of In-Store Network Operating   HTML     90K 
                          Agreement                                              
40: EX-21.1     Subsidiaries of the Registrant                      HTML     14K 
41: EX-23.1     Consent of Ernst & Young Hua Ming                   HTML     14K 
42: EX-23.4     Consent of Grandall Legal Group (Shanghai)          HTML     16K 
43: EX-23.5     Consent of Censere Group                            HTML     16K 
44: EX-23.6     Consent of Ted Lee                                  HTML     15K 
45: EX-23.7     Form of Consent of Ctr Market Research              HTML     15K 
46: EX-23.8     Form of Consent of Sinomonitor                      HTML     15K 
47: EX-99.1     Code of Business Conduct and Ethics of the          HTML     74K 
                          Registrant                                             
48: EX-99.2     Form of Opinion of Grandall Legal Group (Shanghai)  HTML     25K 

Table of Contents

As filed with the Securities and Exchange Commission on November 14, 2007

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CGEN Digital Media Company Limited

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Suite 3213-3214, Tower B Shanghai City Center

No. 100 Zunyi Road

Shanghai 200051

People’s Republic of China

(86-21) 6237 2250

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

CT Corporation System

111 Eighth Avenue

New York, New York 10011

(212) 664-1666

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨                     

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨                     

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨                     

CALCULATION OF REGISTRATION FEE

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated             , 2007

CGEN is offering              ADSs, and the selling shareholders identified in this prospectus are offering an additional              ADSs. Each ADS represents              ordinary share[s], par value $0.000001 per share, in CGEN.

We expect the public offering price to be between $             and $             per ADS. This is CGEN’s initial public offering and no public market exists for the ADSs or our ordinary shares. After pricing of this offering, we expect that the ADSs will trade on the Nasdaq Global Market under the symbol “ADTV.”

Investing in the ADSs and our ordinary shares involves risks that are described in the “ Risk Factors” section beginning on page 11 of this prospectus.

The underwriters may purchase up to an additional              ADSs from CGEN and up to an additional              ADSs from the selling shareholders at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The ADSs will be ready for delivery on or about             , 2007.

The date of this prospectus is             , 2007

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You should rely only on the information contained in this prospectus. Neither we nor the underwriters have authorized anyone, including the selling shareholders, to provide you with information that is different from that contained in this prospectus. This prospectus may only be used where it is legal to offer and sell these securities. The information in this prospectus is only accurate as of the date of this prospectus.

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 PROSPECTUS SUMMARY

You should read the following summary together with the entire prospectus, including the more detailed information regarding us, the ADSs being sold in this offering, and our financial statements and related notes appearing elsewhere in this prospectus. Unless the context otherwise requires, in this prospectus, “we,” “us,” “our company,” “our” and “CGEN” refer to CGEN Digital Media Company Limited, and its subsidiaries, and in the context of describing our operations and consolidated financial information, also include Shanghai CGEN Digital Media Network Co., Ltd., or CGEN Network; “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this prospectus only, Taiwan, Hong Kong and Macau; “ADSs” refers to American depositary shares, each of which represents              ordinary shares in our company; “RMB” or “Renminbi” refers to the legal currency of China; and “$” or “U.S. dollars” refers to the legal currency of the United States. Because of PRC restrictions on foreign ownership of advertising businesses, we operate our business in China through CGEN Network. Although we do not directly or indirectly own any equity interests in CGEN Network, we control CGEN Network through contractual arrangements and consolidate its financial results. See “Corporate Structure” for further information on these contractual arrangements.

CGEN Digital Media Company Limited

Overview

We operate one of the largest in-store television advertising networks in China, measured by our market share of large retail chain stores that carry television advertising networks. Our network of digital flat-panel displays is deployed inside large-format retail chain stores characterized by high shopper traffic and sales revenues, such as hypermarkets and home-improvement superstores. Hypermarkets are large retail facilities that combine the product offerings of department stores and supermarkets, such as groceries, personal care products, clothing and consumer electronics. We have successfully captured a substantial share of our target retail stores in major Chinese cities: hypermarkets that generate minimum annual revenues of RMB200 million per store and attract a minimum daily average shopper traffic of 15,000. Our network is carried in 67% of these hypermarkets in 24 major cities that have installed in-store advertising digital displays, according to a survey commissioned by us and conducted in March 2006 by Sinomonitor, an independent market research company.

As of October 15, 2007, our network was carried in 534 stores across 65 cities in China, with an estimated target audience of approximately 80 million shoppers visiting those stores each week, based on data provided by our retailers. These 65 cities are among China’s most affluent, measured by per capita GDP and disposable income in 2006. These cities include Guangzhou, Shanghai, Beijing and Nanjing, which, according to Nielsen Media Research, together accounted for 24% of all advertising expenditures in China in 2006. In a report commissioned by us, CTR Market Research, an independent research company, estimated that our advertising reach, or the percentage of shoppers in the stores who actually viewed our network, was approximately 70% in 2006. As of October 15, 2007, we had contractual rights to extend our network coverage to approximately 540 additional stores.

Stores that carry our network under multi-year contractual arrangements are part of leading national hypermarket chains, such as Carrefour, Century Mart and Wal-Mart, leading regional hypermarket chains such as Wu-Mart, and the leading home improvement superstore chain in China, B&Q Stores. Carrefour, Century Mart, Wu-Mart and B&Q carried our network exclusively. These four retail chains together accounted for 63.4% and 79.0% of our total rental fees for 2005 and 2006, respectively. In September 2007, we entered into a three-year contract to deploy our network in 100 Wal-Mart stores in China.

We sell airtime on our network to advertisers that want to target a captive audience of consumers in the retail stores while they are shopping and making purchase decisions, or at the point of purchase. As of October 15, 2007, more than 260 advertisers had purchased airtime on our network. Our top 25 advertisers by revenue include: global consumer brands, such as Nestle, Kraft, Crest, Johnson & Johnson, Maybeline and Asahi Beer;

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Chinese consumer brands, such as Joincare, Longligi, Huangjindadang, Taier and Wuliangye; fast-food chains such as KFC; and a credit card association, Visa. A majority of our contracts are entered into with the designated advertising agencies of these brands, including leading advertising agencies such as WPP Group, Omnicom Group and Publicis.

Our network is different from those of our main competitors who operate flat-panel digital advertising displays that are not networked through broadband technology and who update advertising content in each flat-panel display by manually changing pre-recorded DVDs or other storage media. Our network consists of a central management server system linked by broadband connections to computer servers at each retail store that carries our network. These computer servers receive content from our central management servers and play content locally on one or more flat-panel displays. Using virtual private network, or VPN, technology, we can remotely and cost-effectively distribute, air and update thousands of individual media files on a regular basis and manage displays on our network by store and by channel in order to reach our advertisers’ desired audience.

We derive most of our net revenues from the sale of advertising airtime. We also earn a portion of our net revenues from organizing in-store promotional events for retailers and advertisers. We have grown significantly since our inception in September 2003. In 2005, 2006 and the six months ended June 30, 2007, we generated net revenues of RMB21.7 million, RMB158.3 million ($20.8 million) and RMB142.0 million ($18.7 million), respectively. Our net loss for 2005 and 2006 were RMB37.2 million and RMB4.7 million ($0.6 million), respectively, and our net income for the six months ended June 30, 2007 was RMB54.5 million ($7.2 million).

Our Business Model

We believe our business model distinguishes us from traditional advertising media companies because of our ability to offer a value proposition to all three constituents of the advertising industry — advertisers, retailers and consumers.

Advertisers.    Since our inception, we have focused on building a network that covers quality, large-format retail chain stores operating in China’s most affluent cities, where retail consumption is the highest. We enable advertisers to deliver high-impact, relevant and targeted messages to consumers in the stores where their products are sold. Because our viewers are actively engaged in shopping during the airing of the advertisements, we believe they are more receptive to, and influenced by, the advertisements on our network than advertising not shown at the point of purchase.

Retailers.    We typically pay retailers rent for carrying our network in their stores. We believe that retailers also benefit from incremental product sales as a result of targeted advertising of products sold in their stores. Our network provides retailers a multimedia platform for communicating product promotions or other store-specific information to their shoppers, and together with the differentiated shopping experience our network offers, helps enhance the branding of our retailers. Our network also offers retailers an effective platform for collaborating with merchandizers on marketing campaigns and strengthening their relationships.

Consumers.    Our network entertains shoppers and informs them about new products and product promotions in that particular store. We believe the infotainment we air on displays at check-out lines also reduces perceived wait-time. We also believe our network provides a differentiated shopping experience for customers in stores that carry our network.

Our Market Opportunity

We compete for advertising expenditure in China, which is the largest advertising market in Asia excluding Japan, and one of the largest and fastest growing in the world. According to PricewaterhouseCoopers LLP, China’s total advertising expenditure was approximately $11.2 billion in 2006 and is expected to grow at a

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compound annual growth rate, or CAGR, of 15% from 2006 to 2011. Advertising expenditure in China is highly concentrated in urban areas. According to Nielsen Media Research, the top ten PRC cities with the highest advertising expenditures accounted for 52% of China’s total advertising spending in 2006.

Retail sales in China’s urban areas have been increasing at a higher rate than China’s GDP. The retail sector in these urban areas is increasingly dominated by hypermarkets. Hypermarkets accounted for 12% of total grocery retail sales in China in 2006, according to Euromonitor. Euromonitor estimates the number of hypermarkets in China will increase at a CAGR of 12% from 2007 to 2011, and sales at hypermarkets will increase at a CAGR of 8% over the same period. As consumers tend to spend more time per visit in hypermarkets than at smaller retail locations carrying similar merchandise, hypermarket consumers are a desirable and captive audience for advertisers. We focus on deploying our network within hypermarkets and other large-format retail stores to capture this market opportunity.

We offer advertisers an advertising medium similar to at-home television in that it conveys advertising through video and audio to a substantial audience of consumers. However, unlike traditional at-home television, our network is carried exclusively within retail stores and our programming typically consists of shorter segments and advertisements customized for the retail environment.

We believe our network offers an alternative and effective way to reach consumers and will be increasingly used by advertisers to target specific consumer groups at the point of purchase with advertising messages that seek to increase shoppers’ awareness of advertised products.

Our Strengths

We believe our competitive strengths are as follows:

Our Strategy

Our goal is to build the largest in-store television advertising network in China, connecting advertisers with their target shoppers, generating increased sales for retailers and enhancing the shopping experience of customers. We intend to achieve this goal by pursuing the following elements of our strategy:

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Our Challenges

We believe that the primary challenges we face are:

In addition, there are a number of other risks and uncertainties that may affect our business, results of operations and growth. You should carefully consider all of the risks discussed in “Risk Factors” before investing in our ADSs.

Our Corporate History and Structure

We commenced our business in September 2003 through Shanghai CGEN Digital Media Network Co., Ltd., or CGEN Network, a PRC company. On February 24, 2005, we were incorporated in the Cayman Islands. On August 11, 2005, we acquired a Hong Kong company, CGEN Media Technology Co., Ltd., or CGEN Hong Kong, which became our intermediate holding company. On August 29, 2005, we established a wholly owned subsidiary in China, CGEN Digital Technology (Shanghai) Co., Ltd., or CGEN Shanghai, through CGEN Hong Kong. Following a series of transactions, Yising Chan became our sole ultimate shareholder in August 2005. In 2005 and 2006, we issued series A, series B and series C preferred shares to certain investors and received total proceeds of $5.0 million, $13.8 million and $20.0 million, respectively. Investors in our series A, B and C private placements include Shanghai Industrial Holdings, TDF, Redpoint, JAFCO, Sumitomo, Hotung and Merrill Lynch.

PRC laws and regulations restrict foreign ownership of advertising businesses. To comply with PRC law, CGEN Network is currently owned by five PRC citizens, namely Weiming Gao, who is the wife of Yising Chan, Guanyong Tian, Xiaofeng Cao, Fang Yao and Haiguang Zhu. CGEN Network holds the licenses and permits necessary to operate our businesses and provide our advertising services in China. Our relationship with CGEN Network and its shareholders is governed by a series of contractual arrangements that allow us to effectively control CGEN Network. Accordingly, we have consolidated CGEN Network’s historical financial results in our financial statements as a variable interest entity under generally accepted accounting principles in the United States, or GAAP.

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Set forth below is a diagram depicting our corporate structure as of the date of this prospectus.

See “Corporate Structure” and “Related Party Transactions” for further information on our contractual arrangements with CGEN Network and its shareholders.

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Corporate Information

Our principal executive offices are located at Suite 3213-3214, Tower B Shanghai City Center, 100 Zunyi Road, Shanghai 200051, People’s Republic of China. Our telephone number at this address is +(86 21) 6237-2250. Our registered office in the Cayman Islands is located at Scotia Centre, 4^th Floor, P.O. Box 2804, George Town, Grand Cayman, Cayman Islands. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011.

Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our principal website is www.cgenmedia.cn. The information contained on our website is not a part of this prospectus.

Recent Developments

The following is an estimate of our selected unaudited consolidated financial data for the three months ended September 30, 2007. Our financial statements for the three months ended September 30, 2007 have not been audited or reviewed as of the date of this prospectus. As a result, our unaudited consolidated financial data for the three months ended September 30, 2007 may be different from the estimated selected financial data set forth below. For additional information regarding the various risks and uncertainties inherent in estimates of this type, see “Forward-looking Statements.” Our results for the three months ended September 30, 2007 may not be indicative of our results for the full year or future quarterly periods. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus for information regarding trends and other factors that may influence our results of operations.

We estimate that our total revenues for the three months ended September 30, 2007 will range from RMB74 million ($9.9 million) to RMB85 million ($11.3 million), compared to RMB76.6 million in the three months ended June 30, 2007. Compared to the three months ended June 30, 2007, our selling prices remained relatively stable in the three months ended September 30, 2007 and we expanded our operations to 531 stores as of September 30, 2007 from 522 stores as of June 30, 2007.

We estimate that our net income for the three months ended September 30, 2007 will range from

RMB15 million ($2.0 million) to RMB22 million ($2.9 million). This represents a decrease of between 35.3% and 55.9% from RMB34 million in the three months ended June 30, 2007. The higher net income in the three months ended June 30, 2007 was partially attributable to a net bad debt reversal of RMB8.1 million that did not recur in the three months ended September 30, 2007. The decrease in net income for the three months ended September 30, 2007 corresponded to an increase in cost of revenues for the same period, which was primarily attributable to increased rental fees under a renewed rental contract with Carrefour due to increased competition for retail locations. RMB9 million ($1.2 million) to RMB11 million ($1.4 million) of the decrease in net income for the three months ended September 30, 2007 was attributable to increased income tax expenses for the period as a result of the recognition of unrecognized tax benefits related to CGEN Network’s unbilled receivables and CGEN Shanghai’s unbilled technical and consulting service fees to CGEN Network, which was partially offset by deferred tax related income tax benefits.

In addition to renewing our Carrefour contract, we entered into a three-year contract in September 2007 to deploy our network in 100 Wal-Mart stores in China. We will begin to incur significant rental fees under our Wal-Mart contract in the fourth quarter of 2007, while we do not expect to generate revenues from these stores during the same quarter. We estimate that the increase in rental fees will result in an increase of over 50% in cost of revenues, and a corresponding decrease in net operating results, for each of the quarters ended December 31, 2007 and March 31, 2008, compared, respectively, to the quarter ended June 30, 2007. We expect the negative impact on our net operating results from rental fees to continue until the second quarter of 2008 when we expect to complete the deployment of our network in the Wal-Mart stores and begin generating revenues from these stores.

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The Offering

American depositary shares offered:

We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.

Unless otherwise indicated, all information in this prospectus:

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Summary Consolidated Financial and Operating Data

We have derived the following summary consolidated statements of operations and other consolidated financial data for the years ended December 31, 2005 and 2006 and the consolidated balance sheet data as of December 31, 2006 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the following summary consolidated statements of income, operations and other consolidated financial data for the year ended December 31, 2004 from our unaudited consolidated financial statements not included in this prospectus. We have derived the following summary consolidated statements of operations and other consolidated financial data for the six months ended June 30, 2006 and June 30, 2007 and the consolidated balance sheet data as of June 30, 2007 from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared unaudited consolidated financial information on the same basis as our audited consolidated financial statements. The unaudited consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our financial position and operation results for the quarters presented. You should read this summary consolidated financial data together with consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our consolidated financial statements are prepared in accordance with GAAP, and reflect our current corporate structure as if it had been in existence throughout the relevant periods.

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 RISK FACTORS

An investment in our ADSs involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below and our consolidated financial statements and related notes, before making an investment in our ADSs. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Because our industry is relatively new, advertisers may not accept, or may lose interest in, in-store television as a necessary component of their overall advertising strategy and budgets, and our business could be harmed as a result.

The market for in-store television advertising in China is relatively new and its potential is uncertain. We compete for advertising expenditure with many more established advertising media. Our success depends on advertisers’ acceptance of our network and their continuing interest in in-store television as a component of their advertising strategies. However, advertisers may elect not to use our services if they believe that consumers are not receptive to our network or that our network does not provide sufficient value as an effective advertising medium. Likewise, if consumers find some element of our network, such as the audio feature, to be disruptive or intrusive, retailers may decide not to place our flat-panel displays in their stores. In that event, advertisers may view our network as a less attractive advertising medium and decide to reduce their spending on our network. If a substantial number of advertisers lose interest in advertising on our network for these or other reasons, we will be unable to generate sufficient revenues and cash flow to operate our business, and our advertising revenue, liquidity and results of operations could be materially and adversely affected.

We have a limited operating history, which may make it difficult for you to evaluate our business and prospects.

We began our business operations in 2003. Accordingly, we have a very limited operating history for our current operations upon which you can evaluate the viability and sustainability of our business and its acceptance by advertisers and consumers. It is also difficult to evaluate the viability of our use of audiovisual advertising displays in retail stores as a business model because we do not have sufficient experience to address the risks frequently encountered by early stage companies using new forms of advertising media and entering new and rapidly evolving markets. These circumstances may make it difficult for you to evaluate our business and prospects.

We have a history of losses, have only recently become profitable, and may not sustain or increase profitability in the future.

We first became profitable in the third quarter of 2006. We have achieved profitability in each subsequent quarter. However, as of June 30, 2007, we had an accumulated deficit of approximately RMB127.0 million ($16.7 million), primarily due to operating losses in previous years. We may not sustain or increase the profitability of our business on a quarterly or annual basis in the future. Our ability to remain profitable will be contingent, in part, on the amount of our operating expenses, which we plan to increase as we expand our business. If we fail to increase our revenues at historical or anticipated rates or our operating expenses increase without a commensurate increase in our revenues, our business, results of operations and financial condition would be adversely affected and the market price of our ADSs would likely decline.

We face significant competition, and if we do not compete successfully against new and existing competitors, we may lose our market share or be forced to lower our prices in order to compete successfully, which would reduce our operating margins and profitability.

Our primary competitors are other advertising companies that install digital displays within retail stores in China, such as Focus Media, which is listed on the Nasdaq Global Market and has substantially more financial

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resources than we do. We compete for advertising clients primarily on the basis of network coverage, location, price, the range of services that we offer and brand name. We also face competition from other in-store advertising network operators for access to the most desirable retail locations in economically developed cities in China. Increased competition for retail locations will lead to increased retental expenses. Sec “Recent Developments”. Further, individual retailers may also decide to install and operate their own displays on a small scale with off-the-shelf software and equipment. We also compete for overall advertising spending with other advertising media, such as the Internet, billboards, newspapers, television, magazines, radio and advertising carried on public transportation.

In the future, we may also face competition from new entrants into the in-store advertising sector. Increased competition could force us to lower our prices in order to compete with these new entrants. Lowering our prices would reduce our operating margins and profitability and result in a loss of market share. Some of our existing and potential competitors may have competitive advantages, such as significantly greater financial, marketing or other resources, and may be able to mimic or adopt our business model. Moreover, increased competition will provide advertisers with a wider range of media and advertising service alternatives, which could lead to lower prices and decreased revenues, gross margins and profits. We cannot assure you that we will be able to successfully compete against new or existing competitors.

Failure to maintain relationships with existing retailers or establish relationships with new retailers would harm our business and prospects.

Our ability to generate advertising revenues depends significantly upon our ongoing relationships with existing retailers. We maintain significant retailer relationships with leading retailers, including Carrefour, Century Mart, Lotus Supercenter, Wu-mart and B&Q. Our rental fees for the five largest retailers accounted for 68.4%, 82.9% and 81.3% of our total rental fees for 2005, 2006 and the six months ended June 30, 2007, respectively. We cannot assure you that these retailers will choose to renew their agreements with us or enter into agreements with us to carry our network in their newly added stores. Our relationships with these retailers may deteriorate and they may breach or terminate their agreements with us. We may incur significant legal costs if we seek to enforce our rights under these agreements in courts. If a significant number of our existing agreements with retailers are terminated or not renewed, or if our network does not expand with the expansion of these retailers, advertisers may find advertising on our network less attractive and may not desire to purchase advertising time slots on our network, which would cause our revenues to decline and our business and prospects to deteriorate. As part of our business strategy, we intend to expand our retail network by adding other leading retailers. The loss of one or more existing retailer relationships may also impair our ability to develop new retail relationships.

The process of developing a relationship with a retailer and then installing our network in that retailer’s stores can be time-consuming and requires us to expend a substantial amount of resources, from which we may never recognize the anticipated benefits.

Our success depends in large part on our ability to establish relationships with large retailers that have a meaningful number of stores attracting significant shopper traffic. The process of establishing these relationships can be lengthy because in-store television advertising is a relatively new form of media and we often must inform retailers about the benefits of our network to them and their customers. Potential retailer partners also typically engage in extensive internal reviews and analyses, including experiments with pilot programs, before agreeing to carry our network in their stores. We may expend a substantial amount of resources during this process, and a retailer may decide not to proceed with deployment. If retailers do not accept our network as an effective medium for their stores, we would be unable to grow our business or our revenues.

Once a retailer has agreed to carry our network, we must invest a substantial amount of time and resources in installing digital displays and other equipment in the stores of the retailer prior to the receipt of any revenues from such efforts. We may experience increased distribution and operations costs during or after deployment. We may also experience delays in generating revenues, if any, due to deployment delays or difficulties in selling advertising airtime in these stores. In addition, we may be unable to generate sufficient revenues, if any, from selling advertising time on our network in these stores to offset the cost of securing the retailer relationship and deploying and operating our network in these stores.

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If we are unable to add or retain stores that will carry our network on commercially acceptable terms, we could have difficulties in maintaining or expanding our network, and our operating margin and profitability could decline.

Our rental fees to retailers under our display placement agreements and maintenance costs comprise a significant portion of our cost of revenues. In the future, we may need to increase our rental costs to obtain new and desirable retail locations, to maintain existing locations, and to secure exclusivity and renewal terms. In addition, retailers may demand other compensation arrangements in addition to rental fees, such as revenue sharing. If we are unable to pay increased rental costs or pass increased costs of revenues on to our advertising clients through rate increases, we will be forced to absorb these increased costs which will reduce our operating margin and profitability. Furthermore, we may not be able to maintain or expand our network, which is essential to our profitability.

If the supply of desirable retail locations diminishes or stagnates, we may be unable to continue to expand our network, which could make our network less attractive to advertisers and our revenues may suffer as a result.

We believe advertisers place a premium on having their advertisements aired in the most desirable retail locations, including locations frequented by more affluent consumer groups in China. As some cities in China have undergone development and expansion for several decades while others are still at an early stage of development, the supply of desirable retail locations varies considerably from city to city. In more economically developed cities, it may be difficult to secure more desirable locations for our network since many of them have already been occupied either by us or by our competitors. In less developed cities, the supply of desirable locations may be small and the pace of economic development and construction levels may not provide a steadily increasing supply of desirable commercial locations. As a result, we may be unable to expand our network into retail locations that advertisers find desirable and we may be unable to expand our client base or increase the rates we charge for time slots because the value of our network to advertisers may decrease.

The retail industry is highly competitive, and if any of our retailers suffers a business slowdown or failure, or is acquired by others, our revenues could decline.

The retail industry in China is highly competitive and may experience substantial consolidation. Since our ability to generate revenues from advertising sales and services depends upon our ongoing relationships with a limited number of retailers, any substantial weakening or failure of the business of one or more of our major retailers, or the consolidation of one or more of our major retailers with a third party, could cause our revenues to decline, damaging our business and prospects.

We plan to make significant investments in network equipment and the installation and support of our network within our retailers’ stores. We intend to pursue opportunities to invest in new retailer relationships. The weakening, failure or acquisition of any of our retailers in the future could result in a loss of our investment and/or a negative return on our investment.

We may not realize the anticipated benefits of our partnerships, acquisitions or investments and our growth and results of operations may suffer as a result.

As part of our business strategy, we have entered into a strategic partnership with a member of the Shanghai Media Group to license media content from them for use in our programming. See “Business—Our Advertising Solutions—Programming.” We may acquire or invest in technologies, products and businesses that we believe could complement or expand our business, enhance our technical capabilities or offer growth opportunities. We may be unable to identify suitable acquisition candidates in the future or make acquisitions on commercially reasonable terms, or at all. In addition, we may spend significant management time and resources in analyzing and negotiating acquisitions or investments that are not consummated. Any future acquisitions and investments involve several risks, including:

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We may be unable to realize the anticipated benefits of our strategic partnerships or any future acquisitions or investments. If so, we might incur increased expenses without a corresponding increase in revenues and we might not obtain a satisfactory return on our investment and we may not be able to execute our growth strategy as a result.

We rely on computer software and hardware systems in managing our operations, the failure of which could result in a loss of retailers, advertisers and customers and decrease in revenues.

We are dependent upon our computer software and hardware systems in supporting our network and managing and monitoring our programs on the network. In addition, we rely on our computer hardware for the storage, delivery and transmission of the data on our network. Any system failure which causes interruptions to the input, retrieval and transmission of data or increases our service time could disrupt our normal network operations. In addition, computer hackers infecting our network, or the networks of the stores in which our network is integrated, with viruses could cause our network to become unavailable. Although we believe that our disaster recovery plan is adequate to handle the failure of our computer software and hardware systems, we cannot assure you that we will be able to effectively carry out this disaster recovery plan or that we would be able to restore our network operations fast enough to avoid a significant disruption to our business. Any failure in our computer software and/or hardware systems could decrease our revenues and harm our relationships with retailers, advertisers and consumers, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Delivery delays, shortages or quality deficiencies in our components could result in a disruption in the installation or operation of our network.

From time to time, we experience delays in configuring and maintaining the infrastructure of our network for several reasons, including component delivery delays, component shortages and component quality deficiencies, any of which may occur in the future. These delays or problems have in the past and could in the future result in installation delays, reduced revenues, strained relations with retailers and advertisers and loss of business.

Our failure to maintain and expand an effective sales and marketing team or other necessary personnel, or our failure to provide ongoing customer support could cause disruptions of our operations, restrict our sales efforts and our advertising revenues would suffer as a result.

We market our advertising services to advertisers and advertising agencies. As of October 15, 2007, we had 49 dedicated sales and marketing personnel and 48 installation and maintenance personnel. We use job placement agencies to recruit most of our non-executive personnel, many of whom have worked for us for only a short period of time. We also rely on regional distributors to sell airtime in new cities to which we have expanded our network. We depend on sales staff and distributors to market our service offerings to existing and potential clients and to cover a large number of clients in a wide variety of industries. We need to further increase the size of our sales and marketing staff and our distributorships as our business grows. If we are unable to hire, retain, integrate or motivate our current or new marketing personnel or distributors, we may have to limit our sales efforts and suffer a decline in our advertising revenue. In addition, our success depends on our ability to attract and retain senior management, engineering, sales, marketing and other key personnel. As the competition for these employees intensifies, we may be unable to attract and retain necessary key technical and managerial

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personnel to grow our business. The loss of one or more key employees could slow our programming, distribution and sales efforts. We may also incur increased operating expenses and be required to divert the attention of other senior executives to recruit replacements for key personnel.

Advertising is particularly sensitive to changes in economic conditions and advertising trends and a decrease in demand for advertising airtime may impair our ability to generate revenues.

Demand for our advertising airtime and the resulting advertising expenditure by our clients are particularly sensitive to changes in general economic conditions and advertising trends. Advertisers may reduce the money they spend to advertise on our network for a number of reasons, including:

A decrease in demand for advertising airtime in general and for our advertising services in particular would impair our ability to generate advertising revenues and our business, results of operations and financial condition could be materially and adversely affected.

We may be subject to fines and other penalties if our current billing practice is found to be not in compliance with the PRC tax laws by the PRC tax authorities.

As stipulated in the Provisional Rules of the PRC on Business Tax, a 5% business tax becomes payable by an enterprise when payment of a transaction is received or documented evidence of right to collect payment is obtained by such enterprise. We obtain such documented evidence when we issue a tax invoice, which also serves as a sales invoice, to our customers. The business tax must then be paid in cash within a short period of time to the relevant tax authority. We have managed our cash flows through managing the timing of the issuance of tax invoices, which has resulted in increases in unbilled receivables and delays of payment of business tax on these unbilled receivables. As of December 31, 2006 and June 30, 2007, our unbilled receivables amounted to RMB91.0 million ($12.0 million) and RMB153.9 million ($20.2 million), respectively. We intend to settle the unbilled receivables by the end of 2007. However, if our current billing practice is found to be not in compliance with the PRC tax laws by the PRC tax authorities, we may be subject to fines or penalties.

Our cash flow and results of operations would be negatively impacted if we continue to incur substantial bad debt expenses.

In the years ended December 31, 2005 and 2006, our bad debt expenses amounted to nil and RMB10.1 million ($1.3 million), respectively. Bad debt expenses increased substantially in 2006 principally as a result of financial difficulties experienced by three of our clients in 2006. We managed to collect from these clients, resulting in a net bad debt reversal of RMB8.1 million ($1.1 million) in the six months end June 30, 2007. The payment period for our accounts receivables is relatively long which we believe is partly a result of a industry practice and partly a result of our billing practice. The average number of days of receivables aging were 121 days for 2005, 134 days for 2006 and 149 days for the six months ended June 30, 2007 and we do not expect the days of receivables to significantly improve in the foreseeable future. As our business expands and the current industry payment and collection practice and our billing practice continue, we expect that we will continue to be exposed to the credit risk of our clients and may incur significant bad debt expenses in the near future. In addition, although we attempt to establish appropriate reserves for our receivables, those reserves may not be adequate to cover actual costs relating to bad debts. If we incur a significant increase in bad debt expenses, those expenses will have a direct negative impact on our cash flow and results of operations.

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Failure to manage our growth could strain our management, operational and other resources, which could harm our business and limit our growth potential.

We have been rapidly expanding, and plan to continue to rapidly expand, our operations. We must continue to expand our operations to meet the demand of advertisers for larger network coverage, and the demands of retailers for installing and configuring displays in our existing and future locations. This expansion has resulted, and will continue to result, in substantial demand on our management resources. It has also increased our need for a reliable supply of displays for our network, which are manufactured by third-party contractors according to our specifications. To manage our growth, we must develop and improve our existing administrative and operational systems and our financial and management controls, and further expand, train and manage our work force. We may incur substantial costs and expend substantial resources in connection with any such effort. We may not be able to manage our current or future operations effectively and efficiently or compete effectively. We cannot assure you that we will be able to efficiently or effectively manage the growth of our operations, recruit top talent and train our personnel. Any failure to efficiently manage our expansion may adversely affect our ability to efficiently run our business or limit our growth potential.

If we are unable to adapt to changing technology and the needs of retailers, advertisers and shoppers, we will not be able to compete effectively or to increase or maintain our revenues.

The market for in-store television networks requires us to continually identify trends and technology needs of advertisers, retailers and consumers, and to develop new features and enhancements for our network and the advertising that we offer to keep pace with these needs. Examples include the development of high-definition television programs and advanced audio technologies. We will likely incur substantial development and acquisition costs in order to keep pace with these changing needs, and we may not have the financial resources necessary to fund future innovations. Furthermore, we may not be successful in responding to these needs or to competitive advertising offerings. If we are unsuccessful in enhancing our network and our advertising packages and defining, developing and introducing new features on a timely and cost-effective basis, the demand for our network by advertisers may decrease, we may not be able to compete effectively and we may be unable to increase or maintain our revenues.

If we become subject to government actions and civil suits based on the content and services we provide through our network, we may have to expend significant resources to defend against them and our reputation and business may suffer.

PRC advertising laws and regulations require advertisers, advertising operators and advertising distributors, including businesses such as ours, to ensure that the content of the advertisements they prepare or distribute are fair and accurate and are in full compliance with applicable law. Violation of these laws or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In cases involving serious violations, the PRC government may revoke an offender’s license for advertising business operations.

As an operator of an advertising medium, we are obligated under PRC law to monitor the advertising content aired on our network for compliance with applicable law. Although the advertisements aired on our network generally have been previously aired over public television, we are required to separately and independently vet these advertisements for content compliance before airing them. In addition, for advertising content related to certain types of products and services, such as alcohol, cosmetics, pharmaceuticals and medical procedures, we are required to confirm that the advertisers have obtained requisite government approvals including the advertiser’s operating qualifications, proof of quality inspection of the advertised products, government pre-approval of the content of the advertisement and filings with the local authorities. Previously, we did not strictly abide by these requirements. We have remedied this noncompliance and have employed qualified advertising inspectors who are trained to review advertising content for compliance with relevant PRC laws and regulations, and we endeavor to comply with the legal requirements, including by requesting relevant documents

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from the advertisers. However, we cannot assure you that we will not be penalized for our past noncompliance or that each advertisement an advertising client or agency provides to us and that we include in our weekly advertising cycle is in compliance with relevant PRC advertising laws and regulations or that the supporting documentation and government approvals provided to us by our advertising clients in connection with certain advertising content are accurate and complete.

Moreover, civil claims may be filed against us for fraud, defamation, subversion, negligence, copyright or trademark infringement or other violations due to the nature and content of the information displayed on our network. If consumers find the content displayed on our network to be offensive, retailers may seek to hold us responsible for any consumer claims against them or may terminate their relationships with us.

In addition, if the security of our content management system is breached and unauthorized images, text or audio sounds are displayed on our network, viewers or the PRC government may find these images, text or audio sounds to be offensive, which may subject us to civil liability or government censure, as well as disparage our reputation. If our viewers do not believe our content is reliable and accurate, our business model may become less appealing to them and our advertising clients may be less willing to place advertisements on our network. Government censure, investigation or any other government action, or any civil suits against us could divert management time and resources and could have a material and adverse effect on our business, results of operations and financial condition.

We may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely against us, may materially disrupt our business.

We may be subject to claims of infringement upon patents, copyrights or other intellectual property rights held by third parties. Although we are not aware of any such claims, we may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If there is a successful claim of infringement against us, we may be required to pay substantial damages to the party claiming infringement, develop non-infringing technology or enter into royalty or license agreements that may not be available on acceptable terms, if at all. In addition, we may incur substantial expenses in defending against these third party claims, regardless of their merit.

We have limited insurance for our business and we could incur substantial costs if our business is disrupted due to natural disasters, litigation or other business interruptions.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products and do not, to our knowledge, offer business liability insurance. While business disruption insurance is available to a limited extent in China, we have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. As a result, except for property and liability insurance, we do not have any business interruption or litigation insurance coverage for our operations in China. Any business disruption or litigation may result in our incurring substantial costs and the diversion of resources.

We will incur increased costs as a public company.

As a public company, we will incur a significantly higher level of legal, accounting and other expenses than we do as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Global Market, has required changes in the corporate governance practices of public companies.

When we become a public company, we will establish additional board committees and will adopt and implement additional policies regarding internal controls over financial reporting and disclosure controls and procedures. In particular, compliance with Section 404 of the Sarbanes-Oxley Act, which requires public

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companies to include a report of management on the effectiveness of their internal control over financial reporting, will increase our costs. In addition, we will incur costs associated with public company reporting requirements, such as the requirements to file an annual report and other reports with the SEC.

We are currently evaluating and monitoring developments with respect to these rules. We expect these rules and regulations will increase our legal and financial compliance costs, but we cannot predict or estimate the additional costs or the timing of initially additional costs we may incur.

There are material weaknesses in our internal control over financial reporting that require remediation. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control and procedures. In the audit of our financial statements as of and for the years ended December 31, 2005 and 2006, our independent registered public accounting firm considered internal control over financial reporting as a basis for designing the audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm identified three material weaknesses in our internal control over financial reporting, as defined in Auditing Standard No. 2 of the Public Company Accounting Oversight Board. These material weaknesses related to (1) our ineffective control over revenue recognition, including (a) lack of signed contracts prior to commencement of services resulting in the absence of persuasive evidence that an arrangement existed to support recognition of revenue, (b) absence of robust, formalized, documented credit check procedures for accepting customers to assure reasonable collectibility prior to the recognition of revenue, (c) inadequate record keeping for delivery and acceptance of advertising and other services such as customer acknowledgement or history activity log to corroborate that we have duly rendered the services as contracted; (2) our inadequate control environment, principally as a result of lack of GAAP knowledge and oversight, causing errors in financial statements, including accounting for preferred shares, convertible note and warrants, income taxes, shareholder expenses, internally developed software costs, revenue sharing and contingent rentals; and (3) insufficient monitoring to prevent and detect misstatements in accounting for share-based compensation, accruals of sales commissions, assessment of allowance for doubtful accounts and purchase cutoff. We have begun the process to remediate these material weaknesses by adopting the following measures, among others:

We plan to hire more accounting staff and undertake other remedial measures to address the material weaknesses in time to meet the deadline for compliance with Section 404 of the Sarbanes-Oxley Act, which requires every public company to include in its annual report a management assessment of the effectiveness of the company’s internal control over financial reporting and the attestation by an independent registered public accounting firm to the effectiveness of the company’s internal controls over financial reporting. These requirements will first apply to our annual report on Form 20-F for the fiscal year ending on December 31, 2008. We may identify additional material weaknesses of control deficiencies as a result of the assessment process we will undertake to comply with Section 404.

An effective internal control over financial reporting is necessary for us to produce accurate and reliable financial reports and is important to help prevent fraud. If our management or our independent registered public

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accounting firm determines, as required by Section 404 of the Sarbanes-Oxley Act, that we do not have an effective internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, regardless whether or not such a determination results in a restatement of our financial statements. A loss of investor confidence in turn could harm our business and negatively impact the trading price of our ADSs.

Risks Related to Our Corporate Structure

If the PRC government determines that the contractual arrangements that establish the structure for operating our China business do not comply with applicable PRC laws and regulations, we could be subject to severe penalties.

Applicable PRC laws and regulations currently require any foreign entities that invest in the advertising services industry to have at least two years of direct operations in the advertising industry outside of China. We are a Cayman Islands corporation and a foreign legal person under Chinese laws. We have not directly operated an advertising business outside of China and thus cannot qualify for the requirement of minimum two years experience outside China under PRC regulations. Accordingly, our subsidiary, CGEN Shanghai, is currently ineligible to apply for the required business license for providing advertising services in China. We currently operate our advertising business through our contractual arrangements with our consolidated affiliated entity in China, CGEN Network. CGEN Network is currently owned by five PRC citizens, Weiming Gao, Guanyong Tian, Xiaofeng Cao, Fang Yao and Haiguang Zhu, and holds the requisite business license to provide advertising services in China. CGEN Network directly operates our advertising network, enters into display placement agreements and sells advertising time slots to our clients. We have been and are expected to continue to be dependent on CGEN Network and its future subsidiaries to operate our advertising business. We do not have any equity interest in CGEN Network but receive the economic benefits of it through various contractual arrangements and certain corporate governance and shareholder rights arrangements. In addition, we have entered into agreements with CGEN Network and each of the shareholders of CGEN Network which provide us with a substantial ability to control CGEN Network.

If we, CGEN Shanghai, CGEN Network or any future PRC subsidiary of ours are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities, including the State Administration for Industry and Commerce, or SAIC, which regulates advertising companies, would have broad discretion in dealing with such violations, including:

The imposition of any of these penalties could result in a material and adverse effect on our ability to conduct our business, and our financial condition and results of operations.

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We rely on contractual arrangements with CGEN Network and its shareholders for our China operations, which may not be as effective in providing operational control through ownership of a controlling equity interest.

We have relied and expect to continue to rely on contractual arrangements with CGEN Network and its shareholders to operate our business in China. For a description of these contractual arrangements, see “Corporate Structure—Contractual Arrangements with CGEN Network and Its Shareholders.” These contractual arrangements include an equity pledge agreement, under which the shareholders of CGEN Network pledged their equity interests in CGEN Network to CGEN Shanghai. Such pledge was duly created by recording the pledge on CGEN Network’s register of shareholders in accordance with the PRC Collateral Law, and is currently effective. However, according to the PRC Property Rights Law which became effective on October 1, 2007, such pledge shall be registered with the relevant administration for industry and commerce. We cannot assure you that the pledge on CGEN Network’s equity, though established before the effectiveness of the PRC Property Rights Law, will not be required to be registered with the relevant administration for industry and commerce. Since no registration procedures are currently available, CGEN Network may not be able to make a timely registration when required, in which case the effectiveness of such pledge may be affected. These contractual arrangements may not be as effective as ownership of a controlling equity interest would be in providing us with control over CGEN Network. If we had direct ownership of CGEN Network, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of CGEN Network, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, as a legal matter, if CGEN Network or any of its shareholders fails to perform its, his or her respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective. For example, if the shareholders of CGEN Network were to refuse to transfer their equity interests in CGEN Network to us or our designee when we exercise the call option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith towards us, then we may have to take legal action to compel them to perform their contractual obligations. In addition, we may not be able to renew these contracts with CGEN Network and/or its shareholders.

In addition, if CGEN Network or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If CGEN Network undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, our ability to generate revenue and the market price of your ADSs.

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our affiliated entity, our ability to conduct our business may be materially and negatively affected.

The beneficial owners of CGEN Network may have potential conflicts of interest with us and they may not act in our best interest.

The beneficial owners of CGEN Network also hold stock options in our company. Conflicts of interests between their dual roles as beneficial owners of both CGEN Network and our company may arise. We cannot assure you that when conflicts of interest arise, any or all of these individuals will act in the best interests of our company or that any conflict of interest will be resolved in our favor. In addition, these individuals may breach or cause CGEN Network to breach or refuse to renew the existing contractual arrangements that allow us to effectively control CGEN Network, and receive economic benefits from it. Other than relying on the duties of loyalty owed to us by the owners of CGEN Network who are also our directors and officers, the equity pledge agreement and the call option agreement with the owners of CGEN Network and the irrevocable powers of

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attorney they executed to appoint the individuals designated by us to be their attorney-in-fact, we currently do not have any measure or policy to address these potential conflicts of interest. See “Corporate Structure.” In the event of any disputes regarding the equity pledge agreement, the call option agreement and the powers of attorney, we would have to rely on legal remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. If we cannot resolve any conflicts of interest or disputes between us and the beneficial owners of CGEN Network, we would have to rely on legal proceedings, the outcome of which is uncertain and which could be disruptive to our business. Although the shareholders of CGEN Network have committed to transfer to us all dividends or other distributions from CGEN Network as well as any premium they receive from any disposal of CGEN Network’s equity, such commitments are revocable under PRC law before actual delivery of such distributions or premiums. If any of the shareholders of CGEN Network revokes such commitment and refuses to transfer to us such funds, we will not be able to enforce this commitment.

Contractual arrangements we have entered into among our subsidiary and CGEN Network may be subject to scrutiny by the PRC tax authorities, and a finding that we or CGEN Network owe additional taxes could substantially reduce our net income and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between our wholly owned subsidiary in China and CGEN Network do not represent an arm’s-length price and adjust CGEN Network’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by CGEN Network, which could in turn increase its tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on our affiliated entity for underpaid taxes. Our net income may be materially and adversely affected if our affiliated entity’s tax liabilities increase or if it is found to be subject to late payment fees or other penalties.

Our affiliated entity may have engaged in business activities without the necessary registration with local authorities. This could subject us to fines or other penalties, which could negatively impact our revenues or interfere with our ability to operate our business.

According to relevant PRC laws, a company that sets up a branch or site to conduct an advertising business in a location where it is not registered must register with the local branch of the State Administration for Industry and Commerce, or SAIC. CGEN Network currently has registered with the local branches of SAIC in Shanghai, Beijing and Guangzhou, where it has set up its headquarters and branch offices. As our business expands, CGEN Network is in the process of registering other branch offices with the relevant local branch of SAIC of the other cities, but we cannot assure you that we will be able to timely register with the local authorities in each of the cities where we operate and, as a result, we may be subject to penalties for failing to register. These penalties may include disgorgement of profits or revocation of CGEN Network’s business license, although we believe that, as a matter of practice, the authorities typically impose such an extreme penalty only after repeated warnings are ignored or where a violation is blatant and continuous. Because of the discretionary nature of regulatory enforcements in the PRC, we cannot assure you that CGEN Network will not be subject to these penalties as a result of violations of the requirement to register with SAIC or its local branches, or that these penalties would not substantially inhibit our ability to operate our business.

Risks Related to Doing Business in China

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

Substantially all of our business operations are conducted in China. Accordingly, our business, results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the

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past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. While some of these measures benefit the overall PRC economy, they may also have a negative effect on us. For example, our business, financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government has implemented a number of measures, such as raising bank reserves against deposit rates to place additional limitations on the ability of commercial banks to make loans and raise interest rates, in order to slow down specific segments of China’s economy that it believed to be overheating. These actions, as well as future actions and policies of the PRC government, could materially affect our liquidity and access to capital and our ability to operate our business.

Uncertainties with respect to the PRC legal system could limit legal protections available to us.

We conduct our business primarily through our subsidiary and affiliated entity in China. Our operations in China are governed by PRC laws and regulations. Our subsidiary is generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

Governmental control of currency conversion may reduce the available supply of foreign currency and inhibit us from paying dividends in foreign currencies to our shareholders including holders of our ADSs, thereby reducing the value of your ADSs.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our income is primarily derived from dividend payments from our PRC subsidiary. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary and to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs, thereby reducing the value of your ADSs.

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PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders or us to penalties and limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits to us, or otherwise adversely affect us.

SAFE issued a public notice in October 2005 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose company.” PRC residents that are shareholders and/or beneficial owners of offshore special purpose companies established before November 1, 2005 are required to register with the local SAFE branch before March 31, 2006. In addition, any PRC resident that is a shareholder of an offshore special purpose company is required to amend its SAFE registration with respect to that offshore special purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China or other material changes in share capital. In May 2007, SAFE issued relevant guidance to its local branches with respect to the operational process for SAFE registration, which standardized more specific and stringent supervision on the registration relating to the SAFE notice. We have requested our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the ambit of the SAFE notice and urge those who are PRC residents to register with the local SAFE branch as required under the SAFE notice. The failure of these shareholders and/or beneficial owners to timely amend their SAFE registrations pursuant to the SAFE notice or the failure of future shareholders and/or beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such shareholders, beneficial owners and/or our PRC subsidiary to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to our company or otherwise adversely affect our business.

We principally rely on dividends and other distributions on equity paid by our wholly owned subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiary and affiliated entities to make payments to us, or any significant increase of tax rates applicable to our Chinese subsidiary or affiliated entity or the imposition of withholding tax on dividends paid by our subsidiary in China to us, may limit our ability to service our debt or meet other obligations.

We are a holding company, and we rely principally on dividends and other distribution on equity from our wholly owned subsidiary in China and on service, license and other fees paid to our wholly owned subsidiary by CGEN Network for our cash requirements, including the funds necessary to service any debt we may incur. Current PRC regulations permit our subsidiary to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiary and affiliated entities in China are required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital, and to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of the board. These reserves are not distributable as cash dividends. Furthermore, if our subsidiary and affiliated entity in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our subsidiary’s ability to pay dividends and other distributions to us. Furthermore, the new PRC enterprise income tax law to be effective on January 1, 2008 may eliminate the current exemption of income tax on dividends derived by foreign investors from foreign-invested enterprises and may impose on our subsidiary in China an obligation to withhold tax at the rate of up to 20% on dividend distributions to us (for Hong Kong shareholders, the withholding tax rate may be reduced to 5%). In addition, the new law deems an enterprise established offshore but with its management organ in the PRC to be a “resident enterprise” that will be subject to PRC tax on its global income. Any limitation on the ability of our subsidiary and affiliated entity to distribute dividends or other payments to us, or any significant increase of the tax rate applicable to our Chinese subsidiary or affiliated entity or the imposition of withholding tax on dividends payable by our subsidiary to us, or PRC tax on our global income as a “resident enterprise” registered outside PRC under the new law could have a material adverse effect on our financial condition and results of operations.

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Failure to comply with PRC regulations in respect of the registration of our PRC citizen employees’ share options and incentive shares units may subject such employees or us to fines and legal or administrative sanctions.

Pursuant to the Implementation Rules of the Administration Measure for Individual Foreign Exchange, or the Individual Foreign Exchange Rule, and an implementation notice on the rule, issued on January and March 2007 by SAFE respectively, PRC citizens who are granted shares or share options by an overseas listed company according to its employee share incentive plan or option plan shall, through the PRC subsidiary of such overseas listed company or other qualified PRC agent, to exercise their rights on the shares or share options after completing the required procedures with SAFE collectively. Such individuals’ foreign exchange income received from the sale of shares or dividends distributed by the overseas listed company shall be remitted into a collective foreign currency account opened and managed by the PRC subsidiary of the overseas listed company or the PRC agent first before distributing them to such individuals in foreign exchange or in RMB. Our PRC citizen employees who have been granted share options or incentive shares, or PRC optionees, will be subject to the Individual Foreign Exchange Rule when our company becomes an overseas listed company. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and legal sanctions. See “Regulation—Regulations Relating to Employee Share Options”

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC operating subsidiary and affiliated entities.

In using the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC operating subsidiary and affiliates, we may make loans to our PRC subsidiary and consolidated affiliates, or we may make additional capital contributions to our PRC subsidiary. Any loans to our PRC subsidiary or consolidated PRC affiliates are subject to PRC regulations and approvals. For example:

We may also decide to finance our wholly owned subsidiary by means of capital contributions. These capital contributions must be approved by the PRC Ministry of Commerce or its local counterpart. Because CGEN Network is a domestic PRC entity, we are not likely to finance its activities by means of capital contributions due to regulatory issues relating to foreign investment in domestic PRC entities, as well as the licensing and other regulatory issues discussed in the “Regulation” section of this prospectus. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our subsidiary or CGEN Network. If we fail to receive such registrations or approvals, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

Expiration of, or changes to, preferential tax treatment or incentives will increase our tax burden and reduce our net income.

Our subsidiary and affiliated entity in China currently enjoy tax exemptions, tax concessions and reduced income tax rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Taxation” for a description of the tax benefits that apply to us. On March 16, 2007, the National People’s Congress, the Chinese legislature, passed a new enterprise income tax law that is scheduled to take effect on January 1, 2008. The new law applies a uniform 25% enterprise income tax rate to both foreign-invested

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enterprises and domestic enterprises. Existing companies are required to transition to the new enterprise income tax rate during a five-year transition period, but detailed rules and regulations for the implementation of the new tax law have not been promulgated. Furthermore, the new tax law may eliminate the current exemption of enterprise income tax on dividends received by foreign investors from foreign-invested enterprises and may impose on our subsidiary in China an obligation to withhold tax on dividend distributions to us unless otherwise exempted or reduced by treaties or similar arrangement. The rate of the withholding tax, which may be as high as 20%, has yet to be finalized pending promulgation of implementing regulations. The expiration of or any changes to the preferential tax treatment or incentives currently enjoyed by us would reduce our after-tax profitability and materially and adversely affect our results of operations and financial condition.

Fluctuation in the value of the RMB may have a material adverse effect on the value of your investment.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately 9.5% appreciation of the RMB against the U.S. dollar between July 21, 2005 and September 30, 2007. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. Substantially all of our revenues and costs are denominated in RMB, and a significant portion of our financial assets are also denominated in RMB. We principally rely on dividends and other distributions paid to us by our subsidiary and affiliated entities in China. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, an appreciation of the RMB against the U.S. dollar would make any new RMB-denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into the RMB for such purposes. An appreciation of the RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial assets into the RMB, as the RMB is our reporting currency.

Our business operations may be subject to additional licenses or permits required by PRC law that we do not currently possess. As a result, we may be penalized by relevant government authorities and we may not be able to execute our growth strategy.

The State Administration of Radio, Film and Television, or SARFT, promulgated the Rules for Administration of Broadcasting of Audio-Video Programs through the Internet and Other Information Networks in 2004. A broadcasting permit is required under these rules to broadcast, integrate, transmit or download audio-video programs via computers, television, mobile phones and various types of information networks. Various regulations also prohibit private and foreign investments in businesses relating to the dissemination of audio-video programs through information networks. We do not possess the necessary broadcasting permit required under these rules. We distribute advertisements to our servers through broadband connection for play-back on our network. As these regulations are relatively new, there are significant uncertainties relating to their interpretation and application, including whether our business activities fall within their coverage. If the PRC government determines that we are engaging in a broadcasting activity without the requisite permit, we will be subject to administrative penalties and be ordered to cease the violating broadcasting activity. In addition, under our cooperation agreement with a member of the Shanghai Media Group, or SMG, our cooperation partner is responsible for the non-advertising contents aired on our network. SMG currently possesses the permit to broadcast audio-video programs through the Internet and our cooperation partner is authorized to distribute the programs of SMG through broadband network. However, if SMG or our cooperation partner fails to maintain the permit or authorization necessary for the performance of the cooperation with us or if the relevant governmental authority later determines that our cooperation in any way violates applicable PRC regulations or policies of the broadcasting industry, we may be penalized by the governmental authority and our ability to execute our growth strategy of playing more content could be adversely and materially affected.

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The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with this offering under a recently adopted PRC regulation. The regulation also establishes more complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.

On August 8, 2006, six PRC regulatory agencies: the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and SAFE jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which became effective on September 8, 2006. The new regulations require offshore special purpose vehicles, or SPVs, that are controlled by PRC companies or residents and formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its website specifying the documents and materials that SPVs are required to submit when seeking CSRC approval for their listings outside of China. The interpretation and application of the new regulations remain unclear, and we cannot assure you that this offering does not require approval from the CSRC, and if it does, how long it will take us to obtain the approval. These uncertainties could inhibit or delay the completion of this offering because the CSRC has declined to officially clarify the applicability of the new regulations to us and this offering. On the other hand, if CSRC approval is required for this offering, our failure to obtain or delay in obtaining the CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. These sanctions could include fines and penalties on our operations in China, restriction or limitation on our ability to pay dividend outside of China, and other forms of sanctions that may cause a material and adverse effect on our business, results of operations and financial conditions.

Our PRC counsel, Grandall Legal Group (Shanghai), has advised us that, based on their understanding of the current PRC laws, regulations and rules:

We cannot assure you, however, that new rules and regulations or relevant interpretations will not be issued which may require retroactively that we obtain an approval from the CSRC in connection with this offering. If this were to occur, our failure to obtain or delay in obtaining the CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. These sanctions could include fines and penalties on our operations in China, restriction or limitation on our ability to pay dividend outside of China, and other forms of sanctions that may cause a material and adverse effect on our business, results of operations and financial conditions.

The new regulations also established additional procedures and requirements that are expected to make merger and acquisition activities in China by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from the Ministry of Commerce be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. We may grow our business in part by acquiring other advertising companies with existing in-store digital display networks or retailer relationships. Complying with the requirements of the new regulations to complete such transactions could be time-consuming, and any required approval processes, including Ministry of Commerce approval, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

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Any health epidemics and other outbreaks could severely disrupt our business operations.

Our business could be materially and adversely affected by the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, or another epidemic. In 2005 and 2006, there have been reports on the occurrences of avian influenza in various parts of China, including a few confirmed human cases and deaths. Any prolonged recurrence of avian influenza, SARS or other adverse public health developments in China could require the temporary closure of our offices or prevent our staff from traveling to our clients’ offices to sell our services or provide on site services. Such closures could severely disrupt our business operations and adversely affect our results of operations.

Risks Related to Our ADSs and This Offering

There has been no public market for our ordinary shares or ADSs prior to this offering, and an active trading for our ADSs may not develop after this offering so you may not be able to resell your ADSs at or above the price you paid, or at all.

Prior to this initial public offering, there has been no public market for our ordinary shares or ADSs. Our ADSs have been approved for listing on The Nasdaq Global Market. Our ordinary shares will not be listed on any exchange or quoted for trading on any over-the-counter trading system. If an active trading market for our ADSs does not develop after this offering, the market price and liquidity of our ADSs would be materially and adversely affected.

The initial public offering price for our ADSs will be determined by negotiations between us and the underwriters and may bear no relationship to the market price for our ADSs after the initial public offering. An active trading market for our ADSs may not develop and the market price of our ADSs may decline below the initial public offering price. You may lose parts or all of your investment in our ADSs.

The market price for our ADSs may be volatile.

The market price for our ADSs may be volatile and subject to wide fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of other advertising companies, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments, fluctuations of exchange rates between RMB and the U.S. dollar, intellectual property litigation, release of lock-up or other transfer restrictions on our outstanding shares or ADSs, and economic or political conditions in China. In addition, the performance, and fluctuation in market prices, of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price of and trading volumes of our ADSs. Furthermore, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our ADSs.

Since the initial public offering price is substantially higher than our net tangible book value per share, you will incur immediate and substantial dilution.

If you purchase our ADSs in this offering, you will pay more for your ADSs than the amount paid by our existing shareholders for their ordinary shares on a per ADS basis. As a result, you will experience immediate and substantial dilution of approximately $             per ADS (assuming no exercise by the underwriters of their option to purchase additional ADSs), representing the difference between our net tangible book value per ADS as of December 31, 2006, after giving effect to this offering at an assumed initial public offering price of $             per ADS, the midpoint of the estimated public offering price range shown on the cover of this prospectus. In addition, you may experience further dilution to the extent that our ordinary shares are issued upon the exercise of share options. See “Dilution” for a more complete description of how the value of your investment in our ADSs will be diluted upon completion of this offering.

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We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to our shareholders.

We believe that our current cash and cash equivalents, anticipated cash flow from operations and the net proceeds from this offering will be sufficient to meet our anticipated cash needs for the near future. We may, however, require additional cash resources to finance our continued growth or other future developments, including any investments or acquisitions we may decide to pursue. The amount and timing of such additional financing needs will vary principally depending on the timing of new product launches, investments and/or acquisitions, and the amount of cash flow from our operations. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or securities convertible to our ordinary shares could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. If we fail to raise additional funds, we may need to sell debt or additional equity securities or to reduce our growth to a level that can be supported by our cash flow. Without additional capital, we may not be able to:

Our corporate actions are substantially controlled by our officers, directors, principal shareholders and affiliated entities and their interests may not be aligned with ours.

After this offering, our executive officers, directors, principal shareholders and their affiliated entities will beneficially own approximately [·]% of our outstanding shares. These shareholders, if they act together, could exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers or other business combination transactions and they may not act in the best interests of other minority shareholders. This concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders, including you.

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Substantial future sales or the perception of sales of our ADSs or ordinary shares in the public market could cause the price of our ADSs to decline.

Sales of our ADSs or ordinary shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Upon completion of this offering, we will have              ordinary shares outstanding represented by              ADSs, assuming the underwriters do not exercise their option to purchase additional ADSs. All ADSs sold in this offering, other than the up to              ADSs sold in our directed share program, will be freely transferable without restriction or additional registration under the Securities Act. The remaining ordinary shares outstanding after this offering will be available for sale, upon the expiration of the applicable lock-up period beginning from the date of this prospectus, subject to volume and other restrictions as applicable under Rule 144 and Rule 701 under the Securities Act. See “Shares Eligible for Future Sale” and “Underwriting” for a detailed description of the lock-up restrictions. Any or all of these shares may be released prior to expiration of the lock-up period at the discretion of the lead underwriters for this offering. To the extent shares are released before the expiration of the lock-up period and these shares are sold into the market, the market price of our ADSs could decline.

In addition, certain holders of our ordinary shares have the right to cause us to register the sale of an aggregate of [            ] shares under the Securities Act, subject to a 180-day lock-up period in connection with this offering. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the related registration statement. Sales of these registered shares in the public market could cause the price of our ADSs to decline.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period in the future. This may result in volatility and adversely affect the price of our ADSs.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period due to the seasonality of consumer spending and corresponding advertising trends in China. Advertising expenditure generally tends to decrease immediately after the Chinese New Year holidays, which fall in January and February of each year. We also experience a slight decrease in revenues during the hot summer months of July and August each year, when there is a relative slowdown in overall commercial activity in urban areas in China. In addition, we have in the past, and may in the future, face difficulties collecting from advertisers who purchase time slots from us, which may cause our cash flows to be unpredictable. As a result, you may not be able to rely on period to period comparisons of our operating results as an indication of our future performance. If our revenues for a particular quarter are lower than we expect, we may be unable to reduce our operating expenses for that quarter by a corresponding amount, which would harm our operating results for that quarter relative to our operating results from other quarters. We expect quarterly fluctuations in our revenues and results of operations to continue. These fluctuations could result in volatility and adversely affect the price of our ADSs. As our revenues grow, these seasonal fluctuations may become more pronounced.

You may not have the same voting rights as the holders of our ordinary shares and must act through the depositary to exercise your rights.

Except as described in this prospectus and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Upon our written request, the depositary will mail to you a shareholder meeting notice which contains, among other things, a statement as to the manner in which your voting instructions may be given. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack

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recourse if your ADSs are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders’ meeting.

You may not be able to participate in rights offerings and may experience dilution of your holdings as a result.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are registered under the Securities Act, or the distribution of them to ADS holders is exempted from registration under the Securities Act with respect to all holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to rely on an exemption from registration under the Securities Act to distribute such rights and securities. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.

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

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

You may not be able to enforce judgments obtained against us, our directors or our officers.

We are incorporated in the Cayman Islands, and conduct substantially all of our operations in China through our wholly owned subsidiary and affiliated entity in China. All of our officers reside outside the United States and some or all of the assets of those persons are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the respective laws of the Cayman Islands and China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. For more information regarding the relevant laws of the Cayman Islands and China, see “Enforceability of Civil Liabilities.”

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because we are incorporated under Cayman Islands law, conduct substantially all of our operations in China and all of our officers reside outside the United States.

We are incorporated in the Cayman Islands and substantially all of our assets are located outside of the United States. We conduct substantially all of our operations in China through our wholly-owned subsidiaries in China. The majority of our officers and directors reside outside the United States and a substantial portion of the assets of those persons are located outside of the United States. As a result, it may be difficult for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state, and it is uncertain whether such Cayman Islands or PRC courts would be competent to hear original actions brought in

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the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of the United States or any state. For more information regarding the relevant laws of the Cayman Islands and China, see “Enforceability of Civil Liabilities.”

Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (2007 Revision) and common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provides significantly less protection to investors. Furthermore, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Our management will have considerable discretion as to the use of the net proceeds to be received by us from this offering and you may not agree with our management on these uses.

We have not allocated the majority of the net proceeds to us from this offering to any particular purpose. Rather, our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to maintain profitability or increase our share price. The net proceeds from this offering may be placed in investments that do not produce income or that lose value.

Our articles of association may contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including ordinary shares represented by our ADSs, at a premium.

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

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We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.

We do not expect to be considered a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for our current taxable year ending December 31, 2007. However, the application of the PFIC rules is subject to ambiguity in several respects, and, in addition, we must make a separate determination each taxable year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year or any future taxable year. A non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets is attributable to assets that produce or are held for the production of passive income. The market value of our assets generally will be determined based on the market price of our ADSs and ordinary shares, which is likely to fluctuate after this offering. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. If we are treated as a PFIC for any taxable year during which a U.S. Holder (as defined in “Taxation—United States Federal Income Taxation”) directly or indirectly owns ADSs or ordinary shares, the U.S. Holder would be required to (i) pay an interest charge together with tax calculated at the maximum ordinary income rates on “excess distributions,” which are defined to include gain on a sale or other disposition of the ADSs or ordinary shares, or (ii) so long as the ADSs or ordinary shares are regularly traded on a qualified exchange, elect to recognize as ordinary income each year the excess in the fair market value, if any, of the ADSs or ordinary shares held (or deemed held) by the holder at the end of the taxable year over such holder’s adjusted basis in such ADSs or ordinary shares and, to the extent of prior inclusions of ordinary income, recognize ordinary loss for the decrease in value of such ADSs or ordinary shares. See “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.”

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 FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events. All statements other than statements of historical facts are forward-looking statements. These statements relate to events that involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include:

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

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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 USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $             million or approximately $             million if the underwriters exercise their option to purchase additional ADSs in full, after deducting underwriting discounts and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of $             per ADS, the mid-point of the initial public offering price range shown on the cover of this prospectus. We will not receive any of the proceeds from the sale of ADSs by the selling shareholders. A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds of this offering by $             million or $             million if the underwriters exercise their option to purchase additional ADSs in full after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

We intend to use the net proceeds from this offering as follows:

The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have significant flexibility and discretion to apply the net proceeds from this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds from this offering differently than as described in this prospectus.

Pending use of the net proceeds, we intend to hold our net proceeds in demand deposits or invest them in interest-bearing government securities.

In using the proceeds from this offering, as an offshore holding company, we are permitted, under PRC laws and regulations, to provide funding to our PRC subsidiary and consolidated affiliates only through loans or capital contributions and to other entities only through loans. Subject to satisfaction of applicable government registration and approval requirements, we may extend inter-company loans to our PRC subsidiary and consolidated affiliates or make additional capital contributions to our PRC subsidiary and consolidated affiliates to fund their capital expenditures or working capital. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC operating subsidiary and affiliated entities.”

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Upon the completion of this offering, each preferred shareholder who is participating in this offering will receive the amount of proceeds and profit from the sales of ADSs, after deducting underwriting discounts and before deducting costs and expenses associated with purchasing the preferred shares and selling the ADSs, as set forth in the table below:

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 DIVIDEND POLICY

We have not declared or paid any dividends since our inception, and have no present plan to declare and pay any dividends on our ordinary shares in the near future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

Our board of directors has complete discretion as to whether to distribute dividends, subject to the approval of our shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

We are a holding company incorporated in the Cayman Islands. In order to pay dividends, if any, to our shareholders, we rely on dividends from our subsidiary in China, which in turn relies on the payments from our PRC consolidated affiliated entity pursuant to the contractual arrangements that established our corporate structure. Current PRC regulations permit our subsidiary to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our subsidiary in China is required to set aside a certain amount of its accumulated after-tax profits each year, if any, to fund certain statutory reserves. These reserves may not be distributed as cash dividends. Further, if our subsidiary in China incurs debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition, the new PRC enterprise income tax to be effective on January 1, 2008 may eliminate the current exemption of enterprise income tax on dividend derived by foreign investors from foreign-invested enterprises and may impose on our subsidiary in China an obligation to withhold tax at the rate of up to 20% on dividend distributions to us.

If we pay dividends, the depositary will pay you the dividends it receives on our ordinary shares, after deducting its fees and expenses. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

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 CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2007:

You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our additional paid-in capital, total shareholders’ equity (deficit) and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per ADS would increase (decrease) additional paid-in capital and total capitalization and decrease (increase) total shareholders’ deficit by $             million, after deducting the estimated underwriting discounts and commissions and estimated aggregate offering expenses payable by us and assuming no exercise of the underwriters’ option to purchase additional ADSs.

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 DILUTION

If you invest in our ADSs, your interest will be diluted for each ADS you purchase to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS immediately after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the net tangible book value per share attributable to the existing shareholders for our presently outstanding ordinary shares and holders of our series A, series B and series C convertible preferred shares which will automatically convert into our ordinary shares upon the completion of this offering.

Our net tangible book value as of June 30, 2007 was approximately RMB             million ($             million), or RMB             million ($            ) per ordinary share and $             per ADS as of that date. Net tangible book value represents the amount of our total assets, minus the amount of our total liabilities and intangible assets. Dilution is determined by subtracting net tangible book value per ordinary share, after giving effect to the conversion of all outstanding series A, B and C convertible preferred shares into ordinary shares upon the completion of this offering and the additional proceeds we will receive from this offering after deducting underwriting discounts and commissions and estimated offering expenses payable by us, assuming an initial public offering price per ordinary share represented by the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus, from such assumed initial public offering price per ordinary share.

Without taking into account any other changes in net tangible book value after June 30, 2007, other than giving effect to the conversion of all outstanding series A, B and C convertible preferred shares into ordinary shares upon the completion of this offering and our sale of the ADSs offered in this offering at the initial public offering price of $             per ADS, the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of June 30, 2007 would have been $             million, or $             per ordinary share and $             per ADS. This represents an immediate increase in net tangible book value of $             per ordinary share and $             per ADS, to the existing shareholders and an immediate dilution in net tangible book value of $             per ordinary share and $             per ADS, to investors purchasing ADSs in this offering. The following table illustrates such dilution:

A $1.00 increase (decrease) in the assumed public offering price of $             per ADS would increase (decrease) our pro forma net tangible book value after giving effect to this offering by $             million, RMB             (or $             per ordinary share) and RMB             (or $             per ADS) after giving effect to the automatic conversion of our series A, B and C preferred shares into our ordinary shares, and this offering by $             per ordinary share and $             per ADS and would increase (or decrease) the dilution in pro forma net tangible book value per ordinary share and per ADS to new investors in this offering by $             per ordinary share and              per ADS, assuming no exercise of the underwriters’ option to purchase additional ADSs, and after deducting underwriting discounts and commissions and other offering expenses payable by us.

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The following table summarizes, on a pro forma basis as of June 30, 2007, the differences between existing shareholders, including holders of our series A, B and C preferred shares that will be automatically converted into ordinary shares immediately upon the completion of this offering, and the new investors with respect to the number of ordinary shares (in the form of ADSs) purchased from us, the total consideration paid and the average price per ordinary share and per ADS paid, without deducting the underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. The total number of ordinary shares does not include ordinary shares underlying the ADSs issuable upon the exercise of the underwriters’ option to purchase additional ADSs.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per ADS would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and the average price per ADS paid by all shareholders by $             million, $             million and $            , respectively, assuming no exercise of underwriter’s option to purchase additional ADSs and without deducting the underwriting discounts and commissions and estimated expenses payable by us.

The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

The discussion and tables above do not take into account the impact of the exercise of any outstanding stock options. As of                     , 2007, there were              ordinary shares issuable upon exercise of outstanding stock options at a weighted average exercise price of $             per share, and there were              ordinary shares available for future issuance upon the exercise of future grants under our 2007 stock option plan. The discussion and tables above do not take into account the impact of the exercise of any outstanding warrants. As of             , 2007, there were              ordinary shares issuable upon exercise of outstanding warrants. The dilution to new investors would be $             per ordinary share or $             per ADS if all of the outstanding options and warrants to purchase our ordinary shares had been exercised.

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 EXCHANGE RATE INFORMATION

Our business is primarily conducted in China and all of our revenues are denominated in RMB. This prospectus contains translations of RMB amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of RMB into U.S. dollars in this prospectus is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this prospectus were made at a rate of RMB7.6120 to $1.00, the noon buying rate in effect as of June 29, 2007. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, the rates stated below, or at all. The Chinese government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On November 13, 2007, the noon buying rate was RMB7.4279 to $1.00.

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

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 ENFORCEABILITY OF CIVIL LIABILITIES

We were incorporated in the Cayman Islands in order to enjoy certain benefits, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of exchange control or currency restrictions, and the availability of professional and support services. However, certain disadvantages accompany incorporation in the Cayman Islands, such as a less-developed body of securities laws as compared to the United States, significantly less legal protection to investors as compared to the laws of the United States, and the potential lack of standing by Cayman Islands companies to sue before the federal courts of the United States.

Our organizational documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

Substantially all of our operations are conducted in China, and substantially all of our assets are located there. In addition, a majority of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

We have appointed CT Corporation System, 111 Eighth Avenue, New York, NY 10011, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

Conyers Dill & Pearman, our counsel as to Cayman Islands law, and Grandall Legal Group (Shanghai), our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

Conyers Dill & Pearman has further advised us that the courts of the Cayman Islands would recognize as a valid judgment, a final and conclusive in personam judgment obtained in the federal or state courts in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment, (ii) such courts did not contravene the rules of natural justice of the Cayman Islands, (iii) such judgment was not obtained by fraud, (iv) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands, (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands, and (vi) there is due compliance with the correct procedures under the laws of the Cayman Islands.

Grandall Legal Group (Shanghai) has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other agreements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. Therefore, at present, a judgment rendered by a court in the United States is not likely to be enforced by a PRC court.

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 CORPORATE STRUCTURE

Corporate History

Applicable PRC laws and regulations restrict foreign ownership of advertising businesses. To comply with PRC laws and regulations, we operate our in-store television advertising network in China through CGEN Network, a limited liability company incorporated in China in September 2003. CGEN Network is now owned by five Chinese citizens, namely, Weiming Gao, who is the wife of Yising Chan, Guanyong Tian, Xiaofeng Cao, Fang Yao and Haiguang Zhu. CGEN Network holds the licenses and permits necessary to operate our businesses and provide our advertising services in China. Our relationship with CGEN Network and its shareholders is governed by a series of contractual arrangements that allow us to effectively control CGEN Network. Accordingly, we treat CGEN Network as a variable interest entity and have consolidated its historical financial results in our financial statements pursuant to GAAP.

In the opinion of Grandall Legal Group (Shanghai), our PRC legal counsel,

We have been advised by our PRC legal counsel, however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC counsel that if the PRC government determines that the agreements that establish the structure for operating our PRC advertising network businesses do not comply with applicable restrictions on foreign investment in the advertising industry, we could be subject to severe penalties including being prohibited from continuing operation. See “Risk Factors—Risks Related to Our Corporate Structure.”

On February 24, 2005, we were incorporated in the Cayman Islands. On August 11, 2005, we acquired a Hong Kong company, CGEN Hong Kong, which became our intermediate holding company. On August 29, 2005, we established a wholly owned subsidiary in China, CGEN Shanghai, through CGEN Hong Kong. Following a series of transactions, Yising Chan became the sole ultimate shareholder of our company in August 2005. In 2005 and 2006, we issued series A, series B and series C preferred shares to certain investors and received total proceeds of $5.0 million, $13.8 million and $20.0 million, respectively. Investors in the series A, B and C private placements include private equity investment affiliates of Shanghai Industrial Holdings, TDF, Redpoint, JAFCO, Sumitomo, Huitung and Merrill Lynch.

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Corporate Ownership Structure

The following diagram illustrates our current corporate structure and the place of formation and affiliation of each our subsidiary as of the date of this prospectus.

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Material Operating Entities

CGEN Shanghai.    Since August 2005, we have conducted our operations in China primarily through CGEN Shanghai, a wholly foreign-owned enterprise. CGEN Shanghai operates our media software businesses and also provides technology consulting and other related services to CGEN Network. CGEN Shanghai has entered into contractual arrangements with CGEN Network and its shareholders, pursuant to which:

CGEN Network.    We operate our in-store television advertising network in China through CGEN Network, a limited liability company established in China. Weiming Gao, Guanyong Tian, Xiaofeng Cao, Fang Yao and Haiguang Zhu, all of whom are Chinese citizens, own 49.5%, 10%, 18%, 13.5% and 9%, respectively, of CGEN Network. Ms. Gao is the wife of Yising Chan, our chairman. Mr. Yao is our co-founder and is not currently involved in our management. Mr. Zhu is our co-founder and chief technical officer. Mr. Tian is our co-founder and senior vice president. Mr. Cao is our co-founder and is a director of CGEN Network. CGEN Network directly operates our in-store television network, enters into display placement agreements and sells advertising time slots to our clients. It holds the licenses and approvals necessary to conduct our in-store television advertising businesses in China. It has branch offices in each of Beijing and Guangzhou mainly for liaison, consulting and marketing purposes.

We expect to continue to depend on CGEN Network to operate our in-store television network in China unless and until we are permitted under PRC laws and regulations to directly own and operate advertising businesses without constraints.

Contractual Arrangements with CGEN Network and Its Shareholders

Our relationships with CGEN Network and its shareholders are governed by a series of contractual arrangements. Under PRC laws, each of CGEN Network and CGEN Shanghai is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between CGEN Network and CGEN Shanghai, CGEN Network is not required to transfer any other funds generated from its operations to CGEN Shanghai. On September 8, 2005, we entered into the following contractual arrangements, as restated and amended on January 16, 2006 and as amended in part on July 25, 2007:

Agreements That Provide Effective Control over Our Affiliated Entities

Equity Pledge Agreement.    Pursuant to the equity pledge agreement between CGEN Shanghai and the shareholders of CGEN Network, namely Weiming Gao, Guanyong Tian, Xiaofeng Cao, Fang Yao and Haiguang Zhu, each shareholder pledged all of his or her equity interests in CGEN Network to CGEN Shanghai to secure the performance of the shareholders’ and CGEN Network’s obligations under the exclusive technology support and service agreement. If CGEN Network or any of its shareholders breaches its, his or her respective contractual obligations under the exclusive technology support and service agreement, CGEN Shanghai, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. The shareholders agreed not to transfer, sell, pledge, dispose of or otherwise create any new encumbrance on their equity interests in CGEN Network without the prior written consent of CGEN Shanghai. The equity pledge agreement will expire two years after CGEN Network and its shareholders fully perform their respective obligations under the exclusive technology support and service agreement.

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Call Option Agreement.    Under the call option agreement among CGEN Network, the shareholders of CGEN Network and CGEN Shanghai, CGEN Network and its shareholders irrevocably granted CGEN Shanghai or its designated person an exclusive option to purchase, when and to the extent permitted under PRC law, all or part of the equity interests in, or all or part of the assets of, CGEN Network. The exercise price for all of the equity interests or assets of CGEN Network is RMB 10,000 or the minimum price permitted by PRC laws. This call option agreement will remain valid until terminated as agreed upon by the parties thereto. Pursuant to this call option agreement:

The shareholders of CGEN Network have executed powers of attorney to persons designated by CGEN Shanghai that irrevocably authorize them to vote as the shareholders’ attorneys-in-fact on all of the matters of CGEN Network requiring shareholders’ approval.

Agreements That Transfer Economic Benefits to Us

Exclusive Technology Support and Service Agreement.    Pursuant to the exclusive technology support and service agreement between CGEN Network and CGEN Shanghai, CGEN Shanghai has the exclusive right to provide to CGEN Network technology support and consulting services related to the business operations of CGEN Network. CGEN Network agrees to pay quarterly service fees to CGEN Shanghai as reasonably determined from time to time by CGEN Shanghai’s board of directors. When deciding the amount of the quarterly service fees, the board of CGEN Shanghai may consider several factors, including functionality and quality of the technology support provided to CGEN Network, time spent by CGEN Shanghai’s employees for consulting or services, content and commercial value of the services and market value of the services. The quarterly service fees for the five quarters ended December 31, 2006 were RMB3.9 million, RMB2.5 million, RMB4.5 million, RMB6.1 million and RMB8.8 million, respectively. The term of this agreement is five years commencing on January 16, 2006.

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 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

You should read the following information in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

We have derived the following summary consolidated statements of operations and other consolidated financial data for the years ended December 31, 2005 and 2006 and the consolidated balance sheet data as of December 31, 2005 and 2006 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the following summary consolidated statements of operations and other consolidated financial data for the years ended December 31, 2003 and 2004 and the consolidated balance sheet data as of December 31, 2003 and 2004 from our unaudited consolidated financial statements, which are not included in this prospectus. We have derived the following selected consolidated statements of operations and other consolidated financial data for the six months ended June 30, 2006 and June 30, 2007 and the consolidated balance sheet data as of June 30, 2007 from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared our unaudited consolidated financial information on the same basis as our audited consolidated financial statements. The unaudited consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our financial position and operation results for the quarters presented. Our consolidated financial statements are prepared and presented in accordance with GAAP, and reflect our current corporate structure as if it has been in existence throughout the relevant periods.

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