Nevada
|
20-4672080
|
|||
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
PART I.
|
Item 1.
|
June 30,
2013
|
December 31,
2012
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 3,392 | $ | 5,483 | ||||
Term deposit
|
3,426 | 3,357 | ||||||
Accounts receivable, net
|
10,460 | 8,486 | ||||||
Other receivables, net
|
3,080 | 3,103 | ||||||
Prepayment and deposit to suppliers
|
14,636 | 14,596 | ||||||
Due from related parties
|
375 | 210 | ||||||
Other current assets
|
104 | 136 | ||||||
Deferred tax assets-current
|
23 | 50 | ||||||
Total current assets
|
35,496 | 35,421 | ||||||
Investment in and advance to equity investment affiliates
|
851 | 959 | ||||||
Property and equipment, net
|
1,417 | 1,636 | ||||||
Intangible assets, net
|
6,782 | 7,167 | ||||||
Deposit for purchasing of software technology
|
808 | - | ||||||
Goodwill
|
11,312 | 11,083 | ||||||
Deferred tax assets-non current
|
1,023 | 652 | ||||||
Total Assets
|
$ | 57,689 | $ | 56,918 | ||||
Liabilities and Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable *
|
$ | 257 | $ | 110 | ||||
Advances from customers *
|
810 | 1,065 | ||||||
Accrued payroll and other accruals *
|
947 | 904 | ||||||
Payable for acquisition *
|
- | 1,266 | ||||||
Taxes payable *
|
7,564 | 6,683 | ||||||
Other payables *
|
259 | 217 | ||||||
Total current liabilities
|
9,837 | 10,245 |
June 30,
2013
|
December 31,
2012
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
||||||||
Long-term liabilities:
|
||||||||
Deferred tax liability-non current *
|
1,612 | 1,689 | ||||||
Long-term borrowing from director
|
141 | 139 | ||||||
Total Liabilities
|
11,590 | 12,073 | ||||||
Commitments and contingencies
|
||||||||
Equity:
|
||||||||
ChinaNet Online Holdings, Inc.’s stockholders’ equity
|
||||||||
Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 22,226,540 shares and 22,186,540 shares at June 30, 2013 and December 31, 2012)
|
22 | 22 | ||||||
Additional paid-in capital
|
20,029 | 20,008 | ||||||
Statutory reserves
|
2,296 | 2,296 | ||||||
Retained earnings
|
19,969 | 19,505 | ||||||
Accumulated other comprehensive income
|
3,209 | 2,393 | ||||||
Total ChinaNet Online Holdings, Inc.’s stockholders’ equity
|
45,525 | 44,224 | ||||||
Noncontrolling interests
|
574 | 621 | ||||||
Total equity
|
46,099 | 44,845 | ||||||
Total Liabilities and Equity
|
$ | 57,689 | $ | 56,918 |
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
(US $)
|
(US $)
|
(US $)
|
(US $)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Sales
|
||||||||||||||||
From unrelated parties
|
$ | 15,767 | $ | 27,996 | $ | 8,777 | $ | 13,076 | ||||||||
From related parties
|
174 | 66 | 115 | 51 | ||||||||||||
15,941 | 28,062 | 8,892 | 13,127 | |||||||||||||
Cost of sales
|
9,757 | 21,902 | 5,290 | 9,364 | ||||||||||||
Gross margin
|
6,184 | 6,160 | 3,602 | 3,763 | ||||||||||||
Operating expenses
|
||||||||||||||||
Selling expenses
|
1,390 | 1,402 | 602 | 713 | ||||||||||||
General and administrative expenses
|
3,146 | 3,060 | 1,744 | 1,817 | ||||||||||||
Research and development expenses
|
912 | 756 | 463 | 425 | ||||||||||||
5,448 | 5,218 | 2,809 | 2,955 | |||||||||||||
Income from operations
|
736 | 942 | 793 | 808 | ||||||||||||
Other income (expenses)
|
||||||||||||||||
Interest income
|
64 | 121 | 32 | 116 | ||||||||||||
Other (expenses)/income
|
(2 | ) | - | (1 | ) | 1 | ||||||||||
62 | 121 | 31 | 117 | |||||||||||||
Income before income tax expense, equity method investments and noncontrolling interests
|
798 | 1,063 | 824 | 925 | ||||||||||||
Income tax benefit / (expense)
|
(268 | ) | (14 | ) | (354 | ) | 222 | |||||||||
Income before equity method investments and noncontrolling interests
|
530 | 1,049 | 470 | 1,147 | ||||||||||||
Share of losses in equity investment affiliates
|
(125 | ) | (297 | ) | (54 | ) | (104 | ) | ||||||||
Net income
|
405 | 752 | 416 | 1,043 | ||||||||||||
Net loss / (income) attributable to noncontrolling interests
|
59 | (223 | ) | 18 | (148 | ) | ||||||||||
Net income attributable to ChinaNet Online Holdings, Inc.
|
464 | 529 | 434 | 895 |
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
(US $)
|
(US $)
|
(US $)
|
(US $)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Net income
|
405 | 752 | 416 | 1,043 | ||||||||||||
Foreign currency translation gain
|
828 | 298 | 613 | 35 | ||||||||||||
Comprehensive Income
|
$ | 1,233 | $ | 1,050 | $ | 1,029 | $ | 1,078 | ||||||||
Comprehensive loss / (income) attributable to noncontrolling interests
|
47 | (266 | ) | 9 | (154 | ) | ||||||||||
Comprehensive income attributable to ChinaNet Online Holdings, Inc.
|
$ | 1,280 | $ | 784 | $ | 1,038 | $ | 924 | ||||||||
|
||||||||||||||||
Earnings per share
|
||||||||||||||||
Earnings per common share
|
||||||||||||||||
Basic
|
$ | 0.02 | $ | 0.02 | $ | 0.02 | $ | 0.04 | ||||||||
Diluted
|
$ | 0.02 | $ | 0.02 | $ | 0.02 | $ | 0.04 | ||||||||
Weighted average number of common shares outstanding:
|
||||||||||||||||
Basic
|
22,193,391 | 22,184,562 | 22,200,166 | 22,186,540 | ||||||||||||
Diluted
|
22,193,391 | 22,184,562 | 22,200,166 | 22,186,540 |
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash flows from operating activities
|
||||||||
Net income
|
$ | 405 | $ | 752 | ||||
Adjustments to reconcile net income to net cash (used in) / provided by operating activities
|
||||||||
Depreciation and amortization
|
840 | 818 | ||||||
Share-based compensation expenses
|
21 | 27 | ||||||
Allowances for doubtful debts
|
787 | 561 | ||||||
Share of losses in equity investment affiliates
|
125 | 297 | ||||||
Deferred taxes
|
(437 | ) | (558 | ) | ||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable
|
(1,781 | ) | (5,346 | ) | ||||
Other receivables
|
(701 | ) | 226 | |||||
Prepayment and deposit to suppliers
|
258 | 1,983 | ||||||
Due from related parties
|
(160 | ) | 43 | |||||
Other current assets
|
32 | 26 | ||||||
Accounts payable
|
142 | 109 | ||||||
Advances from customers
|
(274 | ) | 1,070 | |||||
Accrued payroll and other accruals
|
32 | 418 | ||||||
Due to related parties
|
- | (162 | ) | |||||
Other payables
|
(45 | ) | 45 | |||||
Taxes payable
|
736 | 783 | ||||||
Net cash (used in) provided by operating activities
|
(20 | ) | 1,092 | |||||
Cash flows from investing activities
|
||||||||
Purchases of vehicles and office equipment
|
(60 | ) | (46 | ) | ||||
Deposit for purchasing of software technology
|
(800 | ) | - | |||||
Project development deposit to a third party
|
- | (2,450 | ) | |||||
Payment for acquisition of VIEs
|
(1,280 | ) | (553 | ) | ||||
Net cash used in investing activities
|
(2,140 | ) | (3,049 | ) |
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash flows from financing activities
|
||||||||
Dividend paid to convertible preferred stockholders
|
- | (5 | ) | |||||
Short-term loan borrowed from an equity investment affiliate
|
- | 316 | ||||||
Short-term loan repaid to an equity investment affiliate
|
- | (538 | ) | |||||
Net cash used in financing activities
|
- | (227 | ) | |||||
Effect of exchange rate fluctuation on cash and cash equivalents
|
69 | 61 | ||||||
Net decrease in cash and cash equivalents
|
(2,091 | ) | (2,123 | ) | ||||
Cash and cash equivalents at beginning of the period
|
5,483 | 10,695 | ||||||
Cash and cash equivalents at end of the period
|
$ | 3,392 | $ | 8,572 | ||||
Supplemental disclosure of cash flow information
|
||||||||
Income taxes paid
|
$ | 39 | $ | 73 | ||||
Non-cash transactions:
|
||||||||
Restricted stock and options granted for future service
|
$ | 21 | $ | 63 |
1.
|
Organization and nature of operations
|
2.
|
Variable Interest Entities
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 2,381 | $ | 4,275 | ||||
Term deposit
|
3,426 | 3,357 | ||||||
Accounts receivable, net
|
10,349 | 8,392 | ||||||
Other receivables, net
|
2,952 | 2,921 | ||||||
Prepayment and deposit to suppliers
|
14,635 | 14,587 | ||||||
Due from related parties
|
118 | 49 | ||||||
Other current assets
|
45 | 35 | ||||||
Deferred tax assets-current
|
23 | 50 | ||||||
Total current assets
|
33,929 | 33,666 | ||||||
Investment in and advance to equity investment affiliates
|
808 | 916 | ||||||
Property and equipment, net
|
1,231 | 1,389 | ||||||
Intangible assets, net
|
6,778 | 7,152 | ||||||
Deposit for purchasing of software technology
|
808 | - | ||||||
Goodwill
|
11,312 | 11,083 | ||||||
Deferred tax assets-non current
|
793 | 511 | ||||||
Total Assets
|
$ | 55,659 | $ | 54,717 | ||||
Liabilities
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 257 | $ | 110 | ||||
Advances from customers
|
810 | 1,065 | ||||||
Accrued payroll and other accruals
|
460 | 455 | ||||||
Due to Control Group
|
11 | 11 | ||||||
Payable for acquisition
|
- | 1,266 | ||||||
Taxes payable
|
7,052 | 6,136 | ||||||
Other payables
|
178 | 196 | ||||||
Total current liabilities
|
8,768 | 9,239 | ||||||
Deferred tax Liabilities-non current
|
1,612 | 1,689 | ||||||
Total Liabilities
|
$ | 10,380 | $ | 10,928 |
3.
|
Summary of significant accounting policies
|
a)
|
Basis of presentation
|
b)
|
Principles of consolidation
|
c)
|
Use of estimates
|
d)
|
Foreign currency translation and transactions
|
June 30, 2013
|
December 31, 2012
|
|||||||
Balance sheet items, except for equity accounts
|
6.1882 | 6.3161 |
Six Months Ended June 30
|
||||||||
2013
|
2012
|
|||||||
Items in the statements of income and comprehensive income, and statements of cash flows
|
6.2479 | 6.3255 |
Three Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Items in the statements of income and comprehensive income, and statements of cash flows
|
6.2105 | 6.3309 |
f)
|
Research and development expenses
|
g)
|
Income taxes
|
h)
|
Uncertain tax positions
|
i)
|
Recent accounting standards
|
4.
|
Cash and cash equivalent
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Cash
|
740 | 893 | ||||||
Bank deposit
|
2,652 | 4,590 | ||||||
3,392 | 5,483 |
5.
|
Term deposit
|
6.
|
Accounts receivable, net
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Accounts receivable
|
14,164 | 12,116 | ||||||
Allowance for doubtful debts
|
(3,704 | ) | (3,630 | ) | ||||
Accounts receivable, net
|
10,460 | 8,486 |
7.
|
Other receivables, net
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Short-term loan made for marketing campaign
|
2,262 | 2,375 | ||||||
Short-term loans to unrelated entities
|
485 | 475 | ||||||
Term deposit interest receivable
|
120 | 59 | ||||||
Staff advances for normal business purpose
|
213 | 194 | ||||||
Overdue contract guarantee deposits
|
956 | 158 | ||||||
Allowance for doubtful debts
|
(956 | ) | (158 | ) | ||||
Other receivables, net
|
3,080 | 3,103 |
8.
|
Prepayments and deposit to suppliers
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Contract execution guarantees to TV advertisement and internet resources providers
|
8,044 | 9,463 | ||||||
Prepayments to TV advertisement and internet resources providers
|
6,529 | 5,069 | ||||||
Other deposits and prepayments
|
63 | 64 | ||||||
14,636 | 14,596 |
9.
|
Due from related parties
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Beijing Fengshangyinli Technology Co., Ltd.
|
45 | 53 | ||||||
Beijing Saimeiwei Food Equipment Technology Co., Ltd.
|
216 | 87 | ||||||
Beijing Telijie Century Environmental Technology Co., Ltd.
|
114 | 70 | ||||||
375 | 210 |
10.
|
Investment in and advance to equity investment affiliates
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Investment in equity investment affiliates
|
807 | 916 | ||||||
Advance to equity investment affiliates
|
44 | 43 | ||||||
851 | 959 |
Shenzhen
Mingshan
|
Zhao Shang
Ke Hubei
|
Total
|
||||||||||
US$(’000)
|
US$(’000)
|
US$(’000)
|
||||||||||
Balance as of December 31, 2012 (audited)
|
492 | 467 | 959 | |||||||||
Share of losses in equity investment affiliates
|
(35 | ) | (90 | ) | (125 | ) | ||||||
Exchange translation adjustment
|
8 | 9 | 17 | |||||||||
Balance as of June 30, 2013 (unaudited)
|
465 | 386 | 851 |
11.
|
Property and equipment, net
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Vehicles
|
986 | 925 | ||||||
Office equipment
|
1,530 | 1,481 | ||||||
Electronic devices
|
1,230 | 1,205 | ||||||
Property and equipment, cost
|
3,746 | 3,611 | ||||||
Less: accumulated depreciation
|
(2,329 | ) | (1,975 | ) | ||||
Property and equipment, net
|
1,417 | 1,636 |
12.
|
Intangible assets, net
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Intangible assets not subject to amortization:
|
||||||||
Trade name
|
315 | 309 | ||||||
Domain name
|
1,561 | 1,529 | ||||||
Intangible assets subject to amortization:
|
||||||||
Contract backlog
|
200 | 196 | ||||||
Customer relationship
|
3,505 | 3,434 | ||||||
Non-compete agreements
|
1,387 | 1,358 | ||||||
Software technologies
|
331 | 325 | ||||||
Cloud-computing based software platforms
|
1,500 | 1,470 | ||||||
Other computer software
|
77 | 76 | ||||||
Intangible assets, cost
|
8,876 | 8,697 | ||||||
Less: accumulated amortization
|
(2,094 | ) | (1,530 | ) | ||||
Intangible assets, net
|
6,782 | 7,167 |
13.
|
Deposit for purchasing of software technology
|
14.
|
Goodwill
|
Amount
|
||||
US$(’000)
|
||||
Balance as of December 31, 2012 (audited)
|
11,083 | |||
Exchange translation adjustment
|
229 | |||
Balance as of June 30, 2013 (unaudited)
|
11,312 |
15.
|
Accrued payroll and other accruals
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Accrued payroll and staff welfare
|
553 | 538 | ||||||
Accrued operating expenses
|
394 | 366 | ||||||
947 | 904 |
16.
|
Payable for acquisition
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Sou Yi Lian Mei
|
- | 1,266 |
17.
|
Taxation
|
1)
|
Income tax
|
l
|
Rise King WFOE is a software company qualified by the related PRC governmental authorities and was approved by the local tax authorities of Beijing, the PRC, to be entitled to a two-year EIT exemption from its first profitable year and a 50% reduction of its applicable EIT rate, which is 25% to 12.5% of its taxable income for the succeeding three years. Rise King WFOE had a net loss for the year ended December 31, 2008 and its first profitable year was fiscal year 2009 which has been verified by the local tax bureau by accepting the application filed by the Company. Therefore, it was approved to be entitled to a two-year EIT exemption for fiscal year 2009 through fiscal year 2010 and a 50% reduction of its applicable EIT rate which is 25% to 12.5% for fiscal year 2011 through fiscal year 2013. Therefore, for the six and three months ended June 30, 2013 and 2012, the applicable income tax rate for Rise King WFOE was all 12.5%. After fiscal year 2013, the applicable income tax rate for Rise King WFOE will be 25% under the current EIT law of PRC.
|
l
|
Business Opportunity Online was approved by the related PRC governmental authorities as a High and New Technology Enterprise under the current EIT law, and was approved by the local tax authorities of Beijing, the PRC, to be entitled to a favorable statutory tax rate of 15%. Therefore, for the six and three months ended June 30, 2013 and 2012, the applicable income tax rate of Business Opportunity Online was all 15%.
|
l
|
Business Opportunity Online Hubei was incorporated in Xiaotian Industrial Park of Xiaogan Economic Development Zone in Xiaogan City, Hubei province of the PRC in 2011. On June 15, 2012, Business Opportunity Online Hubei was approved by the related PRC governmental authorities to be qualified as a software company and was approved by the local tax authorities of Xiaogan City, Hubei province, the PRC, to be entitled to a two-year EIT exemption from its first profitable year, and a 50% reduction of its applicable EIT rate which is 25% to 12.5% of its taxable income for the succeeding three years. Based on the previous communication between the entity and the local tax authorities of Xiaogan Economic Development Zone, the entity is entitled to a two-year EIT exemption for fiscal 2012 and 2013, and a 50% reduction of its applicable EIT rate which is 25% to 12.5% of its taxable income for the succeeding three years until December 31, 2016. However, during the periodic administrative review conducted by local tax authorities of Xiaogan Economic Development Zone in early August 2013, the local tax authorities determined that the first profitable year of the entity was fiscal 2011 instead of fiscal 2012, despite the fact that a deemed income tax computation method was adopted by the entity as approved by the local tax authorities previously. The deemed income tax computation method is considered as a special tax computation and collection method as compared to the regular actual income/loss method. Although there is no definite guidance set forth in the current EIT law regard this issue, the Company believes it may have a favorable impact of the determination of the entity’s first profitable year. Based on the current circumstances, the Company believes that more likely than not the local tax authorities will determine the first profitable year of Business Opportunity Online Hubei as fiscal 2011, which may result in the increase of the entity’s applicable income tax rate for its fiscal year 2013 to 12.5%. Therefore, the entity accrued its income tax expense based on a 12.5% income tax rate for the six months ended June 30, 2013, and an adjustment of approximately US$131,000 income tax expenses due to this determination for the three months ended March 31, 2013 was also recorded during the three months ended June 30, 2013. The Company expects to further communicate with the local tax authorities. A new determination by the local tax authorities may result in a reversal of income tax expense for fiscal 2013 if favorable results achieve. For the six and three months ended June 30, 2012, the applicable income tax rate of Business Opportunity Online Hubei was nil%. For the three months ended March 31, 2012, Business Opportunity Online Hubei was still in the process of applying its software company qualification. Therefore, Business Opportunity Online Hubei accrued its income tax expense for the period using a 25% income tax rate, which was subsequently reversed upon being qualified as a software company in June 2012.
|
l
|
The applicable income tax rate for other PRC operating entities of the Company is 25% for the six and three months ended June 30, 2013 and 2012.
|
l
|
The current EIT law also imposed a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. Holding companies in Hong Kong, for example, will be subject to a 5% rate. Rise King WFOE is invested by immediate holding company in Hong Kong and will be entitled to the 5% preferential withholding tax rate upon distribution of the dividends to its immediate holding company.
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Turnover tax and surcharge payable
|
2,733 | 2,609 | ||||||
Enterprise income tax payable
|
4,831 | 4,074 | ||||||
7,564 | 6,683 |
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Current-PRC
|
(705 | ) | (572 | ) | ||||
Deferred-PRC
|
437 | 558 | ||||||
(268 | ) | (14 | ) |
Three Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Current-PRC
|
(475 | ) | (379 | ) | ||||
Current-PRC-adjustment due to new tax rate enactment
|
(131 | ) | 424 | |||||
Deferred-PRC
|
252 | 177 | ||||||
(354 | ) | 222 |
Amount
|
||||
US$(’000)
|
||||
Balance as of December 31, 2012 (audited)
|
1,689 | |||
Reversal during the period
|
(112 | ) | ||
Exchange translation adjustment
|
35 | |||
Balance as of June 30, 2013 (unaudited)
|
1,612 |
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Tax effect of net operating losses carried forward
|
3,360 | 2,929 | ||||||
Bad debts provision
|
946 | 824 | ||||||
Valuation allowance
|
(3,260 | ) | (3,051 | ) | ||||
1,046 | 702 |
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Deferred tax assets reclassified as current asset
|
23 | 50 | ||||||
Deferred tax assets reclassified as non-current asset
|
1,023 | 652 | ||||||
1,046 | 702 |
18.
|
Long-term borrowing from director
|
June 30,
2013
|
December 31,
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Long-term borrowing from director
|
141 | 139 |
19.
|
Warrants
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|||||||||||||||||||
|
|
Number of
underlying
shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Average
Remaining
Contractual
Life (years)
|
|
|
Number of
underlying
shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Average
Remaining
Contractual
Life (years)
|
|
||||||
Balance, December 31, 2012 (audited)
|
|
|
2,363,456
|
$
|
3.52
|
1.63
|
2,363,456
|
$
|
3.52
|
1.63
|
|
|||||||||||||
Granted / Vested
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
|
|
||||||||||
Forfeited
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
|
|
||||||||||
Exercised
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|||||||||||
Balance, June 30, 2013 (unaudited)
|
2,363,456
|
$
|
3.52
|
1.14
|
2,363,456
|
$
|
3.52
|
1.14
|
20.
|
Restricted Net Assets
|
l
|
Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;
|
l
|
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
|
21.
|
Related party transactions
|
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
-Beijing Saimeiwei Food Equipment Technology Co., Ltd,
|
122 | 55 | ||||||
-Beijing Fengshangyinli Technology Co., Ltd.
|
6 | 1 | ||||||
-Beijing Telijie Century Environmental Technology Co., Ltd.
|
46 | 10 | ||||||
174 | 66 |
Three Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
-Beijing Saimeiwei Food Equipment Technology Co., Ltd,
|
78 | 41 | ||||||
-Beijing Fengshangyinli Technology Co., Ltd.
|
4 | - | ||||||
-Beijing Telijie Century Environmental Technology Co., Ltd.
|
33 | 10 | ||||||
115 | 51 |
22.
|
Employee defined contribution plan
|
23.
|
Concentration of risk
|
24.
|
Commitments
|
Office Rental
|
||||
US$(’000)
|
||||
(Unaudited)
|
||||
Six months ending December 31,
|
||||
-2013
|
182 | |||
Year ending December 31,
|
||||
-2014
|
299 | |||
-2015
|
299 | |||
-2016
|
75 | |||
Total
|
855 |
25.
|
Segment reporting
|
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Brand
management
and sales
channel
building
|
Others
|
Inter-
segment and
reconciling
item
|
Total
|
||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
||||||||||||||||||||||
Revenue
|
9,247 | 5,127 | 140 | 1,427 | - | - | 15,941 | |||||||||||||||||||||
Cost of sales
|
4,264 | 4,743 | - | 750 | - | - | 9,757 | |||||||||||||||||||||
Total operating expenses
|
3,274 | 755 | 105 | 551 | 763 | * | - | 5,448 | ||||||||||||||||||||
Depreciation and amortization expense included in total operating expenses
|
516 | 25 | 105 | 109 | 85 | - | 840 | |||||||||||||||||||||
Operating income (loss)
|
1,709 | (371 | ) | 35 | 126 | (763 | ) | - | 736 | |||||||||||||||||||
Share of losses in equity investment affiliates
|
- | - | - | (90 | ) | (35 | ) | - | (125 | ) | ||||||||||||||||||
Expenditure for long-term assets
|
853 | - | - | - | 7 | - | 860 | |||||||||||||||||||||
Net income (loss)
|
1,510 | (431 | ) | 35 | 5 | (714 | ) | - | 405 | |||||||||||||||||||
Total assets – June 30, 2013
|
39,936 | 15,532 | 503 | 7,813 | 15,550 | (21,645 | ) | 57,689 |
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Brand
management
and sales
channel
building
|
Others
|
Inter-
segment and
reconciling
item
|
Total
|
||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
||||||||||||||||||||||
Revenue
|
5,436 | 2,489 | 71 | 896 | - | - | 8,892 | |||||||||||||||||||||
Cost of sales
|
2,620 | 2,243 | - | 427 | - | - | 5,290 | |||||||||||||||||||||
Total operating expenses
|
1,691 | 373 | 52 | 307 | 386 | * | - | 2,809 | ||||||||||||||||||||
Depreciation and amortization expense included in total operating expenses
|
259 | 13 | 52 | 55 | 43 | - | 422 | |||||||||||||||||||||
Operating income (loss)
|
1,125 | (127 | ) | 19 | 162 | (386 | ) | - | 793 | |||||||||||||||||||
Share of losses in equity investment affiliates
|
- | - | - | (45 | ) | (9 | ) | - | (54 | ) | ||||||||||||||||||
Expenditure for long-term assets
|
847 | - | - | - | 2 | - | 849 | |||||||||||||||||||||
Net income (loss)
|
845 | (172 | ) | 19 | 77 | (353 | ) | - | 416 | |||||||||||||||||||
Total assets – June 30, 2013
|
39,936 | 15,532 | 503 | 7,813 | 15,550 | (21,645 | ) | 57,689 |
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Brand
management
and sales
channel
building
|
Others
|
Inter-
segment and
reconciling
item
|
Total
|
||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
||||||||||||||||||||||
Revenue
|
9,703 | 16,513 | 142 | 1,704 | - | - | 28,062 | |||||||||||||||||||||
Cost of sales
|
4,925 | 16,357 | 12 | 608 | - | - | 21,902 | |||||||||||||||||||||
Total operating expenses
|
3,353 | 467 | 103 | 474 | 821 | * | - | 5,218 | ||||||||||||||||||||
Depreciation and amortization expense included in total operating expenses
|
521 | 35 | 103 | 107 | 52 | - | 818 | |||||||||||||||||||||
Operating income (loss)
|
1,425 | (311 | ) | 27 | 622 | (821 | ) | - | 942 | |||||||||||||||||||
Share of losses in equity investment affiliates
|
- | - | - | (204 | ) | (93 | ) | - | (297 | ) | ||||||||||||||||||
Expenditure for long-term assets
|
46 | - | - | - | - | - | 46 | |||||||||||||||||||||
Net income (loss)
|
1,586 | (293 | ) | 27 | 262 | (830 | ) | - | 752 | |||||||||||||||||||
Total assets June 30,2012
|
42,234 | 16,732 | 702 | 7,367 | 15,500 | (22,704 | ) | 59,831 |
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Brand
management
and sales
channel
building
|
Others
|
Inter-
segment and
reconciling
item
|
Total
|
||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
||||||||||||||||||||||
Revenue
|
5,358 | 6,144 | 71 | 1,554 | - | - | 13,127 | |||||||||||||||||||||
Cost of sales
|
2,833 | 6,013 | 6 | 512 | - | - | 9,364 | |||||||||||||||||||||
Total operating expenses
|
1,839 | 307 | 51 | 404 | 354 | * | - | 2,955 | ||||||||||||||||||||
Depreciation and amortization expense included in total operating expenses
|
263 | 18 | 51 | 53 | 24 | - | 409 | |||||||||||||||||||||
Operating income (loss)
|
686 | (176 | ) | 14 | 638 | (354 | ) | - | 808 | |||||||||||||||||||
Share of losses in equity investment affiliates
|
- | - | - | (94 | ) | (10 | ) | - | (104 | ) | ||||||||||||||||||
Expenditure for long-term assets
|
37 | - | - | - | - | - | 37 | |||||||||||||||||||||
Net income (loss)
|
1,154 | (181 | ) | 14 | 383 | (327 | ) | - | 1,043 | |||||||||||||||||||
Total assets June 30,2012
|
42,234 | 16,732 | 702 | 7,367 | 15,500 | (22,704 | ) | 59,831 |
26.
|
Earnings per share
|
Six months ended June 30,
|
Three months ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
US$(’000)
|
US$(’000)
|
US$(’000)
|
US$(’000)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Net income attributable to ChinaNet Online Holdings, Inc. (numerator for basic and diluted earnings per share)
|
$ | 464 | $ | 529 | $ | 434 | $ | 895 | ||||||||
Weighted average number of common shares outstanding - Basic
|
22,193,391 | 22,184,562 | 22,200,166 | 22,186,540 | ||||||||||||
Effect of diluted securities:
|
||||||||||||||||
Warrants and options
|
- | - | - | - | ||||||||||||
Weighted average number of common shares outstanding -Diluted
|
22,193,391 | 22,184,562 | 22,200,166 | 22,186,540 | ||||||||||||
Earnings per share-Basic
|
$ | 0.02 | $ | 0.02 | $ | 0.02 | $ | 0.04 | ||||||||
Earnings per share-Diluted
|
$ | 0.02 | $ | 0.02 | $ | 0.02 | $ | 0.04 |
27.
|
Share-based compensation expenses
|
Option Outstanding
|
Option Exercisable
|
|||||||||||||||||||||||
Number of
underlying shares
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
Weighted
Average
Exercise
Price
|
Number of
underlying shares
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||||
Balance, December 31, 2012 (audited)
|
939,440 | 8.51 | $ | 1.42 | 939,440 | 8.51 | $ | 1.42 | ||||||||||||||||
Granted/Vested
|
- | - | ||||||||||||||||||||||
Forfeited
|
- | - | ||||||||||||||||||||||
Exercised
|
- | - | ||||||||||||||||||||||
Balance, June 30, 2013 (unaudited)
|
939,440 | 8.01 | $ | 1.42 | 939,440 | 8.01 | $ | 1.42 |
|
Forward-Looking Statements
|
|
Overview
|
|
Basis of presentation, management estimates and critical accounting policies
|
|
Recent Accounting Standards
|
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
US$
|
US$
|
US$
|
US$
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Sales
|
||||||||||||||||
From unrelated parties
|
$ | 15,767 | $ | 27,996 | $ | 8,777 | $ | 13,076 | ||||||||
From related parties
|
174 | 66 | 115 | 51 | ||||||||||||
15,941 | 28,062 | 8,892 | 13,127 | |||||||||||||
Cost of sales
|
9,757 | 21,902 | 5,290 | 9,364 | ||||||||||||
Gross margin
|
6,184 | 6,160 | 3,602 | 3,763 | ||||||||||||
Operating expenses
|
||||||||||||||||
Selling expenses
|
1,390 | 1,402 | 602 | 713 | ||||||||||||
General and administrative expenses
|
3,146 | 3,060 | 1,744 | 1,817 | ||||||||||||
Research and development expenses
|
912 | 756 | 463 | 425 | ||||||||||||
5,448 | 5,218 | 2,809 | 2,955 | |||||||||||||
Income from operations
|
736 | 942 | 793 | 808 | ||||||||||||
Other income (expenses)
|
||||||||||||||||
Interest income
|
64 | 121 | 32 | 116 | ||||||||||||
Other (expenses)/income
|
(2 | ) | - | (1 | ) | 1 | ||||||||||
62 | 121 | 31 | 117 | |||||||||||||
Income before income tax expense, equity method investments and noncontrolling interests
|
798 | 1,063 | 824 | 925 | ||||||||||||
Income tax benefit / (expense)
|
(268 | ) | (14 | ) | (354 | ) | 222 | |||||||||
Income before equity method investments and noncontrolling interests
|
530 | 1,049 | 470 | 1,147 | ||||||||||||
Share of losses in equity investment affiliates
|
(125 | ) | (297 | ) | (54 | ) | (104 | ) | ||||||||
Net income
|
405 | 752 | 416 | 1,043 | ||||||||||||
Net loss / (income) attributable to noncontrolling interests
|
59 | (223 | ) | 18 | (148 | ) | ||||||||||
Net income attributable to ChinaNet Online Holdings, Inc.
|
464 | 529 | 434 | 895 | ||||||||||||
Earnings per share
|
||||||||||||||||
Earnings per common share
|
||||||||||||||||
Basic
|
$ | 0.02 | $ | 0.02 | $ | 0.02 | $ | 0.04 | ||||||||
Diluted
|
$ | 0.02 | $ | 0.02 | $ | 0.02 | $ | 0.04 | ||||||||
Weighted average number of common shares outstanding:
|
||||||||||||||||
Basic
|
22,193,391 | 22,184,562 | 22,200,166 | 22,186,540 | ||||||||||||
Diluted
|
22,193,391 | 22,184,562 | 22,200,166 | 22,186,540 |
|
Revenue
|
Six Months Ended June 30,
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
|
(Amounts expressed in thousands of US dollars, except percentages)
|
|||||||||||||||
Revenue type
|
||||||||||||||||
Internet advertisement
|
$ | 9,046 | 56.7 | % | $ | 9,619 | 34.3 | % | ||||||||
Technical services
|
201 | 1.2 | % | 84 | 0.3 | % | ||||||||||
TV advertisement
|
5,127 | 32.2 | % | 16,513 | 58.8 | % | ||||||||||
Bank kiosks
|
140 | 0.9 | % | 142 | 0.5 | % | ||||||||||
Brand management and sales channel building
|
1,427 | 9.0 | % | 1,704 | 6.1 | % | ||||||||||
Total
|
$ | 15,941 | 100 | % | $ | 28,062 | 100 | % |
Three Months Ended June 30,
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
(Amounts expressed in thousands of US dollars, except percentages)
|
||||||||||||||||
Revenue type
|
||||||||||||||||
Internet advertisement
|
$ | 5,335 | 60.0 | % | $ | 5,313 | 40.5 | % | ||||||||
Technical services
|
101 | 1.1 | % | 45 | 0.3 | % | ||||||||||
TV advertisement
|
2,489 | 28.0 | % | 6,144 | 46.8 | % | ||||||||||
Bank kiosks
|
71 | 0.8 | % | 71 | 0.6 | % | ||||||||||
Brand management and sales channel building
|
896 | 10.1 | % | 1,554 | 11.8 | % | ||||||||||
Total
|
$ | 8,892 | 100 | % | $ | 13,127 | 100 | % |
Name of subsidiary or VIE
|
Revenue from
unrelated
parties
|
Revenue
from related
parties
|
Revenue
from inter-
company
|
Total
|
||||||||||||
$(’000) | $(’000) | $(’000) | $(’000) | |||||||||||||
Rise King WFOE
|
106 | 95 | - | 201 | ||||||||||||
Business Opportunity Online and subsidiaries
|
10,540 | 79 | - | 10,619 | ||||||||||||
Beijing CNET Online and subsidiaries
|
5,121 | - | - | 5,121 | ||||||||||||
Total revenue
|
15,767 | 174 | - | 15,941 |
Name of subsidiary or VIE
|
Revenue from
unrelated
parties
|
Revenue from
related
parties
|
Revenue from
inter-
company
|
Total
|
||||||||||||
$(’000) | $(’000) | $(’000) | $(’000) | |||||||||||||
Rise King WFOE
|
53 | 48 | - | 101 | ||||||||||||
Business Opportunity Online and subsidiaries
|
6,413 | 67 | 6,480 | |||||||||||||
Beijing CNET Online and subsidiaries
|
2,311 | - | - | 2,311 | ||||||||||||
Total revenue
|
8,777 | 115 | - | 8,892 |
Name of subsidiary or VIE
|
Cost of Sales
|
Gross Margin
|
||||||
$(’000) | $(’000) | |||||||
Rise King WFOE
|
- | 201 | ||||||
Business Opportunity Online and subsidiaries
|
5,642 | 4,977 | ||||||
Beijing CNET Online and subsidiaries
|
4,115 | 1,006 | ||||||
Total
|
9,757 | 6,184 |
Name of subsidiary or VIE
|
Cost of Sales
|
Gross Margin
|
||||||
$(’000) | $(’000) | |||||||
Rise King WFOE
|
- | 101 | ||||||
Business Opportunity Online and subsidiaries
|
3,616 | 2,864 | ||||||
Beijing CNET Online and subsidiaries
|
1,674 | 637 | ||||||
Total
|
5,290 | 3,602 |
Name of subsidiary or VIE
|
Net (Loss)/Income
|
|||
$(’000) | ||||
Rise King WFOE
|
(593 | ) | ||
Business Opportunity Online and subsidiaries
|
1,341 | |||
Beijing CNET Online and subsidiaries
|
(93 | ) | ||
Shanghai Jing Yang
|
(2 | ) | ||
ChinaNet Online Holdings, Inc.
|
(248 | ) | ||
Total net loss before allocation to the noncontrolling interest
|
405 |
Name of subsidiary or VIE
|
Net (Loss)/Income
|
|||
$(’000) | ||||
Rise King WFOE
|
(318 | ) | ||
Business Opportunity Online and subsidiaries
|
678 | |||
Beijing CNET Online and subsidiaries
|
169 | |||
Shanghai Jing Yang
|
(1 | ) | ||
ChinaNet Online Holdings, Inc.
|
(112 | ) | ||
Total net loss before allocation to the noncontrolling interest
|
416 |
Name of subsidiary or VIE
|
Revenue from
unrelated
parties
|
Revenue
from related
parties
|
Revenue
from inter-
company
|
Total
|
||||||||||||
$(’000) | $(’000) | $(’000) | $(’000) | |||||||||||||
Rise King WFOE
|
67 | 17 | - | 84 | ||||||||||||
Business Opportunity Online and subsidiaries
|
23,413 | 49 | - | 23,462 | ||||||||||||
Beijing CNET Online and subsidiaries
|
4,516 | - | - | 4,516 | ||||||||||||
Total revenue
|
27,996 | 66 | - | 28,062 |
Name of subsidiary or VIE
|
Revenue from
unrelated
parties
|
Revenue
from related
parties
|
Revenue
from inter-
company
|
Total
|
||||||||||||
$(’000) | $(’000) | $(’000) | $(’000) | |||||||||||||
Rise King WFOE
|
28 | 17 | - | 45 | ||||||||||||
Business Opportunity Online and subsidiaries
|
10,745 | 34 | - | 10,779 | ||||||||||||
Beijing CNET Online and subsidiaries
|
2,303 | - | - | 2,303 | ||||||||||||
Total revenue
|
13,076 | 51 | - | 13,127 |
Name of subsidiary or VIE
|
Cost of Sales
|
Gross Margin
|
||||||
$(’000) | $(’000) | |||||||
Rise King WFOE
|
5 | 79 | ||||||
Business Opportunity Online and subsidiaries
|
18,506 | 4,956 | ||||||
Beijing CNET Online and subsidiaries
|
3,385 | 1,131 | ||||||
Shanghai Jing Yang
|
6 | (6 | ) | |||||
Total
|
21,902 | 6,160 |
Name of subsidiary or VIE
|
Cost of Sales
|
Gross Margin
|
||||||
$(’000) | $(’000) | |||||||
Rise King WFOE
|
3 | 42 | ||||||
Business Opportunity Online and subsidiaries
|
8,181 | 2,598 | ||||||
Beijing CNET Online and subsidiaries
|
1,174 | 1,129 | ||||||
Shanghai Jing Yang
|
6 | (6 | ) | |||||
Total
|
9,364 | 3,763 |
Name of subsidiary or VIE
|
Net (Loss)/Income
|
|||
$(’000) | ||||
Rise King WFOE
|
(921 | ) | ||
Business Opportunity Online and subsidiaries
|
2,071 | |||
Beijing CNET Online and subsidiaries
|
35 | |||
Shanghai Jing Yang
|
(8 | ) | ||
ChinaNet Online Holdings, Inc.
|
(425 | ) | ||
Total net income before allocation to the noncontrolling interest
|
752 |
Name of subsidiary or VIE
|
Net (Loss)/Income
|
|||
$(’000) | ||||
Rise King WFOE
|
(602 | ) | ||
Business Opportunity Online and subsidiaries
|
1,658 | |||
Beijing CNET Online and subsidiaries
|
214 | |||
Shanghai Jing Yang
|
(7 | ) | ||
ChinaNet Online Holdings, Inc.
|
(220 | ) | ||
Total net income before allocation to the noncontrolling interest
|
1,043 |
l
|
Internet advertising revenues for the six months ended June 30, 2013 were approximately US$9.05 million as compared to approximately US$9.62 million for the same period in 2012. For the three months ended June 30, 2013 and 2012, internet advertising revenues was approximately US$5.34 million and US$5.31 million, respectively. Excluding the business tax expenses of approximately US$0.47 million for the six months ended June 30, 2012, which was included in revenue before the launching of the Pilot Collection of Value Added Tax in lieu of Business Tax commencing on September 1, 2012 in Beijing, November 1, 2012 in Fujian province and December 1, 2012 in Hubei province, our internet advertising revenue decreased by approximately 1% for the six months ended June 30, 2013 as compared to the same periods of last year. The decrease in our internet revenues for the six months ended June 30, 2013 was primarily due to the approximately 9% decrease in revenues of this segment incurred during the three months ended March 31, 2013 as compared to the same period of last year, which resulted from a decrease in the average internet advertising spending per customer due to the general decline of China’s economy which continues during fiscal 2013. This situation was slightly improved during the second quarter of fiscal 2013, alone with the gradual increase in the number of customers of this segment, although there is no significant improvement in the per customer spending. Excluding the business tax expenses effect as discussed above of approximately US$0.26 million, our internet revenues increased by approximately 6% for the three months ended June 30, 2013.
|
l
|
Revenues generated from technical services provided by Rise King WFOE were US$0.20 million for the six months ended June 30, 2013 as compared to US$0.08 million for the same period in 2012. For the three months ended June 30, 2013 and 2012, revenues generated from technical services were approximately US$0.10 million and US$0.05 million, respectively. Due to the slowdown in economic growth that began from the second quarter of 2011, and slightly improved in fiscal 2012 and the first half of 2013, many of our clients, including our branded clients, who are mostly SMEs, reduced their advertising spending significantly. In response to the overall economic downturn in China, from the second half of 2011, the majority of our clients cancelled the subscription of these services and only continued their basic internet advertising service, which was recorded in as our internet advertising revenue discussed above. Therefore, for the six and three months ended June 30, 2013 and 2012, our technical services revenues generated by Rise King WFOE were insignificant.
|
l
|
Our TV advertising revenue decreased significantly to US$5.13 million for the six months ended June 30, 2013 from US$16.51 million for the same period in 2012. For the three months ended June 30, 2013, our TV advertising revenue decreased significantly to US$2.49 million from US$6.14 million for the same period in 2012. For the six months ended June 30, 2013, we sold approximately 3,532 minutes of advertising time that we purchased from different provincial TV stations as compared to approximately 15,300 minutes we sold in the same period of 2012. For the three months ended June 30, 2013, we sold approximately 1,668 minutes of TV advertising time as compared to approximately 4,904 minutes we sold in the same period of last year. For the six and three months ended June 30, 2012, we had significantly increased the quantity of time slots purchased from TV stations as compared with previous years with the purpose to strategically bind the cooperating with the TV station for the launching of our entrepreneurial reality show, and consecutively to facilitate more general public visits to our entrepreneurial website, Chuanye.com, create additional traffic on our advertising portals, 28.com and Liansuo.com, and monetize more branded larger size small and medium enterprises for our services and secure our competitive advantage and resources in the TV business segment against our competitors in concordance. However, due to the Chinese New Year holiday effect in the first quarter of each fiscal year, which is correspondingly considered to be the slowest time for our TV advertising segment, and due to the relatively decreased demands of TV advertising due to increased time cost, we achieved only 1% and 2% gross margin for this segment for the six and three months ended June 30, 2012, respectively. For the six and three months ended June 30, 2013, we sold limited TV time slots at an affordable cost to the needed customers at an agreed profitable price, which enabled us to improve the gross margin for this business segment to 7% and 10%, respectively. We will continue to monitor our customers’ needs of the TV advertising services and improve the profitability of this business segment in 2013.
|
l
|
For the six months ended June 30, 2013 and 2012, we earned both US$0.14 million of revenue from the bank kiosk business segment. For the three months ended June 30, 2013 and 2012, we earned both approximately US$0.07 million of revenue from the bank kiosk business segment. The bank kiosk advertising business is not intended to expand at the moment as management’s primary focus is on expanding internet business. The kiosk business’ many details still need to be further analyzed and confirmed before allocating more capital to this business unit. Therefore, this segment was not significant contributor to our revenue for the six and three months ended June 30, 2013 and 2012. Management currently maintains this business without any expansion plans. Some of the technology used in this business unit will be fully integrated into the overall advertising and marketing platform.
|
l
|
For the six months ended June 30, 2013, we achieved approximately US$1.43 million service revenue from our brand management and sales channel building segment as compared to US$1.70 million service revenue generated in the same period of 2012. For the three months ended June 30, 2013, we achieved approximately US$0.90 million service revenue from this segment as compared to US$1.55 million service revenue generated in the same period of 2012. The decrease in revenues generated from this business segment for the six and three months ended June 30, 2013 as compared with the same periods of last year was primarily due to a decrease in the average spending per customer caused by the general decline of China’s economy which continues during the first half year of 2013.
|
|
Cost of revenues
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
2013
|
2012
|
|||||||||||||||||||||||
(Amounts expressed in thousands of US dollars, except percentages)
|
||||||||||||||||||||||||
Revenue
|
Cost
|
GP ratio
|
Revenue
|
Cost
|
GP ratio
|
|||||||||||||||||||
Internet advertisement
|
$ | 9,046 | $ | 4,264 | 53 | % | $ | 9,619 | $ | 4,920 | 49 | % | ||||||||||||
Technical service
|
201 | - | 100 | % | 84 | 5 | 94 | % | ||||||||||||||||
TV advertisement
|
5,127 | 4,743 | 7 | % | 16,513 | 16,357 | 1 | % | ||||||||||||||||
Bank kiosk
|
140 | - | 100 | % | 142 | 12 | 92 | % | ||||||||||||||||
Brand management and sales channel building
|
1,427 | 750 | 47 | % | 1,704 | 608 | 64 | % | ||||||||||||||||
Total
|
$ | 15,941 | $ | 9,757 | 39 | % | $ | 28,062 | $ | 21,902 | 22 | % |
Three Months Ended June 30,
|
||||||||||||||||||||||||
2013
|
2012
|
|||||||||||||||||||||||
(Amounts expressed in thousands of US dollars, except percentages)
|
||||||||||||||||||||||||
Revenue
|
Cost
|
GP ratio
|
Revenue
|
Cost
|
GP ratio
|
|||||||||||||||||||
Internet advertisement
|
$ | 5,335 | $ | 2,620 | 51 | % | $ | 5,313 | $ | 2,830 | 47 | % | ||||||||||||
Technical service
|
101 | - | 100 | % | 45 | 3 | 93 | % | ||||||||||||||||
TV advertisement
|
2,489 | 2,243 | 10 | % | 6,144 | 6,013 | 2 | % | ||||||||||||||||
Bank kiosk
|
71 | - | 100 | % | 71 | 6 | 92 | % | ||||||||||||||||
Brand management and sales channel building
|
896 | 427 | 52 | % | 1,554 | 512 | 67 | % | ||||||||||||||||
Total
|
$ | 8,892 | $ | 5,290 | 41 | % | $ | 13,127 | $ | 9,364 | 29 | % |
l
|
TV advertisement time cost is the largest component of cost of revenue for TV advertisement revenue. We purchase TV advertisement time from different provincial TV stations and resell it to our TV advertisement clients. Our TV advertisement time cost was approximately US$4.74 million and US$16.36 million for the six months ended June 30, 2013 and 2012, respectively. For the three months ended June 30, 2013 and 2012, our TV advertisement time cost was approximately US$2.24 million and US$6.01 million, respectively. The significant decrease in our total TV advertisement time cost was in line with the significant decrease in our TV advertising revenue for the six and three months ended June 30, 2013 as compared to the same periods of 2012, as discussed above.
|
l
|
Cost recognized for Brand management and sales channel building business segment mainly consisted of director labor cost for providing these services to our customers.
|
|
Gross Profit
|
|
Operating Expenses and Net Income
|
Six Months Ended June 30,
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
(Amounts expressed in thousands of US dollars, except percentages)
|
||||||||||||||||
Amount
|
% of total
revenue
|
Amount
|
% of total
revenue
|
|||||||||||||
Total Revenue
|
$ | 15,941 | 100 | % | $ | 28,062 | 100 | % | ||||||||
Gross Profit
|
6,184 | 39 | % | 6,160 | 22 | % | ||||||||||
Selling expenses
|
1,390 | 9 | % | 1,402 | 5 | % | ||||||||||
General and administrative expenses
|
3,146 | 20 | % | 3,060 | 11 | % | ||||||||||
Research and development expenses
|
912 | 6 | % | 756 | 3 | % | ||||||||||
Total operating expenses
|
$ | 5,448 | 34 | % | $ | 5,218 | 19 | % |
Three Months Ended June 30,
|
||||||||||||||||
2013
|
2012
|
|||||||||||||||
(Amounts expressed in thousands of US dollars, except percentages)
|
||||||||||||||||
Amount
|
% of total
revenue
|
Amount
|
% of total
revenue
|
|||||||||||||
Total Revenue
|
$ | 8,892 | 100 | % | $ | 13,127 | 100 | % | ||||||||
Gross Profit
|
3,602 | 41 | % | 3,763 | 29 | % | ||||||||||
Selling expenses
|
602 | 7 | % | 713 | 5 | % | ||||||||||
General and administrative expenses
|
1,744 | 20 | % | 1,817 | 14 | % | ||||||||||
Research and development expenses
|
463 | 5 | % | 425 | 3 | % | ||||||||||
Total operating expenses
|
$ | 2,809 | 32 | % | $ | 2,955 | 22 | % |
l
|
Selling expenses: Selling expenses decreased to US$1.39 million for the six months ended June 30, 2013 from US$1.40 million for the same period of 2012. For the three months ended June 30, 2013, selling expense decreased to US$0.60 million, as compared to US$0.71 million for the same period of last year. Our selling expenses primarily consist of advertising expenses for brand development that we pay to TV stations and other media outlets for the promotion and marketing of our advertising web portals, other advertising and promotional expenses, website server hosting and broadband leasing expenses, staff salaries, staff benefits, performance bonuses, travelling expenses, communication expenses and other general office expenses of our sales department. For the six months ended June 30, 2013, the change in our selling expenses was primarily due to the following reasons: (1) the decrease in staff salary, bonus, employee related benefit expenses and other general selling expenses, such as travelling expenses, business and entertainment expenses and communication expenses of approximately US$0.05 million, primarily due to decrease in sales performance achieved during the period as compared to that achieved in the same period of last year; (2) the increase in website server hosting and broadband leasing expense of approximately US$0.06 million to enhance the safety of our network platforms; and (3) the decrease in our brand development advertising expenses for our advertising web portals of approximately US$0.02 million. Due to the current economic downturn, the increase of TV advertising cost and our overall cost reduction plan, we decided to slow down the brand-building activities until the recovery of the economy based on the factor that our key advertising web portal, 28.com, has been already recognized as one of the most popular Chinese internet portals providing internet advertising and marketing services with sales leads, and other value-added services to SMEs, particularly for small and medium-sized franchisors, in the PRC, by our efforts in brand building over previous years. In 2013, we will continue to actively participate in both domestic and international franchise exhibitions and in government supported employment promotion programs, which are considered as more cost-effective ways for our consistent brand building efforts. For the three months ended June 30, 2012, the decrease in selling expenses was primarily due to the decrease in sales performance based salary and bonus expenses of our sales department.
|
l
|
General and administrative expenses: General and administrative expenses increased to US$3.15 million for the six months ended June 30, 2013 from US$3.06 million for the same period in 2012. For the three months ended June 30, 2013, our general and administrative expenses decreased to US$1.74 million from US$1.82 million for the same period of last year. Our general and administrative expenses primarily consist of salaries and benefits for management, accounting and administrative personnel, office rentals, depreciation of office equipment, professional service fees, maintenance, utilities and other office expenses. For the six months ended June 30, 2013, the change in our general and administrative expenses was primarily due to the following reasons: (1) the decrease in general administrative expenses, such as: office supplies, travelling expenses and entertainment expenses of approximately US$0.02 million, due to the cost reduction plan executed by management; (2) the increase in allowances for doubtful debts of approximately US$0.23 million related to our overdue TV advertising contract guarantee deposits; and (3) the decrease in professional service (such as: investor relations, legal, etc.) charges of approximately US$0.12 million, primarily due to decrease in the related services required from these parties as compared to the same period of last year. For the three months ended June 30, 2013, the decrease in our general and administrative expenses was primarily due to the decrease in professional service charges and bad debts provisions of approximately US$0.05 million and US$0.03 million, respectively.
|
l
|
Research and development expenses: Research and development expenses increased to US$0.91 million and US$0.46 million for the six and three months ended June 30, 2013 as compared to US$0.76 million and US$0.43 million for the same periods of 2012, respectively. Our research and development expenses primarily consist of salaries and benefits for the research and development staff, equipment depreciation expenses, and office utilities and supplies allocated to our research and development department. The increase in research and development expenses for the six and three months ended June 30, 2013 was primarily due to the increase in the research and development activities related to the cloud-based application software and the new mobile platform for internet advertising during these periods.
|
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Amounts in thousands of US dollars
|
||||||||
Net cash (used in) provided by operating activities
|
(20 | ) | $ | 1,092 | ||||
Net cash used in investing activities
|
(2,140 | ) | (3,049 | ) | ||||
Net cash used in financing activities
|
- | (227 | ) | |||||
Effect of foreign currency exchange rate changes on cash
|
69 | 61 | ||||||
Net decrease in cash and cash equivalents
|
(2,091 | ) | $ | (2,123 | ) |
|
Net cash (used in) provided by operating activities:
|
(1)
|
net income excluding an approximately US$0.44 million net deferred income tax benefit, a US$0.99 million non-cash expenses of depreciation, amortizations, share-based compensation and our share of losses in equity investment affiliates, and a US$0.79 million of allowances for doubtful debts of approximately US$1.74 million;
|
(2)
|
the receipt of cash from operations from changes in operating assets and liabilities such as:
|
-
|
accounts payable increased by approximately US$0.14 million;
|
-
|
accruals increased by approximately US$0.03 million;
|
-
|
prepayment to suppliers decreased by approximately US$0.26 million;
|
-
|
other assets decreased by approximately US$0.03 million; and
|
-
|
taxes payable increased by approximately US$0.74 million.
|
(3)
|
offset by the use from operations from changes in operating assets and liabilities such as:
|
-
|
accounts receivable and due from related parties for the advertising services provided increased by approximately US$1.94 million;
|
-
|
other receivables increased by approximately US$0.71 million;
|
-
|
advance from customers decreased by US$0.27 million and
|
-
|
other current liabilities decreased by approximately US$0.04 million.
|
(1)
|
net income excluding an approximately US$0.56 million net deferred income tax benefit, an approximately US$0.56 million of allowance for doubtful debts and a US$1.14 million non-cash expenses of depreciation, amortizations, share-based compensation and our share of losses in equity investment affiliates of approximately US$1.90 million;
|
(2)
|
the receipt of cash from operations from changes in operating assets and liabilities such as:
|
-
|
other receivables decreased by approximately US$0.23 million, which was primarily due to the collection of overdue contact deposit for TV advertising resources purchased;
|
-
|
prepayment and deposit to suppliers decreased by approximately US$1.98 million, which was primarily due to the transferring of prepayment to suppliers to cost of sales when the related services had been provided by the suppliers;
|
-
|
other current assets decreased by approximately US$0.03 million;
|
-
|
advances from customers increased by approximately US$1.07 million;
|
-
|
accounts payable, other payable and accrued payroll and other accruals increased by approximately $0.57 million; and
|
-
|
taxes payable increased by approximately US$0.78 million.
|
(3)
|
offset by the use from operations from changes in operating assets and liabilities such as:
|
-
|
accounts receivable and due from related parties for the advertising services provided increased by approximately US$5.30 million; and
|
-
|
due to related parties decreased by approximately US$0.16 million, due to returning the nominal shareholders of Shanghai Jing Yang for their original paid-in capital contribution.
|
|
Net cash used in investing activities:
|
|
Net cash provided by financing activities:
|
|
Restricted Net Assets
|
l
|
Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;
|
l
|
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
|
Item 4.
|
Exhibit No.
|
Document Description
|
|
31.1
|
Certification of the Principal Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of the Principal Accounting and Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of the Principal Executive Officer and of the Principal Accounting and Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
|
|
101
|
Interactive Data Files
|
CHINANET ONLINE HOLDINGS, INC.
|
||
Date: August 14, 2013
|
By:
|
/s/ Handong Cheng
|
Name: Handong Cheng
|
||
Title: Chief Executive Officer
(Principal Executive Officer)
|
||
|
By:
|
/s/ Zhige Zhang
|
Name: Zhige Zhang
|
||
Title: Chief Financial Officer
(Principal Accounting and Financial Officer)
|
/s/ Handong Cheng
|
|
Handong Cheng
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
/s/ Zhige Zhang
|
|
Zhige Zhang
|
|
Chief Financial Officer
|
|
(Principal Accounting and Financial Officer)
|
/s/ Handong Cheng
|
|
Handong Cheng
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
/s/ Zhige Zhang
|
|
Zhige Zhang
|
|
Chief Financial Officer
|
|
(Principal Accounting and Financial Officer)
|
Note 17 - Taxation (Details) - Deferred tax liabilities (USD $)
In Thousands, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
US$(’000) | |
Balance as of December 31, 2012 (audited) | $ 1,689 |
Reversal during the period | (112) |
Exchange translation adjustment | 35 |
Balance as of June 30, 2013 (unaudited) | $ 1,612 |
Note 14 - Goodwill (Details) - Goodwill (USD $)
In Thousands, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
US$(’000) | |
Balance as of December 31, 2012 (audited) | $ 11,083 |
Exchange translation adjustment | 229 |
Balance as of June 30, 2013 (unaudited) | $ 11,312 |
Note 22 - Employee defined contribution plan (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Compensation and Retirement Disclosure [Abstract] | ||||
Defined Contribution Plan, Cost Recognized | $ 111,000 | $ 91,000 | $ 231,000 | $ 195,000 |
Note 26 - Earnings per share (Details) - Basic and diluted earnings per share (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Note 26 - Earnings per share (Details) - Basic and diluted earnings per share [Line Items] | ||||
Net income attributable to ChinaNet Online Holdings, Inc. (numerator for basic and diluted earnings per share) (in Dollars) | $ 434 | $ 895 | $ 464 | $ 529 |
Weighted average number of common shares outstanding - Basic | 22,200,166 | 22,186,540 | 22,193,391 | 22,184,562 |
Weighted average number of common shares outstanding -Diluted | 22,200,166 | 22,186,540 | 22,193,391 | 22,184,562 |
Earnings per share-Basic (in Dollars per share) | $ 0.02 | $ 0.04 | $ 0.02 | $ 0.02 |
Earnings per share-Diluted (in Dollars per share) | $ 0.02 | $ 0.04 | $ 0.02 | $ 0.02 |
Note 12 - Intangible assets
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets Disclosure [Text Block] |
Amortization
expenses in aggregate for the six months ended June 30, 2013
and 2012 were approximately US$529,000 and US$523,000,
respectively.
Amortization
expenses in aggregate for the three months ended June 30,
2013 and 2012 were approximately US$266,000 and US$261,000,
respectively.
Based
on the carrying value of the finite-lived intangible assets
recorded as of June 30, 2013, and assuming no subsequent
impairment of the underlying intangible assets, the estimated
future amortization expenses is approximately US$521,000 for
the six months ended December 31, 2013, approximately
US$1,043,000 per year through December 31, 2015,
approximately US$1,003,000 for the year ended December 31,
2016 and approximately US$506,000 for the year ended December
31, 2017.
|
Note 26 - Earnings per share (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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Earnings per share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
|
Consolidated Statements Of Income And Comprehensive Income (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Sales | ||||
From unrelated parties | $ 8,777,000 | $ 13,076,000 | $ 15,767,000 | $ 27,996,000 |
From related parties | 115,000 | 51,000 | 174,000 | 66,000 |
8,892,000 | 13,127,000 | 15,941,000 | 28,062,000 | |
Cost of sales | 5,290,000 | 9,364,000 | 9,757,000 | 21,902,000 |
Gross margin | 3,602,000 | 3,763,000 | 6,184,000 | 6,160,000 |
Operating expenses | ||||
Selling expenses | 602,000 | 713,000 | 1,390,000 | 1,402,000 |
General and administrative expenses | 1,744,000 | 1,817,000 | 3,146,000 | 3,060,000 |
Research and development expenses | 463,000 | 425,000 | 912,000 | 756,000 |
2,809,000 | 2,955,000 | 5,448,000 | 5,218,000 | |
Income from operations | 793,000 | 808,000 | 736,000 | 942,000 |
Other income (expenses) | ||||
Interest income | 32,000 | 116,000 | 64,000 | 121,000 |
Other (expenses)/income | (1,000) | 1,000 | (2,000) | |
31,000 | 117,000 | 62,000 | 121,000 | |
Income before income tax expense, equity method investments and noncontrolling interests | 824,000 | 925,000 | 798,000 | 1,063,000 |
Income tax benefit / (expense) | (354,000) | 222,000 | (268,000) | (14,000) |
Income before equity method investments and noncontrolling interests | 470,000 | 1,147,000 | 530,000 | 1,049,000 |
Share of losses in equity investment affiliates | (54,000) | (104,000) | (125,000) | (297,000) |
Net (loss)/income | 416,000 | 1,043,000 | 405,000 | 752,000 |
Net loss / (income) attributable to noncontrolling interests | 18,000 | (148,000) | 59,000 | (223,000) |
Foreign currency translation gain | 613,000 | 35,000 | 828,000 | 298,000 |
Comprehensive Income | 1,029,000 | 1,078,000 | 1,233,000 | 1,050,000 |
Comprehensive loss / (income) attributable to noncontrolling interests | 9,000 | (154,000) | 47,000 | (266,000) |
Comprehensive income attributable to ChinaNet Online Holdings, Inc. | 1,038,000 | 924,000 | 1,280,000 | 784,000 |
Earnings per common share | ||||
Basic (in Dollars per share) | $ 0.02 | $ 0.04 | $ 0.02 | $ 0.02 |
Diluted (in Dollars per share) | $ 0.02 | $ 0.04 | $ 0.02 | $ 0.02 |
Weighted average number of common shares outstanding: | ||||
Basic (in Shares) | 22,200,166 | 22,186,540 | 22,193,391 | 22,184,562 |
Diluted (in Shares) | 22,200,166 | 22,186,540 | 22,193,391 | 22,184,562 |
Net income attributable to ChinaNet Online Holdings, Inc. | $ 434,000 | $ 895,000 | $ 464,000 | $ 529,000 |
Note 5 - Term deposit
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
|||
Term Deposit [Abstract] | |||
Term Deposit [Text Block] |
Term
deposit as of June 30, 2013 represented the amount of cash
placed as a term deposit by one of the Company’s
operating VIEs in a major financial institution of China,
which management believes is of high credit quality. The
interest rate of the term deposit was 3.5% per annual. The
term deposit matured on July 5, 2013 and was extended to July
5, 2014.
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Note 19 - Warrants
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Warrants Disclosure Textblock [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants Disclosure Textblock |
The
Company issued warrants in its August 2009 Financing.
Warrants issued and outstanding at June 30, 2013 and changes
during the six months then ended are as follows:
|
Note 7 - Other receivables, net (Details) - Other receivables, net (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Note 7 - Other receivables, net (Details) - Other receivables, net [Line Items] | ||
Allowance for doubtful debts | $ (956,000) | $ (158,000) |
Other receivables, net | 3,080,000 | 3,103,000 |
Short-term loans to unrelated entities | 485,000 | 475,000 |
Term deposit interest receivable | 120,000 | 59,000 |
Short-term Loan [Member]
|
||
Note 7 - Other receivables, net (Details) - Other receivables, net [Line Items] | ||
Other receivables, gross | 2,262,000 | 2,375,000 |
Staff Advances [Member]
|
||
Note 7 - Other receivables, net (Details) - Other receivables, net [Line Items] | ||
Other receivables, gross | 213,000 | 194,000 |
Overdue Contract Execution Deposits [Member]
|
||
Note 7 - Other receivables, net (Details) - Other receivables, net [Line Items] | ||
Other receivables, gross | $ 956,000 | $ 158,000 |
Note 2 - Variable Interest Entities (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Note 2 - Variable Interest Entities (Details) [Line Items] | ||||
Sales Revenue, Services, Net | $ 8,892,000 | $ 13,127,000 | $ 15,941,000 | $ 28,062,000 |
Cost of Services | 5,290,000 | 9,364,000 | 9,757,000 | 21,902,000 |
Operating Expenses | 2,809,000 | 2,955,000 | 5,448,000 | 5,218,000 |
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | 416,000 | 1,043,000 | 405,000 | 752,000 |
VIEs [Member]
|
||||
Note 2 - Variable Interest Entities (Details) [Line Items] | ||||
Sales Revenue, Services, Net | 8,790,000 | 13,083,000 | 15,740,000 | 27,979,000 |
Cost of Services | 5,289,000 | 9,361,000 | 9,756,000 | 21,897,000 |
Operating Expenses | 2,232,000 | 2,055,000 | 4,322,000 | 3,711,000 |
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | $ 845,000 | $ 1,865,000 | $ 1,245,000 | $ 2,098,000 |
Note 13 - Deposit for purchasing of software technology
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
|||
Deposits For Purchases [Abstract] | |||
Deposits For Purchases [Text Block] |
Deposit
for purchasing of software technology: the Company made a
deposit to an unrelated technical consulting entity of
RMB5,000,000 (approximately US$808,000) for the purchasing of
software technology that related to cloud-computing based
applications and mobile based applications. As of June 30,
2013, the Company was still in the preliminary selection and
valuation stage of these target software applications.
|
Note 17 - Taxation (Details) - Deferred tax assets (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Deferred tax assets [Abstract] | ||
Tax effect of net operating losses carried forward | $ 3,360 | $ 2,929 |
Bad debts provision | 946 | 824 |
Valuation allowance | (3,260) | (3,051) |
Deferred tax assets net | 1,046 | 702 |
Deferred tax assets reclassified as current asset | 23 | 50 |
Deferred tax assets reclassified as non-current asset | $ 1,023 | $ 652 |
Note 18 - Long-term borrowing from director (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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Long Term Borrowing From Director Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Long-term Borrowing from Director [Table Text Block] |
|
Note 16 - Payable for acquisition (Details) (CNY)
In Millions, unless otherwise specified |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2012
Sou Yi Lian Mei [Member]
|
Sep. 30, 2012
Sou Yi Lian Mei [Member]
|
Dec. 20, 2011
Sou Yi Lian Mei [Member]
|
|
Note 16 - Payable for acquisition (Details) [Line Items] | ||||
Business Combination, Consideration Transferred, Liabilities Incurred (in Yuan Renminbi) | 8.0 | |||
Percentage Of Voting Interests Acquired | 49.00% | 49.00% | 51.00% |
Note 2 - Variable Interest Entities (Details) - The consolidated VIEs’ assets and liabilities
|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2013
CNY
|
Jun. 29, 2013
USD ($)
|
Dec. 31, 2012
USD ($)
|
Jun. 30, 2012
USD ($)
|
Dec. 31, 2011
USD ($)
|
Jun. 30, 2013
VIEs [Member]
USD ($)
|
Dec. 31, 2012
VIEs [Member]
USD ($)
|
||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Current assets: | ||||||||||||
Cash and cash equivalents | $ 3,392,000 | $ 5,483,000 | $ 8,572,000 | $ 10,695,000 | $ 2,381,000 | $ 4,275,000 | ||||||
Term deposit | 3,426,000 | 3,357,000 | 3,426,000 | 3,357,000 | ||||||||
Accounts receivable, net | 10,460,000 | 8,486,000 | 10,349,000 | 8,392,000 | ||||||||
Other receivables, net | 3,080,000 | 3,103,000 | 2,952,000 | 2,921,000 | ||||||||
Prepayment and deposit to suppliers | 14,636,000 | 14,596,000 | 14,635,000 | 14,587,000 | ||||||||
Due from related parties | 375,000 | 210,000 | 118,000 | 49,000 | ||||||||
Other current assets | 104,000 | 136,000 | 45,000 | 35,000 | ||||||||
Deferred tax assets-current | 23,000 | 50,000 | 23,000 | 50,000 | ||||||||
Total current assets | 35,496,000 | 35,421,000 | 33,929,000 | 33,666,000 | ||||||||
Investment in and advance to equity investment affiliates | 851,000 | 851,000 | 959,000 | 808,000 | 916,000 | |||||||
Property and equipment, net | 1,417,000 | 1,636,000 | 1,231,000 | 1,389,000 | ||||||||
Intangible assets, net | 6,782,000 | 7,167,000 | 6,778,000 | 7,152,000 | ||||||||
Deposit for purchasing of software technology | 808,000 | 5,000,000 | 808,000 | |||||||||
Goodwill | 11,312,000 | 11,083,000 | 11,312,000 | 11,083,000 | ||||||||
Deferred tax assets-non current | 1,023,000 | 652,000 | 793,000 | 511,000 | ||||||||
Total Assets | 57,689,000 | 56,918,000 | 55,659,000 | 54,717,000 | ||||||||
Current liabilities: | ||||||||||||
Accounts payable | 257,000 | [1] | 110,000 | [1] | 257,000 | 110,000 | ||||||
Advances from customers | 810,000 | [1] | 1,065,000 | [1] | 810,000 | 1,065,000 | ||||||
Accrued payroll and other accruals | 947,000 | [1] | 904,000 | [1] | 460,000 | 455,000 | ||||||
Due to Control Group | 11,000 | 11,000 | ||||||||||
Payable for acquisition | [1] | 1,266,000 | [1] | 1,266,000 | ||||||||
Taxes payable | 7,564,000 | [1] | 6,683,000 | [1] | 7,052,000 | 6,136,000 | ||||||
Other payables | 259,000 | [1] | 217,000 | [1] | 178,000 | 196,000 | ||||||
Total current liabilities | 9,837,000 | 10,245,000 | 8,768,000 | 9,239,000 | ||||||||
Deferred tax Liabilities-non current | 1,612,000 | [1] | 1,689,000 | [1] | 1,612,000 | 1,689,000 | ||||||
Total Liabilities | $ 11,590,000 | $ 12,073,000 | $ 10,380,000 | $ 10,928,000 | ||||||||
|
Note 7 - Other receivables, net (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Receivables [Table Text Block] |
|
Note 22 - Employee defined contribution plan
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
|||
Compensation and Retirement Disclosure [Abstract] | |||
Pension and Other Postretirement Benefits Disclosure [Text Block] |
Full
time employees of the Company in the PRC participate in a
government mandated defined contribution plan, pursuant to
which certain pension benefits, medical care, employee
housing fund and other welfare benefits are provided to
employees. Chinese labor regulations require that the PRC
subsidiaries of the Company make contributions to the
government for these benefits based on certain percentages of
the employees’ salaries. The employee benefits were
expensed as incurred. The Company has no legal obligation for
the benefits beyond the contributions made. The total amounts
for such employee benefits were approximately US$231,000 and
US$195,000 for the six months ended June 30, 2013 and 2012,
respectively. The total amounts for such employee benefits
were approximately US$111,000 and US$91,000 for the three
months ended June 30, 2013 and 2012, respectively.
|
Note 21 - Related party transactions
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions Disclosure [Text Block] |
Revenue
from related parties:
|
Note 26 - Earnings per share (Details)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Warrant [Member]
|
||||
Note 26 - Earnings per share (Details) [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2,363,456 | 3,005,456 | 2,363,456 | 3,005,456 |
Employee Stock Option [Member]
|
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Note 26 - Earnings per share (Details) [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 939,440 | 939,440 | 939,440 | 939,440 |
Note 16 - Payable for acquisition (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Payable For Acquisitions Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Payable for Acquisition [Table Text Block] |
|
Note 2 - Variable Interest Entities (Tables)
|
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Variable Interest Entities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities [Table Text Block] |
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Note 9 - Due from related parties (Tables) (Due From Related Parties [Member])
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Due From Related Parties [Member]
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Note 9 - Due from related parties (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions [Table Text Block] |
|
Note 19 - Warrants (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Warrants Disclosure Textblock [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] |
|
Note 26 - Earnings per share
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Earnings per share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Text Block] |
Basic
and diluted earnings per share for each of the periods
presented are calculated as follows (All amounts, except
number of shares and per share data, are presented in
thousands of US dollars):
For
the six months ended June 30, 2013, the diluted earnings per
share calculation did not include the warrants and options to
purchase up to 2,363,456 and 939,440 shares of common stock,
respectively, because their effect was anti-dilutive.
For
the three months ended June 30, 2013, the diluted earnings
per share calculation did not include the warrants and
options to purchase up to 2,363,456 and 939,440 shares of
common stock, respectively, because their effect was
anti-dilutive.
For
the six months ended June 30, 2012, the diluted earnings per
share calculation did not include the warrants and options to
purchase up to 3,005,456 and 939,440 shares of common stock,
respectively, because their effect was anti-dilutive.
For
the three months ended June 30, 2012, the diluted earnings
per share calculation did not include the warrants and
options to purchase up to 3,005,456 and 939,440 shares of
common stock, respectively, because their effect was
anti-dilutive.
|
Note 6 - Accounts receivable, net (Details) (USD $)
|
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2013
|
Mar. 31, 2013
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
|
Note 6 - Accounts receivable, net (Details) [Line Items] | |||||
Allowance for Doubtful Accounts Receivable, Current | $ 3,704,000 | $ 3,704,000 | $ 3,630,000 | ||
Number of Months Past Due | 6 months | ||||
Provision for Doubtful Accounts | 527,000 | 787,000 | 561,000 | ||
Internet Advertising And TV Advertising [Member]
|
|||||
Note 6 - Accounts receivable, net (Details) [Line Items] | |||||
Allowance for Doubtful Accounts Receivable, Current | 3,704,000 | ||||
Provision for Doubtful Accounts | $ 0 | $ 0 |
Note 5 - Term deposit (Details)
|
Jun. 30, 2013
|
---|---|
Term Deposit [Abstract] | |
Time Deposits, Weighted Average Interest Rate, Maturities Year One | 3.50% |
Note 12 - Intangible assets (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Disclosure Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite and Indefinite Lived Intangible Assets [Table Text Block] |
|
Note 9 - Due from related parties (Details) - Due from related parties (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Related Party Transaction [Line Items] | ||
Due from related parties, current | $ 375 | $ 210 |
Beijing Fengshangyinli Technology [Member]
|
||
Related Party Transaction [Line Items] | ||
Due from related parties, current | 45 | 53 |
Beijing Saimeiwei Food Equipment Technology [Member]
|
||
Related Party Transaction [Line Items] | ||
Due from related parties, current | 216 | 87 |
Beijing Telijie Century Environmental Technology [Member]
|
||
Related Party Transaction [Line Items] | ||
Due from related parties, current | $ 114 | $ 70 |
Note 23 - Concentration of risk (Details)
|
3 Months Ended | 6 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
Jun. 30, 2013
Customer 1 [Member]
|
Jun. 30, 2013
Customer 2 [Member]
|
Jun. 30, 2013
No Customers [Member]
Maximum [Member]
|
Jun. 30, 2012
No Customers [Member]
Maximum [Member]
|
Jun. 30, 2013
Supplier 1 [Member]
|
Jun. 30, 2012
Supplier 1 [Member]
|
Jun. 30, 2013
Supplier 2 [Member]
|
Jun. 30, 2012
Supplier 2 [Member]
|
Jun. 30, 2013
Supplier 3 [Member]
|
Jun. 30, 2012
Supplier 3 [Member]
|
Jun. 30, 2012
Customer 1 [Member]
|
Jun. 30, 2013
Accounts Receivables [Member]
|
Dec. 31, 2012
Accounts Receivables [Member]
|
Jun. 30, 2013
Supplier 1 [Member]
|
Jun. 30, 2012
Supplier 1 [Member]
|
Jun. 30, 2013
Supplier 2 [Member]
|
Jun. 30, 2012
Supplier 2 [Member]
|
Jun. 30, 2013
Maximum [Member]
|
Jun. 30, 2013
Maximum [Member]
|
Dec. 31, 2012
Maximum [Member]
|
|
Note 23 - Concentration of risk (Details) [Line Items] | |||||||||||||||||||||||||
Number of Major Customers | 2 | 1 | 1 | 1 | |||||||||||||||||||||
Concentration Risk, Percentage | 10.00% | 10.00% | 15.00% | 14.00% | 10.00% | 10.00% | 13.00% | 10.00% | 10.00% | ||||||||||||||||
Percent of Accounts Receivables | 11.00% | 11.00% | 10.00% | ||||||||||||||||||||||
Number of Major Suppliers | 3 | 2 | 3 | 2 | |||||||||||||||||||||
Percent of Cost of Sales | 19.00% | 10.00% | 34.00% | 62.00% | 29.00% | 13.00% | 14.00% | 10.00% | 34.00% | 57.00% | 23.00% | 13.00% | 10.00% |
Note 24 - Commitments (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating Leases, Rent Expense | $ 112,000 | $ 121,000 | $ 249,000 | $ 233,000 |
Note 25 - Segment reporting (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Note 25 - Segment reporting (Details) [Line Items] | ||||
Share-based Compensation | $ 21,000 | $ 27,000 | ||
Share Based Compensation Expense [Member]
|
||||
Note 25 - Segment reporting (Details) [Line Items] | ||||
Share-based Compensation | $ 11,000,000 | $ 11,000,000 | $ 21,000,000 | $ 27,000,000 |
Note 20 - Restricted Net Assets
|
6 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||
Disclosure Text Block Supplement [Abstract] | |||||||
Restricted Assets Disclosure [Text Block] |
As
most of the Company’s operations are conducted through
its PRC subsidiary and VIEs, the Company’s ability to
pay dividends is primarily dependent on receiving
distributions of funds from its PRC subsidiary and VIEs.
Relevant PRC statutory laws and regulations permit payments
of dividends by its PRC subsidiary and VIEs only out of their
retained earnings, if any, as determined in accordance with
PRC accounting standards and regulations and after it has met
the PRC requirements for appropriation to statutory reserves.
Paid in capital of the PRC subsidiary and VIEs included in
the Company’s consolidated net assets are also
non-distributable for dividend purposes.
In
accordance with the PRC regulations on Enterprises with
Foreign Investment, a WFOE established in the PRC is required
to provide certain statutory reserves, namely general reserve
fund, the enterprise expansion fund and staff welfare and
bonus fund which are appropriated from net profit as reported
in the enterprise’s PRC statutory accounts. A WFOE is
required to allocate at least 10% of its annual after-tax
profit to the general reserve until such reserve has reached
50% of its registered capital based on the enterprise’s
PRC statutory accounts. Appropriations to the enterprise
expansion fund and staff welfare and bonus fund are at the
discretion of the board of directors. The aforementioned
reserves can only be used for specific purposes and are not
distributable as cash dividends. Rise King WFOE is subject to
the above mandated restrictions on distributable profits.
Additionally, in accordance with the Company Law of the PRC,
a domestic enterprise is required to provide a statutory
common reserve of at least 10% of its annual after-tax profit
until such reserve has reached 50% of its registered capital
based on the enterprise’s PRC statutory accounts. A
domestic enterprise is also required to provide for a
discretionary surplus reserve, at the discretion of the board
of directors. The aforementioned reserves can only be used
for specific purposes and are not distributable as cash
dividends. All of the Company’s PRC VIEs are subject to
the above mandated restrictions on distributable
profits.
As
a result of these PRC laws and regulations, the
Company’s PRC subsidiary and VIEs are restricted in
their ability to transfer a portion of their net assets to
the Company. As of June 30, 2013 and December 31, 2012, net
assets restricted in the aggregate, which include paid-in
capital and statutory reserve funds of the Company’s
PRC subsidiary and VIEs that are included in the
Company’s consolidated net assets, was approximately
US$5.8 million and US$5.5 million, respectively.
The
current PRC Enterprise Income Tax (“EIT”) Law
also imposed a 10% withholding income tax for dividends
distributed by a foreign invested enterprise to its immediate
holding company outside China. A lower withholding tax rate
will be applied if there is a tax treaty arrangement between
mainland China and the jurisdiction of the foreign holding
company. Holding companies in Hong Kong, for example, will be
subject to a 5% rate. Rise King WFOE is invested by its
immediate holding company in Hong Kong and will be entitled
to the 5% preferential withholding tax rate upon distribution
of the dividends to its immediate holding company.
The
ability of the Company’s PRC subsidiary and VIEs to
make dividends and other payments to the Company may also be
restricted by changes in applicable foreign exchange and
other laws and regulations.
Foreign
currency exchange regulation in China is primarily governed
by the following rules:
Currently,
under the Administration Rules, Renminbi is freely
convertible for current account items, including the
distribution of dividends, interest payments, trade and
service related foreign exchange transactions, but not for
capital account items, such as direct investments, loans,
repatriation of investments and investments in securities
outside of China, unless the prior approval of the State
Administration of Foerign Exchange (the “SAFE”)
is obtained and prior registration with the SAFE is made.
Foreign-invested enterprises like Rise King WFOE that need
foreign exchange for the distribution of profits to its
shareholders may effect payment from their foreign exchange
accounts or purchase and pay foreign exchange rates at the
designated foreign exchange banks to their foreign
shareholders by producing board resolutions for such profit
distribution. Based on their needs, foreign-invested
enterprises are permitted to open foreign exchange settlement
accounts for current account receipts and payments of foreign
exchange along with specialized accounts for capital account
receipts and payments of foreign exchange at certain
designated foreign exchange banks.
Although
the current Exchange Rules allow the convertibility of
Chinese Renminbi into foreign currency for current account
items, conversion of Chinese Renminbi into foreign exchange
for capital items, such as foreign direct investment, loans
or securities, requires the approval of SAFE, which is under
the authority of the People’s Bank of China. These
approvals, however, do not guarantee the availability of
foreign currency conversion. The Company cannot be sure that
it will be able to obtain all required conversion approvals
for its operations or the Chinese regulatory authorities will
not impose greater restrictions on the convertibility of
Chinese Renminbi in the future. Currently, most of the
Company’s retained earnings are generated in Renminbi.
Any future restrictions on currency exchanges may limit the
Company’s ability to use its retained earnings
generated in Renminbi to make dividends or other payments in
U.S. dollars or fund possible business activities outside
China.
As
of June 30, 2013 and December 31, 2012, there was
approximately US$39.6 million and US$38.1 million retained
earnings in the aggregate, respectively, which was generated
by the Company’s PRC subsidiary and VIEs in Renminbi
included in the Company’s consolidated net assets,
aside from US$2.5 million and US$2.4 million statutory
reserve funds as of June 30, 2013 and December 31, 2012,
respectively, that may be affected by increased restrictions
on currency exchanges in the future and accordingly may
further limit the Company’s PRC subsidiary’s and
VIEs’ ability to make dividends or other payments in
U.S. dollars to the Company, in addition to the approximately
US$5.8 million and US$5.5 million restricted net assets as of
June 30, 2013 and December 31, 2012, respectively, as
discussed above.
|
Note 1 - Organization and nature of operations
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
|||
Disclosure Text Block [Abstract] | |||
Nature of Operations [Text Block] |
ChinaNet
Online Holdings, Inc. (formerly known as Emazing Interactive,
Inc.) (the “Company”) was incorporated in the
State of Texas in April 2006 and re-domiciled to become a
Nevada corporation in October 2006. From the date of the
Company’s incorporation until June 26, 2009, when the
Company consummated the Share Exchange (discussed below), the
Company’s activities were primarily concentrated in web
server access and company branding in hosting web based
e-games.
On
June 26, 2009, the Company entered into a Share Exchange
Agreement (the “Exchange Agreement”), with (i)
China Net Online Media Group Limited, a company organized
under the laws of British Virgin Islands (“China Net
BVI”), (ii) China Net BVI’s shareholders, Allglad
Limited, a British Virgin Islands company
(“Allglad”), Growgain Limited, a British Virgin
Islands company ("Growgain"), Rise King Investments Limited,
a British Virgin Islands company (“Rise King
BVI”), Star (China) Holdings Limited, a British Virgin
Islands company (“Star”), Surplus Elegant
Investment Limited, a British Virgin Islands company
(“Surplus”), Clear Jolly Holdings Limited, a
British Virgin Islands company (“Clear” and
together with Allglad, Growgain, Rise King BVI, Star and
Surplus, the “China Net BVI Shareholders”), who
together owned shares constituting 100% of the issued and
outstanding ordinary shares of China Net BVI (the
“China Net BVI Shares”) and (iii) G. Edward
Hancock, the principal stockholder of the Company at that
time. Pursuant to the terms of the Exchange Agreement, the
China Net BVI Shareholders transferred to the Company all of
the China Net BVI Shares in exchange for the issuance of
13,790,800 shares (the “Exchange
Shares”) in the aggregate of the Company’s common
stock (the “Share Exchange”). As a result of the
Share Exchange, China Net BVI became a wholly owned
subsidiary of the Company and the Company is now a holding
company, which, through certain contractual arrangements with
operating companies in the People’s Republic of China
(the “PRC”), is engaged in providing advertising,
marketing, communication and brand management and sales
channel building services to small and medium companies in
China.
The
Company’s wholly owned subsidiary, China Net BVI was
incorporated in the British Virgin Islands on August 13,
2007. On April 11, 2008, China Net BVI became the parent
holding company of a group of companies comprised of CNET
Online Technology Limited, a Hong Kong company (“China
Net HK”), which established and is the parent company
of Rise King Century Technology Development (Beijing) Co.,
Ltd., a wholly foreign-owned enterprise (“WFOE”)
established in the PRC (“Rise King WFOE”). The
Company refers to the transactions that resulted in China Net
BVI becoming an indirect parent company of Rise King WFOE as
the “Offshore Restructuring.”
PRC
regulations prohibit direct foreign ownership of business
entities providing internet content, or ICP services in the
PRC, and restrict foreign ownership of business entities
engaging in the advertising business. In October 2008, a
series of contractual arrangements (the “Contractual
Agreements” or “VIE Agreements”) were
entered into among Rise King WFOE and Business Opportunity
Online (Beijing) Network Technology Co., Ltd.
(“Business Opportunity Online”), Beijing CNET
Online Advertising Co., Ltd. (“Beijing CNET
Online”) (collectively the “PRC Operating
Entities”) and its common individual owners (the
“PRC Shareholders” or the “Control
Group”). The Contractual Agreements allowed China Net
BVI, through Rise King WFOE, to, among other things, secure
significant rights to influence the PRC Operating
Entities’ business operations, policies and management,
approve all matters requiring shareholder approval, and
receive 100% of the income earned by the PRC Operating
Entities. In return, Rise King WFOE provides
consulting services to the PRC Operating
Entities. In addition, to ensure that the PRC
Operating Entities and the PRC Shareholders perform their
obligations under the Contractual Arrangements, the PRC
Shareholders have pledged all of their equity interests in
the PRC Operating Entities to Rise King WFOE. They
also entered into an option agreement with Rise King WFOE
which provides that at such time as when the current
restrictions under PRC law on foreign ownership of Chinese
companies engaging in the Internet content, information
services or advertising business in China are lifted, Rise
King WFOE may exercise its option to purchase the equity
interests in the PRC Operating Entities, directly.
Pursuant
to the Contractual Agreements, all of the equity owners'
rights and obligations of the VIEs were assigned to Rise King
WFOE, which resulted in the equity owners lacking the ability
to make decisions that have a significant effect on the
VIEs, Rise King WFOE's ability to extract the profits
from the operation of the VIEs and assume the residual
benefits of the VIEs. Due to the fact that Rise
King WFOE and its indirect parent are the sole interest
holders of the VIEs, the Company included the assets,
liabilities, revenues and expenses of the VIEs in its
consolidated financial statements, which is consistent with
the provisions of FASB Accounting Standards Codification
("ASC") Topic 810 “Consolidation”, subtopic
10.
As
of the date of the Share Exchange, through the Contractual
Agreements, the Company operates its business in China
primarily through Business Opportunity Online and Beijing
CNET Online. Beijing CNET Online owns 51% of Shanghai
Borongdingsi Computer Technology Co., Ltd. (“Shanghai
Borongdingsi”). Business Opportunity Online, Beijing
CNET Online and Shanghai Borongdingsi, were incorporated on
December 8, 2004, January 27, 2003 and August 3, 2005,
respectively.
Shanghai
Borongdingsi is 51% owned by Beijing CNET Online. Beijing
CNET Online and Shanghai Borongdingsi entered into a
cooperation agreement in June 2008, followed up with a
supplementary agreement in December 2008, to conduct a bank
kiosk advertisement business. The business is based on a bank
kiosk cooperation agreement between Shanghai Borongdingsi and
Henan provincial branch of China Construction Bank which
allows Shanghai Borongdingsi or its designated party to
conduct in-door advertisement business within the business
outlets throughout Henan Province. The bank kiosk cooperation
agreement has a term of eight years beginning
in August 2008. However, Shanghai Borongdingsi was not
able to conduct the advertisement business as a stand-alone
business due to the lack of an advertisement business license
and supporting financial resources. Pursuant to the
aforementioned cooperation agreements, Beijing CNET Online
committed to purchase equipment and to provide working
capital, technical and other related support to Shanghai
Borongdingsi. Beijing CNET Online owns the equipment used in
the kiosk business, is entitled to sign contracts in its name
on behalf of the business, and holds the right to collect the
advertisement revenue generated from the bank kiosk business
exclusively until it recovers the cost of purchasing the
equipment. Thereafter, Beijing CNET Online has agreed to
distribute 49% of the net profit generated from the bank
kiosk advertising business, if any, to the minority
shareholders of Shanghai Borongdingsi.
On
June 24, 2010, one of the Company’s VIEs, Business
Opportunity Online, together with three other individuals,
who were not affiliated with the Company, formed a new
company, Shenzhen City Mingshan Network Technology Co., Ltd.
(“Shenzhen Mingshan”). Shenzhen Mingshan is 51%
owned by Business Opportunity Online and 49% owned
collectively by the other three individuals. Shenzhen
Mingshan is primarily engaged in developing and designing
internet based software, online games and the related
operating websites and providing related internet and
information technology services necessary to operate such
games and websites. On January 6, 2011, as approved by the
shareholders of Shenzhen Mingshan, an unaffiliated third
party invested RMB15,000,000 (approximately US$2,423,968)
into Shenzhen Mingshan in exchange for a 60% equity interest
in Shenzhen Mingshan. Therefore, beginning on January 6,
2011, the new investor became the majority shareholder of
Shenzhen Mingshan. The Company’s share of the equity
interest in Shenzhen Mingshan decreased from 51% to 20.4% and
the Company ceased to have a controlling financial interest
in Shenzhen Mingshan, but still retains an investment in, and
significant influence over, Shenzhen Mingshan. On December
19, 2012, as approved by the shareholders of Shenzhen
Mingshan, Shenzhen Mingshan reduced its registered and
paid-in capital from RMB25,000,000 (approximately
US$4,039,947) to RMB22,000,000 (approximately US$3,555,153),
resulted from a decrease in paid-in capital from three other
noncontrolling shareholders, except Business Opportunity
Online. As a result, the Company’s share of the equity
interest in Shenzhen Mingshan increased from 20.4% to 23.18%
and the Company continued to retain significant influence
over Shenzhen Mingshan.
On
December 6, 2010, Rise King WFOE entered into a series of
exclusive contractual arrangements, which were similar to the
Contractual Agreements discussed above, with Rise King
(Shanghai) Advertisement Media Co., Ltd. (“Shanghai
Jing Yang”), a company incorporated under the PRC laws
in December 2009 and primarily engaged in the advertising
business, pursuant to which the Company, through its wholly
owned subsidiary, Rise King WFOE obtained all of the equity
owners' rights and obligations of Shanghai Jing Yang, and the
ability to extract the profits from the operation and assume
the residual benefits of Shanghai Jing Yang, and hence became
the sole interest holder of Shanghai Jing Yang. As
of the date these contractual agreements were entered into,
Shanghai Jing Yang did not have the resources
necessary to conduct any business activities by itself and
the carrying amount of the net assets of Shanghai Jing Yang
which was all cash and cash equivalents approximate its fair
value due to their short maturities. Therefore, Shanghai Jing
Yang’s accounts were included in the Company’s
consolidated financial statements with no goodwill recognized
in accordance with ASC Topic 810
“Consolidation”.
The
Company, through one of its VIEs, Beijing CNET Online,
acquired a 100% equity interest in Quanzhou Zhi Yuan
Marketing Planning Co., Ltd. (“Quanzhou Zhi
Yuan”) and a 51% equity interest in Quanzhou Tian Xi
Shun He Advertisement Co., Ltd. (“Quanzhou Tian Xi Shun
He”) on January 4, 2011 and February 23, 2011,
respectively. Quanzhou Zhi Yuan and Quanzhou Tian
Xi Shun He are both independent advertising companies based
in Fujian province of the PRC, which provide comprehensive
branding and marketing services to over fifty small to medium
sized companies focused primarily in the sportswear and
clothing industry. In June 2011, Beijing CNET Online acquired
the remaining 49% equity interest in Quanzhou Tian Xi Shun
He. Quanzhou Tian Xi Shun He became a wholly owned subsidiary
of Beijing CNET Online accordingly.
On
January 28, 2011, one of the Company’s VIEs, Business
Opportunity Online, formed a new wholly owned subsidiary,
Business Opportunity Online (Hubei) Network Technology Co.,
Ltd. (“Business Opportunity Online
Hubei”). Business Opportunity Online Hubei
is primarily engaged in internet advertisement design,
production and promulgation.
On
March 1, 2011, one of the Company’s VIEs, Business
Opportunity Online, together with an individual, who was not
affiliated with the Company, formed a new company, Beijing
Chuang Fu Tian Xia Network Technology Co., Ltd.
(“Beijing Chuang Fu Tian Xia”). Beijing Chuang Fu
Tian Xia is 51% owned by Business Opportunity Online and 49%
owned by the co-founding individual. In addition to capital
investment, the co-founding individual is required to provide
the controlled domain names, www.liansuo.com
and www.chuangye.com
to be registered under the established company. Beijing
Chuang Fu Tian Xia is primarily engaged in providing and
operating internet advertising, marketing and communication
services to small and medium companies through the websites
associated the above mentioned domain names.
On
April 18, 2011, the Company, through one of its VIEs,
Business Opportunity Online Hubei formed a new wholly owned
company, Hubei CNET Advertising Media Co., Ltd. (“Hubei
CNET”). Hubei CNET is primarily engaged in
advertisement design, production, promulgation and providing
the related advertising and marketing consultancy
services.
On
April 18, 2011, one of the Company’s VIEs, Business
Opportunity Online Hubei, together with an individual, who
was not affiliated with the Company, formed a new company,
Zhao Shang Ke Network Technology (Hubei) Co., Ltd.
(“Zhao Shang Ke Hubei”). Zhao Shang Ke Hubei is
51% owned by Business Opportunity Online Hubei and 49% owned
by the co-founding individual. Zhao Shang Ke Hubei is
primarily engaged in providing advertisement design,
production, promulgation and brand management and sales
channels building services. On December 29, 2011, as approved
by the shareholders of Zhao Shang Ke Hubei, two unaffiliated
third party investors invested RMB10,000,000 (approximately
US$1,615,979) into Zhao Shang Ke Hubei in exchange for an
aggregate 50% equity interest in Zhao Shang Ke Hubei.
Therefore, beginning on December 29, 2011, the
Company’s share of the equity interest in Zhao Shang Ke
Hubei decreased from 51% to 25.5%. As such, the Company
ceased to have a controlling financial interest in Zhao Shang
Ke Hubei, but still retained an investment in, and
significant influence over, Zhao Shang Ke Hubei.
On
July 1, 2011, one of the Company’s VIEs, Quanzhou Zhi
Yuan, formed a new wholly owned company, Xin Qi Yuan
Advertisement Planning (Hubei) Co., Ltd. (“Xin Qi Yuan
Hubei”). Xin Qi Yuan Hubei is primarily engaged in
advertisement design, production, promulgation and providing
the related advertising and marketing consultancy
services.
On
July 1, 2011, one of the Company’s VIEs, Quanzhou Tian
Xi Shun He, formed a new wholly owned company, Mu Lin Sen
Advertisement (Hubei) Co., Ltd. (“Mu Lin Sen
Hubei”). Mu Lin Sen Hubei is primarily engaged in
advertisement design, production, promulgation and providing
the related advertising and marketing consultancy
services.
On
July 1, 2011, one of the Company’s VIEs, Business
Opportunity Online Hubei, together with an individual who is
not affiliated with the Company, formed a new company, Sheng
Tian Network Technology (Hubei) Co., Ltd. (“Sheng Tian
Hubei”). Sheng Tian Hubei is 51% owned by Business
Opportunity Online Hubei and 49% owned by the co-founding
individual. Sheng Tian Hubei is primarily engaged in
computer system design, development and promotion, software
development and promotion, and providing the related
technical consultancy services.
On
December 20, 2011, one of the Company’s VIEs, Business
Opportunity Online Hubei acquired a 51% equity interest in
Sou Yi Lian Mei Network Technology (Beijing) Co. Ltd.,
(“Sou Yi Lian Mei”). In September
2012, Business Opportunity Online Hubei acquired the
remaining 49% equity interest in Sou Yi Lian Mei. Sou Yi Lian
Mei became a wholly owned subsidiary of Business Opportunity
Online Hubei accordingly. Sou Yi Lian Mei is primary engaged
in providing online advertising and marketing services and
operates its business primarily through its wholly-owned
subsidiary, Jin Du Ya He (Beijing) Network Technology Co.,
Ltd (“Jin Du Ya He”).
On
April 11, 2013, one of the Company’s VIEs, Business
Opportunity Online, formed a new wholly owned company,
Quanzhou City Zhi Lang Network Technology Co., Ltd.
(“Quanzhou Zhi Lang”). Quanzhou Zhi Lang is
primarily engaged in brand management and sales channel
building, advertisement design, production and
promulgation.
As
of June 30, 2013, the Company operated its business primarily
in China through its PRC subsidiary and PRC operating
entities, or VIEs as described above.
|
Note 3 - Summary of significant accounting policies
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies [Text Block] |
The
interim consolidated financial statements are prepared and
presented in accordance with accounting principles generally
accepted in the United States of America (“U.S.
GAAP”).
The
interim consolidated financial information as of June 30,
2013 and for the six and three months ended June 30, 2013 and
2012 have been prepared without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission
(the “SEC”). Certain information and
footnote disclosures, which are normally included in annual
consolidated financial statements prepared in accordance with
U.S. GAAP, have been omitted pursuant to those rules and
regulations. The interim consolidated financial
information should be read in conjunction with the financial
statements and the notes thereto, included in the
Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2012, previously filed with the
SEC.
In
the opinion of management, all adjustments (which include
normal recurring adjustments) necessary to present a fair
statement of the Company’s consolidated financial
position as of June 30, 2013, its consolidated results of
operations for the six and three months ended June 30, 2013
and 2012, and its consolidated cash flows for the six months
ended June 30, 2013 and 2012, as applicable, have been made.
The interim results of operations are not necessarily
indicative of the operating results for the full fiscal year
or any future periods.
The
interim consolidated financial statements include the
financial statements of all the subsidiaries and VIEs of the
Company. All transactions and balances between the Company
and its subsidiaries and VIEs have been eliminated upon
consolidation. According to the agreements between Beijing
CNET Online and Shanghai Borongdingsi, although Beijing CNET
Online legally owns 51% of Shanghai Borongdingsi’s
interests, Beijing CNET Online only controls the assets and
liabilities related to the bank kiosks business, which has
been included in the financial statements of Beijing CNET
Online, but does not control other assets of Shanghai
Borongdingsi, thus, Shanghai Borongdingsi’s financial
statements were not consolidated by the Company.
The
preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities
and the related disclosure of contingent assets and
liabilities at the date of these consolidated financial
statements, and the reported amounts of revenue and expenses
during the reporting period. The Company continually
evaluates these estimates and assumptions based on the most
recently available information, historical experience and
various other assumptions that the Company believes to be
reasonable under the circumstances. Since the use of
estimates is an integral component of the financial reporting
process, actual results could differ from those
estimates.
The
functional currency of the Company is United States dollars
(“US$”), and the functional currency of China Net
HK is Hong Kong dollars (“HK$”). The
functional currency of the Company’s PRC operating
subsidiary and VIEs is Renminbi (“RMB”), and PRC
is the primary economic environment in which the Company
operates.
For
financial reporting purposes, the financial statements of the
Company’s PRC operating subsidiary and VIEs, which are
prepared using the RMB, are translated into the
Company’s reporting currency, the United States Dollar
(“U.S. dollar”). Assets and liabilities are
translated using the exchange rate at each balance sheet
date. Revenue and expenses are translated using
average rates prevailing during each reporting period, and
stockholders’ equity is translated at historical
exchange rates. Adjustments resulting from the translation
are recorded as a separate component of accumulated other
comprehensive income in stockholders’ equity.
Transactions
denominated in currencies other than the functional currency
are translated into the functional currency at the exchange
rates prevailing at the dates of the
transactions. The resulting exchange differences
are included in the determination of net income of the
consolidated statements of income and comprehensive income
for the respective periods.
The
exchange rates used to translate amounts in RMB into US$ for
the purposes of preparing the consolidated financial
statements are as follows:
No
representation is made that the RMB amounts could have been,
or could be converted into US$ at the above rates.
Advertising
costs for the Company’s own brand building are not
includable in cost of sales, they are expensed when incurred
or amortized over the estimated beneficial period and are
included in “selling expenses” in the statement
of income and comprehensive income. For the six months ended
June 30, 2013 and 2012, advertising expenses for the
Company’s own brand building were approximately
US$144,000 and US$168,000, respectively. For the three months
ended June 30, 2013 and 2012, advertising expenses for the
Company’s own brand building were approximately
US$120,000 and US$94,000, respectively.
The
Company accounts for the cost of developing and upgrading
technologies and platforms and intellectual property that are
used in its daily operations in research and development
cost. Research and development costs are charged to expense
when incurred. Expenses for research and development for the
six months ended June 30, 2013 and 2012 were approximately
US$912,000 and US$756,000, respectively. Expenses for
research and development for the three months ended June 30,
2013 and 2012 were approximately US$463,000 and US$425,000,
respectively.
The
Company follows the guidance of ASC Topic 740 “Income
taxes” and uses liability method to account for income
taxes. Under this method, deferred tax assets and
liabilities are determined based on the difference between
the financial reporting and tax bases of assets and
liabilities using enacted tax rates that will be in effect in
the period in which the differences are expected to reverse.
The Company records a valuation allowance to offset deferred
tax assets, if based on the weight of available evidence, it
is more-likely-than-not that some portion, or all, of the
deferred tax assets will not be realized. The effect on
deferred taxes of a change in tax rates is recognized in
statement of income and comprehensive income in the period
that includes the enactment date.
The
Company follows the guidance of ASC Topic 740 “Income
taxes”, which prescribes a more likely than not
threshold for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax
return. This Interpretation also provides guidance on
recognition of income tax assets and liabilities,
classification of current and deferred income tax assets and
liabilities, accounting for interest and penalties associated
with tax positions, accounting for income taxes in interim
periods, and income tax disclosures.
The
Company recognizes interest on non-payment of income taxes
under requirement by tax law and penalties associated with
tax positions when a tax position does not meet the minimum
statutory threshold to avoid payment of penalties. According
to the PRC Tax Administration and Collection Law, the statute
of limitations is three years if the underpayment of taxes is
due to computational errors made by the taxpayer or the
withholding agent. The statute of limitations is extended to
five years under special circumstances, where the
underpayment of taxes is more than RMB100,000. In the case of
transfer pricing issues, the statute of limitation is ten
years. There is no statute of limitation in the case of tax
evasion. The tax returns of the Company’s PRC
subsidiary and VIEs are subject to examination by the
relevant tax authorities. The Company did not have any
material interest or penalties associated with tax positions
for the six and three months ended June 30, 2013 and 2012,
and did not have any significant unrecognized uncertain tax
positions as of June 30, 2013 and December 31, 2012,
respectively.
In
February 2013, the FASB issued Accounting Standards Update
(“ASU”) 2013-02, “Comprehensive Income
(Topic 220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income”. The ASU does
not change the current requirements for reporting net income
or other comprehensive income in financial statements.
However, this ASU requires an entity to provide information
about the amounts reclassified out of accumulated other
comprehensive income by component. In addition, an entity is
required to present, either on the face of the statement
where net income is presented or in the notes, significant
amounts reclassified out of accumulated other comprehensive
income by the respective line items of net income but only if
the amount reclassified is required under U.S. GAAP to be
reclassified to net income in its entirety in the same
reporting period. For other amounts that are not required
under U.S. GAAP to be reclassified in their entirety to net
income, an entity is required to cross-reference to other
disclosures required under U.S. GAAP that provide additional
detail about those amounts. The guidance is effective
prospectively for reporting periods beginning after December
15, 2012 for public entities. The adoption of this standard
did not have a material impact on the Company’s
consolidated financial position or results of
operations.
In
March 2013, the FASB issued ASU No. 2013-05, “Foreign
Currency Matters, (Topic 830): Parent's Accounting for the
Cumulative Translation Adjustment upon Derecognition of
Certain Subsidiaries or Groups of Assets within a Foreign
Entity or of an Investment in a Foreign Entity”, to
resolve a diversity in accounting for the cumulative
translation adjustment of foreign currency upon derecognition
of a foreign subsidiary or group of assets. This ASU requires
the parent to apply the guidance in Subtopic 830-30 to
release any related cumulative translation adjustment into
net income when a reporting entity (parent) ceases to have a
controlling financial interest in a subsidiary or group of
assets within a foreign entity. Accordingly, the cumulative
translation adjustment should be released into net income
only if the sale or transfer results in the complete or
substantially complete liquidation of the foreign entity in
which the subsidiary or group of assets had resided. Further,
this ASU clarified that the parent should apply the guidance
in subtopic 810-10 if there is a sale of an investment in a
foreign entity, including both (1) events that result in the
loss of a controlling financial interest in a foreign entity
and (2) events that result in an acquirer obtaining control
of an acquiree in which it held an equity interest
immediately before the acquisition date. Accordingly, the
cumulative translation adjustment should be released into net
income upon the occurrence of those events. The provisions in
this update are effective for fiscal years, and interim
periods within those years, beginning after December 15,
2013. Early adoption is permitted. The adoption of this
standard is not expected to have a material impact on the
Company’s consolidated financial position or results of
operations.
In
July 2013, the FASB issued ASU No. 2013-11, “Income
Taxes, (Topic 740): Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax
Loss, or a Tax Credit Carryforward Exists. The provisions in
this update provide guidance on the financial statement
presentation of an unrecognized tax benefit when a net
operating loss carryforward, similar tax loss, or tax credit
carryforward exists. These provisions provide that an
unrecognized tax benefit, or a portion thereof, should be
presented in the financial statements as a reduction to a
deferred tax asset for a net operating loss carryforward, a
similar tax loss, or a tax credit carryforward, except to the
extent that a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward is not available at the
reporting date to settle any additional income taxes that
would result from disallowance of a tax position, or the tax
law does not require the entity to use, and the entity does
not intend to use, the deferred tax asset for such purpose,
then the unrecognized tax benefit should be presented as a
liability. The provisions in this update are effective for
fiscal years, and interim periods within those years,
beginning after December 15, 2013. Early adoption is
permitted. The adoption of this standard is not expected to
have a material impact on the Company’s consolidated
financial position or results of operations.
Other
accounting standards that have been issued or proposed by the
FASB or other standards-setting bodies that do not require
adoption until a future date are not expected to have a
material impact on the Company’s consolidated financial
statements upon adoption.
|
Note 6 - Accounts receivable, net
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable Disclosure [Text Block] |
All
of the accounts receivable are non-interest bearing. Based on
the assessment of the collectability of the accounts
receivable as of June 30, 2013, the Company provided
approximately US$3,704,000 allowance for doubtful debts,
which were related to the accounts receivable of the
Company’s internet advertising and TV advertising
business segments with an aging over six months. For the six
and three months ended June 30, 2013, no additional allowance
for doubtful debts was provided.
|
Note 11 - Property and equipment, net (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 156,000 | $ 147,000 | $ 311,000 | $ 295,000 |
Note 4 - Cash and cash equivalent
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents Disclosure [Text Block] |
|
Note 10 - Investment in and advance to equity investment affiliates (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investment in and Advance to Equity Investment Affiliates [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments [Table Text Block] |
|
Note 23 - Concentration of risk
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
|||
Risks and Uncertainties [Abstract] | |||
Concentration Risk Disclosure [Text Block] |
Credit
risk
Financial
instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily
of cash and cash equivalents, accounts receivable, other
receivables and prepayments and deposits to suppliers. As of
June 30, 2013 and December 31, 2012, substantially all of the
Company’s cash and cash equivalents were held by major
financial institutions located in Mainland China and Hong
Kong Special Administrative Region of the PRC, which
management believes are of high credit quality.
Risk
arising from operations in foreign countries
All
of the Company’s operations are conducted within the
PRC. The Company’s operations in the PRC are subject to
various political, economic, and other risks and
uncertainties inherent in the PRC. Among other risks, the
Company’s operations in the PRC are subject to the
risks of restrictions on transfer of funds, changing taxation
policies, foreign exchange restrictions; and political
conditions and governmental regulations.
Currency
convertibility risk
Significant
part of the Company’s businesses is transacted in RMB,
which is not freely convertible into foreign currencies. All
foreign exchange transactions take place either through the
People’s Bank of China or other banks authorized to buy
and sell foreign currencies at the exchange rates quoted by
the People’s Bank of China. Approval of foreign
currency payments by the People’s Bank of China or
other regulatory institutions requires submitting a payment
application form together with suppliers’ invoices and
signed contracts. These exchange control measures imposed by
the PRC government authorities may restrict the ability of
the Company’s PRC subsidiary and VIEs to transfer its
net assets, which to the Company through loans, advances or
cash dividends.
Concentration
of customers
For
the six months ended June 30, 2012, two customers accounted
for 15% and 14% of the Company’s sales, respectively.
Except for the aforementioned customers, there was no other
single customer who accounted for more than 10% of the
Company’s sales for the six months ended June 30, 2013
and 2012, respectively.
For
the three months ended June 30, 2012, one customer accounted
for 13% of the Company’s sales. Except for the
aforementioned customer, there was no other single customer
who accounted for more than 10% of the Company’s sales
for the three months ended June 30, 2013 and 2012,
respectively.
As
of June 30, 2013, one customer accounted for 11% of the
Company’s accounts receivables. As of December 31,
2012, one customer accounted for 10% of the Company’s
accounts receivables. Except for the aforementioned customer,
there was no other single customer who accounted for more
than 10% of the Company’s accounts receivable as of
June 30, 2013 and December 31, 2012, respectively.
Concentration
of suppliers
For
the six months ended June 30, 2013, three suppliers
individually accounted for 34%, 29% and 14% of the
Company’s cost of sales, respectively. For the six
months ended June 30, 2012, two suppliers accounted for 62%
and 13% of the Company’s cost of sales, respectively.
Except for the afore-mentioned, there was no other single
supplier who accounted for more than 10% of the
Company’s cost of sales for the six months ended June
30, 2013 and 2012, respectively.
For
the three months ended June 30, 2013, three suppliers
individually accounted for 34%, 23% and 19% of the
Company’s cost of sales, respectively. For the three
months ended June 30, 2012, two suppliers accounted for 57%
and 13% of the Company’s cost of sales, respectively.
Except for the afore-mentioned, there was no other single
supplier who accounted for more than 10% of the
Company’s cost of sales for the three months ended June
30, 2013 and 2012, respectively.
|
Note 27 - Share-based compensation expenses
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] |
As
additional compensation, the Company issued 40,000 shares of
the Company’s restricted common stock to MZ-HCI, in
relation to its investor relations service for fiscal 2013.
These shares were valued at the closing bid price of the
Company’s common stock on the date of grant. The
related compensation expenses were amortized over the
requisite service period. Total compensation expenses
recognized for the six and three months ended June 30, 2013
was US$21,000 and US$10,500, respectively.
On
November 30, 2009, the Company granted 5-year options to each
of its three independent directors, Mr. Douglas MacLellan,
Mr. Mototaka Watanabe and Mr. Zhiqing Chen, to purchase in
the aggregate 54,000 shares of the Company’s common
stock at an exercise price of US$5.00 per share, in
consideration of their services to the Company. These options
vest quarterly at the end of each 3-month period, in equal
installments over the 24-month period from the date of grant.
Unexercised options will expire on November 29, 2014.
On
November 30, 2011, under the Company’s 2011 Omnibus
Securities and Incentive Plan, the Company issued its
management, employees and directors in the aggregate of
885,440 options to purchase up the same number of the
company’s common stock at an exercise price of US$1.20
per share. These options were fully vested and exercisable
upon issuance and subject to forfeiture upon an employee's
cessation of employment at the discretion of the Company.
Unexercised options will expire on November 29,
2021.
Options
issued and outstanding at June 30, 2013 and their movements
during the six months then ended are as follows:
The
aggregate unrecognized share-based compensation expenses as
of June 30, 2013 and 2012 is approximately US$21,000 and
US$63,000, respectively. |
Note 10 - Investment in and advance to equity investment affiliates (Details) - Summary of Investment in and advance to equity investment affiliates (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Jun. 29, 2013
|
Dec. 31, 2012
|
---|---|---|---|
Summary of Investment in and advance to equity investment affiliates [Abstract] | |||
Investment in equity investment affiliates | $ 807 | $ 916 | |
Advance to equity investment affiliates | 44 | 43 | |
$ 851 | $ 851 | $ 959 |
Note 6 - Accounts receivable, net (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Accounts Receivable Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Accounts Receivable [Table Text Block] |
|
Note 10 - Investment in and advance to equity investment affiliates (Details)
|
1 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 19, 2012
USD ($)
|
Dec. 19, 2012
CNY
|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 29, 2013
USD ($)
|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Dec. 29, 2011
USD ($)
|
Dec. 29, 2011
CNY
|
Dec. 19, 2011
CNY
|
Apr. 18, 2011
|
Jan. 06, 2011
USD ($)
|
Jan. 06, 2011
CNY
|
Jun. 24, 2010
|
Jun. 30, 2013
Shenzhen Mingshan [Member]
USD ($)
|
Jun. 30, 2012
Shenzhen Mingshan [Member]
USD ($)
|
Jun. 29, 2013
Shenzhen Mingshan [Member]
USD ($)
|
Jun. 30, 2013
Shenzhen Mingshan [Member]
USD ($)
|
Jun. 30, 2012
Shenzhen Mingshan [Member]
USD ($)
|
Jan. 06, 2011
Shenzhen Mingshan [Member]
|
Dec. 29, 2011
Zhao Shang Ke Hubei [Member]
Revised Share Of Equity [Member]
|
Jun. 30, 2013
Zhao Shang Ke Hubei [Member]
USD ($)
|
Jun. 30, 2012
Zhao Shang Ke Hubei [Member]
USD ($)
|
Jun. 29, 2013
Zhao Shang Ke Hubei [Member]
USD ($)
|
Jun. 30, 2013
Zhao Shang Ke Hubei [Member]
USD ($)
|
Jun. 30, 2012
Zhao Shang Ke Hubei [Member]
USD ($)
|
Dec. 29, 2011
Zhao Shang Ke Hubei [Member]
|
Jan. 06, 2011
Revised Share Of Equity [Member]
|
Dec. 19, 2012
Revised Registered And Paid In Capital [Member]
USD ($)
|
Dec. 19, 2012
Revised Registered And Paid In Capital [Member]
CNY
|
Dec. 19, 2012
Revised Share Of Equity [Member]
|
Dec. 29, 2011
Revised Share Of Equity [Member]
|
|
Note 10 - Investment in and advance to equity investment affiliates (Details) [Line Items] | ||||||||||||||||||||||||||||||||
Equity Method Investment, Ownership Percentage | 20.40% | 20.40% | 51.00% | 20.40% | 20.40% | 51.00% | 51.00% | 25.50% | 51.00% | 20.40% | 23.18% | 25.50% | ||||||||||||||||||||
Investment Contributed By New Investors (in Yuan Renminbi) | $ 1,615,979 | 10,000,000 | 10,000,000 | $ 2,423,968 | 15,000,000 | |||||||||||||||||||||||||||
Investment Contributed By New Investors | 1,615,979 | 10,000,000 | 10,000,000 | 2,423,968 | 15,000,000 | |||||||||||||||||||||||||||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 50.00% | 50.00% | 60.00% | 60.00% | ||||||||||||||||||||||||||||
Registered And Paid In Capital Of Equity Invement Affiliate (in Yuan Renminbi) | 4,039,947 | 25,000,000 | 3,555,153 | 22,000,000 | ||||||||||||||||||||||||||||
Registered And Paid In Capital Of Equity Invement Affiliate | 4,039,947 | 25,000,000 | 3,555,153 | 22,000,000 | ||||||||||||||||||||||||||||
Income (Loss) from Equity Method Investments | $ (54,000) | $ (104,000) | $ (125,000) | $ (125,000) | $ (297,000) | $ (9,000) | $ (10,000) | $ (35,000) | $ (35,000) | $ (93,000) | $ (45,000) | $ (94,000) | $ (90,000) | $ (90,000) | $ (204,000) |
Note 24 - Commitments (Details) - The Company’s contractual obligations (Office Rental [Member], USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
---|---|
Office Rental [Member]
|
|
Note 24 - Commitments (Details) - The Company’s contractual obligations [Line Items] | |
-2013 | $ 182 |
-2014 | 299 |
-2015 | 299 |
-2016 | 75 |
Total | $ 855 |
Note 1 - Organization and nature of operations (Details)
|
1 Months Ended | 1 Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 19, 2012
USD ($)
|
Dec. 19, 2012
CNY
|
Jun. 26, 2009
|
Dec. 29, 2011
USD ($)
|
Dec. 29, 2011
CNY
|
Dec. 19, 2011
CNY
|
Apr. 18, 2011
|
Jan. 06, 2011
USD ($)
|
Jan. 06, 2011
CNY
|
Jun. 24, 2010
|
Jan. 06, 2011
Shenzhen Mingshan [Member]
|
Dec. 19, 2012
Revised Registered And Paid In Capital [Member]
USD ($)
|
Dec. 19, 2012
Revised Registered And Paid In Capital [Member]
CNY
|
Dec. 19, 2012
Revised Share Of Equity [Member]
|
Jan. 04, 2011
Quanzhou Zhi Yuan [Member]
|
Jun. 30, 2011
Quanzhou Tian Xi Shun He [Member]
|
Feb. 23, 2011
Quanzhou Tian Xi Shun He [Member]
|
Dec. 29, 2011
Original Share Of Equity [Member]
|
Dec. 19, 2012
Revised Share Of Equity [Member]
|
Dec. 29, 2011
Revised Share Of Equity [Member]
|
Dec. 31, 2012
Sou Yi Lian Mei [Member]
|
Sep. 30, 2012
Sou Yi Lian Mei [Member]
|
Dec. 20, 2011
Sou Yi Lian Mei [Member]
|
|
Note 1 - Organization and nature of operations (Details) [Line Items] | |||||||||||||||||||||||
Shares Issued Pursuant to Share Exchange Agreement (in Shares) | 13,790,800 | ||||||||||||||||||||||
Investment Contributed By New Investors (in Yuan Renminbi) | $ 1,615,979 | 10,000,000 | 10,000,000 | $ 2,423,968 | 15,000,000 | ||||||||||||||||||
Investment Contributed By New Investors (in Dollars) | 1,615,979 | 10,000,000 | 10,000,000 | 2,423,968 | 15,000,000 | ||||||||||||||||||
Equity Method Investment, Ownership Percentage | 20.40% | 20.40% | 51.00% | 20.40% | 20.40% | 51.00% | 60.00% | 23.18% | 51.00% | 23.18% | 25.50% | ||||||||||||
Registered And Paid In Capital Of Equity Invement Affiliate (in Yuan Renminbi) | 4,039,947 | 25,000,000 | 3,555,153 | 22,000,000 | |||||||||||||||||||
Registered And Paid In Capital Of Equity Invement Affiliate (in Dollars) | $ 4,039,947 | 25,000,000 | $ 3,555,153 | 22,000,000 | |||||||||||||||||||
Percentage Of Voting Interests Acquired | 100.00% | 49.00% | 51.00% | 49.00% | 49.00% | 51.00% |