UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
____________________
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): May 3, 2010

SUBAYE, INC.
(Exact name of registrant as specified in its charter)

Delaware
333-62236
35-2089848
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

9/F., Beijing Business World
56 East Xinglong Street
Chongwen District
Beijing, China 100062
 (Address of principal executive offices) (Zip Code)

(86) 10-67026968
Registrant’s telephone number, including area code


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

Item 2.01  Completion of Acquisition or Disposition of Assets
 
On May 3, 2010, Subaye, Inc. (the “Company”) announced that it is discontinuing its trade services and movie entertainment businesses in order to focus on further developing its online video advertising business.  The Company has sold its trade services business and certain assets of its entertainment business for a total of $7 million in cash proceeds.  Pro forma financial information showing the effects of the transactions are presented in Item 9.01 of this Current Report on Form 8-K.

On April 29, 2010, the Company entered into a purchase and sale agreement (the “Agreement”) with Superb Quality Limited (“Superb”), pursuant to which the Company sold 100% of the ownership interest in Panyu M&M Co. Ltd., the Company’s wholly-owned subsidiary (“Panyu”), to Superb in exchange for $600,000 in cash.  Panyu is the Company’s trade services business and holds the necessary licenses to conduct international and domestic trading and provide logistics services to customers.  To the Company’s knowledge, there is no relationship between Superb and the Company or any of its affiliates, directors, officers or associates of any director or officer.

Additionally, to date the Company has sold certain of its movie copyrights, which are currently held by 3G Dynasty, Inc., the Company’s wholly-owned subsidiary (“3G”), and plans to sell the remaining assets of 3G from time to time, at the discretion of the Company’s management at commercially reasonable prices.  The operations of 3G will be discontinued.  To the Company’s knowledge, there are no relationships between any of the buyers of the movie copyrights or other 3G assets and the Company or any of its affiliates, directors, officers or associates of any director or officer.

Item 9.01  Financial Statements and Exhibits
 
(b)                  Pro forma financial information.

SUBAYE, INC. AND SUBSIDIARIES
Pro Forma Consolidated Segment Results of Operations
To Reflect Discontinued Operations
For the Three Months Ended December 31, 2009
(Unaudited)

In US Dollars (Thousands)
        
         
Revenues
        
Online Membership Services
  
$ 
6,912
  
       
Costs of Sales
        
       
Online Membership Services
    
 1,427
  
Segment Operating Profit (1)
    
5,485
  
Less: Operating Expenses (1)
        
Advertising
    
94
  
Other Selling, General and Administrative
    
1,265
  
Non-controlling Interest (2)
    
472
  
       
Income From Continuing Operations Before Interest and Taxes
  
$
3,654
  

     
(1)
  
Segment operating profit includes a segment’s net revenues reduced by its materials, labor and other product costs along with the segment’s selling, engineering and administrative expenses and non-controlling interest. Unallocated operating expenses, net loss (gain) on sales of businesses and assets, restructuring and other impairment charges, interest income and expense and taxes on income are excluded from the measure.

(2)
  
Reflects the adoption of the FASB’s guidance on non-controlling interests in consolidated financial statements.
 
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SUBAYE, INC. AND SUBSIDIARIES
Pro Forma Balance Sheets
To Reflect Discontinued Operations
As of December 31, 2009
(Unaudited)

         
In US Dollars (Thousands)
        
         
Assets
        
Cash
  
$ 
169
  
       
Accounts Receivable
    
6,563
  
       
Prepaid Advertising
    
3,307
  
Deposit for Inventoriable Assets
    
8,147
  
Assets Held for Sale
    
36,164
  
Property and Equipment
    
9,322
  
Total Assets
    
63,672
  
         
Liabilities
        
       
Accounts Payable and Accrued Expenses
  
$
1,359
  
Liabilities Held for Sale
    
7,519
  
Total Liabilities
    
8,878
  
         
         
Shareholders’ Equity
        
Common Stock
    
7
  
Additional Paid in Capital
    
48,021
  
Deferred Stock Based Compensation
    
(6,789
)
Accumulated Other Comprehensive Income
    
(27
)
Retained Earnings
    
13,582
  
Total Shareholders’ Equity
    
54,794
  
Total Liabilities and Shareholders’ Equity
  
$
63,672
  

SUBAYE, INC. AND SUBSIDIARIES
Pro Forma Consolidated Segment Results of Operations
To Reflect Discontinued Operations
For the Year Ended September 30, 2009
(Unaudited)
         
In US Dollars (Thousands)
        
         
Revenues
        
Online Membership Services
  
$ 
26,651
  
       
Costs of Sales
        
       
Online Membership Services
    
5,957
  
Segment Operating Profit (1)
    
20,694
  
Less: Operating Expenses (1)
        
Advertising
    
9,089
  
Other Selling, General and Administrative
    
3,036
  
Non-controlling Interest (2)
    
3,042
  
       
Income From Continuing Operations Before Interest and Taxes
  
$
5,527
  

     
(1)
  
Segment operating profit includes a segment’s net revenues reduced by its materials, labor and other product costs along with the segment’s selling, engineering and administrative expenses and non-controlling interest. Unallocated operating expenses, net loss (gain) on sales of businesses and assets, restructuring and other impairment charges, interest income and expense and taxes on income are excluded from the measure.

(2)
  
Reflects the adoption of the FASB’s guidance on non-controlling interests in consolidated financial statements.
 

 
SUBAYE, INC. AND SUBSIDIARIES
Pro Forma Balance Sheets
To Reflect Discontinued Operations
As of September 30, 2009
(Unaudited)

         
In US Dollars (Thousands)
        
         
Assets
        
Cash
  
$ 
2
  
       
Accounts Receivable
    
8,266
  
       
Prepaid Advertising
    
370
  
Deposit for Inventoriable Assets
    
8,152
  
Assets Held for Sale
    
29,360
  
Property and Equipment
    
10,580
  
Total Assets
    
56,730
  
         
Liabilities
        
       
Accounts Payable and Accrued Expenses
  
$
566
  
Liabilities Held for Sale
    
5,275
  
Total Liabilities
    
5,841
  
Minority Interest in Subsidiaries
    
10,180
  
         
Shareholders’ Equity
        
Common Stock
    
3
  
Additional Paid in Capital
    
32,452
  
Deferred Stock Based Compensation
    
(2,908
)
Accumulated Other Comprehensive Income
    
54
  
Retained Earnings
    
11,108
  
Total Shareholders’ Equity
    
40,709
  
Total Liabilities and Shareholders’ Equity
  
$
56,730
  
       

(d)   Exhibits
 
Exhibit
Number
Exhibit Title or Description
   
99.1 
Press release, dated May 3, 2010.
 
 
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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated:  May 5, 2010
 

 
SUBAYE, INC.
   
   
 
By:
/s/ Zhiguang Cai                      
 
Name:
Zhiguang Cai
 
Title:
Chief Executive Officer