Nevada
|
90-0617940
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification
No.)
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
PAGE
|
||
PART
I. FINANCIAL INFORMATION
|
||
Item
1. Financial Statements
|
||
Consolidated
Balance Sheets
|
1-2
|
|
Consolidated
Statements of Income and Comprehensive Income
|
3-4
|
|
Consolidated
Statements of Cash Flows
|
5-6
|
|
Notes
to Consolidated Financial Statements
|
7-37
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
38-61
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
62
|
|
Item
4(T). Controls and Procedures
|
62
|
|
PART
II. OTHER INFORMATION
|
||
Item
1. Legal Proceedings
|
63
|
|
Item
1A. Risk Factors
|
63
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
63
|
|
Item
3. Defaults Upon Senior Securities
|
63
|
|
Item
4. Submission of Matters to a Vote of Security Holders
|
63
|
|
Item
5. Other Information
|
63
|
|
Item
6. Exhibits
|
63
|
|
Signatures
|
64
|
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 22,241 | $ | 13,917 | ||||
Accounts
receivable, net
|
4,455 | 3,173 | ||||||
Other
receivables
|
2,856 | 2,636 | ||||||
Prepayment
and deposit to suppliers
|
4,221 | 4,111 | ||||||
Due
from related parties
|
214 | 492 | ||||||
Inventories
|
2 | 2 | ||||||
Other
current assets
|
174 | 30 | ||||||
Total
current assets
|
34,163 | 24,361 | ||||||
Property
and equipment, net
|
1,518 | 1,355 | ||||||
Intangible
assets, net
|
59 | - | ||||||
Other
long-term assets
|
31 | 48 | ||||||
TOTAL
ASSETS
|
$ | 35,771 | $ | 25,764 | ||||
Liabilities
and Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 374 | $ | 290 | ||||
Advances
from customers
|
1,009 | 914 | ||||||
Other
payables
|
22 | 27 | ||||||
Accrued
payroll and other accruals
|
298 | 191 | ||||||
Due
to related parties
|
- | 24 | ||||||
Due
to Control Group
|
416 | 1,142 | ||||||
Due
to director
|
389 | - | ||||||
Taxes
payable
|
2,010 | 1,978 | ||||||
Dividends
payable
|
380 | 373 | ||||||
Total
current liabilities
|
4,898 | 4,939 | ||||||
Long-term
borrowing from director
|
131 | 128 | ||||||
Warrant
liabilities
|
- | 9,564 | ||||||
Commitments
and contingencies
|
- | - |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
||||||||
Equity:
|
||||||||
Series
A convertible preferred stock (US$0.001 par value; authorized-8,000,000
shares; issued and outstanding-2,918,600 and
4,121,600 shares at September 30, 2010 and December 31, 2009 respectively;
aggregate liquidation preference amount: $7,677 and $10,677, accrued but
unpaid dividends of $380 and $373, at September 30, 2010 and December 31,
2009, respectively.
|
3 | 4 | ||||||
Common
stock (US$0.001 par value; authorized-50,000,000 shares; issued and
outstanding-17,061,320 shares and 15,828,320 shares at September 30, 2010
and December 31, 2009 respectively)
|
17 | 16 | ||||||
Additional
paid-in capital
|
18,454 | 10,574 | ||||||
Statutory
reserves
|
372 | 372 | ||||||
Retained
earnings
|
11,320 | 50 | ||||||
Accumulated
other comprehensive income
|
559 | 117 | ||||||
Total
ChinaNet’s Online Holdings, Inc.’s stockholders’ equity
|
30,725 | 11,133 | ||||||
Noncontrolling
interest
|
17 | - | ||||||
Total
equity
|
30,742 | 11,133 | ||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 35,771 | $ | 25,764 |
For the nine months
ended September 30,
|
For the three months
ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(US $)
|
(US $)
|
(US $)
|
(US $)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Sales
|
||||||||||||||||
To
unrelated parties
|
$ | 30,304 | $ | 25,320 | $ | 8,631 | $ | 7,604 | ||||||||
To
related parties
|
872 | 1,985 | 265 | 522 | ||||||||||||
31,176 | 27,305 | 8,896 | 8,126 | |||||||||||||
Cost
of sales
|
15,791 | 15,918 | 3,110 | 4,029 | ||||||||||||
Gross
margin
|
15,385 | 11,387 | 5,786 | 4,097 | ||||||||||||
Operating
expenses
|
||||||||||||||||
Selling
expenses
|
2,187 | 3,253 | 851 | 624 | ||||||||||||
General
and administrative expenses
|
2,410 | 1,530 | 815 | 614 | ||||||||||||
Research
and development expenses
|
605 | 347 | 276 | 133 | ||||||||||||
5,202 | 5,130 | 1,942 | 1,371 | |||||||||||||
Income
from operations
|
10,183 | 6,257 | 3,844 | 2,726 | ||||||||||||
Other
income (expenses):
|
||||||||||||||||
Changes
in fair value of warrants
|
1,861 | (1,289 | ) | - | (1,289 | ) | ||||||||||
Interest
income
|
8 | 9 | 4 | 4 | ||||||||||||
Other
income
|
8 | 8 | 4 | 2 | ||||||||||||
Other
expenses
|
(1 | ) | (100 | ) | 0 | (99 | ) | |||||||||
1,876 | (1,372 | ) | 8 | (1,382 | ) | |||||||||||
Income
before income tax expense and noncontrolling interest
|
12,059 | 4,885 | 3,852 | 1,344 | ||||||||||||
Income
tax expense
|
304 | 1,653 | 25 | 696 | ||||||||||||
Net
income
|
11,755 | 3,232 | 3,827 | 648 | ||||||||||||
Net
loss attributable to noncontrolling interest
|
127 | - | 50 | - | ||||||||||||
Net
income attributable to ChinaNet Online Holdings, Inc.
|
11,882 | 3,232 | 3,877 | 648 | ||||||||||||
Other
comprehensive income
|
||||||||||||||||
Foreign
currency translation gain
|
442 | 13 | 365 | 8 | ||||||||||||
Comprehensive
income
|
$ | 12,197 | $ | 3,245 | $ | 4,192 | $ | 656 |
For the nine months
ended September 30,
|
For the three months
ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(US $)
|
(US $)
|
(US $)
|
(US $)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Net
income attributable to ChinaNet Online Holdings, Inc.
|
$ | 11,882 | $ | 3,232 | $ | 3,877 | $ | 648 | ||||||||
Beneficial
conversion feature of Series A convertible preferred stock
|
- | (5,898 | ) | - | (5,898 | ) | ||||||||||
Dividend
of Series A convertible preferred stock
|
(612 | ) | - | (190 | ) | - | ||||||||||
Net
income attributable to common shareholders of ChinaNet Online Holdings,
Inc.
|
$ | 11,270 | $ | (2,666 | ) | $ | 3,687 | $ | (5,250 | ) | ||||||
Earnings per
share
|
||||||||||||||||
Earnings
per common share
|
||||||||||||||||
Basic
|
$ | 0.68 | $ | (0.18 | ) | $ | 0.22 | $ | (0.33 | ) | ||||||
Diluted
|
$ | 0.57 | $ | (0.18 | ) | $ | 0.19 | $ | (0.33 | ) | ||||||
Weighted
average number of common shares outstanding:
|
||||||||||||||||
Basic
|
16,676,752 | 14,495,560 | 16,939,961 | 15,774,300 | ||||||||||||
Diluted
|
20,905,796 | 14,495,560 | 20,916,463 | 15,774,300 | ||||||||||||
Comprehensive
Income
|
||||||||||||||||
Net
income
|
11,755 | 3,232 | 3,827 | 648 | ||||||||||||
Foreign
currency translation gain
|
442 | 13 | 365 | 8 | ||||||||||||
12,197 | 3,245 | 4,192 | 656 | |||||||||||||
Comprehensive
Income
|
||||||||||||||||
Comprehensive
income / (loss) attributable to noncontrolling interest
|
(127 | ) | - | (50 | ) | - | ||||||||||
Comprehensive
income attributable to ChinaNet’s Online Holdings, Inc.
|
12,324 | 3,245 | 4,242 | 656 | ||||||||||||
12,197 | 3,245 | 4,192 | 656 |
For the nine months ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income
|
$ | 11,755 | $ | 3,232 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||
Depreciation
and amortization
|
275 | 134 | ||||||
Share-based
compensation expenses
|
177 | 190 | ||||||
Changes
in fair value of warrants
|
(1,861 | ) | 1,289 | |||||
Disposal
of fixed assets
|
- | 19 | ||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(1,195 | ) | (1,445 | ) | ||||
Other
receivables
|
2,095 | (166 | ) | |||||
Prepayments
and deposit to suppliers
|
(24 | ) | 9 | |||||
Due
from related parties
|
283 | (154 | ) | |||||
Other
current assets
|
(141 | ) | 33 | |||||
Accounts
payable
|
77 | 117 | ||||||
Advances
from customers
|
76 | 361 | ||||||
Accrued
payroll and other accruals
|
104 | 134 | ||||||
Due
to related parties
|
(24 | ) | (327 | ) | ||||
Due
to director
|
389 | - | ||||||
Due
to Control Group
|
(738 | ) | 33 | |||||
Other
payables
|
(5 | ) | - | |||||
Taxes
payable
|
(8 | ) | 1,275 | |||||
Net
cash provided by operating activities
|
11,235 | 4,734 | ||||||
Cash
flows from investing activities
|
||||||||
Purchases
of vehicles and office equipment
|
(385 | ) | (310 | ) | ||||
Purchases
of intangible assets
|
(59 | ) | - | |||||
Purchases
of other long-term assets
|
(4 | ) | (38 | ) | ||||
Net
cash used in investing activities
|
(448 | ) | (348 | ) |
For the nine months ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
(US $)
|
(US $)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
flows from financing activities
|
||||||||
Cash
investment contributed by noncontrolling interest
|
144 | - | ||||||
Dividend
paid to convertible preferred stockholders
|
(605 | ) | - | |||||
Increase
of short-term loan to third parties
|
(2,257 | ) | (2,024 | ) | ||||
Decrease
of short-term loan from directors
|
- | (13 | ) | |||||
Cancellation
and retirement of common stock
|
- | (300 | ) | |||||
Proceeds
from issuance of Series A convertible preferred stock and warrants (net of
issuance cost of US$ 1,142)
|
- | 9,162 | ||||||
Net
cash (used in)/provided by financing activities
|
(2,718 | ) | 6,825 | |||||
Effect
of exchange rate fluctuation on cash and cash equivalents
|
255 | 10 | ||||||
Net
increase in cash and cash equivalents
|
8,324 | 11,221 | ||||||
Cash
and cash equivalents at beginning of year
|
13,917 | 2,679 | ||||||
Cash
and cash equivalents at end of period
|
$ | 22,241 | $ | 13,900 | ||||
Supplemental
disclosure of cash flow information
|
||||||||
Interest
paid
|
$ | - | $ | - | ||||
Income
tax paid
|
$ | 1,242 | $ | 900 | ||||
Non-cash
transactions:
|
||||||||
Warrant liability
reclassify to additional paid in capital
|
$ | 7,703 | $ | - |
1.
|
Organization
and principal activities
|
2.
|
Summary
of significant accounting policies
|
September 30,
2010
|
December 31,
2009
|
|||||||
Balance
sheet items, except for equity accounts
|
6.6981 | 6.8372 |
Nine months ended
September 30,
|
Three months ended
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Items
in the statements of income and comprehensive income, and the
statements of cash flows
|
6.8164 | 6.8425 | 6.7803 | 6.8411 |
Vehicles
|
5
years
|
|
Office
equipment
|
3-10
years
|
|
Electronic
devices
|
5
years
|
Level 1 -
|
Quoted
prices in active markets for identical assets or
liabilities.
|
Level
2 -
|
Observable
inputs other than Level 1 prices such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or
liabilities.
|
Level
3 -
|
Unobservable
inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or
liabilities.
|
Fair value measurement using inputs
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Carrying amount as of
December 31, 2009
|
|||||||||||||
Financial
instruments
|
US$(’000)
|
US$(’000)
|
US$(’000)
|
US$(’000)
|
||||||||||||
Warrant
liabilities
|
- | 9,564 | - | 9,564 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Cash
|
36 | 616 | ||||||
Deposits
with short-term maturities
|
22,205 | 13,301 | ||||||
22,241 | 13,917 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Accounts
receivable
|
4,527 | 3,244 | ||||||
Less:
Allowance for doubtful debts
|
72 | 71 | ||||||
Accounts
receivable, net
|
4,455 | 3,173 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Advance
deposits for TV advertisement bidding
|
- | 2,261 | ||||||
Short-term
loan to third parties
|
2,298 | - | ||||||
Staff
advances for normal business purpose
|
558 | 375 | ||||||
2,856 | 2,636 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Contract
execution guarantee to TV advertisement and internet resources
providers
|
3,259 | 3,086 | ||||||
Prepayments
to TV advertisement and internet resources providers
|
390 | 991 | ||||||
Prepayment
for purchase of bank kiosk equipment
|
540 | - | ||||||
Other
deposits and prepayments
|
32 | 34 | ||||||
4,221 | 4,111 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Beijing
Hongfujiali Information Technology Co., Ltd.
|
- | 439 | ||||||
Beijing
Saimeiwei Food Equipment Technology Co., Ltd.
|
- | 53 | ||||||
Beijing
Fengshangyinli Technology Co., Ltd.
|
45 | |||||||
Beijing
Telijie Century Environmental Technology Co., Ltd.
|
26 | - | ||||||
Soyilianmei
Advertising Co., Ltd.
|
143 | - | ||||||
214 | 492 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Vehicles
|
577 | 423 | ||||||
Office
equipment
|
1,080 | 816 | ||||||
Electronic
devices
|
447 | 438 | ||||||
Total
property and equipment
|
2,104 | 1,677 | ||||||
Less:
accumulated depreciation
|
586 | 322 | ||||||
Total
property and equipment, net
|
1,518 | 1,355 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Computer
software
|
60 | - | ||||||
Less:
accumulated amortization
|
(1 | ) | - | |||||
Total
intangible assets, net
|
59 | - |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Accrued
payroll and staff welfare
|
252 | 131 | ||||||
Accrued
operating expenses
|
46 | 60 | ||||||
298 | 191 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Beijing
Saimeiwei Food Equipments Technology Co., Ltd
|
- | 14 | ||||||
Beijing
Telijie Century Environmental Technology Co., Ltd.
|
- | 10 | ||||||
- | 24 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Due
to Control Group
|
416 | 1,142 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Due
to director
|
389 | - |
|
l
|
Rise
King WFOE is a software company qualified by the related PRC governmental
authorities and was entitled to a two-year EIT exemption from its first
profitable year and a 50% reduction of its applicable EIT rate, which is
25% of its taxable income for the following three years. Rise
King WFOE had a net loss for the year ended December 31, 2008 and its
first profitable year is fiscal year 2009 which has been verified by the
local tax bureau by accepting the application filed by the
Company. Therefore, it was 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.
|
|
l
|
Business
Opportunity Online was qualified as a High and New Technology Enterprise
in Beijing High-Tech Zone in 2005 and was entitled to a three-year EIT
exemption for fiscal year 2005 through fiscal year 2007 and a 50%
reduction of its applicable EIT rate for the following three years for
fiscal year 2008 through fiscal year 2010. However, in March
2007, a new enterprise income tax law (the “New EIT”) in the PRC was
enacted which was effective on January 1, 2008. Subsequently, on
April 14, 2008, relevant governmental regulatory authorities released
new qualification criteria, application procedures and assessment
processes for “High and New Technology Enterprise” status under the New
EIT which would entitle the re-qualified and approved entities to a
favorable statutory tax rate of 15%. With an effective date of
September 4, 2009, Business Opportunity Online obtained the approval of
its reassessment of the qualification as a “High and New Technology
Enterprise” under the New EIT law and was entitled to a favorable
statutory tax rate of 15%. Under the previous EIT laws and
regulations, High and New Technology Enterprises enjoyed a favorable tax
rate of 15% and were exempted from income tax for three years beginning
with their first year of operations, and were entitled to a 50% tax
reduction to 7.5% for the subsequent three years and 15% thereafter. The
current EIT Law provides grandfathering treatment for enterprises that
were (1) qualified as High and New Technology Enterprises under the
previous EIT laws, and (2) established before March 16, 2007, if
they continue to meet the criteria for High and New Technology Enterprises
under the current EIT Law. The grandfathering provision allows Business
Opportunity Online to continue enjoying their unexpired tax holidays
provided by the previous EIT laws and regulations. Therefore, its income
tax was computed using a tax rate of 7.5% for the nine and three month
period ended September 30, 2010 and the year ended December 31, 2009 due
to its unexpired tax holidays for the year 2009 through year
2010. For the nine and three month period ended September 30,
2009, since Business Opportunity Online had not obtained the approval of
its qualification as a “High and New Technology Enterprise” under the New
EIT law, it estimated and calculated its income tax based on the income
tax rate of 25%, the difference of the income tax expenses between the
estimated and the actual income tax expenses for the nine and three month
periods ended September 30, 2009 was approximately US$1,136,000 and
US$487,000 respectively.
|
|
l
|
The
applicable income tax rate for Beijing CNET Online was 25% for the nine
month periods ended September 30, 2010 and
2009.
|
|
l
|
The
New EIT also imposed a 10% withholding income tax for dividends
distributed by a foreign invested enterprise to its immediate holding
company outside China, which were exempted under the previous enterprise
income tax law and rules. A lower withholding tax rate will be
applied if there is a tax treaty arrangement between mainland China and
the jurisdiction of the foreign holding company. Holding companies in Hong
Kong, for example, will be subject to a 5% rate. Rise King WFOE
is invested by immediate holding company in Hong Kong and will be entitled
to the 5% preferential withholding tax rate upon distribution of the
dividends to its immediate holding
company.
|
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Business
tax payable
|
1,082 | 1,003 | ||||||
Culture
industry development surcharge payable
|
2 | 27 | ||||||
Value
added tax payable
|
(26 | ) | 8 | |||||
Enterprise
income tax payable
|
897 | 886 | ||||||
Individual
income tax payable
|
55 | 54 | ||||||
2,010 | 1,978 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Dividend
payable to Series A convertible preferred stockholders
|
380 | 373 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
||||||||
Long-term
borrowing from director
|
131 | 128 |
As of
March 29,
2010
|
As of
December 31,
2009
|
Changes in
Fair Value
(Gain)/Loss
|
||||||||||
US$’000
|
US$’000
|
US$’000
|
||||||||||
Fair
value of the Warrants:
|
||||||||||||
Series
A-1 warrant
|
3,606 | 4,513 | (907 | ) | ||||||||
Series
A-2 warrant
|
3,256 | 4,019 | (763 | ) | ||||||||
Placement
agent warrants
|
841 | 1,032 | (191 | ) | ||||||||
7,703 | 9,564 | (1,861 | ) |
Gross
proceeds
Allocated
|
Number of
Instruments
|
Allocated value
per instrument
|
||||||||||
US$
(’000)
|
US$
|
|||||||||||
Series
A-1 Warrant
|
2,236 | 2,060,800 | 1.08 | |||||||||
Series
A-2 Warrant
|
2,170 | 2,060,800 | 1.05 | |||||||||
Series
A preferred stock
|
5,898 | 4,121,600 | 1.43 | |||||||||
Total
|
10,304 |
Nine months ended September 30,
|
||||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Advertising
revenue from related parties:
|
||||||||
-Beijing
Saimeiwei Food Equipment Technology Co., Ltd.
|
276 | 1,232 | ||||||
-Beijing
Xiyue Technology Co., Ltd.
|
10 | - | ||||||
-Beijing
Fengshangyinli Technology Co., Ltd.
|
315 | 72 | ||||||
-Soyilianmei
Advertising Co., Ltd.
|
- | 539 | ||||||
-Beijing
Telijie Cleaning Technology Co., Ltd.
|
- | 15 | ||||||
-Beijing
Telijie Century Environmental Technology Co., Ltd.
|
271 | 127 | ||||||
872 | 1,985 |
Three months ended September 30,
|
||||||||
2010
|
2009
|
|||||||
US$(’000)
|
US$(’000)
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Advertising
revenue from related parties:
|
||||||||
-Beijing
Saimeiwei Food Equipment Technology Co., Ltd.
|
11 | 345 | ||||||
-Beijing
Xiyue Technology Co., Ltd.
|
- | - | ||||||
-Beijing
Fengshangyinli Technology Co., Ltd.
|
138 | 11 | ||||||
-Soyilianmei
Advertising Co., Ltd.
|
- | 111 | ||||||
-
Beijing Telijie Century Environmental Technology Co., Ltd.
|
116 | 55 | ||||||
265 | 522 |
Rental
Payments
|
Server hosting
and board-
band lease
payments
|
Internet resources
and TV
advertisement
purchase payments
|
Total
|
|||||||||||||
US$(’000)
|
US$(’000)
|
US$(’000)
|
US$(’000)
|
|||||||||||||
Three
months ended December 31, 2010
|
66 | - | 8,811 | 8,877 | ||||||||||||
Year
ended December 31,
|
||||||||||||||||
-2011
|
267 | 15 | 112 | 394 | ||||||||||||
-Thereafter
|
- | - | - | - | ||||||||||||
Total
|
333 | 15 | 8,923 | 9,271 |
Nine months ended September 30, 2010 (Unaudited)
|
||||||||||||||||||||||||||||||||
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Internet
Ad.
resources
resell
|
IIM
|
Others
|
Inter-
segment
and
reconciling
item
|
Total
|
|||||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
|||||||||||||||||||||||||
Revenue
|
19,478 | 11,044 | 396 | 93 | 165 | 593 | (593 | ) | 31,176 | |||||||||||||||||||||||
Cost
of sales
|
4,907 | 10,709 | 34 | 84 | 9 | 48 | - | 15,791 | ||||||||||||||||||||||||
Total
operating expenses
|
3,777 | 379 | 63 | - | - | 1,576 | * | (593 | ) | 5,202 | ||||||||||||||||||||||
Including:
Depreciation and amortization expense
|
92 | 58 | 63 | - | - | 62 | 275 | |||||||||||||||||||||||||
Operating
income(loss)
|
10,794 | (44 | ) | 299 | 9 | 156 | (1,031 | ) | - | 10,183 | ||||||||||||||||||||||
Changes
in fair value of warrants
|
- | - | - | - | - | 1,861 | - | 1,861 | ||||||||||||||||||||||||
Expenditure
for long-term assets
|
264 | - | - | - | - | 184 | - | 448 | ||||||||||||||||||||||||
Net
income (loss)
|
10,496 | (42 | ) | 299 | 9 | 156 | 837 | - | 11,755 | |||||||||||||||||||||||
Total
assets
|
24,080 | 6,642 | 276 | - | - | 13,211 | (8,438 | ) | 35,771 |
Three months ended September 30, 2010 (Unaudited)
|
||||||||||||||||||||||||||||||||
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Internet
Ad.
resources
resell
|
IIM
|
Others
|
Inter-
segment
and
reconciling
item
|
Total
|
|||||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
|||||||||||||||||||||||||
Revenue
|
7,108 | 1,603 | 133 | - | 52 | 358 | (358 | ) | 8,896 | |||||||||||||||||||||||
Cost
of sales
|
1,643 | 1,453 | 11 | - | 3 | - | - | 3,110 | ||||||||||||||||||||||||
Total
operating expenses
|
1,673 | 94 | 31 | - | - | 502 | * | (358 | ) | 1,942 | ||||||||||||||||||||||
Including:
Depreciation and amortization expense
|
42 | 8 | 31 | - | - | 29 | - | 110 | ||||||||||||||||||||||||
Operating
income(loss)
|
3,792 | 56 | 91 | - | 49 | (144 | ) | - | 3,844 | |||||||||||||||||||||||
Changes
in fair value of warrants
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Expenditure
for long-term assets
|
193 | - | - | - | - | 142 | - | 335 | ||||||||||||||||||||||||
Net
income (loss)
|
3,772 | 57 | 90 | - | 49 | (141 | ) | - | 3,827 | |||||||||||||||||||||||
Total
assets
|
24,080 | 6,642 | 276 | - | - | 13,211 | (8,438 | ) | 35,771 |
Nine months ended September 30, 2009 (Unaudited)
|
||||||||||||||||||||||||||||||||
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Internet
Ad.
resources
resell
|
IIM
|
Others
|
Inter-
segment
and
reconciling
item
|
Total
|
|||||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
|||||||||||||||||||||||||
Revenue
|
12,601 | 14,299 | 21 | 1,088 | 38 | 713 | (1,455 | ) | 27,305 | |||||||||||||||||||||||
Cost
of sales
|
3,396 | 12,218 | 2 | 1,008 | 2 | 34 | (742 | ) | 15,918 | |||||||||||||||||||||||
Total
operating expenses
|
4,175 | 485 | 99 | - | - | *992 | (621 | ) | 5,130 | |||||||||||||||||||||||
Including:
Depreciation and amortization expense
|
31 | 36 | 62 | - | - | 5 | - | 134 | ||||||||||||||||||||||||
Operating
income(loss)
|
5,030 | 1,596 | (80 | ) | 80 | 36 | (313 | ) | (92 | ) | 6,257 | |||||||||||||||||||||
Changes
in fair value of warrants
|
- | - | - | - | - | (1,289 | ) | - | (1,289 | ) | ||||||||||||||||||||||
Expenditure
for long-term assets
|
169 | 135 | - | - | - | 136 | (92 | ) | 348 | |||||||||||||||||||||||
Net
income (loss)
|
3,333 | 1,557 | (80 | ) | 80 | 36 | (1,602 | ) | (92 | ) | 3,232 | |||||||||||||||||||||
Total
assets
|
10,359 | 5,985 | 355 | - | - | 9,868 | (4,096 | ) | 22,471 |
Three months ended September 30, 2009 (Unaudited)
|
||||||||||||||||||||||||||||||||
Internet
Ad.
|
TV
Ad.
|
Bank
kiosk
|
Internet
Ad.
resources
resell
|
IIM
|
Others
|
Inter-
segment
and
reconciling
item
|
Total
|
|||||||||||||||||||||||||
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
US$
(‘000)
|
|||||||||||||||||||||||||
Revenue
|
4,730 | 3,114 | 1 | 243 | 38 | 421 | (421 | ) | 8,126 | |||||||||||||||||||||||
Cost
of sales
|
1,241 | 2,534 | 2 | 232 | 2 | 18 | - | 4,029 | ||||||||||||||||||||||||
Total
operating expenses
|
1,063 | 177 | 21 | - | - | *439 | (329 | ) | 1,371 | |||||||||||||||||||||||
Including:
Depreciation and amortization expense
|
12 | 12 | 21 | - | - | 4 | - | 49 | ||||||||||||||||||||||||
Operating
income(loss)
|
2,426 | 403 | (22 | ) | 11 | 36 | (36 | ) | (92 | ) | 2,726 | |||||||||||||||||||||
Changes
in fair value of warrants
|
- | - | - | - | - | (1,289 | ) | - | (1,289 | ) | ||||||||||||||||||||||
Expenditure
for long-term assets
|
133 | 118 | - | - | - | 88 | (92 | ) | 247 | |||||||||||||||||||||||
Net
income (loss)
|
1,654 | 386 | (22 | ) | 11 | 36 | (1,325 | ) | (92 | ) | 648 | |||||||||||||||||||||
Total
assets
|
10,359 | 5,985 | 355 | - | - | 9,868 | (4,096 | ) | 22,471 |
Nine months ended
September 30,
|
Three months ended
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
US$(’000)
|
US$(’000)
|
US$(’000)
|
US$(’000)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
(Amount in thousands
except for the number of
shares and per share data)
|
(Amount in thousands
except for the number of
shares and per share data)
|
|||||||||||||||
Net
income attributable to ChinaNet Online Holdings, Inc.
|
$ | 11,882 | $ | 3,232 | $ | 3,877 | $ | 648 | ||||||||
Beneficial
conversion feature of Series A convertible preferred stock
|
- | (5,898 | ) | - | (5,898 | ) | ||||||||||
Dividend
for Series A convertible preferred stock
|
(612 | ) | - | (190 | ) | - | ||||||||||
Net
income attributable to common shareholders of ChinaNet Online Holdings,
Inc. (numerator for basic
earnings
per
share)
|
$ | 11,270 | $ | (2,666 | ) | $ | 3,687 | $ | (5,250 | ) | ||||||
Dividend
for Series A convertible preferred stock
|
612 | - | 190 | - | ||||||||||||
Net
income attributable to common shareholders of ChinaNet Online Holdings,
Inc. (numerator for
diluted earnings
per
share)
|
$ | 11,882 | $ | (2,666 | ) | $ | 3,877 | $ | (5,250 | ) | ||||||
Weighted
average number of common shares outstanding - Basic
|
16,676,752 | 14,495,560 | 16,939,961 | 15,774,300 | ||||||||||||
Effect
of diluted securities:
|
||||||||||||||||
Series
A Convertible preferred stock
|
3,274,981 | - | 3,015,339 | - | ||||||||||||
Warrants
|
954,063 | - | 961,163 | - | ||||||||||||
Weighted
average number of common shares outstanding -Diluted
|
20,905,796 | 14,495,560 | 20,916,463 | 15,774,300 | ||||||||||||
Earnings
per share-Basic
|
$ | 0.68 | $ | (0.18 | ) | $ | 0.22 | $ | (0.33 | ) | ||||||
Earnings
per share-Diluted
|
$ | 0.57 | $ | (0.18 | ) | $ | 0.19 | $ | (0.33 | ) |
Underlying
stock price
|
$ | 3.43 | ||
Expected
term
|
3 | |||
Risk-free
interest rate
|
1.10 | % | ||
Dividend
yield
|
- | |||
Expected
Volatility
|
150 | % | ||
Exercise
price of the option
|
$ | 5 |
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,
January 1, 2010
|
54,000 | 4.92 | - | |||||||||||||||||||||
Granted/Vested
|
- | $ | 5.00 | 20,250 | 4.17 | $ | 5.00 | |||||||||||||||||
Forfeited
|
- | - | ||||||||||||||||||||||
Exercised
|
- | - | ||||||||||||||||||||||
Balance,
September 30, 2010
|
54,000 | 4.17 | $ | 5.00 | 20,250 | 4.17 | $ | 5.00 |
|
l
|
Change of reporting entity and
basis of presentation
|
|
l
|
Critical accounting policies and
management estimates
|
|
l
|
Rise
King WFOE is a software company qualified by the related PRC governmental
authorities and was entitled to a two-year EIT exemption from its first
profitable year and a 50% reduction of its applicable EIT rate, which is
25% of its taxable income for the following 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
us. Therefore, it was 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.
|
|
l
|
Business
Opportunity Online was qualified as a High and New Technology Enterprise
in Beijing High-Tech Zone in 2005 and was entitled to a three-year EIT
exemption for fiscal year 2005 through fiscal year 2007 and a 50%
reduction of its applicable EIT rate for the subsequent three years for
fiscal year 2008 through fiscal year 2010. However, in March
2007, a new enterprise income tax law (the “New EIT”) in the PRC was
enacted which was effective on January 1, 2008. Subsequently, on
April 14, 2008, relevant governmental regulatory authorities released
new qualification criteria, application procedures and assessment
processes for “High and New Technology Enterprise” status under the New
EIT which would entitle the re-qualified and approved entities to a
favorable statutory tax rate of 15%. With an effective date of
September 4, 2009, Business Opportunity Online obtained the approval of
its reassessment of the qualification as a “High and New Technology
Enterprise” under the New EIT law and was entitled to a favorable
statutory tax rate of 15%. Under the previous EIT laws and
regulations, High and New Technology Enterprises enjoyed a favorable tax
rate of 15% and were exempted from income tax for three years beginning
with their first year of operations, and were entitled to a 50% tax
reduction to 7.5% for the subsequent three years and 15% thereafter. The
current EIT Law provides grandfathering treatment for enterprises that
were (1) qualified as High and New Technology Enterprises under the
previous EIT laws, and (2) established before March 16, 2007, if
they continue to meet the criteria for High and New Technology Enterprises
under the current EIT Law. The grandfathering provision allows Business
Opportunity Online to continue enjoying their unexpired tax holidays
provided by the previous EIT laws and regulations. Therefore, its income
tax was computed using a tax rate of 7.5% for the nine month period ended
September 30, 2010 and the year ended December 31, 2009 due to its
unexpired tax holidays for year 2009 through year 2010. For the
nine month period ended September 30, 2009, since Business Opportunity
Online had not obtained the approval of its qualification as a “High and
New Technology Enterprise” under the New EIT law, it estimated and
calculated its income tax based on the income tax rate of
25%. The difference between the estimated and the actual income
tax expense for the nine and three month period ended September 30, 2009
was approximately US$1,136,000 and US$487,000,
respectively.
|
|
l
|
The
applicable income tax rate for Beijing CNET Online was 25% for the nine
month period ended September 30, 2010 and
2009.
|
|
l
|
The
New EIT also imposed a 10% withholding income tax for dividends
distributed by a foreign invested enterprise to its immediate holding
company outside China, which were exempted under the previous enterprise
income tax law and rules. A lower withholding tax rate will be
applied if there is a tax treaty arrangement between mainland China and
the jurisdiction of the foreign holding company. Holding companies in Hong
Kong, for example, will be subject to a 5% rate. Rise King WFOE
is invested by immediate holding company in Hong Kong and will be entitled
to the 5% preferential withholding tax rate upon distribution of the
dividends to its immediate holding
company.
|
Gross
proceeds
Allocated
|
Number of
instruments
|
Allocated
value per
instrument
|
||||||||||
US$(’000)
|
US$
|
|||||||||||
Series
A-1 Warrant
|
2,236 | 2,060,800 | 1.08 | |||||||||
Series
A-2 Warrant
|
2,170 | 2,060,800 | 1.05 | |||||||||
Series
A preferred stock
|
5,898 | 4,121,600 | 1.43 | |||||||||
Total
|
10,304 |
A.
|
RESULTS OF OPERATIONS FOR THE
NINE AND THREE MONTHS ENDED
SEPTEMBER
30, 2010 AND 2009
|
Nine months
ended September 30,
|
Three
months
ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(US
$)
|
(US
$)
|
(US
$)
|
(US
$)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Sales
|
||||||||||||||||
To
unrelated parties
|
$ | 30,304 | $ | 25,320 | $ | 8,631 | $ | 7,604 | ||||||||
To
related parties
|
872 | 1,985 | 265 | 522 | ||||||||||||
31,176 | 27,305 | 8,896 | 8,126 | |||||||||||||
Cost
of sales
|
15,791 | 15,918 | 3,110 | 4,029 | ||||||||||||
Gross
margin
|
15,385 | 11,387 | 5,786 | 4,097 | ||||||||||||
Operating
expenses
|
||||||||||||||||
Selling
expenses
|
2,187 | 3,253 | 851 | 624 | ||||||||||||
General
and administrative expenses
|
2,410 | 1,530 | 815 | 614 | ||||||||||||
Research
and development expenses
|
605 | 347 | 276 | 133 | ||||||||||||
5,202 | 5,130 | 1,942 | 1,371 | |||||||||||||
Income
from operations
|
10,183 | 6,257 | 3,844 | 2,726 | ||||||||||||
Other
income (expenses):
|
||||||||||||||||
Changes
in fair value of warrants
|
1,861 | (1,289 | ) | - | (1,289 | ) | ||||||||||
Interest
income
|
8 | 9 | 4 | 4 | ||||||||||||
Other
income
|
8 | 8 | 4 | 2 | ||||||||||||
Other
expenses
|
(1 | ) | (100 | ) | 0 | (99 | ) | |||||||||
1,876 | (1,372 | ) | 8 | (1,382 | ) | |||||||||||
Income
before income tax expense
|
12,059 | 4,885 | 3,852 | 1,344 | ||||||||||||
Income
tax expense
|
304 | 1,653 | 25 | 696 | ||||||||||||
Net
income
|
11,755 | 3,232 | 3,827 | 648 | ||||||||||||
Net
loss attributable to noncontrolling interest
|
127 | - | 50 | - | ||||||||||||
Net
income attributable to ChinaNet Online Holdings, Inc.
|
11,882 | 3,232 | 3,877 | 648 | ||||||||||||
Other
comprehensive income
|
||||||||||||||||
Foreign
currency translation gain
|
442 | 13 | 365 | 8 | ||||||||||||
Comprehensive
income
|
$ | 12,197 | $ | 3,245 | $ | 4,192 | $ | 656 |
Net income attributable to ChinaNet Online Holdings,
Inc.
|
$ | 11,882 | $ | 3,232 | $ | 3,877 | $ | 648 | ||||||||
Beneficial conversion feature of
Series A convertible preferred stock
|
- | (5,898 | ) | - | (5,898 | ) | ||||||||||
Dividend of Series A convertible
preferred stock
|
(612 | ) | - | (190 | ) | - | ||||||||||
Net income attributable to common
shareholders of ChinaNet Online Holdings, Inc.
|
$ | 11,270 | $ | (2,666 | ) | $ | 3,687 | $ | (5,250 | ) | ||||||
Earnings per
share
|
||||||||||||||||
Earnings per common
share
|
||||||||||||||||
Basic
|
$ | 0.68 | $ | (0.18 | ) | $ | 0.22 | $ | (0.33 | ) | ||||||
Diluted
|
$ | 0.57 | $ | (0.18 | ) | $ | 0.19 | $ | (0.33 | ) | ||||||
Weighted average number of
common
shares
outstanding:
|
||||||||||||||||
Basic
|
16,676,752 | 14,495,560 | 16,939,961 | 15,774,300 | ||||||||||||
Diluted
|
20,905,796 | 14,495,560 | 20,916,463 | 15,774,300 |
Nine
months
ended September 30,
|
Three months
ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(US
$)
|
(US
$)
|
(US
$)
|
(US
$)
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
NON GAAP
|
NON GAAP
|
NON GAAP
|
NON GAAP
|
|||||||||||||
Income
from operations
|
$ | 10,183 | $ | 6,257 | $ | 3,844 | $ | 2,726 | ||||||||
Other
income (expenses):
|
||||||||||||||||
Changes
in fair value of warrants (note1)
|
- | - | - | - | ||||||||||||
Interest
income
|
8 | 9 | 4 | 4 | ||||||||||||
Other
income
|
8 | 8 | 4 | 2 | ||||||||||||
Other
expenses
|
(1 | ) | (100 | ) | 0 | (99 | ) | |||||||||
15 | (83 | ) | 8 | (93 | ) | |||||||||||
Income
before income tax expense
|
10,198 | 6,174 | 3,852 | 2,633 | ||||||||||||
Income
tax expense
|
304 | 1,653 | 25 | 696 | ||||||||||||
Net
income
|
9,894 | 4,521 | 3,827 | 1,937 | ||||||||||||
Net
loss attributable to noncontrolling interest
|
127 | - | 50 | - | ||||||||||||
Net
income attributable to ChinaNet Online Holdings, Inc.
|
10,021 | 4,521 | 3,877 | 1,937 | ||||||||||||
Other
comprehensive income
|
||||||||||||||||
Foreign
currency translation gain
|
442 | 13 | 365 | 8 | ||||||||||||
Comprehensive
income
|
$ | 10,336 | $ | 4,534 | $ | 4,192 | $ | 1,945 | ||||||||
Net
income attributable to ChinaNet Online Holdings, Inc.
|
10,021 | 4,521 | 3,877 | 1,937 | ||||||||||||
Beneficial
conversion feature of Series A convertible preferred stock (note2)
|
- | - | - | - | ||||||||||||
Dividend
of Series A convertible preferred stock
|
(612 | ) | - | (190 | ) | - | ||||||||||
Net
income attributable to common shareholders of ChinaNet Online Holdings,
Inc.
|
$ | 9,409 | $ | 4,521 | $ | 3,687 | $ | 1,937 | ||||||||
Earnings per
share
|
||||||||||||||||
Earnings
per common share
|
||||||||||||||||
Basic
|
$ | 0.56 | $ | 0.31 | $ | 0.22 | $ | 0.12 | ||||||||
Diluted
|
$ | 0.48 | $ | 0.30 | $ | 0.19 | $ | 0.11 | ||||||||
Weighted
average number of common shares outstanding:
|
||||||||||||||||
Basic
|
16,676,752 | 14,495,560 | 16,939,961 | 15,774,300 | ||||||||||||
Diluted
|
20,905,796 | 15,126,526 | 20,916,463 | 17,646,624 |
Revenue type
|
Nine months ended September
30,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||
Internet
advertisement
|
$ | 19,478 | 62.48 | % | $ | 12,601 | 46.15 | % | ||||||||
TV
advertisement
|
11,044 | 35.42 | % | 13,600 | 49.81 | % | ||||||||||
Internet
Ad. Resources resell
|
93 | 0.30 | % | 1,045 | 3.83 | % | ||||||||||
Bank
kiosks
|
396 | 1.27 | % | 21 | 0.07 | % | ||||||||||
Internet
information management
|
165 | 0.53 | % | 38 | 0.14 | % | ||||||||||
Total
|
$ | 31,176 | 100 | % | $ | 27,305 | 100 | % |
Revenue type
|
Three months ended September
30,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||
Internet
advertisement
|
$ | 7,108 | 79.90 | % | $ | 4,730 | 58.21 | % | ||||||||
TV
advertisement
|
1,603 | 18.02 | % | 3,114 | 38.32 | % | ||||||||||
Internet
Ad. resources resell
|
- | - | 243 | 2.99 | % | |||||||||||
Bank
kiosks
|
133 | 1.50 | % | 1 | 0.01 | % | ||||||||||
Internet
information management
|
52 | 0.58 | % | 38 | 0.47 | % | ||||||||||
Total
|
$ | 8,896 | 100 | % | $ | 8,126 | 100 | % |
Revenue type
|
Nine months ended September
30,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||
Internet
advertisement
|
$ | 19,478 | 100 | % | $ | 12,601 | 100 | % | ||||||||
—From
unrelated parties
|
18,607 | 95.53 | % | 11,420 | 90.63 | % | ||||||||||
—From
related parties
|
871 | 4.47 | % | 1,181 | 9.37 | % | ||||||||||
TV
advertisement
|
11,044 | 100 | % | 13,600 | 100 | % | ||||||||||
—From
unrelated parties
|
11,043 | 99.99 | % | 12,796 | 94.09 | % | ||||||||||
—From
related parties
|
1 | 0.01 | % | 804 | 5.91 | % | ||||||||||
Internet
Ad. resources resell
|
93 | 100 | % | 1,045 | 100 | % | ||||||||||
—From
unrelated parties
|
93 | 100 | % | 1,045 | 100 | % | ||||||||||
—From
related parties
|
- | - | - | - | ||||||||||||
Bank
kiosks
|
396 | 100 | % | 21 | 100 | % | ||||||||||
—From
unrelated parties
|
396 | 100 | % | 21 | 100 | % | ||||||||||
—From
related parties
|
- | - | - | - | ||||||||||||
Internet
information management
|
165 | 100 | % | 38 | 100 | % | ||||||||||
—From
unrelated parties
|
165 | 100 | % | 38 | 100 | % | ||||||||||
—From
related parties
|
- | - | - | - | ||||||||||||
Total
|
$ | 31,176 | 100 | % | $ | 27,305 | 100 | % | ||||||||
—From
unrelated parties
|
$ | 30,304 | 97.20 | % | $ | 25,320 | 92.73 | % | ||||||||
—From
related parties
|
$ | 872 | 2.80 | % | $ | 1,985 | 7.27 | % |
Revenue type
|
Three months ended September
30,
|
|||||||||||||||
2010
(Unaudited)
|
2009
(Unaudited)
|
|||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||
Internet
advertisement
|
$ | 7,108 | 100 | % | $ | 4,730 | 100 | % | ||||||||
—From
unrelated parties
|
6,844 | 96.29 | % | 4,389 | 92.79 | % | ||||||||||
—From
related parties
|
264 | 3.71 | % | 341 | 7.21 | % | ||||||||||
TV
advertisement
|
1,603 | 100 | % | 3,114 | 100 | % | ||||||||||
—From
unrelated parties
|
1,602 | 99.94 | % | 2,933 | 94.19 | % | ||||||||||
—From
related parties
|
1 | 0.06 | % | 181 | 5.81 | % | ||||||||||
Internet
Ad. Resources resell
|
- | - | 243 | 100 | % | |||||||||||
—From
unrelated parties
|
- | - | 243 | 100 | % | |||||||||||
—From
related parties
|
- | - | - | - | ||||||||||||
Bank
kiosks
|
133 | 100 | % | 1 | 100 | % | ||||||||||
—From
unrelated parties
|
133 | 100 | % | 1 | 100 | % | ||||||||||
—From
related parties
|
- | - | - | - | ||||||||||||
Internet
information management
|
52 | 100 | % | 38 | 100 | % | ||||||||||
—From
unrelated parties
|
52 | 100 | % | 38 | 100 | % | ||||||||||
—From
related parties
|
- | - | - | - | ||||||||||||
Total
|
$ | 8,896 | 100 | % | $ | 8,126 | 100 | % | ||||||||
—From
unrelated parties
|
$ | 8,631 | 97 | % | $ | 7,604 | 93.58 | % | ||||||||
—From
related parties
|
$ | 265 | 3 | % | $ | 522 | 6.42 | % |
l
|
We
achieved a 55% increase in internet advertising revenues to US$19.5
million for the nine months ended September 30, 2010 from US$12.6 million
for the same period in 2009. For the three months ended September 30,
2010, our internet advertising revenue increased to US$7.1 million from
US$4.1 million for the same period in 2009. This is primarily a result of
(1) the successful brand building effort for www.28.com made in prior
years both on TV and at other well-known portal websites in China, as well
as participating in government programs with respect to stimulating
employment rates through entrepreneurship and launching of services to
branded clients in China in the fiscal year of 2010; (2) more mature
client service technologies; (3) launching of more value-added services;
and (4) a more experienced sales team. During the nine and three months
ended September 30, 2010, we engaged approximately 100 branded clients and
achieved about 30 branded clients who use our portal and website to
promote their chain stores (or franchise outlets) and other business
opportunities. We also enhanced our search engine optimization function,
which allows us to provide a more technologically advanced chargeable
advertisement for generating sales leads, which was also one of the main
reasons for the increases in internet advertisement
revenue.
|
l
|
We
had a 19% decrease in TV advertising revenue to US$11.0 million for the
nine months ended September 30, 2010 from US$13.6 million for the same
period in 2009. For the three months ended September 30, 2010,
our TV advertising revenue decreased to US$1.6 million as compared to
US$3.1 million for the same period in 2009. We generated this
US$11.0 million of TV advertising revenue by selling approximately 13,650
minutes of advertising time that we purchased from approximately seven
provincial TV stations as compared with approximately 17,400 minutes of
advertising time that we sold in the same period in 2009. The
decrease in revenue we generated from the TV advertisement segment for the
nine months ended September 30, 2010 as compared to the same period of
last year and was mainly due to the following reasons: (1) a decrease of
approximately 3,750 minutes of advertising time sold; (2) increases in
demand for TV advertising are relatively limited due to higher demand for
internet advertising, which can be more cost effective; (3) in response to TV stations
increasing their sales prices, we in turn increased the prices we charged
to our customers which resulted in lower demand from our customers for
this service; (4) Spring Festival was in the middle of the first quarter
of fiscal 2010, which had a negative impact on the demand for
our advertising services and as a result, we had to decrease
our selling price which in turn led to a negative gross profit ratio in
the first quarter of 2010. For the three months ended June 30, 2010 and
September 30, 2010, we increased our selling prices as compared to that in
the first quarter of 2010, and our gross profit ratio of this business
segment improved to 7% and 9% for the second and third quarter of 2010,
respectively, as compared with (2%) for the first quarter of 2010. We do
not anticipate that this business segment will expand in the
future. Rather, we expect that this business segment will be
operated as part of multi-channel communication platform for www.28.com and its related
services. Meanwhile, management will closely monitor this business segment
for the rest of fiscal year 2010 in an effort to improve its
performance.
|
l
|
Our
resale of internet advertising resources is our resale of a portion of the
internet resources that we purchase from Baidu in bulk to our existing
internet advertising clients, in order to promote their businesses through
sponsored searches, search engine traffic generation techniques
etc. We achieved approximately US$0.1 million revenue in this
business segment for the nine months ended September 30, 2010 as compared
to approximately US$1.0 million for the same period in 2009. We do not
consider this segment to be a core business or revenue source, because it
does not promote the www.28.com brand and the revenue
generated by this segment is subjected to price fluctuation caused by the
bidding system adopted by different search engines. In fiscal year 2010,
as we intend to promote our direct service website of www.28.com, which has a much
higher gross profit, we believe the revenue from this segment will
decrease accordingly as compared to last year. We will continue monitor
our clients’ demands from this segment, and continue to negotiate the
agency terms (i.e. discount rate, credit terms, etc) with major recourses
providers, including Baidu, and adjust our strategy accordingly to
maximize our earnings from this segment in the
future.
|
l
|
As
of September 30, 2010, we deployed 200 kiosks in China Construction Bank
Henan Branch, and achieved approximately US$0.4 million of revenue from
this segment as compared to approximately US$0.02 million for the same
period in 2009. Since the bank kiosk advertising business is still in the
initial development stage, it was not a significant contribution to
revenue for the nine months ended September 30, 2010. We
expanded the number of kiosks in fiscal year 2010 starting from Henan,
Shanghai and plan to cover Beijing, Guangdong and Si Chuan based on the
possible client sources we are targeting. As of September 30,
2010, we have placed orders to purchase and install an additional 408
kiosks and, as of September 30, 2010, we have finished the installation of
250 kiosks, including 150 kiosks in China Construction Bank Henan province
and 100 kiosks in Shanghai Rural Commercial Bank. We will
continue our efforts to develop this segment in fiscal year of 2010.
Management believes that the increase in the number of the kiosks that
have been and will be installed will enhance the related advertising
coverage though bank kiosks and will help us to yield more clients in the
future.
|
l
|
Internet
information management is a business segment that we launched in August
2009, which offers our clients an intelligent software product based on
our proprietary search engine optimization technology. The main
objective of the product is to help our clients gain an early warning of
potential negative exposure on the internet so that when necessary they
can formulate an appropriate response. We charge a monthly fee
to clients who utilize this service. For the nine months ended
September 30, 2010, we generated US$0.17 million of revenue from this
business segment. We plan to expand our efforts to offer this service to
more of our existing clients as well as a part of sales package to our
branded clients in the future.
|
Nine months ended September
30,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||||||||||
Revenue
|
Cost
|
GP
ratio
|
Revenue
|
Cost
|
GP
ratio
|
|||||||||||||||||||
Internet
advertisement
|
$ | 19,478 | 4,907 | 75 | % | $ | 12,601 | 3,352 | 73 | % | ||||||||||||||
TV
advertisement
|
11,044 | 10,709 | 3 | % | 13,600 | 11,520 | 15 | % | ||||||||||||||||
Internet
Ad. resources resell
|
93 | 84 | 10 | % | 1,045 | 1,008 | 4 | % | ||||||||||||||||
Bank
kiosk
|
396 | 34 | 91 | % | 21 | 2 | 90 | % | ||||||||||||||||
Internet
information management
|
165 | 9 | 95 | % | 38 | 2 | 95 | % | ||||||||||||||||
Others
|
- | 48 | N/A | - | 34 | N/A | ||||||||||||||||||
Total
|
$ | 31,176 | 15,791 | 49 | % | $ | 27,305 | 15,918 | 42 | % |
Three months ended September
30,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||||||||||
Revenue
|
Cost
|
GP
ratio
|
Revenue
|
Cost
|
GP
Ratio
|
|||||||||||||||||||
Internet
advertisement
|
$ | 7,108 | 1,643 | 77 | % | $ | 4,730 | 1,241 | 74 | % | ||||||||||||||
TV
advertisement
|
1,603 | 1,453 | 9 | % | 3,114 | 2,534 | 19 | % | ||||||||||||||||
Internet
Ad. resources resell
|
- | - | N/A | 243 | 232 | 5 | % | |||||||||||||||||
Bank
kiosk
|
133 | 11 | 92 | % | 1 | 2 | (100 | )% | ||||||||||||||||
Internet
information management
|
52 | 3 | 94 | % | 38 | 2 | 95 | % | ||||||||||||||||
Others
|
- | - | N/A | - | 18 | N/A | ||||||||||||||||||
Total
|
$ | 8,896 | 3,110 | 65 | % | $ | 8,126 | 4,029 | 50 | % |
l
|
Internet
resources cost is the largest component of our cost of revenue for
internet advertisement revenue. We purchased these resources from other
well-known portal websites in China, such as: Baidu, and Google to help
our internet advertisement clients to get better exposure and to generate
more visits for their advertisements placed on our portal
website. We accomplish these objectives though sponsored
search, advanced tracking,
advanced traffic
generation technologies, and search engine
optimization technologies in connection
with the well-known portal websites as indicated above. Our internet
resources cost for internet advertising revenue was US$4.9 million and
US$3.4 million for the nine months ended September 30, 2010 and 2009,
respectively. Our average gross profit ratio for internet advertising
services is about 70%-80%. For the nine months ended September
30, 2010 and 2009, the gross profit ratio for this segment was 75% and 73%
respectively, which was considered stable and reasonable for this business
segment.
|
l
|
TV
advertisement time cost is the largest component of our cost of revenue
for TV advertisement revenue. We purchase TV advertisement time from about
seven different provincial TV stations and resell it to our TV
advertisement clients through infomercials produced by us. Our TV
advertisement time cost was US$10.7 million and US$11.5 million for the
nine months ended September 30, 2010 and 2009, respectively. Our gross
profit ratio for this segment decreased to 3% for the nine months ended
September 30, 2010 as compared to 15% for the same period of 2009. This
decrease was mainly due to the following reasons: (1) the increase of our
selling price is relatively lower than the increase of the purchase cost
per minute charged by the TV stations for fiscal year 2010 as compared to
that in 2009 due to the limitation of TV advertisement demands in
consideration of the better price performance ratio generated from
internet advertisement; (2) because the Spring Festival was in the
middle of the first quarter of 2010, we decreased our selling price
accordingly to attract customers, which led a 2% negative gross
profit ratio for this segment. However, this situation improved in
the second and third quarter of 2010, in which we achieved approximately
7% and 9% gross profit ratio, respectively. Management believes that in
the last quarter of year of 2010, the TV advertisement segment will
continue to generate positive gross
profit.
|
l
|
Our
resale of internet advertising resources that we purchase from Baidu in
large volumes, allows us to enjoy a more favorable discount on rates. We
normally purchase these internet resources for providing value-added
services to our internet advertising clients on our own portal website
www.28.com. However,
besides placing advertisements on www.28.com, some of our advertising
clients also want to use other direct channels for their promotions, so
they purchase internet resources from us because, through us, they have
access to lower rates as compared to the current market price for such
internet resources. The gross profit ratio for this business is not
considered to be stable, because it is subject to price fluctuation caused
by the bidding system adopted by different search engines. For the nine
months ended September 30, 2010, we limited the supply of this segment,
because we intend to promote direct advertisement services to our
customers through our own portal website, www.28.com.
|
Nine months ended September
30,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||
Amount
|
% of total
revenue
|
Amount
|
% of total
revenue
|
|||||||||||||
Total
Revenue
|
$ | 31,176 | 100 | % | $ | 27,305 | 100 | % | ||||||||
Gross
Profit
|
15,385 | 49 | % | 11,387 | 42 | % | ||||||||||
Selling
expenses
|
2,187 | 7 | % | 3,253 | 12 | % | ||||||||||
General
and administrative expenses
|
2,410 | 8 | % | 1,530 | 6 | % | ||||||||||
Research
and development expenses
|
605 | 2 | % | 347 | 1 | % | ||||||||||
Total
operating expenses
|
$ | 5,202 | 17 | % | $ | 5,130 | 19 | % |
Three months ended September
30,
|
||||||||||||||||
2010
(Unaudited)
|
2009
(Unaudited)
|
|||||||||||||||
(Amount expressed in thousands of US dollars,
except percentages)
|
||||||||||||||||
Amount
|
% of total
revenue
|
Amount
|
% of total
revenue
|
|||||||||||||
Total
Revenue
|
$ | 8,896 | 100 | % | $ | 8,126 | 100 | % | ||||||||
Gross
Profit
|
5,786 | 65 | % | 4,097 | 50 | % | ||||||||||
Selling
expenses
|
851 | 10 | % | 624 | 8 | % | ||||||||||
General
and administrative expenses
|
815 | 9 | % | 614 | 8 | % | ||||||||||
Research
and development expenses
|
276 | 3 | % | 133 | 2 | % | ||||||||||
Total
operating expenses
|
$ | 1,942 | 22 | % | $ | 1,371 | 17 | % |
l
|
Selling
expenses: Selling expenses decreased to US$2.2 million for the nine months
ended September 30, 2010 from US$3.3 million for the same period in
2009. For the three months ended September 30, 2010, selling
expenses increased to US$0.9 million as compared to US$0.6 million for the
same period of 2009. Our selling expenses primarily consist of
brand development advertising expenses that we pay to TV stations and
other media outlets for the promotion of www.28.com, other advertising and
promotional expenses, staff salaries, benefits and performance bonuses,
website server hosting and broadband leasing expenses, and travel and
communication expenses. For the nine months ended September 30, 2010, the
decrease in our selling expenses was mainly due to the decrease of our
brand development advertising expenses on TV for the nine months ended
September 30, 2010 to approximately US$1.2 million as compared to
approximately US$2.3 million for the same period in 2009. We do not expect
that the decrease in brand building expenses on TV will have a
significant adverse impact on our future revenue growth, because, through
the investment we have made in brand building of www.28.com in the last
two years, our website has been gradually recognized as one of the most
popular portal providing advertising services and other internet
services for SMEs, particularly for small and medium sized franchises, in
China. With the increase of the cost for brand development
through TV advertisement, we have changed our strategy to focus brand
building activities more on our participation in related
government support programs of raising employment rates to prolong our
brand building effects to the next level. For the nine months ended
September 30, 2010, we recorded approximately US$0.34 million brand
building expenses in relation to the co-funding of "Entrepreneurship Fund
for Chinese College Students” in China, which is recognized by the six
major central ministries, including, China Federation of Industry and
Commerce, Ministry of Education, Central Committee of the Communist Young
League, United Front Work Department of CPC Central Committee, Ministry of
Human Resources and Social Security, and Ministry of Civil Affairs.
Management believes that these activities will help to yield additional
branded clients who will utilize the portal to promote their chain stores
(so called franchises), related products and services, or business
opportunities over the internet and other communication channels of the
company. The increase of the selling expenses for the three
months ended September 30, 2010 was mainly due to the increase of the
website server hosting service charges of approximately US$0.1 million
and an approximately US$0.2 million increase of advertisement
charges for www.28.com in
this quarter.
|
l
|
General
and administrative expenses: General and administrative expenses increased
to US$2.4 million for the nine months ended September 30, 2010 as compared
to US$1.5 million for the same period in 2009. For the three
months ended September 30, 2010, general and administrative expenses
increased to US$0.8 million as compared to US$0.6 million for the same
period in 2009. 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. The increase in our general and administrative
expenses was mainly due to the following reasons: (1) the increase in
professional services charges related to US public company, including but
not limited to legal, accounting, and internal control enhancement,
for about US$0.5 million; (2) the increase of the start-up expenditures of
our newly established subsidiary, Shenzhen Mingshan, for about US$0.2
million; and (3) the increase of staff salary, travelling expenses and
other general office supplies in relation to the expansion of our
business, for about US$0.2 million.
|
l
|
Research
and development expenses: Research and development expenses increased to
US$0.60 million for the nine months ended September 30, 2010 from US$0.35
million for the same period in 2009. For the three months ended September
30, 2010, research and development increased to US$0.28 million as
compared to US$0.13 million for the same period in 2009. 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 of the research and development
expenses for the nine and three months ended September 30, 2010 was mainly
due to the expansion of our R&D function which resulted in an increase
of the salary expenses and other general administrative expense and
suppliers. We expect that our research and development expenses
will increase in future periods as we will continue expanding, optimizing
and enhancing the stability of our portal website and upgrading our
advertising and internet management software. In general, we expect
research and development expenses to remain relatively stable as a
percentage (3%-5%) of our total revenues in the
future.
|
B.
|
LIQUIDITY AND CAPITAL
RESOURCES
|
Nine months ended September 30,
|
||||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Amount in thousands of US
dollars
|
||||||||
Net cash provided by operating
activities
|
11,235 | 4,734 | ||||||
Net cash used in investing
activities
|
(448 | ) | (348 | ) | ||||
Net cash (used in)/provided by financing
actives
|
(2,718 | ) | 6,825 | |||||
Effect of foreign currency
exchange rate changes on cash
|
255 | 10 | ||||||
Net increase in cash and cash
equivalents
|
8,324 | 11,221 |
C.
|
Off-Balance
Sheet Arrangements
|
Exhibit
No.
|
Document Description
|
|
Employment
Agreement by and between Rise King Century Development (Beijing) Co., Ltd.
and Hangdong Cheng
|
||
10.2
|
Employment
Agreement by and between Rise King Century Development (Beijing) Co., Ltd.
and Zhige Zhang
|
|
10.3
|
Employment
Agreement by and between Rise King Century Development (Beijing) Co., Ltd.
and George Kai Chu
|
|
10.4
|
Employment
Agreement by and between ChinaNet Online Holdings, Inc. and Min
Hu
|
|
10.5
|
Employment
Agreement by and between Rise King Century Development (Beijing) Co., Ltd.
and Hongli Xu
|
|
10.6
|
Employment
Agreement by and between Rise King Century Development (Beijing) Co., Ltd.
and Li Wu
|
|
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.
|
|
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).
|
CHINANET
ONLINE HOLDINGS, INC.
|
||
Date:
November 15, 2010
|
By:
|
/s/
Handong Cheng
|
Name:
Handong Cheng
|
||
Title:
Chief Executive Officer
(Principal
Executive Officer)
|
||
I.
|
Term
of the Contract
|
Article
1.
|
Being
unanimously agreed by both parties, the term of this Contract adopts the
_2nd_ type from the
following:
|
1.
|
Fixed
term of ______ years, from year___ month___ date___ to year___ month
___ date___ (not including Probation Period);
|
2.
|
Non-fixed
term;
|
3.
|
Upon
the completion of certain duties.
|
II.
|
Job
Title and Duties
|
Article
2.
|
Party
A, pursuant to its work needs, employs Party B to assume the Position of
Chairman of the
Board at the Department of Management .
Based on the job requirements and Party B’s performance, Party A has the
right to promote or adjust Party B’s affiliated department and job title.
Without valid reasons, Party B may not refuse such job change or
re-arrangement by Party A. Party B shall fulfill all duties of the
re-arranged post and accept the adjusted salary subject to the
position/salary adjustment
sheet.
|
Article
3.
|
Following
Party A’s requirements, Party B shall complete the number of work hours
and tasks by the required quality standards, and shall take good care of
his/her own office supplies and the facilities of the working
area.
|
III.
|
Work
Schedule, Rests and Vacations
|
Article
4.
|
Pursuant
to the relevant state regulations, Party A implements a work schedule of
5 work
days per week, not exceeding 44 work-hours per week
;
|
Article
5.
|
Party
A may arrange Party B to extend its work hours or to work overtime
due to the business needs;
|
Article
6.
|
Party
A shall protect Party B’s right to rest; Party B is entitled to days of
rest, holidays, wedding leave, funeral leave, and maternity
leave.
|
IV.
|
Labor
Compensation
|
Article
7.
|
According
to the Company’s principle of compensation and method of evaluation, and
based on Party B’s performance and achievement, Party A determines the
salary level and distribution method for Party B. Based on its
performance, job position and the Company’s operation situation, Party B’s
salary may be adjusted accordingly by the Company, which shall not be
lower than the minimum salary level required by the local government.
Party B is liable for its salary and individual income taxes, which Party
A is responsible to withhold or
collect.
|
|
Employee
salary compensation is confidential information of the Company. Employees
are responsible for keeping such information confidential, and no one is
allowed to disclose it to others. If a disclosing act is identified, the
Company reserves the right to investigate this act for liability,
including economic penalty (up to the total sum of the Employee’s salary
of 12 previous months) and
dismissal.
|
Article
8.
|
In
the event Party A arranges Party B to extend its work hours or to work
overtime, this must be done in accordance with the Employee Handbook of
the Company.
|
V.
|
Insurances
and Benefits
|
Article
9.
|
Within
the term of the contract, Party A shall take out employee-related “medical
insurance”, “old-age insurance”, “unemployment insurance” and “working
safety insurance” for Party B, pursuant to the relevant state regulations.
For Party B’s social labor insurance, Party A will withhold the
portion assumed by the Employee from its
salary.
|
Article 10.
|
Within
the term of the contract, Party B is also entitled to some relevant
benefits provided in the Employee
Handbook.
|
Article
11.
|
In
the event Party B contracts occupational disease or is injured at work, it
shall be handled in accordance with the relevant regulations of the state
and Beijing governments.
|
Article
12.
|
In
the event Party B is sick or injured by non-work accidents, the resulting
medical treatment period(s) shall be defined in accordance with the
relevant regulations of the state and Beijing governments, except for
situations resulting from Party B’s self-harming acts, after-work illness
and injuries, or injuries caused by its violation of the state laws and
statutes.
|
Article
13.
|
In
the event Party B had become ill before employed and was not satisfying
the health condition required by Party A for the job, but
concealed its medical history, Party B is solely responsible for all the
resulting costs and fees.
|
VI.
|
Rights
and Obligations of Both
Parties
|
Article
14
|
Rights
of Party A
|
1.
|
Pursuant
to the relevant laws, statutes, and policies, Party A is entitled to
establish, and to monitor the implementation of, various rules and
regulation for the Company in order to regulate Party B’s behaviors. If
Party B violates the rules and regulations of the Company, Party B has the
right to penalize.
|
2.
|
Party
A shall provide education and training to Party B; and
according to job duties, check and urge Party B in completing the given
tasks.
|
3.
|
Within
the term of the contract, depending on the work demand, Party A has the
right to adjust or change Party B’s job
position.
|
Article
15
|
Obligations
of Party A
|
1.
|
Party
A must operate or develop its business in accordance with the laws and
statutes of People’s Republic of
China;
|
2.
|
Party
A must, pursuant to the state laws and statutes, establish rules and
regulations for the Company; and provide Party B with training with regard
to law-abiding, professional virtue and technical
skills;
|
3.
|
Party
A must provide necessary working environment, condition, equipment and
tools to Party B.
|
Article
16.
|
Rights
of Party B
|
1.
|
Party
B is entitled to the labor protection, insurances and vacations provided
by Party A according to law;
|
2.
|
Party
B is entitled to receive labor compensation, bonus, and allowance
according to relevant provisions;
|
3.
|
Within
the term of the contract, if there is a dispute between both parties,
Party B has the right to apply for mediation, arbitration or resort to
litigation.
|
Article
17.
|
Obligations
of Party B
|
1.
|
Party
B must comply with the laws and statutes of People’s Republic of China,
the rules and regulations of the Company, and the labor
disciplines;
|
2.
|
Party
B shall bring its own computer when working at the Company, and ensure
that all the software programs installed on the computer are legal and
authorized. Any disputes, controversies and their associated legal
responsibilities lie solely with Party
B.
|
3.
|
Within
the term of the contract or within the first year after this contract was
terminated, Party B must keep confidential the Company’s business secrets
and is not allowed to use or let others use such information, or to
disclose to others any information concerning Party A’s technology and
operation; nor allowed to work for another employer by engaging in any job
that competes with the Company’s business. The “others”
includes:
|
4.
|
Within
the first year after the contract is terminated, Party B may not contact
for any commercial purpose, or provide to a third party information about,
clients or entities with which Party B was acquainted during its
employment with Party A;
|
5.
|
When
leaving its position, Party B shall do its own job well for the handover;
and shall turn all the records, notebooks and all materials in connection
with Party B’s work, including photocopies, computer software, etc., over
to Party A.
|
VII.
|
Liability
for Breach
|
Article
18.
|
Within
the term of the contract, any of the following acts by Party B constitutes
a breach:
|
1.
|
Unilaterally
dissolves the contract without
notice;
|
2.
|
Violates
Party A’s labor disciplines or operation
rules;
|
3.
|
Operates
the same business of its own; or works for other in-competition employers
who operates the same business as Party
A;
|
4.
|
Discloses
the business secrets of the
Company;
|
5.
|
Conducts
other acts violating this labor
contract.
|
Article
19.
|
Amendments
to Labor Contract
|
1.
|
In
the event Party A switches to other production or changes operation
tasks;
|
2.
|
Over
matters on which both parties agree through consultation and
consensus;
|
3.
|
In
the event the related statutes or policies have been revised or
repealed.
|
Article
20.
|
Renewal
of Labor Contract
|
Article
21
|
Termination
of Labor Contract
|
1.
|
The
execution of this contract will be terminated upon the expiration of the
contract or the completion of the tasks/duties prescribed
herein;
|
2.
|
The
performance of this contract is impossible due to Force
Majeure;
|
3.
|
In
the event Party A, after being confirmed by certain government agencies,
has closed its business, shut down its joint venture, announced
bankruptcy, or entered into the legal rectification period for being on
the verge of bankruptcy.
|
Article
22
|
Dissolution
of Labor Contract
|
1.
|
Upon
consultation and consensus of both parties, this contract may be
dissolved;
|
2.
|
In
the event Party B submits an written notification to Party A 30 days in
advance, this contract may be
dissolved;
|
3.
|
Upon
the occurrence of any of the following, Party A may dissolve the
contract:
|
4.
|
Upon
the occurrence of any of the following, the labor contract may be
dissolved after Party A gives a written notification to Party B 30 days in
advance, or pays Party B salary for one additional
month:
|
5.
|
If
any of the following happens to Party B, Party A may not dissolve this
contract in accordance with Item 4 above (under Article
22):
|
IX.
|
Resolution
of Labor Disputes
|
Article
23
|
In
the event a dispute arises between both parties in the course of
fulfilling this contract, the concerned parties shall submit a request to
the Labor Dispute Mediation Committee for mediation; If such mediation
proves ineffectual and one of the parties resorts to arbitration, the
party shall submit a written request for arbitration to the tribunal Labor
Dispute Arbitration Committee within 60 days from the occurrence of the
dispute; if refusing to accept the arbitration judgment, the concerned
party may file a lawsuit case to the local people’s
court.
|
X.
|
Other
Matters Agreed by Both Parties
|
XI.
|
Misc.
|
Article
24
|
Other
matters not covered herein shall be handled in accordance with the current
state laws, statues and regulations and the Company’s Employee Handbook,
or be resolved through consultation of both
parties.
|
Article
25
|
This
contract is in duplicates, with one to each
party.
|
I.
|
Term
of the Contract
|
|
Article
1.
|
Being
unanimously agreed by both parties, the term of this Contract adopts the
_2nd_ type from the following:
|
|
1.
|
Fixed
term of ____ years, from year___month___date___ to
year___month___date___ (not including Probation
Period);
|
|
2.
|
Non-fixed
term;
|
|
3.
|
Upon
the completion of certain duties.
|
II.
|
Job
Title and Duties
|
Article
2.
|
Party
A, pursuant to its work needs, employs Party B to assume the Position of
Chairman of the Board at the Department of Management . Based on the job
requirements and Party B’s performance, Party A has the right to promote
or adjust Party B’s affiliated department and job title. Without valid
reasons, Party B may not refuse such job change or re-arrangement by Party
A. Party B shall fulfill all duties of the re-arranged post and accept the
adjusted salary subject to the position/salary adjustment
sheet.
|
Article
3.
|
Following
Party A’s requirements, Party B shall complete the number of work hours
and tasks by the required quality standards, and shall take good care of
his/her own office supplies and the facilities of the working
area.
|
III.
|
Work
Schedule, Rests and Vacations
|
Article
4.
|
Pursuant
to the relevant state regulations, Party A implements a work schedule
of 5 work days per week, not exceeding 44 work-hours per week
;
|
Article
5.
|
Party
A may arrange Party B to extend its work hours or to work overtime due to
the business needs;
|
Article
6.
|
Party
A shall protect Party B’s right to rest; Party B is entitled to days of
rest, holidays, wedding leave, funeral leave, and maternity
leave.
|
IV.
|
Labor
Compensation
|
Article
7.
|
According
to the Company’s principle of compensation and method of evaluation, and
based on Party B’s performance and achievement, Party A determines the
salary level and distribution method for Party B. Based on its
performance, job position and the Company’s operation situation, Party B’s
salary may be adjusted accordingly by the Company, which shall not be
lower than the minimum salary level required by the local government.
Party B is liable for its salary and individual income taxes, which Party
A is responsible to withhold or collect.
|
Employee
salary compensation is confidential information of the Company. Employees
are responsible for keeping such information confidential, and no one is
allowed to disclose it to others. If a disclosing act is identified, the
Company reserves the right to investigate this act for liability,
including economic penalty (up to the total sum of the Employee’s salary
of 12 previous months) and dismissal.
|
|
Article
8.
|
In
the event Party A arranges Party B to extend its work hours or to work
overtime, this must be done in accordance with the Employee Handbook of
the Company.
|
V.
|
Insurances
and Benefits
|
Article
9.
|
Within
the term of the contract, Party A shall take out employee-related “medical
insurance”, “old-age insurance”, “unemployment insurance” and “working
safety insurance” for Party B, pursuant to the relevant state regulations.
For Party B’s social labor insurance, Party A will withhold the
portion assumed by the Employee from its salary.
|
Article 10.
|
Within
the term of the contract, Party B is also entitled to some relevant
benefits provided in the Employee Handbook.
|
Article
11.
|
In
the event Party B contracts occupational disease or is injured at work, it
shall be handled in accordance with the relevant regulations of the state
and Beijing governments.
|
Article
12.
|
In
the event Party B is sick or injured by non-work accidents, the resulting
medical treatment period(s) shall be defined in accordance with the
relevant regulations of the state and Beijing governments, except for
situations resulting from Party B’s self-harming acts, after-work illness
and injuries, or injuries caused by its violation of the state laws and
statutes.
|
Article
13.
|
In
the event Party B had become ill before employed and was not satisfying
the health condition required by Party A for the job, but
concealed its medical history, Party B is solely responsible for all the
resulting costs and fees.
|
VI.
|
Rights
and Obligations of Both Parties
|
Article
14
|
Rights
of Party A
|
1.
|
Pursuant
to the relevant laws, statutes, and policies, Party A is entitled to
establish, and to monitor the implementation of, various rules and
regulation for the Company in order to regulate Party B’s behaviors. If
Party B violates the rules and regulations of the Company, Party B has the
right to penalize.
|
2.
|
Party
A shall provide education and training to Party B; and
according to job duties, check and urge Party B in completing the given
tasks.
|
3.
|
Within
the term of the contract, depending on the work demand, Party A has the
right to adjust or change Party B’s job position.
|
Article
15
|
Obligations
of Party A
|
1.
|
Party
A must operate or develop its business in accordance with the laws and
statutes of People’s Republic of China;
|
2.
|
Party
A must, pursuant to the state laws and statutes, establish rules and
regulations for the Company; and provide Party B with training with regard
to law-abiding, professional virtue and technical
skills;
|
3.
|
Party
A must provide necessary working environment, condition, equipment and
tools to Party B.
|
Article
16.
|
Rights
of Party B
|
1.
|
Party
B is entitled to the labor protection, insurances and vacations provided
by Party A according to law;
|
2.
|
Party
B is entitled to receive labor compensation, bonus, and allowance
according to relevant provisions;
|
Within
the term of the contract, if there is a dispute between both parties,
Party B has the right to apply for mediation, arbitration or resort to
litigation.
|
|||
Article
17.
|
Obligations
of Party B
|
||
1.
|
Party
B must comply with the laws and statutes of People’s Republic of China,
the rules and regulations of the Company, and the labor
disciplines;
|
||
2.
|
Party
B shall bring its own computer when working at the Company, and ensure
that all the software programs installed on the computer are legal and
authorized. Any disputes, controversies and their associated legal
responsibilities lie solely with Party B.
|
||
3.
|
Within
the term of the contract or within the first year after this contract was
terminated, Party B must keep confidential the Company’s business secrets
and is not allowed to use or let others use such information, or to
disclose to others any information concerning Party A’s technology and
operation; nor allowed to work for another employer by engaging in any job
that competes with the Company’s business. The “others”
includes:
|
||
1) Personnel
internal to Party A who is not permitted but use such
information;
|
|||
|
2) Personnel
external to Party A who use such information without the Company’s written
consent;
|
||
4.
|
Within
the first year after the contract is terminated, Party B may not contact
for any commercial purpose, or provide to a third party information about,
clients or entities with which Party B was acquainted during its
employment with Party A;
|
||
5.
|
When
leaving its position, Party B shall do its own job well for the handover;
and
shall turn all the records, notebooks and all materials in connection with
Party
B’s work, including photocopies, computer software, etc., over to Party
A.
|
VII.
|
Liability
for Breach
|
||
Article
18.
|
Within
the term of the contract, any of the following acts by Party B
constitutes a breach:
|
||
1)
Party B’s serious violation the labor disciplines or Party A’s
rules and regulations; dereliction of duty; or fraud that causes material
damages to the Company’s interests;
|
|||
2)
Party B’s entering into labor relationship with other employer in the same
period, seriously affecting its performance of the Company’s duties or
tasks; or Party B’s refusal to correct the faults at Party A’s
request.
|
|||
|
3)
Party B deceives or swindles Party A into signing or changing the labor
contract against its true intention.
|
||
4)
Within the term of employment, Party B discloses information concerning
Party A’s technology or business operation.
|
|||
5)
Party B is being prosecuted in accordance with the law.
|
|||
4.
|
Upon
the occurrence of any of the following, the labor contract may be
dissolved after Party A gives a written notification to Party B 30 days in
advance, or pays Party B salary for one additional
month:
|
||
1)
Party B becomes ill or suffers non-work related injury; and, after
the required medical treatment period, still unable to perform its
original work or other work re-arranged by Party
A;
|
|||
2)
Party B is not competent for its work, and after receiving training or
being re-assigned, is still not competent for its work;
|
|||
3)
The objective circumstances under which the labor contracted was executed
have undergone material changes, rendering the original contract
impossible to be fulfilled; and both parties are unable to reach agreement
on the amendment of the contract after consultation.
|
|||
5.
|
If
any of the following happens to Party B, Party A may not dissolve this
contract in accordance with Item 4 above (under Article
22):
|
||
1)
Party B is engaged in operations that carry risks of contracting
occupational disease and has not received physical health checkup before
leaving post, or is suspected to be an occupational disease patient under
diagnosis or medical observation.
|
|||
2) Party
B has contracted occupational disease while employed by Party A, or was
injured during work and determined to have lost or partially lost his
ability to work.
|
|||
3)
Party B is sick or suffers non-work related injury but is within
the required treatment
period.
|
4)
Party B is a female employee during pregnancy, labor and nursing
period;
|
|||
5)
Party B has worked consecutively for 15 years in the Company and is
less than 5 years from legal retirement
age;
|
|||
6) Other
circumstances provided by law and administrative
statutes.
|
IX.
|
Resolution
of Labor Disputes
|
In
the event a dispute arises between both parties in the course of
fulfilling this contract, the concerned parties shall submit a request to
the Labor Dispute Mediation Committee for mediation; If such
mediation proves ineffectual and one of the parties resorts to
arbitration, the party shall submit a written request for
arbitration to the tribunal Labor Dispute Arbitration Committee
within 60 days from the occurrence of the dispute; if refusing
to accept the arbitration judgment, the concerned party may
file a lawsuit case to the local people’s
court.
|
|
X.
|
Other
Matters Agreed by Both Parties
|
XI.
|
Misc.
|
Other
matters not covered herein shall be handled in accordance with the current
state laws, statues and regulations and the Company’s Employee Handbook,
or be resolved through consultation of both
parties.
|
|
Article
25
|
This
contract is in duplicates, with one to each
party.
|
Address:
|
Basement
of Building 6, Yuquan Huigu Park, No. 3 Minzhuang Road
Haidian District, Beijing.
|
|
71
7 1 2206, 100079
|
|
1976.01.02
|
|
0486
7549 02(B)
|
|
2206,
100079
|
1.
|
Pursuant
to the Labor Law of the People’s Republic of China (hereinafter “Labor
Law”). the Employment Law of the People’s Republic of China (hereinafter
“Employment Law”) and other relevant regulations, in consideration of the
mutual promises and covenants made herein, and for other good and -valuable
consideration, the receipt and sufficiency of which is acknowledged,
Party A and Party B (collectively referred to as the “Parties”)
hereby agree as follows:
|
2.
|
This
Contract shall be a contract with a fixed term of one years, from
2010,
May 22
(“Starting Date”) to 2010, May 22.
|
3.
|
If
upon the expiration of the term, Party A and Party B agree to
renew this Contract, they shall execute the Agreement to Renew Employment
Contract attached to this Contract as Appendix A, or shall execute a
new employment contract.
|
4.
|
Party B
agrees to assume the position of Chief Operating
Officer (or engage in ________) pursuant to the work needs of
Party A. The position duty, work task, objective, disciplines and
other relevant management rules shall be implemented according to the work
standards and other rules prescribed by Party A. The main work
location of Party B shall be
[Beijing].
|
5.
|
Both
Parties acknowledge that, Party A shall have the right to change the
type of work, job title and position, job duties and work location of
Party B at any time according to the business needs of Party A
or ability or work performance or actual situation of Party B,
provided, however, that such change shall be made in good faith with
reasonable causes. Party B shall be subject to any such changes as
deemed necessary and appropriate in the sole judgment of
Party A.
|
6.
|
Party B
hereby agrees that, in addition to the duties and responsibilities
otherwise set forth herein, during the term of this Contract, Party B
shall:
|
|
7.1
|
devote
his/her full time, attention and skills during the normal working hours
designated to him/her hereunder exclusively to the performance of his/her
duties hereunder, and effectively perform his/her duties and make his/her
best endeavors to ensure the satisfactory accomplishment of the assignment
to him/her by Party A; and
|
|
7.2
|
perform
his/her duties hereunder faithfully and diligently for Party A in
accordance with the terms hereunder, the rules and policies of
Party A and the applicable laws and regulations, engage in no
activities which are in violation of any PRC laws or regulations or may be
prejudicial to the interests of Party A, and seek no personal gains,
directly or indirectly, by utilizing his/her position or power in
Party A.
|
8.
|
Party B
shall work five (5) days per week, eight (8) hours per day, with the
average working hours not exceeding forty (40) hours per week.
Party A may require Party B to work overtime due to the business
needs and Party A shall pay Party B overtime pay in accordance
with its overtime management rules and the relevant state
regulations.
|
9.
|
Party A
shall provide Party B with appropriate working conditions and
facilities and with labor protection in accordance with the state
standards and Party B shall comply with the rules and regulations of
work safety and sanitation formulated by
Party A.
|
10.
|
Party A
will be responsible for providing education and training to Party B
on business technologies, labor safety and sanitation and articles of
association of Party A.
|
11.
|
According
to Party B’s position and skills, Party A pays
________ to
Party B as the basic salary, monthly paid. During the term of
employment under this Contract, Party A will decide the earning prior
to tax of Party B based upon Party A’s then current salary systems
and position adjustment policies. Party A will pay the payment
through the individual bank account designated by Party A or through
other means Party A deems proper. The amount of salary will be
stipulated in an offer
letter.
|
12.
|
Party B
shall be responsible for the payment of due and payable individual income
tax resulting from the salary and other remuneration paid by Party A
in accordance with the relevant PRC laws and regulations. Party A, as
the withholding person, shall withhold the individual income tax and other
due and payable tax of Party B prior to paying the remuneration to
Party B as required by law.
|
13.
|
Party A
shall have the right to adjust the salary and welfare of Party B
appropriately based on the capability, experience, attitude, performance,
achievement, working-age and position of Party B as well as according
to the salary and position adjustment policies and business conditions
experienced by Party.
A.
|
14.
|
Party A
shall deduct the following from the salary payable to Party,. B
in accordance with the relevant PRC laws and
regulations:
|
|
14.1
|
The
individual income tax of
Party B;
|
|
14.2
|
The
part of the society insurance and other welfare benefits which are to be
borne by Party B;
|
|
14.3
|
All
compensation or lines payable by Party B and withheld by Party A
on the effective court verdict or arbitration
decision;
|
|
14.4
|
All
compensation or lines payable by Party B to Party A according to
court verdict or arbitration
decision.
|
15.
|
Party A
may, in its discretion, pay a bonus to Party B based upon
Party A’s business operation situation and articles of association.
The detailed amount, conditions and form will be set forth by
Party A. Notwithstanding the above, paying bonus should not be deemed
as an obligation of Party A.
|
16.
|
The
Parties shall pay premiums for social security insurance schemes such as
Pension, Unemployment, Medical Insurance, etc. in accordance
with relevant PRC laws and
regulations.
|
17.
|
Party B
shall abide by the Working Rules and articles of association stipulated by
Party A pursuant to laws. Party B shall strictly adhere to
proper instructions and decisions of Party A, take care of all assets
of Party A, and abide by professional
morality.
|
18.
|
In
case Party B violates the Working Rules or articles of association of
Party A, Party A may impose punishment to Party B in
accordance with the Working Rules or articles of association of
Party A.
|
19.
|
Party A
has the right to require Party B to compensate the economic losses
caused by Party B’s violation of relevant laws, Working Rules or
articles of association of
Party A.
|
20.
|
Party A
has the right to appropriately amend its rules or articles of association
at any time based on its business needs. Party A shall notify
Party B in any way Party A deems proper, including but not
limited to, through notice, announcement. e-mail and memorandum of any
such changes.
|
21.
|
Party B
shall not take position in any other enterprise or company during working
in Party A. Any invention, creation, development, design,
improvement, production made by Party B during working in
Party A shall belong to Party A, and any intellectual property
right arising from them (including but not limited to patent right,
copyright, know-how) shall also belong to
Party A.
|
22.
|
Party B
shall keep the proprietary and confidential information of Party A
confidential and shall abide by any confidentiality rules set forth by
Party A. Party B shall not take, use of or disclose any material
or information of Party A to any third party except on behalf of
Party A’s and with Party A’s prior written consent. Party B
shall execute and abide by the Non-disclosure and Non-Competition
Agreement (“Confidentiality Agreement”). Where Party B breaches the
competition restriction obligation under the Confidentiality Agreement,
Party B shall pay liquidated damages to Party A in accordance
with Confidentiality Agreement.
|
23.
|
Party B
agrees that Party A may disclose his/her personal information
including, but not limited to, Party B’s name, address, nationality,
position, payment, bank account, this Contract and its renewal and
amendment, as directly or indirectly required by Party A’s reasonable
business and operation.
|
24.
|
In
case a modification occurs in the laws and administrative regulations that
govern this Contract, the corresponding part of this Contract and
appendixes shall be modified accordingly. In case a major change occurs in
the circumstances under which this Contract was concluded or there is any
conflict between this Contract and the relevant PRC laws and regulations,
so that this Contract cannot be performed anymore, the relevant part of
this Contract may be modified upon agreement between Party A and
Party B through amicable consultation based on the requirements of
the relevant PRC laws and
regulations.
|
25.
|
This
Contract may be terminated upon mutual agreement between Party A and
Party B in writing.
|
26.
|
Party A
shall have right to unilaterally terminate this Contract with immediate
effect without any prior written notice under the following circumstances,
and will notify Party B of such
termination:
|
|
26.1
|
The
termination of this Contract during the probation (if any) period under
Article 3 hereof;
|
|
26.2
|
Party B
seriously violates the labor disciplines or the rules or regulations of
Party A (including but not limited to the Working Rules or articles
of association of Party A);
|
|
26.3
|
Party B
causes serious damage to the interests of Party A due to
Party B’s serious dereliction of his/her duties (including but not
limited to, his/her duties under Article 7 hereof), or his/her engagement
in malpractices for seeking personal
gains:
|
|
26.4
|
Party B
has additionally established an employment relationship with another
employer which materially affects the completion of his tasks with
Party A, or Party B refuses to rectify the matter after the same
is brought to his attention by
Party A;
|
|
26.5
|
The
Employment contract is invalid because Party B uses such means as
deception or coercion, or takes advantage of Party A’s difficulties,
to cause Party A to conclude the employment contract, or to make an
amendment thereto, which is contrary to Party A’s true intent;
or
|
|
26.6
|
Party B
is criminally prosecuted under the
law.
|
27.
|
Party A
may terminate this Contract by serving 30 days’ prior written notice to
Party B or giving Party B one month’s salary in lieu of notice
in any one of the following
circumstances:
|
|
27.1
|
where
Party B. after undergoing a legally prescribed period of medical
treatment and recuperation for an illness or a non-work-related injury,
remains unable to carry out the original job, and is also unfit for the
job otherwise assigned to Party B by
Party A.
|
|
27.2
|
where
Party B is unable to fulfill the duties of his/her position to the
standards required under the terms hereof or by Party A, and, despite
undergoing further training or a transfer or his/her position, remains
unable to do so;
|
|
27.3
|
where
this Contract cannot be performed due to any major changes of any
objective circumstances under which this Contract was concluded, and
following consultation, Party A and Party B cannot agree upon
the necessary modification to be made to this
Contract.
|
28.
|
The
term “major changes of any,
objective circumstances” stipulated in Section 27.3 includes but not
limited to:
|
|
28.1
|
Merger
of Party A into another business entity, or sale or transfer by
Party A of substantial portion of the assets it owns to other
enterprises or third parties;
|
|
28.2
|
Material
adjustment in operative policy or material changes in operative situation
of Party A;
|
|
28.3
|
Serious
difficulty incurred in the operation of
Party A;
|
|
28.4
|
Entry
into the period of clearing up, or stop of manufacture or business totally
or partially by Party A;
|
|
28.5
|
Declaration
of bankruptcy, dissolution or liquation by
Party A;
|
|
28.6
|
Decision
of Party A in ceasing the research and development which directly
relates to Party B’s work according to the need of business
development of Party A and/or the actual market situation; or.
|
|
28.7
|
Laws
or regulations newly promulgated by the government that makes either Party
or both Parties not able to perform this
Contract.
|
29.
|
Party B
may resign his/her job and terminate this Contract during the Contract
term with a prior written notice of 30 days to Party A. With regard
to Party A’s economic losses arising from Party B, Party A
shall have the right to deduct any such amount of economic losses from
corresponding salary and any other remuneration due and payable to
Party B and Party A shall still have the right to claim the
uncompensated economic losses from
Party B.
|
30.
|
In
the event that Party A is close to bankruptcy or faces a bad business
situation or serious difficulty in the operation, Party A shall
explain the situation to its employees. After having solicited opinions
from the employees, and reported the situation to the administrative
department for labor, Party A may terminate this
Contract.
|
31.
|
Party A
shall not terminate this Contract in accordance with Articles 28 and 31
hereof where Party B:
|
|
31.1
|
is
engaged in operations exposing him to occupational disease hazards and has
not undergone a pre-departure occupational health check-up, or is
suspected of having contracted an occupational disease and is being
diagnosed or under medical
observation;
|
|
31.2
|
has
been confirmed as having lost or partially lost his capacity to work due
to an occupational disease contracted or a work-related injury sustained
with the Employer;
|
|
31.3
|
is
receiving, medical treatment for diseases or injuries related to work
within the stipulated period of
time:
|
|
31.4
|
is
a female staff member during her pregnancy, maternity and lactation;
or
|
|
31.5
|
has
been working for the Employer continuously for not less than 15 years and
is less than 5 years away from his legal retirement
age;
|
|
31.6
|
finds
himself in other circumstances stipulated in laws or administrative
statues.
|
32.
|
In
any of the following circumstances, Party B may terminate this
Contract:
|
|
32.1
|
Party A
fails to pay the social insurance premiums for Party B in accordance
with the law;
|
|
32.2
|
Where
Party A forces Party B to work by means of violence,
intimidation, detention or illegal restriction of personal freedom, or
where Party B is instructed m violation of rules and regulations or
peremptorily ordered by Party A to perform dangerous operations which
threaten his personal safety;
|
|
32.3
|
Party A
fail to pay labor remuneration in full and on time or fails to provide the
labor protection or working conditions as agreed under this
Contract.
|
|
32.4
|
The
Employment contract is invalid because Party A uses such means as
deception or coercion, or takes advantage of Party B’s difficulties,
to cause Party B to conclude the employment contract, or to make an
amendment thereto, which is contrary to Party B’s true
intent;
|
|
32.5
|
Party A’s
rules and regulations violate laws or regulations, thereby harming
Party B’s rights and interests;
or
|
|
32.6
|
Other
circumstances in which laws or administrative statues permit Party B
to terminate his employment
contract
|
33.
|
Upon
the termination of this Contract, Party B shall cease conducting, any
activities on Party A’s behalf or complete the uncompleted matters
pursuant to Party A’s request, and settle all accounts with
Party A. Party B shall, within 3 days of the termination of this
Contract, return all the property and hand over all files and documents
(including but not limited to written documents and electronic documents)
he or she has in his/her possession but is the property of Party A,
and Party A may carry out the resign procedures with the confirmation
of the aforesaid properties, files and documents and issue resign consent
letter. If Party B fails to complete the above hand-over
procedures, Party A could refuse to handle the procedures of
termination for Party B and may set-off any amounts due to
Party B for the losses Party A suffers
therefrom.
|
34.
|
Party A
shall provide economic compensation and/or medical subsidies to
Party B pursuant to relevant laws and regulations in case
Party A terminates this Contract according to Article 26, 28 and 31
of this Contract and applicable laws and
regulations.
|
35.
|
In
case Party A fails to pay salary, economic. compensation or medical
subsidies to Party B according to relevant laws and regulations and
stipulations of this Contract, Party A shall hear the statutory
liability for indemnification to
Party B.
|
36.
|
If
Party B terminates this Contract in breach of the terms and
conditions specified herein, Party B shall indemnify Party A for
its losses incurred therefrom according to the relevant laws and
regulations.
|
37.
|
Before
Party B is trained at Party A’s expense, Party A may
require Party B to execute an agreement, pursuant to which the
service term may be prescribed and if Party B resigns from his/her
job by breaching the service term stipulated in the Contract, Party B
shall at the time of resignation reimburse Party A for the training
fees herein.
|
38.
|
Any
dispute arising out of the interpretation and performance of this contract
shall be settled through friendly consultation between the Parties. If the
parties fail to reach a solution through friendly consultation, one or
both parties can bring such dispute to the competent Labor Dispute
Arbitration Commission within sixty (60) days of the dispute. In case the
parties have no disagreement to the arbitral award of such Labor Dispute
Arbitration Commission, such arbitral award is final and binding upon the
parties. In case any party is not satisfied with the decision of the
arbitration, the party may bring a lawsuit to the court having
jurisdiction.
|
39.
|
Party B
has been aware of and agreed to abide by the Working Rules, which will be
provided to Party B from time to time, and shall be of the same legal
validity with this Contract. However, this Contract shall prevail in the
event of any conflict between the Working Rules and this
Contract.
|
40.
|
Party A
and Party B could execute the Agreement to Amend Employment Contract
attached as Appendix B to revise partial provisions of this Contract, or
conclude a new employment contract upon agreement of
consultation.
|
41.
|
The
invalidity and non-enforcement of any provision of this Contract shall not
affect the validity of any other provision of this
Contract.
|
42.
|
Failure
or delay of any Party hereto to exercise a right under this Contract shall
not constitute a waiver thereof.
|
43.
|
If
there is any conflict between this Contract and the relevant laws and/or
regulations, the provisions of the relevant laws and/or regulations shall
prevail.
|
44.
|
This
Contract shall become effective from the date of the execution hereof. In
case both parties do not execute this Contract on the same day, the later
date shall be the effective date of this
Contract.
|
Party A: Rise King Century
Technology
Development (Beijing) Co., Ltd.
|
Party B: | |
By:
|
By:
|
|
Name:
|
Name:
|
|
Date:
|
Date:
|
I.
|
Term
of the Contract
|
Article
1.
|
Being
unanimously agreed by both parties, the term of this Contract
adopts
the 1st type from the following:
|
1.
|
Fixed
term of Three years, from May 1,
2009 to April 30,
2012 (not including Probation Period);]
|
|
2.
|
Non-fixed
term;
|
|
3.
|
Upon
the completion of certain duties.
|
|
II.
|
Job
Title and Duties
|
|
Article
2.
|
Party
A, according to the job requirements, employs Party B for the Position of
Sales at the Department of Television Sales. Based on the job requirements
and Party B’s performance, Party A has the right to promote or adjust
Party B’s affiliated department and job title. Without valid reasons,
Party B may not refuse such job change or re-arrangement by Party A. Party
B shall fulfill all duties of the re-arranged post and accept the adjusted
salary subject to the position/salary adjustment sheet.
|
|
Article
3.
|
Following
Party A’s requirements, Party B shall complete the number of work hours
and tasks by the required quality standards, and shall take good care of
his/her own office supplies and the facilities of the working
area.
|
|
III.
|
Work
Schedule, Rests and Vacations
|
|
Article
4.
|
Pursuant
to the relevant state regulations, Party A implements a work schedule
of 5 work days per
week, not exceeding 44 work-hours per
week;
|
Article
5.
|
Party
A may arrange Party B to extend its work hours or to work overtime due to
the business needs;
|
|
Article
6.
|
Party
A shall protect Party B’s right to rest; Party B is entitled to days of
rest, holidays, wedding leave, funeral leave, and maternity
leave.
|
IV.
|
Labor
Compensation
|
Article
7.
|
According
to the Company’s principle of compensation and method of evaluation, and
based on Party B’s performance and achievement, Party A determines the
salary level and distribution method for Party B. Based on its
performance, job position and the Company’s operation situation, Party B’s
salary may be adjusted accordingly by the Company, which shall not be
lower than the minimum salary level required by the local government.
Party B is liable for its salary and individual income taxes, which Party
A is responsible to withhold or collect.
|
Employee
salary compensation is confidential information of the Company. Employees
are responsible for keeping such information confidential, and no one is
allowed to disclose it to others. If a disclosing act is identified, the
Company reserves the right to investigate this act for liability,
including economic penalty (up to the total sum of the Employee’s salary
of 12 previous months) and dismissal.
|
|
Article
8.
|
In
the event Party A arranges Party B to extend its work hours or to work
overtime, this must be done in accordance with the Employee Handbook of
the Company.
|
V.
|
Insurances
and Benefits
|
Article
9.
|
Within
the term of the contract, Party A shall take out employee-related “medical
insurance”, “old-age insurance”, “unemployment insurance” and “working
safety insurance” for Party B, pursuant to the relevant state regulations.
For Party B’s social labor insurance, Party A will withhold the
portion assumed by the Employee from its salary.
|
Article 10.
|
Within
the term of the contract, Party B is also entitled to some relevant
benefits provided in the Employee Handbook.
|
Article
11.
|
In
the event Party B contracts occupational disease or is injured at work, it
shall be handled in accordance with the relevant regulations of the state
and Beijing governments.
|
Article
12.
|
In
the event Party B is sick or injured by non-work accidents, the resulting
medical treatment period(s) shall be defined in accordance with the
relevant regulations of the state and Beijing governments, except for
situations resulting from Party B’s self-harming acts, after-work illness
and injuries, or injuries caused by its violation of the state laws and
statutes.
|
Article
13.
|
In
the event Party B had become ill before employed and was not satisfying
the health condition required by Party A for the job, but
concealed its medical history, Party B is solely responsible for all the
resulting costs and fees.
|
VI.
|
Rights
and Obligations of Both Parties
|
Article
14
|
Rights
of Party A
|
1.
|
Pursuant
to the relevant laws, statutes, and policies, Party A is entitled to
establish, and monitor the implementation of, various rules and regulation
for the Company in order to regulate Party B’s behaviors. If Party B
violates the rules and regulations of the Company, Party B has the right
to penalize.
|
2.
|
Party
A shall provide education and training to Party B; and
according to job duties, check and urge Party B in completing the given
tasks.
|
3.
|
Within
the term of the contract, depending on the work demand, Party A has the
right to adjust or change Party B’s job position.
|
Article
15.
|
Obligations
of Party A
|
1.
|
Party
A must operate or develop its business in accordance with the laws and
statutes of People’s Republic of
China;
|
2.
|
Party
A must, pursuant to the state laws and statutes, establish rules and
regulations for the Company; and provide Party B with training with regard
to law-abiding, professional virtue and technical
skills;
|
3.
|
Party
A must provide necessary working environment, condition, equipment and
tools to Party B.
|
Article
16.
|
Rights
of Party B
|
1.
|
Party
B is entitled to the labor protection, insurances and vacations provided
by Party A according to law;
|
2.
|
Party
B is entitled to receive labor compensation, bonus, and allowance
according to relevant provisions;
|
3.
|
Within
the term of the contract, if there is a dispute between both parties,
Party B has the right to apply for mediation, arbitration or resort to
litigation.
|
Article
17.
|
Obligations
of Party B
|
1.
|
Party
B must comply with the laws and statutes of People’s Republic of China,
the rules and regulations of the Company, and the labor
disciplines;
|
2.
|
Party
B shall bring its own computer when working at the Company, and ensure
that all the software programs installed on the computer are legal and
authorized. Any disputes, controversies and their associated legal
responsibilities lie solely with Party B.
|
|
|
3.
|
Within
the term of the contract or within the first year after this contract was
terminated, Party B must keep confidential the Company’s business secrets
and is not allowed to use or let others use such information, or to
disclose to others any information concerning Party A’s technology and
operation; nor allowed to work for another employer by engaging in any job
that competes with the Company’s business. The “others”
includes:
|
1)
Personnel internal to Party A who is not permitted but use
such information;
|
|
2)
Personnel external to Party A who use such information without
the Company’s written
consent;
|
4.
|
Within
the first year after the contract is terminated, Party B may not contact
for any commercial purpose, or provide to a third party information about,
clients or entities with which Party B was acquainted during its
employment with Party A;
|
|||||||||
5.
|
When
leaving its position, Party B shall do its own job well for the
handover; and shall turn all the records, notebooks and all
materials in connection with Party B’s work, including
photocopies, computer software, etc., over to Party
A.
|
VII.
|
Liability for Breach | |||||||||
Article
18.
|
Within
the term of the contract, any of the following acts by Party
B constitutes a breach:
|
1.
|
Unilaterally dissolves the contract without notice; |
2.
|
Violates Party A’s labor disciplines or operation rules; |
3.
|
Operates the same business of its own; or works for other in-competition employers who operates the same business as Party A; |
4.
|
Discloses the business secrets of the Company; |
5.
|
Conducts other acts violating this labor contract. |
In
the event Party B is found to be guilty of any above acts, Party A is
entitled to suspend Party B’s salary, while requiring Party B to be
responsible for all the losses and damages.
|
|
Article
19.
|
Amendments to Labor Contract |
Under
the following circumstances, both parties may make amendments to the
related provisions of the labor contract
herein:
|
1.
|
In the event Party A switches to other production or changes operation tasks; |
2.
|
Over matters on which both parties agree through consultation and consensus; |
3.
|
In the event the related statutes or policies have been revised or repealed. |
Article
20.
|
Renewal of Labor Contract |
Closing
to the expiration date of this contract, depending on Party A’s work
demand or Party B’s request, both parties may renew the labor contract
based on consultation and agreement. The contract party of either side
shall announce its intent of such to the other within 30 days before the
contract is expired. If both parties are not able to reach an agreement on
the renewal, the labor contract will terminate naturally upon the
expiration of this contract.
|
|
Article
21
|
Termination of Labor Contract |
1.
|
The execution of this contract will be terminated upon the expiration of the contract or the completion of the tasks/duties prescribed herein; |
2.
|
The performance of this contract is impossible due to Force Majeure; |
3.
|
In the event Party A, after being confirmed by certain government agencies, has closed its business, shut down its joint venture, announced bankruptcy, or entered into the legal rectification period for being on the verge of bankruptcy. |
Article
22
|
Dissolution of Labor Contract |
1.
|
Upon consultation and consensus of both parties, this contract may be dissolved; |
2.
|
In the event Party B submits an written notification to Party A 30 days in advance, this contract may be dissolved; |
3.
|
Upon the occurrence of any of the following, Party A may dissolve the contract: |
1)
Party B’s serious violation the labor disciplines or Party A’s rules and
regulations; dereliction of duty; or fraud that causes material damages to
the Company’s interests;
|
|
2)
Party B’s entering into labor relationship with other employer in the same
period, seriously affecting its performance of the Company’s duties or
tasks; or Party B’s refusal to correct the faults at Party A’s
request.
|
|
3) Party
B deceives or swindles Party A into signing or changing the labor contract
against its true intention.
|
|
4)
Within the term of employment, Party B discloses information concerning
Party A’s technology or business operation.
|
|
5)
Party B is being prosecuted in accordance with the
law.
|
4.
|
Upon the occurrence of any of the following, the labor contract may be dissolved after Party A gives a written notification to Party B 30 days in advance, or pays Party B salary for one additional month: |
1)
Party B becomes ill or suffers non-work related injury; and, after the
required medical treatment period, still unable to perform its original
work or other work re-arranged by Party A;
|
|
2)
Party B is not competent for its work, and after receiving training or
being re-assigned, is still not competent for its work;
|
|
3)
The objective circumstances under which the labor contracted was executed
have undergone material changes, rendering the original contract
impossible to be fulfilled; and both parties are unable to reach agreement
on the amendment of the contract after
consultation.
|
5.
|
If any of the following happens to Party B, Party A may not dissolve this contract in accordance with Item 4 above (under Article 22): |
1)
Party B is engaged in operations that carry risks of contracting
occupational disease and has not received physical health checkup before
leaving post, or is suspected to be an occupational disease patient under
diagnosis or medical observation.
|
|
2)
Party B has contracted occupational disease while employed by Party A, or
was injured during work and determined to have lost or partially lost his
ability to work.
|
|
3)
Party B is sick or suffers non-work related injury but is within the
required treatment period.
|
4)
Party B is a female employee during pregnancy, labor and nursing
period;
|
|
5)
Party B has worked consecutively for 15 years in the Company and is less
than 5 years from legal retirement age;
|
|
6)
Other circumstances provided by law and administrative
statutes.
|
|
IX.
|
Resolution
of Labor Disputes
|
Article
23
|
In
the event a dispute arises between both parties in the course of
fulfilling this contract, the concerned parties shall submit a request to
the Labor Dispute Mediation Committee for mediation; If such
mediation proves ineffectual and one of the parties resorts to
arbitration, the party shall submit a written request for
arbitration to the tribunal Labor Dispute Arbitration Committee
within 60 days from the occurrence of the dispute; if refusing
to accept the arbitration judgment, the concerned party may
file a lawsuit case to the local people’s
court.
|
X.
|
Other
Matters Agreed by Both Parties
|
XI.
|
Misc. |
Article 24 |
Other
matters not covered herein shall be handled in accordance with the current
state laws, statues and regulations and the Company’s Employee Handbook,
or be resolved through consultation of both
parties.
|
Article 25 | This contract is in duplicates, with one to each party. |
November
15, 2010
|
|
/s/ Handong Cheng | |
Handong
Cheng
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
November
15, 2010
|
|
/s/ Zhige Zhang | |
Zhige
Zhang
|
|
Chief
Financial Officer
|
|
(Principal
Accounting and Financial Officer)
|
November
15, 2010
|
|
/s/ Handong Cheng | |
Handong
Cheng
|
|
Chief
Executive Officer
|
|
(Principal
Executive Officer)
|
|
/s/ Zhige Zhang | |
Zhige
Zhang
|
|
Chief
Financial Officer
|
|
(Principal
Accounting and Financial Officer)
|