Summary of significant accounting policies

Basis of presentation

The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The unaudited condensed consolidated interim financial information as of

March 31, 2018

and for the

three

months ended

March 31, 2018

and

2017

have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the

2017

Form

-K.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of

March 31, 2018,

its condensed consolidated results of operations for the

three

months ended

March 31, 2018

and

2017,

and its condensed consolidated cash flows for the

three

months ended

March 31, 2018

and

2017,

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.

Principles of consolidation

The condensed consolidated interim financial statements include the financial statements of all the subsidiaries and VIEs of the Company. All accounts and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

Use of estimates

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 condensed 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.

Foreign currency translation

The exchange rates used to translate amounts in RMB into US$ for the purposes of preparing the condensed consolidated financial statements are as follows:

	March 31, 2018		December 31, 2017

Balance sheet items, except for equity accounts		6.2881		6.5342

	Three Months Ended March 31,
	2018		2017

Items in the statements of operations and comprehensive loss, and statements of cash flows		6.3632		6.8861

representation is made that the RMB amounts could have been, or could be converted into US$ at the above rates.

Advertising costs

Advertising costs for the Company’s own brand building are

not

includable in cost of revenues, they are expensed when incurred and are included in “sales and marketing expenses” in the statements of operations and comprehensive loss. For the

three

months ended

March 31, 2018

and

2017,

advertising expenses for the Company’s own brand building were approximately

US$389,000

and

US$510,000,

respectively.

Research and development expenses

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

three

months ended

March 31, 2018

and

2017

were approximately

US$193,000

and

US$395,000,

respectively.

Revenue recognition

January 1, 2018,

the Company adopted ASC Topic

606,

“Revenue from Contracts with Customers”, applying the modified retrospective method. The adoption didn’t result in a material adjustment to the accumulated deficit as of

January 1, 2018.

In accordance with ASC Topic

606,

revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In determining when and how much revenue is recognized from contracts with customers, the Company performs the following

five

-step analysis: (

) identify the contract(s) with a customer; (

) identify the performance obligations in the contract; (

) determine the transaction price; (

) allocate the transaction price to the performance obligations in the contract; (

) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company’s contracts with customers do

not

include multiple performance obligations,

significant financing component, variable consideration, nor any clause concerning with returns, refunds or other similar obligations.

The Company does

not

believe that significant management judgements are involved in revenue recognition, but the amount and timing of the Company’s revenues could be different for any period if management made different judgments or utilized different estimates. Generally, the Company recognizes revenue under ASC Topic

606

for each type of its performance obligation either over time (generally, the transfer of a service) or at a point in time (generally, the transfer of a good (information)) as follows:

Online advertising placement service/TV advertising service

For online advertising placement service contracts and TV advertising service contracts that are established based on a fixed price scheme with the related advertisement placements obligation, the Company provides advertisement placements in specified locations on the Company’s advertising portals for agreed periods and/or place the advertisements onto the Company’s purchased advertisement time during specific TV programs for agreed periods. Revenue is recognized ratably over the period the advertising is provided and, as such, the Company considers the services to have been delivered (“over time”).

Sales of effective sales lead information

For advertising contracts related to purchase of effective sales lead information, revenue is recognized based on a fixed price per sales lead and the quantity of effective sales lead, when information is delivered and accepted by customers (“point in time”).

Search engine marketing and data service

Revenue from search engine marketing and data services is recognized on a monthly basis based on the direct cost consumed through search engines for providing such services with a premium (“over time”). The Company recognizes the revenue on a gross basis, because the Company determines that it is a principle in the transaction who control the goods or services before they are transferred to the customers.

All of the Company’s revenues are generated from the PRC. The following tables present the Company’s revenues disaggregated by products and services and timing of revenue recognition:

	Three Months Ended March 31,
	2018		2017
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)
Internet advertising and data service
--online advertising placement		1,597		1,902
--sales of effective sales lead information		122		390
Search engine marketing and data service		6,443		4,972
TV advertising service		91		-
Others		7		-
Total revenues		8,260		7,264

	Three Months Ended March 31,
	2018		2017
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)

Revenue recognized over time		8,138		6,874
Revenue recognized at a point in time		122		390
Total revenues		8,260		7,264

Contract costs

For the

three

months ended

March 31, 2018,

the Company did

not

have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers within the scope of ASC Topic

606,

that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

Contract balances

The Company evaluates overall economic conditions, its working capital status and customer specific credit and negotiates the payment terms of a contract with individual customer on a case by case basis in its normal course of business.

Advances received from customers related to unsatisfied performance obligations are recoded as contract liabilities (advance from customers), which will be realized as revenues upon the satisfaction of performance obligations through the transfer of related promised goods and services to customers.

For contracts without a full or any advance payments required, the Company bills the customers any unpaid contract price immediately upon satisfaction of the related performance obligations when revenue is recognized, and the Company normally receives payment from customers within

days after a bill is issued.

The Company does

not

have any contract assets (unbilled receivables) since revenue is recognized when control of the promised goods or services is transferred and the payment from customers is

not

contingent on a future event.

The Company’s contract liabilities consist of advance from customers related to unsatisfied performance obligations in relation to internet adverting service, search engine marketing service, as well as TV advertising service. The Company’s contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. All contract liabilities are expected to be recognized as revenue within

one

year. The table below summarized the movement of the Company’s contract liabilities for the

three

months ended

March 31, 2018:

	Advance from customers
	US$(’000)

Balance as of January 1, 2018		3,559
Revenue recognized from beginning contract liability balance		(3,113	)
Advances received from customers related to unsatisfied performance obligations		1,564
Balance as of March 31, 2018 (Unaudited)		2,010

For the

three

months ended

March 31, 2018,

there is

revenue recognized from performance obligations that were satisfied in prior periods.

Transaction price allocated to remaining performance obligation

The Company has elected to apply the practical expedient in paragraph ASC Topic

606

and did

not

disclose the information related to transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of

March 31, 2018,

because all performance obligations of the Company’s contracts with customers have an original expected duration of

one

year or less.

Impact of recently issued accounting pronouncements

January 2017,

the FASB issued ASU

No.

2017

04,

“Intangibles-Goodwill and Others (Topic

350

)-Simplify the Test for Goodwill Impairment”. To simplify the subsequent measurement of goodwill, the amendments in this ASU eliminated Step

from the goodwill impairment test. In computing the implied fair value of goodwill under Step

an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this ASU also eliminated the requirements for any reporting unit with a

zero

or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step

of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a

zero

or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. An entity should apply the amendments in this ASU on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the

first

annual period and in the interim period within the

first

annual period when the entity initially adopts the amendments in this ASU. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this ASU for its annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments.

July 2017,

the FASB issued ASU

No.

2017

11,

“Earnings Per Share (Topic

260

), Distinguishing Liabilities from Equity (Topic

480

), Derivatives and Hedging (Topic

815

)-I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The amendments in part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic

260

to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic

470

20,

Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic

260

). The amendments in Part II of this ASU recharacterize the indefinite deferral of certain provisions of Topic

480

that now are presented as pending content in the Codification, to a scope exception. Those amendments do

not

have an accounting effect. For public business entities, the amendments in Part I of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after

December 15, 2019,

and interim periods within fiscal years beginning after

December 15, 2020.

Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part II of this ASU do

not

require any transition guidance because those amendments do

not

have an accounting effect. The Company has adopted the amendments in this ASU from

January 1, 2018,

when determining whether certain financial instruments issued by the Company after

January 1, 2018

should be classified as liabilities or equity instruments, a down round feature

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The adoption of the amendments in this ASU did

not

have a material impact on the Company’s consolidated financial position and results of operations.

February 2018,

the FASB issued ASU

2018

02:

“Income Statement—Reporting Comprehensive Income (Topic

220

)-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Act”). Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is

not

affected. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments in this ASU are effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments.

March 2018,

the FASB issued ASU

2018

05:

“Income Taxes (Topic

740

)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

No.

118”.

The amendments in this ASU add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin

No.

118,

which expresses the view of the staff regarding application of Topic

740,

Income Taxes, in the reporting period that includes

December 22, 2017 -

the date on which the Tax Cuts and Jobs Act was signed into law. The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments.