G&A expenses for the fourth quarter of 2010 were US$1.8 million, a year-over-year increase of 45.3% from US$1.3 million in the fourth quarter of 2009. G&A expenses as a percentage of net revenues for the quarter were 13.1%, representing a decrease from 23.2% in the fourth quarter of 2009. G&A expenses for the full year 2010 were US$7.3 million, up 64.4% from US$4.4 million in the full year 2009. The year-over-year increases in G&A expenses for the fourth quarter of 2010 and fiscal year 2010 were primarily due to an increase in employee compensation expenses contributable to G&A expenses as a result of the expansion of the Company. An increase in share-based compensation expenses also contributed to the increase in G&A expenses in the full year 2010.
Gain (Loss) on Change in Fair Value of Derivative Liabilities
In the fourth quarter of 2010, the Company did not record any charge on change in fair value of derivative liabilities as it did in the fourth quarter of 2009, as the redemption provisions of series A preferred shares that had triggered the accounting treatment of derivative liabilities were modified in June 2010. The series A preferred shares were converted into ordinary shares upon the Company’s initial public offering, so there would be no such charge after the Company’s initial public offering. In the fourth quarter of 2009, a gain of US$0.3 million was recorded. The Company recorded a gain on change in fair value of derivative liabilities of US$0.4 million for the full year 2010, as compared to a loss on change in fair value of derivative liabilities of US$0.8 million for the full year 2009, primarily due to the fact that the likelihood of occurrence of an optional conversion or a change in control event was reduced with the approaching initial public offering.
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