| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of our results of operations and financial condition should be read together with our combined and condensed financial statements and the notes thereto and other financial information, which are included elsewhere in this registration statement. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In addition, our financial statements and the financial information included in this registration statement reflect our organization transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.
This section contains forward-looking statements. These forward-looking statements are subject to various factors, risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Further, as a result of these factors, risks and uncertainties, the forward-looking events may not occur. Relevant factors, risks and uncertainties include, but are not limited to, those discussed in “Item 1. Business,” “Item 1A. Risk Factors” and elsewhere in this registration statement. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s beliefs and opinions as of the date of this registration statement. We are not obligated to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. See “Forward-Looking Statements.”
Overview and Strategy
In this Quarterly Report on Form 10-Q, unless the context requires or is otherwise specified, references to the “Company,” “we,” “us,” “our” and similar expressions include the following entities (as defined herein):
(i) China Xingbang Industry Group Inc., a Nevada corporation (“Xingbang NV”);
(ii) Xing Bang Industry Group Limited, a British Virgin Islands company and a wholly-owned subsidiary of the Registrant (“Xingbang BVI”);
(iii) China Group Purchase Alliance Limited, a Hong Kong company and a wholly-owned subsidiary of Xingbang BVI (“Xingbang HK”);
(iv) Guangzhou Xingbang Information Consulting Co., Ltd., a wholly foreign-owned enterprise, or the “WFOE”, formed in the People’s Republic of China (“PRC”) and a wholly-owned subsidiary of Xingbang HK; and
(iv) Guangdong Xingbang Industry Information & Media Co. Ltd., our principal operating subsidiary, which is a Chinese variable interest entity that the WFOE controls through certain contractual arrangements (“Guangdong Xingbang”).
Through our wholly owned subsidiaries, Xingbang BVI and Xingbang HK, we own the WFOE, which controls Guangdong Xingbang, a variable interest entity, through a series of variable interest entity, or VIE contractual arrangements. Guangdong Xingbang is the sole source of income and operations of the Registrant. A summary of our business is described below.
We were formed as a Nevada corporation on April 12, 2011 to acquire operational control over Guangdong Xingbang. Since foreign investors are restricted by the laws and regulations of the People’s Republic of China to operate the media and e-commerce business in China, we operate our business through ownership of the WFOE that provides management, consulting, investment and technical services to Guangdong Xingbang. We do not own any direct equity interest in Guangdong Xingbang. In May 2011, the WFOE entered into a series of contractual arrangements which effectively give the WFOE operational control over Guangdong Xingbang despite the lack of direct ownership. As a result of these contractual arrangements, we treat Guangdong Xingbang as a variable interest entity, or VIE, under U.S. generally accepted accounting principles, and we have included its historical financial results in our combined financial statements.
Our subsidiaries, Xingbang NV, Xingbang BVI and Xingbang HK are holding companies which do not have any operations or own any assets except for the ownership of the WFOE. The only current operation of the WFOE is to provide consulting and management services to Guangdong Xingbang. Currently, we solely rely on results of operations of Guangdong Xingbang. If the PRC government declares the VIE agreements are not enforceable, we will not be able to exercise effective control over Guangdong Xingbang and combine the financial results of Guangdong Xingbang. In such case, our results of operations and financial position will be materially adversely affected.
Guangdong Xingbang, which was founded in 2005, derives revenue primarily from three types of business: e-commerce related revenue derived from our ju51 Online Mall, advertising revenue, and revenue from consulting services provided to businesses and local governments in China.
Our revenue highly correlates to the Chinese real estate market and is seasonal. Since January 2010, the Chinese government began to put forth policies restraining real estate growth and, as a result, the demand for home furnishings began to decrease in the fourth quarter of 2010. Manufacturers and distributors cut their advertising and consulting budgets in the first quarter of 2011 and the decreased demand had a significant impact on our revenue and deferred revenue in the first three quarters of 2011. Management believes it is possible for the Chinese government to continue its policy to restrain high housing prices in the foreseeable future. Such policy is intended to incentivize consumers who previously were not able to afford the high home prices and spend on home furnishings. Prior to the policy change, many apartments and houses were purchased by speculators who bought them and did not spend any money to furnish them. We believe an increased number of home buyers buying for personal occupancy will lead to increased growth in the home furnishings market and we expect to see more aggressive marketing initiatives by the home furnishings industry in the future. Generally, the first half of the year is low season for the home furnishings market, as people generally do not decorate their home during this period because of wet weather and other factors, so our revenue in advertising and consulting (except for consulting provided to local governments, and revenue generated by our ju51 Mall) is relatively low during this period.
On February 2, 2012, to avoid confusion by consumers and to better reflect their functions, we rebranded direct sale stores as technical service stations. Besides brick-and-mortar stores, we also decided to franchise decoration companies to become our technical service stations.
As part of our operation of the ju51 Mall, we seek to capitalize on our relationship with distributors by engaging the distributors, or “channel service providers”, to develop technical service stations, potential advertising and consulting services clients and distribute our newspapers. We also intend to build representative offices throughout China to develop technical service stations. Distributors will receive commission based on the franchise fee paid by technical service stations, the advertising and consulting services revenue generated by such distributor, and will be compensated for its distribution costs. By doing so, our management believes we can develop the ju51 Mall quickly and increase our advertising and consulting revenues in the foreseeable future.
We also decided to develop membership of decoration technicians as shopping guides to help increase sales volume on the ju51 Mall. To promptly develop membership of decoration technicians and better organize and manage them, we will develop decoration companies to be our technical service stations. In principle, we only develop a technical service station within a county or a district of a city to protect their economic interests. Technical service stations will earn commissions, paid by flagship stores, based on a percentage of the sales in the geographical area they are franchised to cover. A decoration technician will also earn commissions, paid by flagship stores, based on a percentage of the amount he/she sells as a shopping guide. Customers, who input the membership number of the decoration technician when they place orders, will enjoy membership price lower than the direct sale price listed on the ju51 Mall. To help consumers learn more about or check the personal information of decoration technicians, we founded a web portal of China Decoration Technician the web address is http://www.zgzxjg.com in November 2011.
As of February 14, 2012, the board of directors exempted distributors from paying service charges from October 2011 to June 2012, considering that the distributors have undergone loss resulting from low sales volume on the ju51 Mall, and in order to maintain a good and sustainable cooperation relationship with them, and authorized Mr. Yao, the Chairman, CEO and President, to exempt distributors from paying service charges, direct sale stores (later rebranded as technical service stations) from paying franchise fee based on the trade volume on the ju51 Mall. Accordingly, we do not expect revenue generated from service charges until the third quarter of 2012 at the earliest.
Critical Accounting Policies and Estimates
In preparing our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States, we make estimates and assumptions that affect the accounting, recognition and disclosure of our assets, liabilities, stockholders’ equity, revenues and expenses. We make these estimates and assumptions because certain information that we use is dependent upon future events, which cannot be calculated with a high degree of precision from data available or cannot be readily calculated based upon generally accepted methodologies. In some cases, these estimates are particularly difficult and therefore require a significant amount of judgment. Actual results could differ from the estimates and assumptions that we use in the preparation of our condensed consolidated financial statements.
There have not been any significant changes to our critical accounting policies discussed under “Item 2. Financial Information — Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” included in our S-1/A registration statement.
Results of Operations — Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011.
The following table presents, for the three months indicated, our combined statement of operations information.
| | | For the three months ended March 31, | |
| | | 2012 | | | 2011 | |
| | | (Consolidated and Unaudited) | | | (Combined and Unaudited) | |
| | | | | | | |
| Revenue | | | | | | | | |
| Advertising | | $ | 117,017 | | | $ | 358,542 | |
| Consulting service | | | 49,589 | | | | 675,053 | |
| E-commerce | | | - | | | | - | |
| Total revenue | | | 166,606 | | | | 1,033,595 | |
| Cost of Revenue | | | | | | | | |
| Advertising | | | 125,383 | | | | 158,310 | |
| Consulting service | | | 18,542 | | | | 60,596 | |
| E-commerce | | | 75,479 | | | | 4,828 | |
| Total cost of revenue | | | 219,404 | | | | 223,734 | |
| Gross (Loss) Profit | | | (52,798 | ) | | | 809,861 | |
| Operating Expenses | | | | | | | | |
| Selling, general and administrative expenses | | | 320,386 | | | | 800,293 | |
| Impairment of website development cost | | | 10,460 | | | | - | |
| Depreciation | | | 26,293 | | | | 27,182 | |
| Total operating expenses, net | | | 357,139 | | | | 827,475 | |
| Net Loss From Operations | | | (409,937 | ) | | | (17,614 | ) |
| Other Income(Expenses) | | | | | | | | |
| Interest income | | | 378 | | | | 703 | |
| Interest on note payable | | | - | | | | (4,792 | ) |
| Other income | | | 37 | | | | 1,557 | |
| Other expenses | | | (908 | ) | | | (617 | ) |
| Gain (Loss) on disposal of property and equipment | | | 2,300 | | | | (1,097 | ) |
| Total other income (expenses), net | | | 1,807 | | | | (4,246 | ) |
| Net Loss Before Taxes | | | (408,130 | ) | | | (21,860 | ) |
| Income Tax Benefit | | | 53,514 | | | | 3,279 | |
| Net Loss | | | (354,616 | ) | | | (18,581 | ) |
| Other Comprehensive Income-Foreign currency translation gain | | | (1,644 | ) | | | 5,350 | |
| Comprehensive Loss | | $ | (356,260 | ) | | $ | (13,231 | ) |
| Net Loss Per Share-Basic and Diluted | | $ | (0.00 | ) | | $ | (0.00 | ) |
| Weighted Average Number of Shares Outstanding During the Year -Basic and Diluted | | | 81,244,000 | | | | 79,999,000 | |
Revenue
During the three months ended March 31, 2012, we had total revenue of $166,606. Of this, $117,017 was attributable to revenue generated from advertising, $49,589 was attributable to consulting services rendered, and $0 was contributed by e-commerce. During the three months ended March 31, 2011, total revenue was $1,033,595. Of this, $358,542 was attributable to revenue generated from advertising, $675,053, was attributable to consulting services rendered, and $0 was from e-commerce. The decrease of $866,989 or approximately 83.88% was mainly due to decreased advertising revenue and consulting revenue. The decreased revenue was primarily because we put more effort on e-commerce as well as the slowdown of the real estate market in China during 2011.
Cost of revenue
Cost of revenue is comprised of printing cost, editorial fee, agent fee, salaries of consulting service providers, amortization of website development costs, salaries of website administrators and business tax relating to advertising, services rendered and e-commerce.
Cost of revenue for the three months ended March 31, 2012 was $219,404, compared to $223,734 for the three months ended March 31, 2011, a decrease of $4,330, or approximately 1.94%. The reason for the change was the decrease in the cost of advertising revenue, which was $32,927, or approximately 20.8%, the decrease in the cost of consulting revenue, which was $42,054, or approximately 69.4% and the increase in the cost of e-commerce, which was $70,651, or approximately 1,463.36%. The reason for the decrease of cost of advertising and consulting was the decrease in agent fee, salaries of consulting service providers and business tax relating to advertising and service rendered. The reason for the increased cost of e-commerce was due to the expenses related to the development and roll out of the ju51 Mall.
Gross (Loss) profit
Gross loss was $52,798 for the three months ended March 31, 2012, a decrease of $862,659, or approximately106.52%, compared to gross profit of $809,861 from the same period prior year. The reason for the decrease was mainly due to the decrease in advertising revenue and consulting revenue.
Operating expenses
Operating expenses consist of selling, general and administrative expense, impairment of website development cost and depreciation.
Operating expenses for the three months ended March 31, 2012 were $357,139, including $320,386 in general, selling and administrative expenses, $10,460 in impairment of website development cost, and $26,293 in depreciation. Operating expenses for the three months ended March 31, 2011 were $827,475, composed of $800,293 in general, selling and administrative expenses, $0 in impairment of website development cost, and $27,182 in depreciation. The decrease in operating expenses from the quarter ended March 31, 2011 to the quarter ended March 31, 2012 was $470,336, or approximately 56.84%. Of this, selling, general and administrative expenses decreased $479,907, or approximately 59.97%, impairment of website development cost increased $10,460, and depreciation decreased $889, or approximately 3.27%. The reason for the decrease in the selling, general and administrative expenses was due to the decrease in commission earned by our sales force.
Other income (expenses), net
Other expenses, net, consist mainly of net of interest income, interest on note payable, interest expenses paid to stockholders, other income, other expenses, and loss on disposal of property and equipment.
Other income, net, for the three months ended March 31, 2012was $1,807 and other expenses, net were $4,246 for the three months ended March 31, 2011, an increase of $6,053, or approximately142.56%. The increase in other income, net, was primarily attributable to the decrease in interest expenses on note payable, which was $4,792, or 100% and the increase in gain on disposal of property and equipment, which was $3,397, or approximately 309.66%. The disposal of property and equipment was due to our closing of 52 local representative offices, which were engaged in soliciting new advertisers for our publications and in distributing our publications throughout their respective regions.
Income tax benefit
Income tax benefit was $53,514 for the three months ended March 31, 2012, as compared to $3,279 for the three months ended March 31, 2011. The increase in income tax benefit was mainly attributable to the increase in net loss before taxes, which was $386,270, or approximately 1,767.02%. Our effective income tax rate was 15% for the three months ended March 31, 2012 and 2011, because we are qualified as a “New or High Technology Enterprise” under PRC laws, which is subject to review every year.
Net loss
Net loss was $354,616 and $18,581 for the three months ended March 31, 2012 and 2011, respectively. The increase mainly was the result of a decrease in revenue.
Other comprehensive (loss) income
Other comprehensive loss was $1,644 for the three months ended March 31, 2012. Other comprehensive income was $5,350 for the three months ended March 31, 2011. The decrease in foreign currency translation gains was primarily caused by the fluctuation in the RMB to U.S. dollar exchange rate in 2012 compared to 2011.
Liquidity and Capital Resources
Cash and cash equivalents
Cash and cash equivalents consist primarily of cash on hand and demand deposits at a bank. We had $1,305,293 and $199,188 of cash and cash equivalents on hand as of March 31, 2012 and December 31, 2011, respectively. There was an increase of $1,106,105 in our cash and cash equivalents from December 31, 2011 to March 31, 2012.
The increase in our cash and cash equivalents from December 31, 2011 to March 31, 2012 was largely attributable to an increase in net cash provided by operating activities, which was $1,343,104, the decrease in net cash used in investing activities, which was $407,068, on a period-to-period basis.
We require cash for working capital, capital expenditures, repayment of debt, salaries, commissions and related benefits and other operating expenses and income taxes. We expect that our working capital needs will increase for the foreseeable future, as we continue to develop and grow our business. See “Business — General in our 10-K filed with the SEC on March 26, 2012.”
The following table summarizes our cash flows for the three months ended March 31, 2012 and 2011:
| | | For the three months Ended March 31, | |
| (Unaudited) | | 2012 | | | 2011 | |
Net cash provided by (used in) operating activities | | | | | | | | |
Net cash used in investing activities | | | | | | | | |
Net Cash Provided by (Used in) Operating Activities. Net cash provided by operating activities was $1,122,648 for the three months ended March 31, 2012, and net cash used in operating activities was $220,456 for the three months ended March 31, 2011. The most significant items affecting the comparison of our operating cash flow for the three months ended March 31, 2012 and 2011 are summarized below:
| | ● | Increase in cash loss from operations--Our net income from operations, excluding depreciation, amortization and impairment of website development cost, increased by $304,157 on a period-to-period basis, from cash income of $13,429 for the three months ended March 31, 2011 to cash loss of $290,728 for the three months ended March 31, 2012, which negatively impacted our cash flows from operations. The increase in cash loss from operations was due to the decrease of revenue in the first quarter in 2012 from the same period last year. |
| | ● | Increased decrease in deferred revenue --Deferred revenue decreased by $24,781 for the first quarter of 2012, while they increased by $36,116 for the same period in 2011. The reason for the change was that we entered into less advertising and consulting contracts. |
| | ● | Decrease in accounts receivable –Accounts receivable decreased by $1,493,685 for the first quarter in 2012, while they decreased by $41,735 for the same period in 2011. The reason for the decrease was that we collected service charges in the first quarter 2012 payable by the channel service providers in March 2012. |
| | ● | Decrease in other payables and accrued expenses--Other payables and accrued expenses decreased by $51,280 for the first quarter in 2012, while they decreased $108,568 for the same period in 2011. Other payables and accrued expenses consisted of other tax payables, other payables, accrued professional fees, accrued website development cost, accrued expenses, deposits received from customers, accrued wages and accrued welfare. The increase in other payables and accrued expenses was the result of the decrease in other tax payables and accrued website development cost, which decreased $13,895 and $67,109, respectively, compared with the balances as of December 31, 2011. |
Net Cash Used in Investing Activities. Our investing activities for the three months ended March 31, 2012 and 2011 used cash of $18,332 and $425,400, respectively. The decrease in cash used in investing activities was largely caused by the decrease of $501,489 as a result of repayment by Mr. Yao of such amount loaned to him by the Company.
The Guangdong Xingbang Shareholders and entities controlled by Mr. Yao borrowed funds from Guangdong Xingbang. Guangdong Xingbang also borrowed funds from the Guangdong Xingbang Shareholders from time to time when it was short of cash for operations. All of the related party loans have been settled by November 14, 2011, and we do not intend to make such loans in the future absent a reasonable business purpose. The Audit Committee will be reviewing all related party transactions and will determine, on a case by case basis, what constitutes a “reasonable business purpose” pursuant to the authority the Board grants to the Audit Committee.
Capital Resources
We had working capital of $261,859 and $577,993 as of March 31, 2012 and December 31, 2011, respectively. The reason for the decrease from December 31, 2011 to March 31, 2012 was primarily due to the decrease in accounts receivable and other payables and accrued expenses.
We are a holding company with no significant revenue-generating operations of our own, and thus any cash flows from operations are and will be generated by Guangdong Xingbang through our WFOE’s existing consulting services management arrangement with Guangdong Xingbang. Our ability to service our debt and fund our ongoing operations is dependent on the results of these operations and their ability to provide us with cash. The WFOE’s ability to make loans or pay dividends are restricted under PRC law and may be restricted under the terms of future indebtedness, its governing documents or other agreements. Based upon the cash on hand, anticipated cash to be received from our operations and the expected availability of cash from Guangdong Xingbang’s shareholders, we believe that our sources of liquidity will be sufficient to enable us to meet our cash needs for at least the next 12 months. Nonetheless, our liquidity and capital position could be adversely affected by:
| ● | Loss of revenue from advertising, consulting services or from the ju51 Online Mall, which was opened on August 2, 2011; |
| ● | Guangdong Xingbang’s delay or discontinuance of payment of consulting fees under the VIE agreements; |
| ● | any change of policy on accounts receivable; |
| ● | the enactment of new laws and regulations; |
| ● | our inability to grow our business as we anticipate by expanding our existing advertising, consulting services and operation of the new e-commerce business; |
| ● | any other changes in the cost structure of our underlying business model; and |
| ● | any of the other risks and uncertainties described in “Item 1A. Risk Factors.” |
Debt Obligations
The following is a summary of amounts outstanding under our debt obligations as of March 31, 2012 and December 31, 2011.
| | | For the periods ended | |
| (Unaudited) (in US dollar) | | March 31, 2012 | | | December 31, 2011 | |
| Due to a related company | | | 10,155 | | | | 10,161 | |
| Accounts payable | | | 23,193 | | | | 19,670 | |
| Total debt | | | 33,348 | | | | 29,831 | |
Due to related company
As of March 31, 2012 and December 31, 2011, Guangdong Xingbang owed Zhongshan Xingbang Purchase & Exhibition Service Co., Ltd (“Zhongshan Xingbang”) $10,155, $10,161, respectively under an unsecured, interest-free, demand loan. Zhongshan Xingbang. is an entity controlled by Mr. Xiaohong Yao, our Chairman of the Board, CEO and President.
Accounts payable
As of March 31, 2012 and December 31, 2011, Guangdong Xingbang owed the printing company which prints its newspaper, $22,193 and $19,670, respectively.
Off-Balance Sheet Arrangements
On February 14, 2012, the board of directors resolved to exempt distributors from paying service charges from October 2011 to June 2012 and to authorize Mr. Yao, the Chairman, CEO and President, to exempt distributors from paying service charges, and brick-and-mortar stores or decoration companies from paying franchise fees. As of March 31, 2012 and December 31, 2011, we did not have any off-balance sheet obligations involving unconsolidated subsidiaries that provide financing or potentially expose us to unrecorded financial obligations. All of our obligations with respect to Guangdong Xingbang have been presented on our combined balance sheets as of each such date.
Recently Issued Accounting Pronouncements
See Note 9 of Notes to Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements” for a description of recently issued and adopted accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position, and cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
We seek to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended ( the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures.
The Company’s management, including our Chief Executive Officer and interim Chief Financial Officer, reassessed the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2012 and has subsequently determined that our disclosure controls and procedures were not effective as of March 31, 2012 due to certain material weaknesses including (i) lack of sufficient accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements; and (ii) lack of standard charter of accounts and written accounting manual and closing procedures to facilitate preparation of financial statements under U.S. GAAP for financial reporting processes. As a result of such material weaknesses, our disclosure controls and procedures were not effective.
Limitations on the Effectiveness of Disclosure Controls.
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the first quarter of 2012 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting, except as disclosed above.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We may be involved in litigation and other legal proceedings from time to time in the ordinary course of our business. Except as otherwise set forth in this quarterly report, we believe the ultimate resolution of these matters will not have a material effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors.
There have not been any material changes to the risk factors that were included in our 10-K filed with the SEC on March 26, 2012.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no issuances of our equity securities during the quarter ended March 31, 2012.
Limitations on Our Payment of Dividends
We have not paid any cash dividends to date and we do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
In the future, we may be a party to agreements that limit or restrict our ability to pay dividends.
In addition, Nevada corporate law prohibits us from making any distribution (including a dividend) on our capital stock at a time when:
| | ● | we would not be able to pay our debts as they become due in the usual course of business; or |
| | ● | our total assets would be less than the sum of (i) our total liabilities plus (ii) the amount that would be needed, if we were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution (although we presently do not have any stockholders with such preferential rights). |
Guangzhou Xingbang Information Consulting Co., Ltd. is a wholly-foreign owned enterprise under the laws of the PRC. The principal regulations governing dividend distributions by wholly foreign owned enterprises and Sino-foreign equity joint ventures include:
| | ● | The Wholly Foreign Owned Enterprise Law (1986), as amended; |
| | ● | The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended; |
| | ● | The Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and |
| | ● | The Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended. |
Under these regulations, wholly foreign owned enterprises and Sino-foreign equity joint ventures in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, before paying dividends to their shareholders, these foreign invested enterprises are required to set aside at least 10% of their profits each year, if any, to fund certain reserve funds until the amount of the cumulative total reserve funds reaches 50% of the relevant company’s registered capital. Accordingly, the WFOE is allowed to distribute dividends only after having set aside the required amount of its profits into the reserve funds as required under applicable PRC laws and regulations.
Item 3. Defaults on Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
| Exhibit No. | | Description |
| 31.1* | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 |
| 31.2* | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 |
| 32.1* | | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2* | | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS ** | | XBRL Instance Document |
| 101.SCH ** | | XBRL Taxonomy Extension Schema Document |
| 101.CAL ** | | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF ** | | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB ** | | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE ** | | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herein
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | China Xingbang Industry Group Inc. |
| | | |
| Date: May 9, 2012 | By: | /s/ Xiaohong Yao |
| | | Xiaohong Yao, Chairman, President and CEO |
| | | (principal executive officer) |
| | | |
| | By: | /s/ Haigang Song |
| | | Haigang Song, Chief Financial Officer |
14
