(Name, Telephone, Email and/or Facsimile number and Address of Company
Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of
the Act.
Securities registered or to be registered pursuant to Section 12(g) of
the Act.
*Not for trading, but only in connection with the listing on
the NASDAQ Global Market of American Depository Shares each representing 5 ordinary shares pursuant to the requirements of the
Securities and Exchange Commission
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act.
Indicate the number of outstanding shares of each of the issuer’s classes of capital
or common stock as of the close of the period covered by the annual report: 118,098,018 ordinary shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
If this report is an annual or transaction report, indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registration has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in the filing:
U.S. GAAP
þ
International
Financial Reporting Standards as issued by the International Accounting Standards Board
o
Other
o
If “Other” has been checked in response to the previous question, indicate by
check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
This Amendment No. 1 (“Amendment No. 1”) to our Annual Report
on Form 20-F for the year ended December 31, 2015, originally filed with the Securities and Exchange Commission on April 27, 2016
(“2015 Form 20-F”), is being filed solely for the purpose of furnishing a revised audit report of BDO China Shu
Lun Pan Certified Public Accountants LLP that is for all financial statement periods included in the consolidated financial statements
as required by Rule 2-01 of Regulation S-X. The revised audit report together with the consolidated financial statements for China
Finance Online Co. Limited, its subsidiaries, its variable interest entities (“VIEs”) and its VIE’s subsidiaries
are included at the end of this Amendment No.1. The revised audit report clearly indicates it covers our consolidated balance sheets
as of ended December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in shareholders’
equity, and cash flows for each of the three years in the period ended December 31, 2015. No other changes have been made in the
consolidated financial statements previously filed or in the footnotes thereto.
Other than as expressly set forth above, this Amendment No. 1 does not,
and does not purport to, amend, update or restate the information in any other item of the 2015 Form 20-F, or reflect any events
that have occurred after the 2015 Form 20-F was originally filed. The Company’s 2015 Form 20-F, as amended by this Amendment
No. 1, continues to speak as of the initial filing date of the 2015 Form 20-F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES
|
China Finance Online Co. Limited
("China Finance Online" or the "Company") was incorporated in Hong Kong on November 2, 1998. China Finance
Online, its subsidiaries, its variable interest entities ("VIEs") and its VIEs' subsidiaries (collectively, the "Group")
is a leading web-based financial services company in China.
The Company provides Chinese
retail investors with online access to securities, commodities and wealth management products, as well as financial database and
analytics services to institutional customers. The Company's prominent flagship portal site
www.jrj.com
is ranked among
the top financial websites in China. Leveraging our extensive experience and robust internet capabilities, the Company is
adapting and strategically transitioning its business to the new environment by rapidly building Investment Masters (iTougu) and
Yinglibao, the Company's two newest businesses, into leading one-stop financial products and services platforms for individual
investors in China.
In 2015, the Company integrated
its web-based trading platform,
Securities Master (Zhengquantong)
, and
Yinglibao
, its internet-based financial platform
that integrates cash management solutions and mutual fund distribution, into
iTougu
which facilitates communication between
securities investment advisors and their respective clients and followers in real-time and for 24 hours a day, and enabling a vast
number of Chinese individual investors to obtain private advice from thousands of securities investment advisors. The Company also
continued to diversify its product offerings on the wealth management platform,
Yinglibao
. The Company also provides our
rapidly growing commodities brokerage services (formerly known as precious metals business) in mainland China along with brokerage
services in Hong Kong in order to address market demand for alternative investment opportunities. We further diversified our product
offering in the commodities brokerage services with the launch of a heavy oil brokerage business in 2015.
In addition, the Company offers
basic financial software, information services and securities investment advisory services to retail investors in China. Through
its subsidiary, Shenzhen Genius Information Technology Co., Ltd., the Company provides financial database and analytics to
institutional customers including domestic financial, research, academic and regulatory institutions. China Finance Online also
provides brokerage services in Hong Kong.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
Details of China Finance Online's
significant subsidiaries, VIEs and VIEs' subsidiaries as of December 31, 2015 were as follows:
Company name
|
Place of
incorporation or
establishment
|
Date of
incorporation or
acquisition
|
legal
ownership
interest
|
Principal
activity
|
Subsidiaries:
|
|
|
|
|
China Finance Online (Beijing) Co., Ltd. ("CFO Beijing")
|
Beijing, PRC
|
Jul. 9, 1998
|
100%
|
N/A
|
Fortune Software (Beijing) Co., Ltd. ("CFO Software")
|
Beijing, PRC
|
Dec. 7, 2004
|
100%
|
N/A
|
Shenzhen Genius Information Technology Co., Ltd. ("CFO Genius")
|
Shenzhen, PRC
|
Sep. 21, 2006
|
100%
|
Subscription service
|
Zhengyong Information & Technology (Shanghai) Co., Ltd.
|
|
|
|
|
(“CFO Zhengyong”)
|
Shanghai, PRC
|
Aug. 17, 2008
|
100%
|
N/A
|
Zhengtong Information Technology (Shanghai) Co., Ltd ("CFO Zhengtong")
|
Shanghai, PRC
|
Jun. 24, 2008
|
100%
|
N/A
|
iSTAR Financial Holdings Limited ("iSTAR Financial Holdings")
|
BVI
|
Jul. 16, 2007
|
85%
|
Investment holdings
|
iSTAR International Securities Co. Limited ("iSTAR Securities")
|
Hong Kong, PRC
|
Nov. 23, 2007
|
85%
|
Brokerage service
|
iSTAR International Futures Co. Limited ("iSTAR Futures")
|
Hong Kong, PRC
|
Apr. 16, 2008
|
85%
|
Brokerage service
|
iSTAR International Wealth Management Co. Limited
|
Hong Kong, PRC
|
Oct. 8, 2008
|
85%
|
Securities advising, future contract
|
("iSTAR Wealth Management")
|
|
|
|
advising and asset management
|
iSTAR International Credit Co. Limited ("iSTAR Credit")
|
Hong Kong, PRC
|
Feb. 10, 2012
|
85%
|
N/A
|
|
|
|
|
|
Variable interest entities:
|
|
|
|
|
Beijing Fuhua Innovation Technology Development Co., Ltd. ("CFO Fuhua")
|
Beijing, PRC
|
Dec. 31, 2000
|
Nil
|
Web portal and advertising service
|
Shanghai Chongzhi Co., Ltd. ("CFO Chongzhi")
|
Shanghai, PRC
|
Jun. 6, 2008
|
Nil
|
Subscription service
|
Fortune (Beijing) Qicheng Technology Co., Ltd. ("CFO Qicheng")
|
Beijing, PRC
|
Dec. 18, 2009
|
Nil
|
N/A
|
Shenzhen Newrand Securities Advisory and Investment Co., Ltd.
|
Shenzhen, PRC
|
Oct. 17, 2008
|
Nil
|
Securities investment advising
|
("CFO Newrand ")
|
|
|
|
|
Shanghai Stockstar Wealth Management Co., Ltd.
|
|
|
|
|
("Stockstar Wealth Management")
|
Shanghai, PRC
|
Apr. 12, 2011
|
Nil
|
N/A
|
Beijing Chuangying Advisory and Investment Co., Ltd.
|
|
|
|
|
(
"CFO Chuangying"
)
|
Beijing, PRC
|
Jan. 9, 2009
|
Nil
|
N/A
|
|
|
|
|
|
Subsidiaries of variable interest entities:
|
|
|
|
|
Shanghai Meining Computer Software Co., Ltd. ("CFO Meining")
|
Shanghai, PRC
|
Oct. 1, 2006
|
Nil
|
Web portal, advertising, subscription,
|
|
|
|
|
and SMS
|
Shenzhen Newrand Securities Training Center ("CFO Newrand Training")
|
Shenzhen, PRC
|
Oct. 17, 2008
|
Nil
|
Securities investment training
|
Fortune (Beijing) Huiying Investment Consulting Co., Ltd. ("CFO Huiying")
|
Beijing, PRC
|
Dec. 18, 2009
|
Nil
|
N/A
|
Shenzhen Tahoe Investment and Development Co., Ltd ("CFO Tahoe")
|
Shenzhen, PRC
|
Sep. 30, 2013
|
Nil
|
N/A
|
Shenzhen Shangtong Software Co., Ltd. ("CFO Shenzhen Shangtong")
|
Shenzhen, PRC
|
Sep. 23, 2009
|
Nil
|
N/A
|
Zhengjin (Fujian) Precious Metals Investment Co., Ltd.
|
Fujian, PRC
|
Jan. 6, 2013
|
Nil
|
Commodities brokerage
|
("CFO Zhengjin Fujian")
|
|
|
|
|
Zhengjin (Shanghai) Precious Metals Investment Co., Ltd.
|
Shanghai, PRC
|
Dec. 12, 2013
|
Nil
|
Commodities brokerage
|
("CFO Zhengjin Shanghai")
|
|
|
|
|
Zhengjin (Tianjin) Precious Metals Investment Co., Ltd.
|
Tianjin, PRC
|
Jul. 23, 2013
|
Nil
|
Commodities brokerage
|
("CFO Zhengjin Tianjin")
|
|
|
|
|
Henghui (Tianjin) Precious Metals Investment Co., Ltd.
|
Tianjin, PRC
|
Sep. 30, 2013
|
Nil
|
Commodities brokerage
|
("CFO Henghui")
|
|
|
|
|
Zhengjin (Beijing) Wisdom Petroleum and Chemical Investment
|
|
|
|
|
Management Co., Ltd. ("CFO Zhengjin Beijing")
|
Beijing, PRC
|
Jan. 13, 2014
|
Nil
|
N/A
|
Yinglibao (Beijing) Technology Co., Ltd. ("CFO Yinglibao")
|
Beijing, PRC
|
Jan. 15, 2014
|
Nil
|
Internet-based financial platform
|
Zhengjin (Qingdao) Wisdom Trading Co., Ltd. ("CFO Zhengjin Qingdao")
|
Qingdao, PRC
|
Sep. 4, 2014
|
Nil
|
N/A
|
Zhengjin (Jiangsu) Precious Metals Co., Ltd. ("CFO Zhengjin Jiangsu")
|
Nanjing, PRC
|
Nov. 19, 2014
|
Nil
|
Commodities brokerage
|
iTougu (Beijing) Network Technology Co., Ltd. ("CFO iTougu")
|
Beijing, PRC
|
Dec. 8, 2014
|
Nil
|
Investment advisory service platform
|
Tibet Fortune Jinyuan Network Technology Co., Ltd. ("CFO Tibet")
|
Tibet, PRC
|
Aug. 22, 2015
|
Nil
|
N/A
|
Shanghai Guiwo Information Technology Co., Ltd. (“CFO Guiwo”)
|
Shanghai, PRC
|
Apr. 1, 2015
|
Nil
|
N/A
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
The consolidated
financial statements of the Group include the financial statements of the Company and its controlled operating entities including
the subsidiaries and the variable interest entities for which the Company is the primary beneficiary. A variable interest entity
is the entity in which the Company, through contractual arrangements as the primary beneficiary, bears the risks of, and enjoys
the rewards normally associated with ownership of the entity.
People
'
s
Republic of China
("PRC") regulations prohibit or restrict direct foreign ownership of
business entities providing certain services in PRC, such as internet content service and securities investment advisory service.
In order to comply with these regulations, China Finance Online, through its subsidiaries, entered into contractual arrangements
with the Company's VIEs and their equity owners who are PRC citizens.
The Group
made loans to the shareholders of the VIEs solely for the purposes of capitalizing the VIEs. Pursuant to the loan agreements, these
loans can only be repaid by transferring all of their interests in the VIEs to the Group or a third party designated by the Group.
The Group has entered into proxy agreements or power of attorney and exclusive equity purchase option agreements with the VIEs
and nominee shareholders of the VIEs through the Company's wholly owned significant subsidiaries including CFO Beijing, CFO Software,
CFO Zhengyong and CFO Zhengtong (collectively, the "
WFOEs
" and each a "
WFOE
"). The foregoing
agreements provide the WFOEs the right to direct the activities that most significantly affect the economic performance of the
VIEs and to acquire the equity interests in the VIEs when permitted by the PRC laws, respectively. Certain exclusive agreements
have been entered into with the VIEs through the WFOEs, which obligate the WFOEs to absorb the majority of the risk of loss from
the VIEs' activities and entitle the WFOEs to receive the majority of their residual returns. In addition, the Group has entered
into share pledge agreements for the equity interests in the VIEs held by the shareholders of the VIEs.
Despite
the lack of technical majority ownership, the agreements with the VIEs provide the WFOEs with effective control over and the ability
to receive substantially all of the economic benefits of its VIEs, resembling a parent-subsidiary relationship between the WFOEs
and the VIEs. The shareholders of the VIEs effectively assigned all of their voting rights underlying their equity interest in
the VIEs to the WFOEs. In addition, through the other exclusive agreements, which consist of strategic consulting services agreement,
technical support services agreement and operating support services agreement, the WFOEs demonstrate their ability and intention
to continue to exercise the ability to absorb substantially all of the profits and all of the expected losses of the VIEs. The
VIEs are subject to operating risks, which determine the variability of the Company's interest in those entities. Based on these
contractual arrangements, the Company consolidates the VIEs as required by SEC Regulation SX-3A-02 and Accounting Standards Codification
("ASC") Topic 810 ("ASC 810")
because the Company holds all the variable
interests of the VIEs through the WFOEs.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
The principal terms of the agreements
entered into amongst the VIEs, their respective shareholders and the WFOEs are further described below.
Exclusive technology consulting
and management service agreement
Pursuant to a series of technology
support and service agreements, the WOFEs retain exclusive right to provide the VIEs and their subsidiaries technology support
and consulting services and exclusive management consulting service. As a result of these services, the WOFEs are entitled to charge
the VIEs and their subsidiaries annual service fees. The terms of the strategic consulting services agreement, the technical support
services agreement and the operating support services agreement are twenty, ten and ten years, respectively, and these agreements
will be automatically renewed on applicable expiration dates, unless the contracting WOFE informs the corresponding VIE its intention
to terminate such contract one month prior to the applicable expiration date. Notwithstanding the foregoing, none of the parties
has a right to terminate the service contracts. The principal services agreements that the WOFEs have entered into with VIEs include:
|
·
|
strategic consulting services agreement, pursuant to which the amount of the fee to be charged
is 30% of each VIE's income before tax;
|
|
·
|
technical support services agreement, pursuant to which the amount of the fee to be charged is
30% of each VIE's income before tax; and
|
|
·
|
operating support services agreement, pursuant to which the amount of the fee to be charged is
40% of each VIE's income before tax.
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES – continued
|
Exclusive purchase right agreement
on the equity interest of the VIEs
Pursuant to the purchase option
agreement, the WOFEs have the unconditional right to purchase the entire equity interest in, or all the assets of the VIEs at a
price equal to the total principal amount of the loan lent by the WOFEs to the shareholders of the VIEs when and if such purchase
is permitted by the PRC law or the current shareholders of the VIEs cease to be directors or employees of the VIEs. The term of
the exclusive purchase right agreement is perpetual and can be terminated at the discretion of the WOFEs.
Power of attorney
Pursuant to the power of attorney,
each of the shareholders of the VIEs have executed an irrevocable power of attorney assigning the WOFEs or individuals designated
by the WOFEs as their attorney-in-fact to vote on their behalf on all matters of the VIEs requiring shareholder approval under
PRC laws and regulations and the articles of association of VIEs.
The Articles of Incorporation
of the VIE state that the major rights of the shareholders include the right to appoint directors, the general manager and other
senior management. Therefore, through the irrevocable power of attorney arrangement, the WOFEs have the ability to exercise effective
control over the VIEs through shareholder votes and, through such votes, to also control the composition of the board of directors.
In addition, the senior management team of the VIEs is the same as that of the WOFEs. The term of the power of attorney is twenty
years and will be automatically renewed on the expiration date. The contract can be terminated at the discretion of the WOFEs.
Pledge agreement
Pursuant to the equity pledge
agreement between the WOFEs and the shareholders of the VIEs, the shareholders of the VIEs pledged all of their equity interests
in the VIEs to the WOFEs to guarantee the VIEs' performance of its obligations under the exclusive technology consulting and service
agreement. If the VIEs breach their contractual obligations under that agreement, the WOFEs, as the pledge, will be entitled to
certain rights, including the rights to sell the pledged equity interests. The shareholders of the VIEs agree that, without prior
written consent of the WOFEs, they will not transfer, sell, and dispose of or create any encumbrance on their equity interest in
the VIEs. The term of the pledge agreement is twenty years and will be automatically renewed on the expiration date, unless the
WOFEs inform the VIEs of their intention to terminate the agreement one month prior to the expiration date.
Through these contractual agreements,
the WOFEs have the ability to effectively control the VIEs and are also able to receive substantially all the economic benefits
of the VIEs.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
Details of significant VIEs and
their counterparts which substantially control the VIEs as of December 31, 2015 were as follows:
VIE name
|
Contractual arrangement
|
Date counterpart
|
|
|
|
CFO Fuhua
|
May 27, 2004
|
CFO Beijing
|
CFO Chongzhi
|
June 8, 2008
|
CFO Software
|
CFO Newrand
|
October 17, 2008
|
CFO Zhengyong
|
CFO Qicheng
|
November 20, 2009
|
CFO Chuangying
|
Stockstar Wealth Management
|
April 12, 2011
|
CFO Zhengtong
|
Risks in relation to the VIE structure
The Company's ability to control
the VIEs also depends on the power of attorney the WOFEs have to vote on all matters requiring shareholder approval in the VIEs.
As noted above, the Company believes this power of attorney is legally enforceable but may not be as effective as direct equity
ownership.
In addition, if the legal structure
and contractual arrangements were found to be in violation of any existing PRC laws and regulations, the regulatory authorities
may exercise their discretion and
|
·
|
revoke the business and operating licenses of our PRC subsidiaries or VIEs;
|
|
·
|
restrict the rights to collect revenues from any of our PRC subsidiaries;
|
|
·
|
discontinue or restrict the operations of any related-party transactions among our PRC subsidiaries
or VIEs;
|
|
·
|
require our PRC subsidiaries or VIEs to restructure the relevant ownership structure or operations;
|
|
·
|
take other regulatory or enforcement actions, including levying fines that could be harmful to
our business; or
|
|
·
|
impose additional conditions or requirements with which we may not be able to comply.
|
The imposition of any of these
penalties may result in a material adverse effect on the Company's ability to conduct its business. In addition, if the imposition
of any of these penalties causes the Company to lose the rights to direct the activities of the VIEs and their subsidiaries or
the right to receive their economic benefits, the Company would no longer be able to consolidate the VIEs. The Company does not
believe that any penalties imposed or actions taken by the PRC Government would result in the liquidation of the Company, its subsidiaries,
or the VIEs.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES – continued
|
The Company has consolidated
its VIEs because it was the primary beneficiary of those entities. Through the contractual agreements discussed above, the Company,
through its wholly owned subsidiaries, has (1) the power to direct the activities of the VIEs that most significantly affect the
entities' economic performance and (2) the right to receive benefits from the VIEs, therefore it consolidates the VIEs.
The consolidated VIEs operate
securities investment advisory business and commodities brokerage business. The following table presents the most important revenue-producing
assets to operate commodities brokerage business, which was recognized in the Company's consolidated financial statements.
|
|
December 31 ,
|
|
|
2014
|
|
2015
|
|
|
|
|
|
Commodities brokerage business:
|
|
|
|
|
|
|
|
|
Commodities trading right
|
|
$
|
1,291,061
|
|
|
$
|
966,222
|
|
Customer relationship
|
|
|
894,219
|
|
|
|
573,312
|
|
|
|
$
|
2,185,280
|
|
|
$
|
1,539,534
|
|
The VIEs also hold important
unrecognized revenue-producing assets, such as our domain names and Internet Content Provider Licenses with respect to
www.jrj.com
and
www.stockstar.com
and certain value-added technologies, which were also considered revenue-producing assets. However,
none of such assets were recorded on the Company's consolidated balance sheets as such assets were all acquired or internally developed
with insignificant costs and expenses incurred.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
The following financial statement
amounts and balances of the VIEs for which the Company is the primary beneficiary and their subsidiaries were before intercompany
elimination as of and for the years ended:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,615,035
|
|
|
$
|
47,788,398
|
|
Consideration receivable
|
|
|
13,400,882
|
|
|
|
-
|
|
Account receivable -others, net
|
|
|
22,217,745
|
|
|
|
45,278,278
|
|
Loan receivable
|
|
|
10,295,800
|
|
|
|
-
|
|
Others
|
|
|
6,558,399
|
|
|
|
3,971,332
|
|
Total current assets
|
|
$
|
70,087,861
|
|
|
$
|
97,038,008
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
3,242,905
|
|
|
|
4,311,095
|
|
Acquired intangible assets, net
|
|
|
2,185,280
|
|
|
|
1,539,534
|
|
Cost method investment
|
|
|
907,919
|
|
|
|
554,392
|
|
Equity method investment, net
|
|
|
-
|
|
|
|
1,228,269
|
|
Rental deposits
|
|
|
913,187
|
|
|
|
989,383
|
|
Guarantee fund deposits
|
|
|
4,604,924
|
|
|
|
5,850,623
|
|
Investment in subsidiaries
|
|
|
43,751,417
|
|
|
|
43,553,986
|
|
Deferred tax assets, non-current
|
|
|
13,328
|
|
|
|
4,982
|
|
Total assets
|
|
$
|
125,706,821
|
|
|
$
|
155,070,272
|
|
|
|
|
|
|
|
|
|
|
Third-party liabilities
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
10,514,186
|
|
|
|
20,425,274
|
|
Accounts payable
|
|
|
18,843,147
|
|
|
|
3,387,125
|
|
Total current liabilities
|
|
$
|
29,357,333
|
|
|
$
|
23,812,399
|
|
Non-current liabilities
|
|
|
899,356
|
|
|
|
571,924
|
|
Total third-party liabilities
|
|
$
|
30,256,689
|
|
|
$
|
24,384,323
|
|
Inter-company liabilities
|
|
$
|
42,155,248
|
|
|
$
|
44,591,484
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
|
|
Year ended December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
58,549,393
|
|
|
$
|
98,207,958
|
|
|
$
|
136,412,062
|
|
Net income (loss)
|
|
$
|
(5,469,402
|
)
|
|
$
|
12,305,855
|
|
|
$
|
49,300,399
|
|
|
|
Year ended December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(14,469,067
|
)
|
|
$
|
3,204,749
|
|
|
$
|
(835,965
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(9,440,165
|
)
|
|
|
(5,685,885
|
)
|
|
|
38,523,306
|
|
Net cash provided by (used in) financing activities
|
|
|
35,830,988
|
|
|
|
1,430,739
|
|
|
|
(6,061,473
|
)
|
Effect of exchange rate changes
|
|
$
|
(46,900
|
)
|
|
$
|
(95,269
|
)
|
|
$
|
(1,452,505
|
)
|
There are no consolidated VIE's assets that are collateral
for the VIE's obligations and can only be used to settle the VIE's obligations.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of presentation
The consolidated financial statements
of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.
GAAP").
Basis of consolidation
The consolidated financial statements
include the financial statements of China Finance Online, its subsidiaries, VIEs for which the Company is the primary beneficiary
and those VIEs' subsidiaries. All inter-company transactions and balances have been eliminated upon consolidation.
Cash and cash equivalents
Cash and cash equivalents consist
of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities
of three months or less when purchased.
Restricted cash
Restricted cash is the deposit
in bank accounts for providing guarantee to subscription revenue customers by Shanghai Stockstar Securities Advisory and Investment
Co., Ltd. ("CFO Securities Consulting") in accordance with the requirement of China Securities Regulatory Commission
("CSRC"). The restriction period is one year.
Fair value
Fair value is the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions
that market participants would use when pricing the asset or liability.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Fair value
- continued
Authoritative literature provides
a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input
that is significant to the fair value measurement as follows:
Level 1-inputs are based upon
unadjusted quoted prices for identical instruments traded in active markets.
Level 2-inputs are based upon
quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are
not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
Level 3-inputs are generally
unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset
or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted
cash flow models, and similar techniques.
The Group measures certain
assets, including the long-term investments and intangible assets, at fair value on a nonrecurring basis when they are deemed to
be impaired. The fair values of these investments and intangible assets are determined based on valuation techniques using the
best information available, and may include management judgments, future performance projections, etc.
Trust bank balances held on
behalf of customers
Trust bank balances held on behalf
of customers consist two parts: i) iSTAR Securities and iSTAR Futures receive fund from customers for purpose of buying or selling
securities and futures on behalf of its customers and deposits the fund in its interest-bearing bank account; ii) The funds received
by CFO Newrand from customers who purchase mutual funds and other wealth management products which are deposited in a trust bank
account. The Group launched "Yinglibao", an internet-based financial platform that integrates cash management solutions
and mutual fund distribution. Such bank balance represents an asset of the Group for the amounts due to customers for the trust
bank balance held on their behalf and payable to customers on demand. The Group also recognizes a corresponding liability.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Use of estimates
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and revenue and expenses in the financial statements and accompanying notes. Significant accounting estimates
reflected in the Group's financial statements include account receivable, cost method investment, equity method investment, impairment
of goodwill and long-lived assets, income taxes, share-based compensation and purchase price allocation. Actual results could differ
from those estimates.
Loan receivable
Loans are reported at either
their outstanding principal balances. For loans reported at their outstanding principal balances, interest income is accrued on
the unpaid principal balance. A loan is considered impaired when, based on current events and the financial condition of the borrower,
it is probable that the company will be unable to collect all principal and interest due according to the contractual terms of
the loan agreement. Loan collectability is monitored by the Group in connection with the ongoing monitoring of the associated financial
guarantee transactions.
Short-term investments
Short-term investments comprise
marketable debt and equity securities, which are classified as trading, held-to-maturity or available-for-sale. Trading securities
are securities that are bought and held principally for the purpose of selling them in the near term and are reported at fair value,
with unrealized gains and losses recognized in earnings. Short-term investments are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to maturity. All of the Company's held-to-maturity securities are classified
as short-term investments on the consolidated balance sheets based on their contractual maturity dates which are less than one
year and are stated at their amortized costs. Short-term investments classified as available for sale are carried at their fair
values and the unrealized gains or losses from the changes in fair values are included in accumulated other comprehensive income.
Available for sale securities are classified as current assets on the accompanying consolidated balance sheets because they are
available for immediate sale.
The Group reviews its short-term
investments for other-than-temporary impairment based on the specific identification method. The Company considers available quantitative
and qualitative evidence in evaluating potential impairment of its short-term investments. If the cost of an investment exceeds
the investment's fair value, the Group considers, among other factors, general market conditions, government economic plans, the
duration and the extent to which the fair value of the investment is less than the cost, and the Group's intent and ability to
hold the investment, in determining if impairment is needed.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Property and equipment, net
Property and equipment, net are
carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated
useful lives:
Technology infrastructure (in years)
|
5
|
Computer equipment
(in years)
|
5
|
Furniture, fixtures and equipment
(in years)
|
5
|
Motor vehicle
(in years)
|
5
|
Leasehold improvements
(in years)
|
Shorter of the lease term or 5
|
Acquired intangible assets,
net
Acquired intangible assets are
estimated by management based on the fair value of assets acquired. Identifiable intangible assets are carried at cost less accumulated
amortization. Amortization of definite-lived intangible assets is computed using the straight-line method over the estimated average
useful lives, which are as follows:
License and related trademarks (in years)
|
|
15
|
|
Completed technology (in years)
|
|
5
|
|
Customer relationship (in years)
|
4
|
-
|
5
|
Certain trademarks resulting
from the acquisitions of business and certain trading rights bought by the Group are determined to have indefinite lives. If
an intangible asset is determined to have an indefinite life, it is not amortized until its useful life is determined to be no
longer indefinite.
Guarantee fund deposits
Guarantee fund deposits consist
of i) the funds deposited with Hong Kong Exchange and Clearing Limited by iSTAR Futures, to guarantee its customers' settlement
obligations; ii) the funds deposited with the commodities exchanges as a result of its customers' trading. The Group needs to deposit
certain percentage of its customers' trading margins with the commodities exchanges.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Impairment of long-lived assets
with definite lives
The Group reviews its long-lived
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be
recoverable. When these events occur, the Group compares the carrying value of the long-lived assets to the estimated undiscounted
future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted
cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value
of the assets.
There were nil, $1,802,125 and nil impairment losses in relation to the long-lived
assets with definite lives for the years ended December 31, 2013, 2014 and 2015.
Business combinations
Business combinations are recorded
using the acquisition method of accounting. The assets acquired, the liabilities assumed, and any noncontrolling interest of the
acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill is recognized and measured
as the excess of the total consideration transferred plus the fair value of any noncontrolling interest of the acquiree, if any,
at the acquisition date over the fair values of the identifiable net assets acquired. Common forms of the consideration made in
acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the
fair value as at the date of acquisition.
Where the consideration in an
acquisition includes contingent consideration the payment of which depends on the achievement of certain specified conditions post-acquisition,
the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability
it is subsequently carried at fair value with changes in fair value reflected in earnings.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Impairment of goodwill and
indefinite-lived intangible assets
The Group performs a qualitative
analysis that includes reviewing the carrying value of intangible assets not subject to amortization, including goodwill, to determine
whether impairment may exist, whenever events or changes in circumstances indicate that the carrying amount of an asset may no
longer be recoverable at least annually.
The excess of the purchase price
over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill. After a qualitative analysis
indicates an impairment test is needed, the Company completes a two-step goodwill impairment test. The first step is to compare
the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds
its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount
of a reporting unit exceeds its fair value, the second step is to compare the implied fair value of goodwill to the carrying value
of a reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business
combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting
unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied
fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair
value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being
a discounted cash flow.
The impairment test for other
intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying
value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal
to that excess. The estimates of fair values of intangible assets not subject to amortization are determined using various discounted
cash flow valuation methodologies. Significant assumptions are inherent in this process, including estimates of discount rates.
Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets.
The Group performed the annual
impairment tests on December 31 of each year. Based on the Group's assessment, the Group recorded nil, $8,149,525 and nil goodwill
impairment losses during the years ended December 31, 2013, 2014 and 2015, respectively. In addition, the Group recorded nil, nil
and $250,360 impairment loss in relation to intangible assets with indefinite life during the years ended December 31, 2013, 2014
and 2015.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Revenue recognition
Commodities brokerage business
The Group derives commission
income, carrying charges and trading revenues from its commodities brokerage services.
Commission income is recognized
on a trade basis based on their customers' trading volumes. The commission earned is fixed no matter how the client's open positions
are ultimately settled. Additionally, the Group charges carrying charges to its customers. The commissions and carrying
charges are presented in net revenues in the statement of comprehensive income.
Amounts are settled with the
Exchange by both the Group and the customers and the exchange then settles with any counterparty. The exchange offsets the Group's
gains and losses and amounts receivable and amounts payable from the exchange are presented net on the statement of financial position
as the Group and the exchange settle net.
Trading gains, net include brokerage
fees and margins generated from derivative trades executed with customers and other counterparties and are recognized when trades
are executed. Trading gains, net also include activities where the Group acts as market maker in the purchase and sale of commodities
derivative instruments with customers. These transactions may be offset simultaneously with another customer or counterparty, offset
with similar but not identical positions on an exchange, made from inventory, or may be aggregated with other purchases to provide
liquidity intraday, for a number of days, or in some cases, particularly the commodities brokerage business, even longer periods
(during which fair value may fluctuate). Therefore, trading gains, net includes activities from the Group's operations of
a proprietary commodity trades. Net trading gains are recognized on a trade-date basis and include realized gains or losses and
changes in unrealized gains or losses on investments at fair value.
Unrealized gains/losses on open
positions will be marked to market at each period end and may present trading gains and losses which comprise both realized and
unrealized gains and losses, on a net basis in the statement of comprehensive income. The open transactions may lead to receivables
and/or payables for open transaction which are recorded on the Statement of Financial Position.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Revenue recognition
- continued
Commodities brokerage business-continued
Revenue generally is recognized net of any taxes
collected from customers and subsequently remitted to governmental authorities. The following table presents the totally recognized
net revenue from commodities trading business, consisted of:
|
|
Years ended December 31,
|
|
|
2014
|
|
2015
|
|
|
|
|
|
Commodities trading gains
|
|
$
|
38,297,005
|
|
|
$
|
53,776,323
|
|
Commission income
|
|
|
17,397,978
|
|
|
|
22,913,704
|
|
Carrying charges
|
|
|
4,396,134
|
|
|
|
3,012,627
|
|
|
|
$
|
60,091,117
|
|
|
$
|
79,702,654
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Revenue recognition
- continued
Hong Kong Brokerage services
The Group also derives commission
from its brokerage services provided by the subsidiaries, iSTAR Securities and iSTAR Futures which buy or sell securities and future
contracts on their customers' behalf. The Group acts as an agent with their customers for these transactions. The commission income
is recognized on a trade date basis as transactions occur.
Financial information and
advisory services
The Group derives revenue from
subscription fees from subscribers to their financial data, information services and investment advisory. The Group recognizes
revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred,
(3) the fee is fixed or determinable and (4) collectability is probable. Upon receipt of the upfront cash payments from the subscriber,
the Group will activate the subscriber's account and provide the subscriber the access code. This will commence a certain subscription
period according to the customer demand and the full payment will be deferred and recognized ratably over the subscription period.
The Group recognizes revenue ratably over the life of the arrangement. Estimated refund of subscription fees is recorded as deduction
of revenue and deferred revenue.
Advertising revenue
The Group derives its advertising
fees from advertising sales on their website for a fixed period of time, generally less than one year. Revenues from advertising
arrangements are recognized ratably over the period the advertising is displayed.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
|
Business taxes and value added
taxes
Starting from January 1, 2012,
the PRC Ministry of Finance and the State Administration of Taxation launched a Business Tax to value added tax ("VAT")
Transformation Pilot Program(the "Pilot Program"), for certain industries in Shanghai. On September 1, 2012, the PRC
Ministry of Finance and the State Administration of Taxation extended the Pilot Program to certain industries in other eight regions,
including Beijing and Shenzhen. With the adoption of Pilot Program, our advertising-related revenues and certain subscription revenues
were subject to VAT tax at a rate of 6%. Our advertising- related revenues, certain subscription revenues and certain commodities
brokerage revenues were recognized after deducting VAT and other related surcharges.
Revenue is recorded net of business
taxes when incurred. The Group is subject to business taxes of 3%-5% on taxable services provided to its customers. During the
years ended December 31, 2013, 2014, and 2015, business taxes and related surcharges totaled $598,044, $1,425,835 and $1,663,869,
respectively.
The Group's certain PRC subsidiaries, VIEs and VIEs'
subsidiaries are subject to VAT at a rate of 17% on subscription-based revenue. VAT payable on subscription-based revenue is computed
net of VAT paid on purchases. In respect of subscription-based revenue, however, if the net amount of VAT payable exceeds 3% of
subscription-based revenue, the excess portion of value added tax can be refunded immediately.
The Group therefore is subject
to an effective net VAT burden of 3% from subscription-based revenue and records VAT on a net basis. Net amount of value added
tax is recorded either in the line item of other current liabilities or prepaid expenses and other current assets on the face of
consolidated balance sheet.
Subscription-based revenue includes
the benefit of the rebate of value added taxes on sale of the downloadable software received from the Chinese tax authorities as
part of the PRC government policy of encouraging software development in the PRC. In 2013, 2014 and 2015, the Group recognized
$639,936, $425,908 and $328,817, respectively, in VAT refunds.
Government subsidies
The Group records government
subsidies when granted by local government authority and are not subject to future return. The government subsidies include research
& development subsidy, business tax refund, innovation fund and high-tech company subsidy.
Deferred revenue
Payments received in advance
of for our financial information and advisory service, advertising service are recorded as deferred revenue until earned and when
the relevant revenue recognition requirements have been met.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
|
Cost method investment
For investments in an investee
over which the Group does not have significant influence, the Group carries the investment at cost and recognizes income as any
dividends declared from distribution of investee's earnings. The Group reviews the cost method investments for impairment whenever
events or changes in circumstances indicate that the carrying value may no longer be recoverable. An impairment loss is recognized
in earnings equal to the difference between the investment's cost and its fair value at the balance sheet date of the reporting
period for which the assessment is made. The fair value of the investment would then become the new cost basis of the investment.
Equity method investment
Under the equity method, the
Group initially records its investment at cost. The Group subsequently adjusts the carrying amount of the investment to recognize
the Company's proportionate share of each equity investee's net income or loss. The Group will discontinue applying equity method
if an investment (and additional financial supports to the investee, if any) has been reduced to zero. When the equity-method investment
in ordinary shares is reduced to zero and further investments are made that have a higher liquidation preference than ordinary
shares, the Group would recognize the loss based on its percentage of the investment with the same liquidation preference, and
the loss would be applied to those investments of a lower liquidation preference first before being further applied to the investments
of a higher liquidation preference. An impairment loss on the equity method investments is recognized in the consolidated statements
of comprehensive income when the decline in value is determined to be other than-temporary.
Foreign currency translation
The functional and reporting
currency of the Company is the United States dollar ("U.S. dollar"). The financial records of the Group's subsidiaries,
VIEs and VIEs' subsidiaries located in the PRC, Hong Kong and British Virgin Islands are maintained in their local currencies,
the Renminbi ("RMB"), Hong Kong Dollars ("HK$"), and U.S. Dollars ("US$"), respectively, which are
also the functional currencies of these entities.
Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange
ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into
functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses
are recognized in the statements of operations.
The Group's entities with functional
currency of RMB and HK$ translate their operating results and financial position into the US$, the Group's reporting currency.
Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and
losses are translated using the average rate for the year. Translation adjustments are report as cumulative translation adjustments
and are shown as a separate component of other comprehensive income.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
|
Foreign currency risk
The RMB is not a freely convertible
currency. The State Administration for Foreign Exchange, under the authority of the People's Bank of China, controls the conversion
of Renminbi into foreign currencies. The value of the RMB is subject to changes in central government policies and to international
economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Cash and cash
equivalents of the Group included aggregate amounts of $26,974,664, $19,726,992 and $79,461,280 at December 31, 2013, 2014 and
2015 which were denominated in RMB.
Product development expenses
Costs of product development,
including investment in data capability, are expensed as incurred until technological feasibility has been established, at which
time any additional costs would be capitalized. The Group essentially completed its development concurrently with the establishment
of technological feasibility, and, accordingly, no costs have been capitalized.
Advertising costs
The Group expenses advertising
costs as incurred. Total advertising expenses were $2,391,762, $7,505,506 and $4,908,593 for the years ended December 31, 2013,
2014 and 2015, respectively, and have been included as part of sales and marketing expenses in the accompanying consolidated statements
of operations.
Commissions paid
Commissions paid are the commission
rebates of our Hong Kong brokerage business and the commissions paid to the sales agents of our commodities brokerage business.
Total commissions paid were $3,125,982, $11,546,126 and $5,049,661 for the years ended December 31, 2013, 2014 and 2015.
Income taxes
Current income taxes are provided
for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized for temporary differences
between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry
forwards and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will
not be realized.
The impact of an uncertain income
tax position on the income tax return is recognized at the largest amount that is more-likely-than not to be sustained upon audit
by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of
being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
|
Comprehensive income (loss)
Comprehensive income (loss) includes
net income (loss), unrealized gain (loss) on short-term investments and foreign currency translation adjustments. Beginning in
January 1, 2012, the Group presents the components of net income, the components of other comprehensive income and total comprehensive
income a single continuous consolidated statement of comprehensive income.
Fair value of financial instruments
Financial instruments include
cash and cash equivalents, restricted cash, accounts receivable, cost method investment, equity method investment, loan receivable
and accounts payable.
The carrying values of cash and
cash equivalents, restricted cash, accounts receivable, loan receivable and accounts payable approximate their fair value due to
their short-term maturities.
The carrying value of the cost
method investment was $1,217,617 and $554,392 as of December 31, 2014 and 2015, which approximate the fair value of the investment
based on the valuation performed by the Company.
The carrying value of the equity
method investment was nil and $1,228,269 as of December 31, 2014 and 2015, which approximate the fair value of the investments
at the acquired date and subsequently adjusted as the net assets of the investee change through the earning of income.
The Group does not use derivative
instruments to manage risks.
Share-based compensation
Share-based compensation with
employees is measured based on the grant date fair value of the equity instrument. The Group recognizes the compensation costs
net of an estimated forfeiture rate using the straight-line method for performance based awards or graded vesting attribution method
for service based awards, over the requisite service period of the award, which is generally the vesting period of the award. The
estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are
expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment
in the period of change and will also impact the amount of share-based compensation expense to be recognized in future periods.
Share awards issued to nonemployees
are measured at fair value at the earlier of the commitment date or the date the services is completed and recognized over the
period the service is provided or as goods is received.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
|
Net income (loss) per share
Basic net income (loss) per share
attributable to China Finance Online Co. Limited is computed by dividing net income (loss) attributable to China Finance Online
Co. Limited by the weighted average number of ordinary shares outstanding during the period. Diluted net income per ordinary share
attributable to China Finance Online Co. Limited reflects the potential dilution that could occur if securities or other contracts
to issue ordinary shares were exercised or converted into ordinary shares. The dilutive effect of the stock options and nonvested
shares is computed using treasury stock method.
Concentrations of credit risk
Financial instruments that potentially
expose the Group to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, short-term
investments, loan receivable and accounts receivable. The Group places its cash and cash equivalents, restricted cash, short-term
investments in major financial institutions located in PRC and Hong Kong, which management considers to be of high credit quality.
The Group conducts ongoing credit
evaluations of its customers and generally does not require collateral or other security from its customers except for the accounts
receivable-margin clients which represents the margin loan to customers for securities purchase. The accounts receivable-margin
client was collateralized by the securities the margin client purchased. The Group manages its credit risk by collecting up-front
fee from its customers and billing at regular intervals during the contract period. The Group assesses the adequacy of allowance
for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.
Details of clients accounting for 10% or more of accounts
receivable are as follows:
|
|
Year ended December 31,
|
|
|
2014
|
|
2015
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
|
|
|
|
|
|
|
|
A
|
|
$
|
1,963,900
|
|
|
|
13.5
|
|
|
$
|
*
|
|
|
|
*
|
|
B
|
|
$
|
5,044,178
|
|
|
|
34.6
|
|
|
$
|
*
|
|
|
|
*
|
|
C
|
|
$
|
*
|
|
|
|
*
|
|
|
$
|
4,245,971
|
|
|
|
25.9
|
|
* Represented less than 10% of consolidated account
receivable balance.
There were no customers with 10% or more of the Group's
revenues during 2013, 2014, or 2015.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Recently accounting pronouncements
In May 2014, the Financial Accounting
Standards Board ("FASB") issued ASU No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with
Customers. ASU 2014-09 supersedes the revenue recognition requirements in ASC 605, and requires entities to recognize
revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled to in exchange for those goods or services. ASU 2014-09 is originally effective for the annual reporting
periods beginning after December 15, 2016, including interim periods within that reporting period. ASU 2015-14, Revenue
from Contracts with Customers, defers the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09 is effective for
annual reporting periods beginning after December 15, 2017 and interim periods therein. Early adoption is permitted to the
original effective date. The Group is currently evaluating the timing of its adoption and the impact of adopting the new revenue
standard on its consolidated financial statements and considering additional disclosure requirements.
In April 2015, the FASB issued
ASU No. 2015-03 ("ASU 2015-03"), Interest – Imputation of Interest. ASU 2015-03 requires
debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the
debt liability rather than as an asset. ASU 2015-03 is effective for annual reporting periods beginning after December 15,
2015, including interim periods within that reporting period. Early adoption is permitted. The Group does not expect the adoption
of ASU 2015-03 will have a significant impact on the consolidated financial statements.
In September 2015, the FASB issued
ASU No. 2015-16 ("ASU 2015-16"), Business Combinations (Topic 805) Simplifying the Accounting for Measurement – Period
Adjustments. ASU 2015-16 requires the acquirer to recognize adjustments to provisional amounts that are identified during
the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record,
in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income
effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the
acquisition date. In addition, an entity is required to present separately on the face of the income statement or disclose in the
notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been
recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.
For public business entities, ASU 2015-16 is effective for fiscal years beginning after December 15, 2015. Early adoption
is permitted. The Group does not expect the adoption of ASU 2015-16 will have a significant impact on the consolidated financial
statements.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
Recently accounting pronouncements
- continued
In November 2015, the FASB issued
ASU No. 2015-17 ("ASU 2015-17"), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.
ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income
tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet statement of financial position.
The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the consolidated
balance sheet. The amendments in this update are effective for fiscal years beginning after December 15, 2016, and interim
periods therein and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted.
The Group does not expect the adoption of ASU 2015-17 will have a significant impact on the consolidated financial statements.
In February 2016, the FASB issued
ASU No. 2016-02 ("ASU 2016-02"), Leases. ASU 2016-02 specifies the accounting for leases. For operating
leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present
value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated
so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02 is effective for
public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Early
adoption is permitted. The Group is currently evaluating the impact of adopting this standard on its consolidated financial statements.
Acquisition of CFO Guiwo
On
April 1, 2015, Fortune Zhengjin Co., Ltd. ("Fortune Zhengjin", formerly known as Huifu Jinyuan
Co., Ltd.)
,
an affiliate of the Company, acquired 100% of equity interest of Shanghai Guiwo Information Technology Co., Ltd. ("CFO
Guiwo"), which was not a significant acquisition. Total cash consideration was $16,278. The Company recognized $19,906
goodwill at the acquisition date.
The results of CFO Guiwo's operations have been included in the consolidated
statement of comprehensive income for the year ended December 31, 2015.
Neither the results of operations since the
acquisition date nor the pro forma results of operations of CFO Guiwo were presented because of the effects of this
acquisition was not significant to the Company's consolidated statement of comprehensive income.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
3.
|
ACQUISITIONS - continued
|
Acquisition of CFO Tahoe
On September 30, 2013, Shanghai
Stockstar Wealth Management Co., Ltd. ("Stockstar Wealth Management"), an affiliate of the Company, paid $6,506,181 to
subscribe the newly issued shares of Shenzhen Tahoe Investment and Development Co., Ltd. ("CFO Tahoe") and acquired 60%
of the equity interest. CFO Tahoe held the 55% share equity in Henghui (Tianjin) Precious Metals Investment Co., Ltd. ("CFO
Henghui"), with which the Company expects to develop the commodities brokerage business in the future. With the assistance
of a third party appraiser, the Company allocated the purchase price to assets acquired and liabilities assumed as of the acquisition
date as follows and goodwill was allocated to commodities brokerage business and other related services operating segment. The
net revenue and net income of CFO Tahoe in the amount of $5,988,280 and $1,864,234, respectively, have been included in the consolidated
statement of comprehensive income for the year ended December 31, 2013.
|
|
|
|
Useful life (in years)
|
Purchase price allocation:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,279,425
|
|
|
|
|
|
Prepaid expenses and current assets
|
|
|
1,135,765
|
|
|
|
|
|
Accounts receivable
|
|
|
2,143,957
|
|
|
|
|
|
Property and equipment, net
|
|
|
47,770
|
|
|
|
|
|
Rental deposit
|
|
|
72,431
|
|
|
|
|
|
Acquired intangible assets:
|
|
|
|
|
|
|
|
|
Commodities trading right
|
|
|
699,414
|
|
|
|
|
|
Customer relationship
|
|
|
1,250,813
|
|
|
|
4.3
|
|
Guarantee fund deposits
|
|
|
1,626,545
|
|
|
|
|
|
Total assets acquired
|
|
|
12,256,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
(2,810,425
|
)
|
|
|
|
|
Deferred tax liabilities
|
|
|
(487,557
|
)
|
|
|
|
|
Total net assets
|
|
|
8,958,138
|
|
|
|
|
|
Noncontrolling interest
|
|
|
(9,508,295
|
)
|
|
|
|
|
Goodwill
|
|
|
7,056,338
|
|
|
|
|
|
Total purchase price
|
|
$
|
6,506,181
|
|
|
|
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
3.
|
ACQUISITIONS - continued
|
Acquisition of Champion Connection's business
On July 1, 2013, Giant Bright
International Holdings Limited ("CFO GB") and Mainfame Group Limited ("CFO MF"), two subsidiaries of the Company,
entered into a series of contractual arrangement with Champion Connection Network H.K Limited ("Champion Connection")
to acquire the packaged fixed assets, experienced personnel related to its investment advisory and institution subscription services
businesses in China, respectively. For the acquisition, the purchase consideration comprised cash consideration was $4,044,980,
30% shares of CFO GB, 30% shares of CFO MF and a contingent consideration of 5% shares of CFO MF. With the assistance of a third
party appraiser, the Company allocated the purchase price to assets acquired and liabilities assumed as of the acquisition date
as follows and goodwill was allocated to investment advisory services, institution subscription services and other related services
operating unit. In addition, the fair value of the shares of CFO GB and CFO MF were determined by using the income approach.
Purchase price allocation:
|
|
|
Property and equipment, net
|
|
$
|
199,803
|
|
Total assets acquired
|
|
|
199,803
|
|
Goodwill
|
|
|
6,544,150
|
|
Cash consideration
|
|
|
4,044,980
|
|
The fair value of 30% shares of CFO GB
|
|
|
1,760,861
|
|
The fair value of 30% shares of CFO MF
|
|
|
804,142
|
|
Contingent consideration of 5% shares of CFO MF
|
|
|
133,970
|
|
Total purchase price
|
|
$
|
6,743,953
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
3.
|
ACQUISITIONS - continued
|
Business combination of CFO Netinfo
On July 1, 2013, Zhengyong Information
Technology (Shanghai) Co., Ltd. ("CFO Zhengyong"), a subsidiary of the Company, entered into a series of contractual
arrangement with Netinfo (Beijing) Technology Co., Ltd. ("CFO Netinfo") to acquire 100% of the equity interest, with
which the Company expects to develop the investment advisory services in the future. For the acquisition, the total cash consideration
was $808,996. With the assistance of a third party appraiser, the Company allocated the purchase price to assets acquired and liabilities
assumed as of the acquisition date as follows and goodwill was allocated to investment advisory services business and other related
services operating segment.
The net revenue and net loss of CFO Netinfo in the amount of
$286,500 and $355,322, respectively, have been included in the consolidated statement of
comprehensive income
for the year ended December 31, 2013.
|
|
|
|
Useful life (in years)
|
Purchase price allocation:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
121,044
|
|
|
|
|
|
Prepaid expenses and current assets
|
|
|
339,296
|
|
|
|
|
|
Accounts receivable
|
|
|
4,912
|
|
|
|
|
|
Acquired intangible assets:
|
|
|
|
|
|
|
|
|
Security consulting license
|
|
|
598,657
|
|
|
|
15
|
|
Total assets acquired
|
|
|
1,063,909
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
(274,748
|
)
|
|
|
|
|
Deferred tax liabilities
|
|
|
(149,664
|
)
|
|
|
|
|
Income tax payable
|
|
|
612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net assets
|
|
|
640,109
|
|
|
|
|
|
Goodwill
|
|
|
168,887
|
|
|
|
|
|
Total purchase price
|
|
$
|
808,996
|
|
|
|
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
3.
|
ACQUISITIONS - continued
|
If comparative financial statements
are presented, the pro forma results as though the business combination that occurred during the current year had occurred as of
the beginning of the comparable prior annual reporting period The pro forma results are prepared for comparative purposes only
and do not purport to be indicative of the results of operations which actually would have resulted, nor is it indicative of future
operating results. There was no significant acquisition during the years ended December 31, 2014 and 2015, and then no pro forma
results were presented.
Fair value of acquired assets
The Group measured the fair value
for the assets acquired, with the assistance of an independent valuation firm, using discounted cash flow techniques,
and these assets were valued using Level 3 inputs, because the Group used unobservable inputs to value them, reflecting the Group's
assessment of the assumptions market participants would use in valuing these purchased intangible assets.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
On June 1, 2014, the Group signed
a series of contractual arrangements for the business restructure. Pursuant to the arrangements, the Group disposed (i) its entire
100% equity interest of several VIEs and subsidiaries of VIEs designated under the contract, (ii) the workforce and assets from
the acquisition of Champion Connection's business related to the institutional subscription services to CFO GB and CFO MF's noncontrolling
shareholders. In addition, the Group also should pay 20% net income of three subsidiaries of VIEs related to the commodities brokerage
services designated under the contract, and a cash consideration of $1,620,877, to get (i) 20% equity interest of CFO Tahoe, and
(ii) 40% equity interest of CFO GB and 30% CFO MF. The Group recognized a gain from the disposal with an amount of $90,666 in the
consolidated statement of comprehensive income for the year ended December 31, 2014.
|
|
December 31,
|
|
|
2014
|
|
2015
|
|
|
|
|
|
Accounts receivable-margin clients
|
|
$
|
1,698,861
|
|
|
$
|
4,367,417
|
|
Less: Allowance for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
Accounts receivable- margin clients, net
|
|
$
|
1,698,861
|
|
|
$
|
4,367,417
|
|
Accounts receivable-others
|
|
|
12,928,570
|
|
|
|
12,048,306
|
|
Less: Allowance for doubtful accounts
|
|
|
(43,077
|
)
|
|
|
(40,592
|
)
|
Accounts receivable-others, net
|
|
$
|
12,885,493
|
|
|
$
|
12,007,714
|
|
Accounts receivable- margin clients
represent the receivables derived in the Hong Kong brokerage service in iSTAR Securities, which is pledged by the customer's purchased
securities.
Accounts receivable-others represent
the receivables derived in commodities brokerage business and other ordinary business without any collateral or other security
from its customers.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
6.
|
CONSIDERATION RECEIVABLE
|
In order
to enhance our return on cash during the strategic transition period, in March 2013, the Group made an equity method investment
to a real estate developer in Langfang City, Hebei Province (the "Langfang Developer"). The Group invested an aggregate
$22,142,400 in consideration for 49% of its equity interests. In December 2013, the Company transferred this investment to two
third party companies at the consideration of $24,930,702. As of December 31, 2013, the Company has collected $11,481,244 in cash.
The carrying balance of consideration receivable was $13,400,882 as of December 31, 2014.
The consideration receivable
was pledged by the 100% equity interests of Langfang Developer. As of December 31, 2014, based on the valuation of the 100% equity
interests of Langfang Developer performed by a third party appraiser, there was no impairment loss of the consideration receivable.
In December 2015, the Company
fully collected the consideration receivable. The carrying balance of consideration receivable was nil as of December 31, 2015.
|
7.
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
Prepaid expenses and other current assets consist
of the following:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Prepayment of advertising fees
|
|
$
|
213,837
|
|
|
$
|
209,778
|
|
Advertising deposit
|
|
|
355,390
|
|
|
|
196,290
|
|
Advances to suppliers
|
|
|
840,308
|
|
|
|
1,272,519
|
|
VAT refund receivable
|
|
|
139,908
|
|
|
|
68,429
|
|
Interest receivable
|
|
|
1,264,075
|
|
|
|
65
|
|
Prepayment of office rental
|
|
|
380,325
|
|
|
|
170,536
|
|
Amount due from noncontrolling shareholders (i)
|
|
|
2,393,645
|
|
|
|
-
|
|
Sales of cost method investment receivable (Note 11)
|
|
|
2,168,868
|
|
|
|
-
|
|
Amounts due from equity method investee
|
|
|
-
|
|
|
|
212,904
|
|
Other current assets
|
|
|
784,507
|
|
|
|
1,358,126
|
|
|
|
$
|
8,540,863
|
|
|
$
|
3,488,647
|
|
(i) The amounts due from noncontrolling
shareholders represented the interest free loans to the noncontrolling shareholders. Pursuant to the agreement, all the loans were
for temporary cash turnover purpose and were received in the first quarter of 2015.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
The Group has loan receivable due from third parties,
which consisted of the following:
|
|
As of December 31,
|
|
|
|
|
|
|
2014
|
|
2015
|
|
Interest rate
|
|
Period
|
A(i)
|
|
$
|
10,295,800
|
|
|
$
|
-
|
|
|
1.5% per month
|
|
October 9, 2013 to October 20, 2014
|
|
|
$
|
10,295,800
|
|
|
$
|
-
|
|
|
19-21% per annum
|
|
October 21, 2014 to December 31, 2014
|
|
(i)
|
The loan was made to the Langfang Developer, in which the Group also made an equity method investment
in 2013 (Note 6). The principal and its return are pledged by the 100% equity interests of Langfang Developer.
|
|
|
|
|
|
In September 2014, the Company's
board of directors approved an extension of the outstanding loan to December 31, 2014.
|
|
|
|
|
|
As of December 31, 2014, based
on the valuation of the 100% equity interests of Langfang Developer performed by a third party appraiser, there was no impairment
loss of the loan.
|
|
|
|
|
|
In March, 2015, the Group collected
approximately $2.1 million (RMB13 million, equivalently) from Langfang Developer. In December 2015, the Company received the remaining
outstanding loan and relative interests. The Group recorded $693,231, $3,783,929 and $2,283,875 interest income in relation to
the consideration receivable and loan receivable during the years ended December 31, 2013, 2014 and 2015, respectively.
|
The following table presents
changes in loan receivable for the twelve-month period ended December 31, 2014 and 2015, respectively:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Beginning balance
|
|
$
|
10,333,120
|
|
|
$
|
10,295,800
|
|
Collection
|
|
|
-
|
|
|
|
(9,807,585
|
)
|
Exchange difference
|
|
|
(37,320
|
)
|
|
|
(488,215
|
)
|
Ending balance
|
|
$
|
10,295,800
|
|
|
$
|
-
|
|
|
9.
|
SHORT-TERM INVESTMENTS
|
The Group measured the trading
securities at fair value based on quoted market prices in an active market. As a result the Group has determined the valuation
of its trading securities falls within Level 1 of the fair value hierarchy. As of December 31, 2014 and 2015, the Group did not
hold any trading securities. For the year ended December 31, 2013, 2014 and 2015, the Group recognized a loss from the trading
securities of nil, $47,941 and $18,396 in the consolidated statement of comprehensive income, respectively.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
9.
|
SHORT-TERM INVESTMENTS - continued
|
The Group measured the available-for-sale
securities at the fair value shown by the financial institution which the Group believes a Level 2 valuation.
The following table presents
changes in level 2 available-for-sale securities measured on a recurring basis for the twelve-month period ended December 31, 2014
and 2015, respectively:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Purchases
|
|
|
90,205,903
|
|
|
|
105,334,483
|
|
Redemption
|
|
|
(90,323,594
|
)
|
|
|
(105,560,595
|
)
|
Realized gain
|
|
|
106,392
|
|
|
|
234,421
|
|
Exchange difference
|
|
|
11,299
|
|
|
|
(8,309
|
)
|
Ending balance
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table provides
additional information on the realized gains of the sale of available-for-sale securities as of December 31, 2014 and 2015, respectively.
For purposes of determining gross realized gains, the cost of securities sold is based on specific identification.
|
|
Year ended December 31, 2015
|
|
|
Proceeds
|
|
Costs
|
|
Gains
|
|
Exchange
difference
|
Available-for-sale securities
|
|
$
|
105,560,595
|
|
|
$
|
105,334,483
|
|
|
$
|
234,421
|
|
|
$
|
(8,309
|
)
|
Total
|
|
$
|
105,560,595
|
|
|
$
|
105,334,483
|
|
|
$
|
234,421
|
|
|
$
|
(8,309
|
)
|
|
|
Year ended December 31, 2014
|
|
|
Proceeds
|
|
Costs
|
|
Gains
|
|
Exchange
difference
|
Available-for-sale securities
|
|
$
|
90,323,594
|
|
|
$
|
90,205,903
|
|
|
$
|
106,392
|
|
|
$
|
11,299
|
|
Total
|
|
$
|
90,323,594
|
|
|
$
|
90,205,903
|
|
|
$
|
106,392
|
|
|
$
|
11,299
|
|
The fair values of trading securities and available-for-sale
securities as measured, and held-to-maturity securities as disclosed are further discussed in Note 10.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
10.
|
FAIR VALUE MEASUREMENT
|
Fair value disclosed or measured on a recurring
basis
The fair values of the Group's
trading securities and available-for-sale securities as measured, held-to-maturity securities as disclosed are determined based
on the discounted cash flow method. The Group measured the available-for-sale
securities at the fair value shown by the financial institution which the Group believes a Level 2 valuation.
The Group's financial assets
measured or disclosed at fair value on a recurring basis both were nil as of December 31, 2014 and 2015.
The following table presents
changes in level 2 available-for-sale securities measured on a recurring basis for the twelve-month period ended December 31, 2014
and 2015, respectively:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Purchases
|
|
|
90,205,903
|
|
|
|
105,334,483
|
|
Redemption
|
|
|
(90,323,594
|
)
|
|
|
(105,560,595
|
)
|
Realized gain
|
|
|
106,392
|
|
|
|
234,421
|
|
Exchange difference
|
|
|
11,299
|
|
|
|
(8,309
|
)
|
Ending balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Fair
value disclosed or measured on a non-recurring basis
The Group measures certain financial
assets, including equity method investments and cost method investments, at fair value on a nonrecurring basis only if an impairment
charge were to be recognized. The Group's non-financial assets, such as intangible assets, goodwill and fixed assets, would be
measured at fair value only if they were determined to be impaired on an other-than-temporary basis.
|
|
Fair value at
December 31, 2014
|
|
Total losses
in the year ended
December 31, 2014
|
|
Fair value at
December 31, 2015
|
|
Total losses
in the year ended
December 31, 2015
|
Non- Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
-
|
|
|
|
(8,149,525
|
)
|
|
|
-
|
|
|
|
-
|
|
Intangible Assets
|
|
|
-
|
|
|
|
(1,802,125
|
)
|
|
|
-
|
|
|
|
(250,360
|
)
|
As of December 31, 2014 and 2015, certain goodwill (Note 16) and
intangible assets (Note 15) were written off from their carrying value to fair value, which was measured using significant unobservable
inputs (Level 3), with impairment loss incurred and recorded in the in the consolidated statement of comprehensive income for the
year ended December 31, 2014 and 2015.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In
U.S. dollars)
|
11.
|
COST METHOD INVESTMENT
|
In 2012, the Group made a cost
method investment. The carrying amount of the cost method investments was $802,202 as of December 31, 2012. As result of an addition
investment of $309,698 in 2013, the carrying balance of such investment was $1,138,899 as of December 31, 2013.
In 2014, the Group made another
cost method investment of $81,064. The total carrying balance of such cost method investments were $1,217,617 as of December 31,
2014.
In 2014, the Group sold its
equity interests in Ocean Butterflies Holdings Inc. to a third party, which was fully impaired as of December 31, 2011. Gains from
the sale of cost method investment recognized in the consolidated statement of comprehensive income for the year ended December
31, 2014 was $4,337,736, of which $2,168,868 was remained receivable as of December 31, 2014. In April, 2015, the Group collected
$2,168,868, the remaining consideration related to the sale of Ocean Butterflies Holdings Inc.
In May 2015, the Group sold
a cost method investment to third parties, which was acquired during 2012 and 2013, and recognized a gain from the sale of cost
method investment of $4,648,302 in the consolidated statement of comprehensive income for the year ended December 31, 2015.
In December 2015, the Group
entered a series of arrangements to dispose its 90% equity interests in CFO Securities Consulting with third parties. With the
assistance of a third party appraiser, the fair value of the 10% retained noncontrolling investment of $477,393 was recognized
in the consolidated balance sheets. (Note 13)
As a result, the carrying balance
of cost method investment was $554,392 as of December 31, 2015.
The following table presents
changes in cost method investment for the twelve-month period ended December 31, 2014 and 2015, respectively:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Beginning balance
|
|
$
|
1,138,899
|
|
|
$
|
1,217,617
|
|
Acquisitions
|
|
|
81,713
|
|
|
|
-
|
|
consideration of disposal
|
|
|
(4,337,736
|
)
|
|
|
(5,790,369
|
)
|
Gain from sale of cost method investment
|
|
|
4,337,736
|
|
|
|
4,648,302
|
|
Fair value adjustment of retained noncontrolling investment
|
|
|
-
|
|
|
|
477,393
|
|
Exchange difference
|
|
|
(2,995
|
)
|
|
|
1,449
|
|
Ending balance
|
|
$
|
1,217,617
|
|
|
$
|
554,392
|
|
These investments are recorded
as cost method investments, as the Group did not have a significant influence to the investee. There was no impairment of the Group's
cost method investment for the year ended December 31, 2014 and 2015.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In
U.S. dollars)
|
12.
|
EQUITY METHOD INVESTMENT
|
In June 2015, the Group paid
$307,996 to acquire 20% of an investee's the equity interest. In December 2015, the Group entered a contractual arrangement with
a third party to transfer its 15% equity interests in Aishang (Beijing) Fortune Technology Co., Ltd. ("CFO Aishang"),
which was previously owned 55% equity interests by the Group. The remaining 40% equity interests in CFO Aishang was recorded as
equity method investment at the disposal date, as the Group lost control over CFO Aishang. The fair value of the retained noncontrolling
investment of $985,586 was recognized in the consolidated balance sheets, based on the valuation performed by a third party. (Note
13)
The Group recognized a loss
from equity method investment of $66,970 in the consolidated statement of comprehensive income for the year ended December 31,
2015. The carrying balance of equity method investment was $1,228,269 as of December 31, 2015.
The following table presents
changes in equity method investment for the twelve-month period ended December 31, 2015:
|
|
December 31,
2015
|
Beginning balance
|
|
$
|
-
|
|
Acquisitions
|
|
|
307,996
|
|
Equity method investment losses
|
|
|
(66,970
|
)
|
Fair value adjustment of retained noncontrolling investment
|
|
|
985,586
|
|
Exchange difference
|
|
|
1,657
|
|
Ending balance
|
|
$
|
1,228,269
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
In December, 2015, the
Group entered a series of arrangements to dispose its 100% equity interests in Zhongcheng Futong Co., Ltd. ("CFO
Zhongcheng") which holds 90% equity interests in CFO Securities Consulting with third parties. Pursuant to the arrangements,
the cash consideration was $9,322,850. With the assistance of a third party appraiser, the fair value of the 10% retained
noncontrolling investment of $477,393 was recognized as a cost method investment in the consolidated balance sheets (Note
11), as the Group did not have any significant influence over CFO Securities Consulting. The Group recorded a gain on the
interest sold and the retained noncontrolling investment of $9,161,948 in the consolidated statement of comprehensive income
for the year ended December 31, 2015.
In December, 2015, the Company
entered a contractual arrangement with third parties to transfer its 15% equity interests in CFO Aishang, which was previously
owned 55% equity interests by the Group. Pursuant to the arrangements, the cash consideration was $3,861. With the assistance of
a third party appraiser, the fair value of the 40% retained noncontrolling investment of $985,586 was recognized as an equity method
investment in the consolidated balance sheets (Note 12). The Group recorded a gain on the interest sold and the retained noncontrolling
investment of $837,853 in the consolidated statement of comprehensive income for the year ended December 31, 2015.
The gain on the interest sold
and the retained noncontrolling investment was calculated as the difference between the aggregate of (i) the fair value of the
consideration transferred, (ii) the fair value of any retained noncontrolling investment in the former affiliated company on the
date the affiliated company was deconsolidated, and (iii) the carrying amount of any noncontrolling interest in the former affiliated
company on the date the affiliated company was deconsolidated, if applicable; and the carrying amount of the former affiliated
company's net assets.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
14.
|
PROPERTY AND EQUIPMENT, NET
|
Property and equipment, net consisted of:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Technology infrastructure
|
|
$
|
9,842,789
|
|
|
$
|
10,638,276
|
|
Computer equipment
|
|
|
1,995,876
|
|
|
|
2,163,506
|
|
Furniture, fixtures and equipment
|
|
|
4,052,425
|
|
|
|
3,800,591
|
|
Motor vehicle
|
|
|
929,340
|
|
|
|
875,729
|
|
Leasehold improvements
|
|
|
4,610,488
|
|
|
|
4,931,813
|
|
|
|
|
21,430,918
|
|
|
|
22,409,915
|
|
Less: accumulated depreciation
|
|
|
(16,567,969
|
)
|
|
|
(16,620,381
|
)
|
|
|
$
|
4,862,949
|
|
|
$
|
5,789,534
|
|
Depreciation expense for the
years ended December 31, 2013, 2014 and 2015 were $1,732,035, $1,524,655 and $1,364,048, respectively.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
15.
|
ACQUIRED INTANGIBLE ASSETS, NET
|
Intangible assets as of December
31, 2014 and 2015 were as follows:
|
|
December, 31
|
|
|
2014
|
|
2015
|
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Impairment
|
|
Disposal
|
|
Net carrying
amount
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Impairment
|
|
Net carrying
amount
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodities trading right
|
|
|
1,372,773
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(81,712
|
)
|
|
|
1,291,061
|
|
|
|
1,216,582
|
|
|
|
-
|
|
|
|
(250,360
|
)
|
|
|
966,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed technology
|
|
|
68,639
|
|
|
|
(27,187
|
)
|
|
|
(41,452
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Customer relationship
|
|
|
1,256,741
|
|
|
|
(362,522
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
894,219
|
|
|
|
1,184,243
|
|
|
|
(610,931
|
)
|
|
|
-
|
|
|
|
573,312
|
|
Securities consulting license and related trademarks
|
|
|
5,570,082
|
|
|
|
(741,279
|
)
|
|
|
(1,760,673
|
)
|
|
|
(3,068,130
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
8,268,235
|
|
|
$
|
(1,130,988
|
)
|
|
$
|
(1,802,125
|
)
|
|
$
|
(3,149,842
|
)
|
|
$
|
2,185,280
|
|
|
$
|
2,400,825
|
|
|
$
|
(610,931
|
)
|
|
$
|
(250,360
|
)
|
|
$
|
1,539,534
|
|
Amortization expenses for the
years ended December 31, 2013, 2014 and 2015 were $432,957, $448,768 and $285,088, respectively. Future amortization expenses of
acquired intangible assets with determinable lives are $393,460, $393,460, and $32,788 for 2016, 2017 and 2018, respectively.
There was no impairment on
intangible assets for the year ended December 31, 2013. For the year ended December 31, 2014, the Group recorded an
impairment loss on its intangible assets in the amount of $1,802,125 associated with the acquired completed technology and
securities consulting license and related trademarks due to management's estimation of the expected future cash flows
associated with these assets were insufficient to recover their carrying values. During 2014, the Group disposed its
intangible assets in the amount of $3,149,842 associated with the acquired commodities trading right and securities
consulting license and the related trademarks due to the business restructure. For the year ended December 31, 2015, the
Group recorded an impairment loss of $250,360 related to commodities trading right.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
Changes in goodwill for the years
ended December 31, 2013, 2014 and 2015 were as follows:
|
|
Commodities
Brokerage
|
|
Investment
advisory
services
|
|
Institutional
subscription
services
|
|
Total
|
Balance as of January 1, 2014
|
|
$
|
7,115,479
|
|
|
$
|
8,182,468
|
|
|
$
|
1,676,490
|
|
|
$
|
16,974,437
|
|
Impairment of CFO East Win
|
|
|
-
|
|
|
|
(3,112,365
|
)
|
|
|
-
|
|
|
|
(3,112,365
|
)
|
Impairment of Champion Connection's business
|
|
|
-
|
|
|
|
(4,867,660
|
)
|
|
|
-
|
|
|
|
(4,867,660
|
)
|
Disposal of Champion Connection's business (Note4)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,676,490
|
)
|
|
|
(1,676,490
|
)
|
Impairment of CFO Netinfo
|
|
|
-
|
|
|
|
(169,500
|
)
|
|
|
-
|
|
|
|
(169,500
|
)
|
Exchange difference
|
|
|
(25,699
|
)
|
|
|
(32,943
|
)
|
|
|
-
|
|
|
|
(58,642
|
)
|
Balance as of December 31, 2014
|
|
$
|
7,089,780
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,089,780
|
|
Acquisition of CFO Guiwo (Note3)
|
|
|
19,906
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,906
|
|
Exchange difference
|
|
|
(410,066
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(410,066
|
)
|
Balance as of December 31, 2015
|
|
$
|
6,699,620
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,699,620
|
|
During the third quarter of
2013, the Group made a series of business acquisition and restructures. The Company has re-categorized its reporting units to better
reflect the evolving nature of its businesses and reallocated its goodwill. The goodwill related to acquisition of CFO Tahoe was
allocated to commodities brokerage reporting unit; the goodwill related to the acquisition of CFO East Win, CFO Netinfo and Champion
Connection's investment advisory business were allocated to investment advisory services reporting unit and the goodwill related
to the acquisition of Champion Connection's institutional subscription business were allocated to the institutional reporting unit.
In the second quarter of 2014,
due to the new business redirection to develop our online brokerage services "Securities Master", the Group was expected
to suffer reduced cash flow in its investment advisory reporting unit. With the assistance of a third party appraiser, the Group
recognized an impairment loss of $8,149,525 related to the investment advisory services reporting unit. On June 1, 2014, the Group
disposed all of goodwill related to the institutional reporting unit of $1,676,490 as a result of the business restructure (Note
4). The Group also performed a goodwill impairment test related to commodities trading business as of December 31, 2014 and no
impairment loss was recorded.
The goodwill related to the acquisition
of CFO Guiwo was allocated to commodities trading reporting unit, which was acquired in the second quarter of 2015. The Group performed
a goodwill impairment test as of December 31, 2015 and no impairment loss was recorded.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
In the goodwill impairment test,
the Group used the income approach, which it believed to be more reliable than the market approach in determining the fair value
of the Group's reporting units. Accordingly, it adopted a discounted cash flow ("DCF") method under the income approach,
which considers a number of factors that include expected future cash flows, growth rates, discount rates, and comparable multiples
from publicly traded companies in the industry and requires the Group to make certain assumptions and estimates regarding industry
economic factors and future profitability of its business unit. The assumptions are inherently uncertain and subjective.
Based on the impairment tests
performed, the Group recognized impairment losses of nil, $8,149,525 and nil for the years ended December 31, 2013, 2014 and 2015,
respectively.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
Accounts payable consist of:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Amount due to customers of Hong Kong brokerage business
|
|
$
|
7,982,827
|
|
|
$
|
2,388,638
|
|
Amount due to sales agents
|
|
|
583,367
|
|
|
|
1,722,827
|
|
Amount due to noncontrolling shareholders
|
|
|
876,911
|
|
|
|
910,864
|
|
Others
|
|
|
409,386
|
|
|
|
471,399
|
|
|
|
$
|
9,852,491
|
|
|
$
|
5,493,728
|
|
|
18.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
Accrued expenses and other current liabilities consist
of:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Accrued bonus
|
|
$
|
3,612,689
|
|
|
$
|
4,825,633
|
|
Accrued professional service fees
|
|
|
760,780
|
|
|
|
416,676
|
|
Withholding individual income tax-option exercise
|
|
|
61,683
|
|
|
|
61,683
|
|
Value added taxes and other taxes payable
|
|
|
945,471
|
|
|
|
2,219,300
|
|
Accrued raw data cost
|
|
|
762,492
|
|
|
|
1,285,418
|
|
Accrued bandwidth cost
|
|
|
127,650
|
|
|
|
38,527
|
|
Accrued welfare benefits
|
|
|
72,160
|
|
|
|
61,594
|
|
Amount payable related to business restructure (Note 4)
|
|
|
360,520
|
|
|
|
-
|
|
Advances related to disposal of subsidiaries (i)
|
|
|
-
|
|
|
|
5,081,927
|
|
Accrued sales service fees
|
|
|
491,981
|
|
|
|
578,910
|
|
Others
|
|
|
1,642,308
|
|
|
|
1,085,757
|
|
|
|
$
|
8,837,734
|
|
|
$
|
15,655,425
|
|
(i)
|
|
On March 30, 2015, the Group signed a sale &
purchase agreement with a third party, to transfer the 100% ordinary shares of iSTAR Futures and iSTAR Wealth Management (the
"
Transaction
"
). In April 2015,
the Group collected partial consideration of approximately $5.1 million. Due to the Transaction was not completed as of December
31, 2015, the agreement was expired automatically. The Group refunded the $5.1 million and entered into a new agreement in April
2016. (Note 28)
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES
|
As of December 31, 2015, the
Company and its subsidiaries have five share-based compensation plans, which are described below. The compensation expenses that
had been charged against income for those plans were $3,035,122, $4,698,953 and $6,056,033 for 2013, 2014, and 2015, respectively.
2004 Stock incentive plan
In January 2004, the Company
adopted the 2004 stock incentive plan (the "2004 Plan") which allows the Company to offer a variety of incentive awards
to employees, directors, officers and other eligible persons in the Group, and consultants and advisors outside the Group. We amend
the 2004 Plan in September 2004, August 2006, June 2009 and June 2010. The total number of ordinary shares authorized under the
2004 Plan was 30,688,488, and all of these authorized ordinary shares were granted to directors, officers, employees and non-employees
as of December 31, 2014.
Options to employees
During 2013, the Company granted
totaling 7,740,000 stock options to directors, officers and employees at an exercise price that equaled the trading price of the
stock upon the stock option grant. These options vest over 3 years except the 3,300,000 shares granted to the two officers which
vest over 2 years.
The fair value of employee options
was estimated on the basis of the Black-Scholes Option Pricing model with the following assumptions:
|
|
Years ended December 31, 2013
|
|
|
|
Weighted average risk free rate of return
|
|
|
1.40
|
%
|
Weighted average expected option life (in years)
|
|
|
6.14
|
|
Expected volatility rate
|
|
|
76.67
|
%
|
Dividend yield
|
|
|
-
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES - continued
|
2004 Stock incentive plan - continued
Options to employees
-
continued
The volatility of the underlying
ordinary shares during the life of the options was estimated based on the historical stock price volatility of the Company over
the past years.
|
(2)
|
Risk-free interest rate
|
Risk-free interest rate was estimated
based on the yield to maturity of treasury bonds of the United States with a maturity period close to the expected term of the
options.
The expected life was estimated
based on historical information.
The dividend yield was estimated
by the Company based on its expected dividend policy over the expected term of the options.
Options are generally granted at
an exercise price equal to the fair market value of the Company's shares at the date of grant.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES - continued
|
2004 Stock incentive plan - continued
Options to non-employees
During 2013, the Company granted
6,260,000 options under the 2004 Plan to consultants and strategic advisers. The fair value of non-employee options is estimated
using the Black-Scholes Option Pricing model as such method provided a more accurate estimate of the fair value of services provided
by the consultants and strategic advisers. The fair value of the stock options is remeasured as of the end of each reporting period
until the services of these non-employees are complete under the service contracts. These options vest over two years.
Summary of stock options to employees and non-employees
A summary of the stock option activity is as follows:
|
|
2013
|
|
2014
|
|
2015
|
|
|
Number
of options
|
|
Weighted
average
exercise price
|
|
Number
of options
|
|
Weighted
average
exercise price
|
|
Number
of options
|
|
Weighted
average
exercise price
|
Outstanding at beginning of year
|
|
|
11,144,998
|
|
|
$
|
0.93
|
|
|
|
24,505,348
|
|
|
$
|
0.54
|
|
|
|
21,326,160
|
|
|
$
|
0.57
|
|
Granted
|
|
|
14,000,000
|
|
|
|
0.25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(190,250
|
)
|
|
|
0.16
|
|
|
|
(1,164,300
|
)
|
|
|
0.54
|
|
|
|
(2,205,600
|
)
|
|
|
0.22
|
|
Forfeited
|
|
|
(449,400
|
)
|
|
|
1.25
|
|
|
|
(2,014,888
|
)
|
|
|
0.27
|
|
|
|
(1,787,800
|
)
|
|
|
1.18
|
|
Outstanding at end of year
|
|
|
24,505,348
|
|
|
$
|
0.54
|
|
|
|
21,326,160
|
|
|
$
|
0.57
|
|
|
|
17,332,760
|
|
|
$
|
0.55
|
|
Shares exercisable at end of year
|
|
|
10,500,548
|
|
|
$
|
0.93
|
|
|
|
14,070,240
|
|
|
$
|
0.73
|
|
|
|
14,513,528
|
|
|
$
|
0.61
|
|
The following table summarizes
information with respect to stock options outstanding at December 31, 2015:
|
|
Options outstanding
|
|
Option exercisable
|
Stock option
with exercise price of:
|
|
Number
outstanding
|
|
Weighted
average
remaining
contractual life
(in years)
|
|
Weighted
average
exercise
price
|
|
Aggregate
intrinsic
value as of
December
31,
2015
|
|
Number
exercisable
|
|
Weighted
average
exercise
price
|
|
Aggregate
intrinsic
value as of
December
31,
2015
|
$1.07
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
$0.96
|
|
|
2,268,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,268,000
|
|
|
|
|
|
|
|
|
|
$1.318
|
|
|
53,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,600
|
|
|
|
|
|
|
|
|
|
$1.26
|
|
|
413,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413,360
|
|
|
|
|
|
|
|
|
|
$1.648
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
$1.426
|
|
|
2,091,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,091,000
|
|
|
|
|
|
|
|
|
|
$1.43
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
$0.25
|
|
|
11,746,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,927,568
|
|
|
|
|
|
|
|
|
|
|
|
|
17,332,760
|
|
|
5.85
|
|
$
|
0.55
|
|
|
$
|
12,412,802
|
|
|
|
14,513,528
|
|
|
$
|
0.61
|
|
|
$
|
9,616,123
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES - continued
|
2004 Stock incentive plan
-
continued
Summary of stock options to
employees and non-employees
- continued
The weighted-average grant-date
fair value of options granted during the years 2013 was $0.17. The total intrinsic value of options exercised during the years
ended December 31, 2013, 2014 and 2015 was $208,895, $647,701, and $1,881,129, respectively. The total fair value of shares vested
during the year ended December 31, 2013, 2014 and 2015 were $141,549, $3,080,628 and $2,067,037, respectively.
The Company recognized share-based
compensation expenses of $2,539,274, $2,664,317 and $546,465 for stock option in the years ended December 31, 2013, 2014 and 2015,
respectively.
As of December 31, 2015, there
were $39,183 unrecognized share-based compensation expenses relating to the stock options, which are expected to be recognized
over a weighted average period of one year.
Restricted shares to employees
On January 2, 2014, the Company
granted remaining 1,100,240 ordinary shares, which were in the form of restricted shares, to employees under 2004 Plan. The vesting
of the restricted shares is subject to rendering service to the Company for three years. Based on the Company's requisite service
period stated in the 2004 Plan, 748,162 shares were vested as of January 2, 2016, of which 258,086 shares were issued to an employee
as of December 31, 2015. The fair value of restricted shares is $1.106, which equal to the fair market value of the Company's shares
at the date of grant. The Company recognized share-based compensation expenses of $762,568 and $324,496 for the years ended December
31, 2014 and 2015. As of December 31, 2015, there were $129,801 unrecognized share-based compensation expenses relating to the
restricted shares, which are expected to be recognized over a weighted average period of one year.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES - continued
|
2007 Equity incentive plan
In July 2007, the Company adopted
the 2007 Equity incentive plan (the "2007 Plan") and granted nonvested shares covering 10,558,493 ordinary shares of
the Company to the employees who were eligible for the 2007 Plan. The vesting of the nonvested shares are subject to achieving
certain operating performance targets and rendering service to the Company for the requisite service period stated in the 2007
Plan. Based on the Company's operating performance, 8,658,048 shares were vested as of December 31, 2010.
In June 2014, the Annual General
Meeting approved the amendment to the 2007 Plan and the Restricted Stock Issuance and Allocation Agreement of 2007 Plan. Pursuant
to such agreement, together with the remaining 1,900,445 ordinary shares which were not vested due to the operating performance
targets under 2007 Plan not being achieved, 3,000,000 ordinary shares were collectively granted to the employees who were eligible.
The fair value of a nonvested share on the grant date was measured at the quoted market price of the Company's equity shares. The
nonvested shares shall become activated and vest during the period commencing from the grant date and ending on December 31, 2016
based on the Company's achievement of the performance targets.
As of December 31, 2014, there
was no nonvested shares become activated and vested due to the performance targets were not achieved, and nil share-based compensation
expenses relating to the nonvested shares was recognized.
As of December 31, 2015, the
granted shares were activated and vested based on the Group's achievement of performance target. The fair value of granted share
is $0.82, which equal to the fair market value of the Company's shares at the date of grant. The Company recognized share-based
compensation expenses of $1,476,000 for the years ended December 31, 2015. As of December 31, 2015, there were $984,000 unrecognized
share-based compensation expenses relating to the restricted shares, which are expected to be recognized over a weighted average
period of one year.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES - continued
|
2007 Equity incentive plan
- continued
A summary of the status of the
nonvested shares as of December 31, 2013, 2014 and 2015, and changes during the year ended December 31, 2014 and 2015, respectively
is presented below.
Nonvested shares
|
|
Shares
|
|
Weighted-
average grant/
modification
date
fair value
|
|
Aggregate
intrinsic
value
|
At the beginning of year 2014
|
|
|
1,900,445
|
|
|
$
|
0.252
|
|
|
$
|
2,390,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,099,555
|
|
|
$
|
0.82
|
|
|
$
|
901,635
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the end of year 2014
|
|
|
3,000,000
|
|
|
$
|
1.064
|
|
|
$
|
3,192,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
3,000,000
|
|
|
$
|
0.82
|
|
|
|
2,460,000
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the end of year 2015
|
|
|
3,000,000
|
|
|
$
|
1.082
|
|
|
$
|
3,246,000
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES - continued
|
2010 Equity incentive plan of iSTAR Financial Holdings
In November 2010, iSTAR Financial
Holdings, a subsidiary of the Company, implemented the "2010 equity incentive plan" (the "2010 Plan") under
which the Company transferred 1,500 nonvested shares which representing 15% of total iSTAR Financial Holdings' equity interest
to its management group as a share incentive. If the grantees left the Company before the third anniversary of the grant date when
the nonvested shares become vested, they should transfer the shares to the Company at no consideration. Therefore, the total share
based compensation expenses are recognized ratably over the three years of vesting period. In addition, as the grantees are entitled
to all the shareholder's rights, including the dividend rights since the date of grant, the 15% share of the earnings of iSTAR
Financial Holdings is recognized as noncontrolling interest on the Company's consolidated financial statements since November 1,
2010, the date of grant.
The fair value of the share incentive
was determined to be $1,188 per share. The Group recognized $495,848 share based compensation cost in 2013. As of December 31,
2013, all compensation cost relating to nonvested shares was recognized.
2014 Stock incentive plan
In July 2014, the Company adopted
the 2014 stock incentive plan (the "2014 Plan") which allows the Company to offer a variety of incentive awards to employees,
directors, officers and other eligible persons in the Group, and consultants and advisors outside the Group. The maximum number
of ordinary Shares that may be delivered pursuant to awards granted to eligible persons under 2014 Plan during calendar year 2014
is equal to 5,000,000 ordinary shares; provided, that, as of January 1 of each calendar year thereafter during the term of
2014 plan, the maximum number of ordinary shares that may be delivered pursuant to awards granted to eligible persons under 2014
Plan shall be increased by 3,000,000 Ordinary Shares. As of result, the total number of ordinary shares authorized under the 2014
Plan was 8,000,000 as of December 31, 2015. As of December 31, 2015, 31,400 shares were available for future grant of awards.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES – continued
|
2014 Stock incentive plan – continued
Options to employees
During 2014 and 2015, the Company
granted totaling 1,930,000 and 120,000 stock options to employees at an exercise price that equaled the trading price of the stock
upon the stock option grant, respectively. These options vest over 3 years.
The fair value of employee options
was estimated on the basis of the Black-Scholes Option Price model with the following assumptions:
|
Years ended December 31,
|
|
2014
|
|
2015
|
Weighted average risk free rate of return
|
1.39%
|
-
|
1.62%
|
|
1.32%
|
Weighted average expected option life (in years)
|
6.82
|
-
|
6.87
|
|
6.86
|
Expected volatility rate
|
77.74%
|
-
|
79.37%
|
|
77.81%
|
Dividend yield
|
|
-
|
|
|
-
|
The volatility of the underlying
ordinary shares during the life of the options was estimated based on the historical stock price volatility of the Company over
the past years.
|
(2)
|
Risk-free interest rate
|
Risk-free interest rate was estimated
based on the yield to maturity of treasury bonds of the United States with a maturity period close to the expected term of the
options.
The expected life was estimated based on historical
information.
The dividend yield was estimated
by the Company based on its expected dividend policy over the expected term of the options.
Options are generally granted at an exercise price
equal to the fair market value of the Company's shares at the date of grant.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES – continued
|
2014 Stock incentive plan – continued
Options to non-employees
During 2014, the Company granted
30,000 options under the 2014 Plan to a consultant. The fair value of non-employee options is estimated using the Black-Scholes
Option Pricing model as such method provided a more accurate estimate of the fair value of services provided by the consultants
and strategic advisers. The fair value of the stock options is remeasured as of the end of each reporting period until the services
of these non-employees are complete under the service contracts. These options vest over 3 years.
Summary of stock options to employees and non-employees
A summary of the stock option activity is as follows:
|
|
2014
|
|
2015
|
|
|
Number
of options
|
|
Weighted
average
exercise price
|
|
Number
of options
|
|
Weighted
average
exercise price
|
Outstanding at beginning of year
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,860,000
|
|
|
$
|
0.89
|
|
Granted
|
|
|
1,960,000
|
|
|
|
0.90
|
|
|
|
120,000
|
|
|
|
0.87
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,600
|
)
|
|
|
0.92
|
|
Forfeited
|
|
|
(100,000
|
)
|
|
|
0.88
|
|
|
|
(741,400
|
)
|
|
|
0.89
|
|
Outstanding at end of year
|
|
|
1,860,000
|
|
|
$
|
0.89
|
|
|
|
1,235,000
|
|
|
$
|
0.88
|
|
Shares exercisable at end of year
|
|
|
-
|
|
|
|
-
|
|
|
|
480,200
|
|
|
$
|
0.89
|
|
The following table summarizes
information with respect to stock options outstanding at December 31, 2015:
|
|
Options outstanding
|
|
Option exercisable
|
Stock option with exercise price of:
|
|
Number
outstanding
|
|
Weighted
average
remaining
contractual life
(in years)
|
|
Weighted
average
exercise
price
|
|
Aggregate
intrinsic
value as of
December 31,
2015
|
|
Number
exercisable
|
|
Weighted
average
exercise
price
|
|
Aggregate
intrinsic
value as of
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.878
|
|
|
985,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
433,400
|
|
|
|
|
|
|
|
|
|
$0.92
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,800
|
|
|
|
|
|
|
|
|
|
$1.03
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
$1.04
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
$0.87
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
1,235,000
|
|
|
8.70
|
|
$
|
0.88
|
|
|
$
|
433,540
|
|
|
|
480,200
|
|
|
$
|
0.89
|
|
|
$
|
168,688
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES – continued
|
2014 Stock incentive plan – continued
Summary of stock options to
employees and non-employees
– continued
The weighted-average grant-date
fair value of options granted during the years 2014 and 2015 was $0.63 and $0.61, respectively. The total intrinsic value of options
exercised during the years ended December 31, 2014 and 2015 was nil and $1,159, respectively. The total fair value of shares vested
during the year ended December 31, 2014 and 2015 was nil and $496,560, respectively.
The Company recognized share-based
compensation expenses of $148,451 and $(187,485) for stock option in the years ended December 31, 2014 and 2015, respectively.
As of December 31, 2015, there
were $345,961 unrecognized share-based compensation expenses relating to the stock options, which are expected to be recognized
over a weighted average period of two year.
Restricted shares to employees
During 2014, the Company granted
1,780,000 restricted shares under the 2014 Plan to directors and employees. The vesting of the restricted shares is subject to
rendering service to the Company for two years. Based on the Company's requisite service period stated in the 2014 Plan, there
were 890,000 shares vested, of which 15,000 shares were issued as of December 31, 2015. The fair value of restricted shares was
$0.878, which was the fair market value of the Company's shares at the date of grant.
On November 16, 2015, the Company
granted 3,800,000 restricted shares under the 2014 Plan to selected directors and employees. Subject to the agreement, the awards
shall become activated and vest during the period commencing on the grant date and ending on November 16, 2018 (the "Vesting
Term"), provided that the participant has achieved all the performance targets. The fair value of restricted shares was $0.742,
which was the fair market value of the Company's shares at the date of grant.
The Company recognized share-based
compensation expenses of $310,888 and $898,903 relating to the restricted shares granted to employees in 2014 and 2015, respectively.
As of December 31, 2015, there were $3,172,649 unrecognized share-based compensation expenses relating to the restricted shares
granted to employees, which are expected to be recognized over a weighted average period of 2.6 year.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES – continued
|
2014 Stock incentive plan – continued
Restricted shares to non-employees
During 2014, the Company granted
1,150,000 restricted shares under the 2014 Plan to consultants. The fair value of the stock options is remeasured as of the end
of each reporting period until the services of these non-employees are completed under the service contracts. These options vest
over two years except 50,000 restricted shares granted to one consultant which vest over three years. The Company recognized share-based
compensation expenses of $245,958 and $754,354 relating to the restricted shares granted to non-employees in 2014 and 2015, respectively.
As of December 31, 2015, there were $427,988 unrecognized share-based compensation expenses relating to the restricted shares granted
to non-employees, which are expected to be recognized over a weighted average period of half year.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
19.
|
STOCK OPTIONS AND NONVESTED SHARES – continued
|
Restricted shares of Shanghai Shangtong Co., Ltd.
("CFO Shangtong"), Fortune Zhengjin and CFO Tahoe
On July 1, 2014, CFO Shangtong
and Fortune Zhengjin, two affiliates of the Company, entered into a series of contractual arrangement with selected employees of
the Group. Pursuant to the agreement, these employees were granted 10% restricted shares of CFO Shangtong and Fortune Zhengjin.
The vesting of the restricted shares is subject to rendering service to the Company for five years. The fair value of restricted
shares is $28,965 and $2,464,455, which equal to the fair value of the CFO Shangtong and Fortune Zhengjin's 10% net assets at the
effective date of the agreement, respectively.
On July 1, 2015, Fortune Zhengjin
entered into an additional arrangement with selected employees of the Group. Pursuant to the agreement, these employees were granted
8% restricted shares of Fortune Zhengjin. The vesting of the restricted shares is subject to rendering service to the Company for
five years. The fair value of restricted shares is $4,681,533, which equal to the fair value of Fortune Zhengjin's 8% net assets
at the effective date of the agreement. CFO Tahoe also entered an arrangement with selected employees of the Group. Pursuant to
the agreement, these employees were granted 1.95% restricted shares of CFO Tahoe. The fair value of restricted shares is subject
to rendering service to the Company for five years. The fair value of restricted shares is $1,141,124, which equal to the fair
value of CFO Tahoe's 1.95% net assets at the effective date of the agreement.
The Company recognized share-based
compensation expenses of $6,584 and $560,187 in 2014 relating to CFO Shangtong, Fortune Zhengjin, respectively. There were $10,200,
$1,965,535 and $267,565 share-based compensation expenses recorded in 2015 relating to CFO Shangtong, Fortune Zhengjin and CFO
Tahoe, respectively.
As of December 31, 2015, there
were $10,510 and $4,478,097 and $873,559 unrecognized share-based compensation expenses relating to CFO Shangtong, Fortune Zhengjin
and CFO Tahoe, respectively, which are expected to be recognized over a weighted average period of 3.5 years.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
Hong Kong
China Finance Online, iSTAR Securities,
iSTAR Futures, iSTAR Wealth Management, iSTAR Credit and other eight subsidiaries were established in Hong Kong. These companies
were subject to Hong Kong profit tax at 16.5%. In addition, companies who incorporated outside of Hong Kong and carried on a trade,
profession or business in Hong Kong were also subject to Hong Kong profit tax in respect of their profits arising in or derived
from Hong Kong.
British Virgin Islands
Companies that were incorporated
in the BVI are not subject to taxation in their country of incorporation. Subsidiaries incorporated in the BVI include iSTAR Financial
Holdings and other eleven subsidiaries.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
20.
|
INCOME TAXES - continued
|
PRC
The Group's PRC entities are
subject to 25% PRC Enterprise Income Tax ("EIT") on the taxable income in accordance with the relevant PRC income tax
laws, except for certain entities that enjoy preferential tax rates, which are lower than the statutory rates, as described below.
Under the EIT Law and its implementing
rules, an enterprise which qualifies as a "high and new technology enterprise" ("the HNTE") is entitled to
a tax rate of 15%.
Under the EIT law and its implementing
rules, enterprises that obtain status of "Software Enterprises" are entitled to be exempted from EIT tax for the first
two profit-making years and enjoy a preferential 12.5% tax rate, which is half of the standard EIT rate of 25% for the three years
thereafter.
A summary of the main PRC entities
that subject to tax preferential policies for the year ended December 31, 2015 is as follows:
PRC entities
|
Chinese EIT rate
|
Qualification for preferential tax rate
|
CFO Qicheng
|
Preferential tax rate of 12.5% in 2013 and 2014.
|
Software Enterprises
|
CFO Shenzhen Shangtong
|
Preferential tax rate of 12.5% in 2013 and 2014.
|
Software Enterprises
|
CFO Software
|
Preferential tax rate of 15% in 2013.
|
HNTE
|
CFO Meining
|
Preferential tax rate of 15% from 2013 to 2015.
|
HNTE
|
CFO Genius
|
Preferential tax rate of 15% from 2013 to 2015.
|
HNTE
|
CFO Tibet
|
Preferential tax rate of 9% from 2015 to 2017 and 15% thereafter
|
Preferential tax rate for enterprises in Tibet, China
|
Under the EIT Law, the HNTE status
is valid for three years and qualifying entities can then apply to renew for an additional three years provided their business
operations continue to qualify for the HNTE status. CFO Software obtained its HNTE status in 2008 and its renewal in 2011. CFO
Meining obtained its HNTE status in 2008 and obtained the renewal successfully in 2011 and 2014. In 2012, CFO Genius also obtained
the HNTE status and successfully renewed it in 2015.
In 2013 and 2014, CFO Chongzhi
and CFO Shangtong filed their EIT by adopting the "deemed-profit method". In 2014, Shanghai Yongfu Enterprises Management
Consulting Co., Ltd. adopted this method. In 2015, Zhengjin (Jiangsu) Precious Metals Co., Ltd. also adopted this method .Under
this method, the qualifying entities filed their income tax by calculating as 2.5% of the gross revenues. This method is subject
to be reevaluated by the local tax authority in the future.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
20.
|
INCOME TAXES - continued
|
PRC
-
continued
The EIT Law includes a provision
specifying that legal entities organized outside of the PRC will be considered residents for PRC Income tax purposes if the place
of effective management or control is within the PRC. The implementation rules to the EIT Law provide that non-resident legal entities
will be considered PRC residents if substantial and overall management and control over the manufacturing and business operations,
personnel, accounting, properties, etc., occurs within the PRC. Despite the present uncertainties resulting from the limited PRC
tax guidance on the issue, the Group does not believe that currently the legal entities organized outside of the PRC within the
Group should be treated as residents for EIT law purposes. If the PRC tax authorities subsequently determine that the Company and
its subsidiaries registered outside the PRC should be deemed a resident enterprise, the Company and its subsidiaries registered
outside the PRC will be subject to the PRC income tax at a rate of 25%.
If the Company were to be non-resident
for PRC tax purpose, dividends paid to it out of profits earned after January 1, 2008 would be subject to a withholding tax. In
the case of dividends paid by PRC subsidiaries the withholding tax would be 10% not considering the arrangements for the Avoidance
of Double Taxation on income and Prevention of Fiscal Evasion with respect to Taxes on Income between mainland and Hong Kong.
Aggregate deficits of the Company's
subsidiaries located in the PRC were approximately $20.3 million at December 31, 2015. And accordingly, no provision has been made
for the Chinese dividend withholding taxes.
Aggregate undistributed earnings
of the Company's VIEs and its VIEs' subsidiaries located in the PRC that is available for distribution to the Company of approximately
$30.0 million at December 31, 2015. A deferred tax liability should be recorded for taxable temporary differences attributable
to the excess of financial reporting amounts over tax basis amounts, including those differences attributable to a more than 50%
interest in a domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by which
the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means.
The Company has not recorded any such deferred tax liability attributable to the undistributed earnings of its financial interest
in VIEs because it believes such excess earnings can be distributed in a manner that would not be subject to income tax.
Income tax (provision) benefit
was as follows:
|
|
December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
Current
|
|
$
|
(478,966
|
)
|
|
$
|
(558,696
|
)
|
|
$
|
(2,071,154
|
)
|
Deferred
|
|
|
378,908
|
|
|
|
44,782
|
|
|
|
686,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(100,058
|
)
|
|
$
|
(513,914
|
)
|
|
$
|
(1,384,262
|
)
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
20.
|
INCOME TAXES - continued
|
PRC
- continued
The principal components of deferred income taxes
were as follows:
|
|
December 31,
|
|
|
2014
|
|
2015
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
Deferred revenue - current
|
|
$
|
594,196
|
|
|
$
|
445,314
|
|
Accrued expenses and other liabilities
|
|
|
467,758
|
|
|
|
612,161
|
|
Net operating loss carrying forwards
|
|
|
4,233,246
|
|
|
|
4,718,396
|
|
Gross current deferred tax assets
|
|
|
5,295,200
|
|
|
|
5,775,871
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(4,369,119
|
)
|
|
|
(4,806,407
|
)
|
|
|
|
|
|
|
|
|
|
Total current deferred tax assets
|
|
|
926,081
|
|
|
|
969,464
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax assets
|
|
|
|
|
|
|
|
|
Deferred revenue- non-current
|
|
$
|
268,393
|
|
|
$
|
121,133
|
|
Net operating loss carrying forwards
|
|
|
10,556,749
|
|
|
|
10,984,475
|
|
Gross non-current deferred tax assets
|
|
|
10,825,142
|
|
|
|
11,105,608
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(10,753,602
|
)
|
|
|
(11,085,358
|
)
|
|
|
|
|
|
|
|
|
|
Total non-current deferred tax assets
|
|
$
|
71,540
|
|
|
$
|
20,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Account receivable and other assets
|
|
|
(580,197
|
)
|
|
|
(15,132
|
)
|
|
|
|
|
|
|
|
|
|
Total current deferred tax liabilities
|
|
$
|
(580,197
|
)
|
|
$
|
(15,132
|
)
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(546,320
|
)
|
|
|
(384,883
|
)
|
|
|
|
|
|
|
|
|
|
Total non-current deferred tax liabilities
|
|
$
|
(546,320
|
)
|
|
$
|
(384,883
|
)
|
A valuation allowance of $15,122,721
and $15,891,765 was established as of December 31, 2014 and 2015, respectively, for the entities that have incurred losses because
the Group believes that it is more likely than not that the related deferred tax assets will not be realized in the future. At
December 31, 2015, operating loss carry forwards includes approximately $52.3 million which will expire by 2020, and $18.7 million
which will carry forward indefinitely.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
20.
|
INCOME TAXES - continued
|
PRC
- continued
Reconciliation between total
income tax expense (benefit) and the amount computed by applying the PRC EIT statutory rate to income before income taxes is as
follows:
|
|
Years ended December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
Income (loss) before tax
|
|
$
|
(8,073,832
|
)
|
|
$
|
(10,116,814
|
)
|
|
$
|
28,201,950
|
|
Income tax (benefits) expenses calculated at 25%
|
|
|
(2,018,458
|
)
|
|
|
(2,529,204
|
)
|
|
|
7,050,488
|
|
Effect of tax holiday
|
|
|
(266,396
|
)
|
|
|
(4,125,912
|
)
|
|
|
(8,139,429
|
)
|
Effect of income tax rate difference in other jurisdictions
|
|
|
305,505
|
|
|
|
1,789,762
|
|
|
|
645,873
|
|
Non-deductible expenses.
|
|
|
267,748
|
|
|
|
1,425,655
|
|
|
|
2,559,649
|
|
Non-taxable income
|
|
|
(439,861
|
)
|
|
|
(549,315
|
)
|
|
|
(893,950
|
)
|
Change in valuation allowance
|
|
|
2,251,520
|
|
|
|
4,502,928
|
|
|
|
161,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
100,058
|
|
|
$
|
513,914
|
|
|
$
|
1,384,262
|
|
During the years ended December
31, 2013, 2014 and 2015, if the Company's subsidiaries, VIEs and VIEs' subsidiaries in the PRC were neither in the tax holiday
period nor had they been specifically allowed special tax concessions, they would have recorded additional income tax expense of
$31,910, $20,851 and $1,102,399, respectively. The impact of the tax holidays on basic net income per ordinary share was an increase
of $0.00, $0.00 and $0.01, for the years ended December 31, 2013, 2014 and 2015, respectively.
The Group did not identify significant
unrecognized tax benefits for the years ended December 31, 2013, 2014 and 2015. The Group did not incur any interest and penalties
related to potential underpaid income tax expenses and also believed that the adoption of pronouncement issued by FASB regarding
accounting for uncertainty in income taxes did not have a significant impact on the unrecognized tax benefits within 12 months
from December 31, 2015.
In accordance with relevant PRC
tax administration laws, tax years from 2010 to 2015 of the Group's PRC subsidiaries and VIEs remain subject to tax audits as of
December 31, 2015, at the tax authority's discretion.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
21.
|
AMERICAN DEPOSITARY SHARES ("ADS") PLAN
|
In September 2015, the Group
issued 4,000,000 ordinary shares to its American Depositary Receipt bank and in exchange received 800,000 ADSs under the 2004 Plan
and 2014 Plan. As of December 31, 2015, 3,305,800 shares were available for future exercise of options and vesting of granted
shares.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
22.
|
NET INCOME (LOSS) PER SHARE
|
The following table sets forth
the computation of basic and diluted income (loss) per share for the years indicated:
|
|
Years ended December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
Net income (loss) attributable to China Finance Online Co. Limited
|
|
$
|
(8,573,128
|
)
|
|
$
|
(7,167,849
|
)
|
|
$
|
22,482,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares outstanding used in computing basic net income (loss) per share
|
|
|
109,019,513
|
|
|
|
109,385,712
|
|
|
|
110,997,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Incremental shares from assumed conversions of
stock options and nonvested shares
|
|
|
-
|
|
|
|
-
|
|
|
|
14,131,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares outstanding used in computing diluted net income (loss) per share
|
|
|
109,019,513
|
|
|
|
109,385,712
|
|
|
|
125,129,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to China Finance Online Co. Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
- basic
|
|
$
|
(0.08
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
0.20
|
|
- diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
0.18
|
|
For the years ended December
31, 2013 and 2014, 24,505,348 options and 1,900,445 nonvested shares, 23,186,160 options, 4,030,240 restricted shares and 3,000,000
nonvested shares, were anti-dilutive, respectively, because the Group was in the loss position.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
23.
|
MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION
|
Full time employees of the Group
in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care,
unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require
the Group to accrue for these benefits based on certain percentages of the employees' salaries. The total provisions for such employee
benefits were $2,710,481, $3,685,654 and $4,353,944 for the years ended December 31, 2013, 2014 and 2015, respectively.
|
24.
|
NONCONTROLLING INTERESTS
|
|
|
Commodities
brokerage
services
|
|
Investment
advisory
services
|
|
Institutional
Subscription
Services
|
|
iSTAR Financial
holdings brokerage
services
|
|
Other
|
|
Total
|
Balance as of January 1, 2013
|
|
$
|
-
|
|
|
$
|
688,062
|
|
|
$
|
-
|
|
|
$
|
63,306
|
|
|
$
|
-
|
|
|
$
|
751,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of CFO Tahoe (Note 3)
|
|
|
9,508,295
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,508,295
|
|
Acquisition of Champion Connection (Note 3)
|
|
|
-
|
|
|
|
1,760,861
|
|
|
|
938,112
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,698,973
|
|
Acquisition of Nontrolling interests of CFO East Win
|
|
|
-
|
|
|
|
586,954
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
586,954
|
|
Changes in ownership of subsidiaries
|
|
|
-
|
|
|
|
289,656
|
|
|
|
(1,068,471
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(778,815
|
)
|
Paid-in capital from noncontrolling shareholders
|
|
|
1,405,963
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,405,963
|
|
Share-based compensation (Note 19)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
74,376
|
|
|
|
-
|
|
|
|
74,376
|
|
Net income (loss)
|
|
|
1,056,322
|
|
|
|
(419,202
|
)
|
|
|
(64,585
|
)
|
|
|
(173,297
|
)
|
|
|
-
|
|
|
|
399,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
|
$
|
11,970,580
|
|
|
$
|
2,906,331
|
|
|
$
|
(194,944
|
)
|
|
$
|
(35,615
|
)
|
|
$
|
-
|
|
|
$
|
14,646,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business restructure
|
|
|
(2,569,160
|
)
|
|
|
2,384,519
|
|
|
|
786,355
|
|
|
|
-
|
|
|
|
12,201
|
|
|
|
613,915
|
|
Dividends paid to noncontrolling shareholders
|
|
|
(1,030,012
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,030,012
|
)
|
Share-based compensation (Note 19)
|
|
|
158,696
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
158,696
|
|
Net income (loss)
|
|
|
2,463,956
|
|
|
|
(5,290,850
|
)
|
|
|
(591,411
|
)
|
|
|
3,936
|
|
|
|
(48,510
|
)
|
|
|
(3,462,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
$
|
10,994,060
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(31,679
|
)
|
|
$
|
(36,309
|
)
|
|
$
|
10,926,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to noncontrolling shareholders
|
|
|
(6,509,680
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,509,680
|
)
|
Changes in controlling ownership interest
|
|
|
1,393,508
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
320,956
|
|
|
|
1,714,464
|
|
Paid-in capital from noncontrolling shareholders
|
|
|
641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
641
|
|
Share-based compensation (Note 19)
|
|
|
724,285
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
724,285
|
|
Net income (loss)
|
|
|
4,815,506
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(195,587
|
)
|
|
|
(284,647
|
)
|
|
|
4,335,272
|
|
Balance as of December 31, 2015
|
|
$
|
11,418,320
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(227,266
|
)
|
|
$
|
-
|
|
|
$
|
11,191,054
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
25.
|
COMMITMENTS AND CONTINGENCIES
|
Commitments
The Group leases certain office
premises and purchases data under non-cancelable leases. Rent expenses under operating leases for 2013, 2014 and 2015 were $4,808,894,
$7,013,985 and $6,044,119, respectively.
Future minimum payments under
non-cancelable operating leases and data purchase agreements were as follows:
Year ending
|
|
|
2016
|
|
$
|
5,437,871
|
|
2017
|
|
|
3,359,212
|
|
2018
|
|
|
1,632,872
|
|
|
|
|
|
|
Total
|
|
$
|
10,429,955
|
|
Securities Litigation
The Company and certain of its
officers and directors were named as defendants in a putative securities class actions filed in Central District of California
which was then transferred to Southern District of New York. The complaints allege that the Company violated Exchange Act Section
10(b) and Rule 10b-5 by failing to disclose certain its transactions as related party transaction. As the actions remain in their
preliminary stages, the Company's management is unable to express any opinion on the likelihood of an unfavorable outcome or any
estimate of the amount or range of any potential loss.
Litigation
The Group was involved in certain cases pending in some PRC courts
as of December 31, 2015. These cases include a copyright infringement case, among others. Adverse results in these lawsuits may
include awards of damages and may also result in a loss of revenue or otherwise harm the business of the Group.
For many proceedings, the Company
is currently unable to estimate the reasonably possible loss or a range of reasonably possible losses as the proceedings are in
the early stages, and/or there is a lack of clear or consistent interpretation of laws specific to the industry-specific complaints
among different jurisdictions. As a result, there is considerable uncertainty regarding the timing or ultimate resolution of such
matters, which includes eventual loss, fine, penalty or business impact, if any, and therefore, an estimate for the reasonably
possible loss or a range of reasonably possible losses cannot be made. However, the Company believes that such matters, individually
and in the aggregate, when finally resolved, are not reasonably likely to have a material adverse effect on the Company’s
consolidated results of operations, financial position and cash flows.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
26.
|
SEGMENT AND GEOGRAPHIC INFORMATION
|
The Group has three operating
segments (1) commodities brokerage services, (2) online financial information and advisory service, and other related services
in PRC, (3) Hong Kong brokerage services. Operating segments are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision-makers in deciding how to allocate resources
and in assessing performance. The Group's chief executive officer has been identified as the chief operating decision makers. The
Group's chief operating decision maker directs the allocation of resources to operating segments based on the profitability and
cash flows of each respective segment.
The Group evaluates performance
based on several factors, including net revenue, cost of revenue, operating expenses, income from operation. The following tables
show the operations of the Group's operating segments:
For the year ended December 31, 2015
|
|
Commodities
brokerage
services
|
|
Subscription
services and other
related
services
|
|
Hong Kong
brokerage
services
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
113,720,922
|
|
|
$
|
27,236,753
|
|
|
$
|
3,149,063
|
|
|
$
|
144,106,738
|
|
Less: intersegment sales
|
|
|
(34,018,268
|
)
|
|
|
(2,683,704
|
)
|
|
|
-
|
|
|
|
(36,701,972
|
)
|
Net revenues from external customer
|
|
|
79,702,654
|
|
|
|
24,553,049
|
|
|
|
3,149,063
|
|
|
|
107,404,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
4,975,361
|
|
|
|
14,321,339
|
|
|
|
1,181,538
|
|
|
|
20,478,238
|
|
Less: intersegment cost of revenues
|
|
|
-
|
|
|
|
(739,501
|
)
|
|
|
-
|
|
|
|
(739,501
|
)
|
Cost of revenues after elimination
|
|
|
4,975,361
|
|
|
|
13,581,838
|
|
|
|
1,181,538
|
|
|
|
19,738,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
4,026,984
|
|
|
|
11,148,924
|
|
|
|
2,978,161
|
|
|
|
18,154,069
|
|
Product development
|
|
|
2,549,731
|
|
|
|
8,188,718
|
|
|
|
-
|
|
|
|
10,738,449
|
|
Sales and marketing
|
|
|
69,674,657
|
|
|
|
12,139,100
|
|
|
|
566,396
|
|
|
|
82,380,153
|
|
Loss from impairment of intangible assets
|
|
|
250,360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments operating expenses
|
|
|
76,501,732
|
|
|
|
31,476,742
|
|
|
|
3,544,557
|
|
|
|
111,523,031
|
|
Less: intersegment operating expenses
|
|
|
(35,907,706
|
)
|
|
|
(47,620
|
)
|
|
|
(110,721
|
)
|
|
|
(36,066,047
|
)
|
Total operating expenses.
|
|
|
40,594,026
|
|
|
|
31,429,122
|
|
|
|
3,433,836
|
|
|
|
75,456,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government subsidies
|
|
|
251,828
|
|
|
|
-
|
|
|
|
-
|
|
|
|
251,828
|
|
Income (loss) from operations
|
|
$
|
34,385,095
|
|
|
$
|
(20,457,911
|
)
|
|
$
|
(1,466,311
|
)
|
|
$
|
12,460,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments assets.
|
|
$
|
109,286,634
|
|
|
$
|
179,706,230
|
|
|
$
|
47,011,111
|
|
|
$
|
336,003,975
|
|
Less: intersegment assets
|
|
|
(51,101,320
|
)
|
|
|
(122,077,495
|
)
|
|
|
(18,760,003
|
)
|
|
|
(191,938,818
|
)
|
Total assets.
|
|
$
|
58,185,314
|
|
|
$
|
57,628,735
|
|
|
$
|
28,251,108
|
|
|
$
|
144,065,157
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
26.
|
SEGMENT AND GEOGRAPHIC INFORMATION - continued
|
For the year ended December 31, 2014
|
|
Commodities
brokerage
services
|
|
Subscription
services and other
related
Services
|
|
Hong Kong
brokerage
services
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
80,943,201
|
|
|
$
|
25,250,486
|
|
|
$
|
4,610,516
|
|
|
$
|
110,804,203
|
|
Less: intersegment sales
|
|
|
(20,852,084
|
)
|
|
|
(6,256,234
|
)
|
|
|
-
|
|
|
|
(27,108,318
|
)
|
Net revenues from external customer
|
|
|
60,091,117
|
|
|
|
18,994,252
|
|
|
|
4,610,516
|
|
|
|
83,695,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
10,526,980
|
|
|
|
8,091,595
|
|
|
|
1,731,651
|
|
|
|
20,350,226
|
|
Less: intersegment cost of revenues
|
|
|
-
|
|
|
|
2,503
|
|
|
|
-
|
|
|
|
2,503
|
|
Cost of revenues after elimination
|
|
|
10,526,980
|
|
|
|
8,094,098
|
|
|
|
1,731,651
|
|
|
|
20,352,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
8,320,540
|
|
|
|
19,544,999
|
|
|
|
2,655,925
|
|
|
|
30,521,464
|
|
Product development
|
|
|
2,460,048
|
|
|
|
13,567,759
|
|
|
|
-
|
|
|
|
16,027,807
|
|
Sales and marketing
|
|
|
52,371,135
|
|
|
|
12,845,724
|
|
|
|
586,015
|
|
|
|
65,802,874
|
|
Loss from impairment of intangible assets
|
|
|
-
|
|
|
|
1,802,125
|
|
|
|
-
|
|
|
|
1,802,125
|
|
Loss from impairment of goodwill
|
|
|
-
|
|
|
|
8,149,525
|
|
|
|
-
|
|
|
|
8,149,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments operating expenses
|
|
|
63,151,723
|
|
|
|
55,910,132
|
|
|
|
3,241,940
|
|
|
|
122,303,795
|
|
Less: intersegment operating expenses
|
|
|
(24,533,694
|
)
|
|
|
(15,199,246
|
)
|
|
|
(117,740
|
)
|
|
|
(39,850,680
|
)
|
Total operating expenses.
|
|
|
38,618,029
|
|
|
|
40,710,886
|
|
|
|
3,124,200
|
|
|
|
82,453,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government subsidies
|
|
|
655,437
|
|
|
|
3,980
|
|
|
|
-
|
|
|
|
659,417
|
|
Income (loss) from operations
|
|
$
|
11,601,545
|
|
|
$
|
(29,806,752
|
)
|
|
$
|
(245,335
|
)
|
|
$
|
(18,450,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments assets.
|
|
$
|
62,272,231
|
|
|
$
|
171,870,606
|
|
|
$
|
52,776,273
|
|
|
$
|
286,919,110
|
|
Less: intersegment assets
|
|
|
(26,824,659
|
)
|
|
|
(127,444,636
|
)
|
|
|
(18,746,458
|
)
|
|
|
(173,015,752
|
)
|
Total assets.
|
|
$
|
35,447,572
|
|
|
$
|
44,425,970
|
|
|
$
|
34,029,815
|
|
|
$
|
113,903,358
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
26.
|
SEGMENT AND GEOGRAPHIC INFORMATION - continued
|
For the year ended December 31, 2013
|
|
Commodities
brokerage
services
|
|
Subscription
services and other
related Services
|
|
Hong Kong
brokerage
services
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
30,124,245
|
|
|
$
|
21,656,482
|
|
|
$
|
3,404,767
|
|
|
$
|
55,185,494
|
|
Less: intersegment sales
|
|
|
|
|
|
|
(2,447,417
|
)
|
|
|
|
|
|
|
(2,447,417
|
)
|
Net revenues from external customer
|
|
|
30,124,245
|
|
|
|
19,209,065
|
|
|
|
3,404,767
|
|
|
|
52,738,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
2,613,287
|
|
|
|
7,018,379
|
|
|
|
938,404
|
|
|
|
10,570,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,087,048
|
|
|
|
10,831,336
|
|
|
|
3,291,718
|
|
|
|
15,210,102
|
|
Product development
|
|
|
784,083
|
|
|
|
8,248,244
|
|
|
|
-
|
|
|
|
9,032,327
|
|
Sales and marketing
|
|
|
22,015,190
|
|
|
|
10,429,389
|
|
|
|
591,074
|
|
|
|
33,035,653
|
|
Total segments operating expenses
|
|
|
23,886,321
|
|
|
|
29,508,969
|
|
|
|
3,882,792
|
|
|
|
57,278,082
|
|
Less: intersegment operating expenses
|
|
|
(2,447,417
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,447,417
|
)
|
Total operating expenses
|
|
|
21,438,904
|
|
|
|
29,508,969
|
|
|
|
3,882,792
|
|
|
|
54,830,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government subsidies
|
|
|
-
|
|
|
|
11,187
|
|
|
|
-
|
|
|
|
11,187
|
|
Income (loss) from operations
|
|
$
|
6,072,054
|
|
|
$
|
(17,307,096
|
)
|
|
$
|
(1,416,429
|
)
|
|
$
|
(12,651,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments assets
|
|
|
27,791,654
|
|
|
|
80,844,211
|
|
|
|
31,893,233
|
|
|
|
140,529,098
|
|
Less: intersegment balances
|
|
|
-
|
|
|
|
(7,036,363
|
)
|
|
|
-
|
|
|
|
(7,036,363
|
)
|
Total assets
|
|
$
|
27,791,654
|
|
|
$
|
73,807,848
|
|
|
$
|
31,893,233
|
|
|
$
|
133,492,735
|
|
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
26.
|
SEGMENT AND GEOGRAPHIC INFORMATION - continued
|
Enterprise wide disclose
The Group derives revenue from external customers
for each of the following services during the years presented:
|
|
Years ended December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
Commodities brokerage services revenues
|
|
$
|
30,124,245
|
|
|
$
|
60,091,117
|
|
|
$
|
79,702,654
|
|
Financial information and advisory services revenues
|
|
|
11,122,400
|
|
|
|
10,355,732
|
|
|
|
17,205,459
|
|
Advertising revenue
|
|
|
6,799,109
|
|
|
|
8,160,310
|
|
|
|
7,023,399
|
|
Hong Kong brokerage services revenues
|
|
|
3,404,767
|
|
|
|
4,610,516
|
|
|
|
3,149,063
|
|
Others
|
|
|
1,287,556
|
|
|
|
478,210
|
|
|
|
324,191
|
|
Total revenue from external customers..
|
|
$
|
52,738,077
|
|
|
$
|
83,695,885
|
|
|
$
|
107,404,766
|
|
Substantially all of the Company's
revenues for the years ended December 31, 2013, 2014 and 2015 were generated from the PRC and Hong Kong.
As of December 31, 2013, 2014
and 2015, respectively, substantially all of long-lived assets of the Group are located in the PRC and Hong Kong.
CHINA FINANCE ONLINE CO. LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
FOR THE YEARS ENDED DECEMBER 31, 2013,
2014 AND 2015
(In U.S. dollars)
|
27.
|
STATUTORY RESERVES AND RESTRICTED NET ASSETS
|
PRC legal restrictions permit
payments of dividends by the Group's PRC entities only out of their retained earnings, if any, determined in accordance with PRC
regulations. Prior to payment of dividends, pursuant to the laws applicable to the PRC Domestic Enterprises and PRC Foreign Investment
Enterprises, the PRC entities must make appropriations from after-tax profit to non-distributable statutory reserve funds as determined
by the Board of Directors of the Group. These reserve funds include the (1) general reserve, (2) enterprise expansion fund and
(3) staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriations
of not less than 10% of after-tax profit (as determined under accounting principles and financial regulations applicable to PRC
enterprises at each year-end); the other two funds are to be made at the discretion of the board of directors of each of the Group's
subsidiaries.
These reserve funds can only
be used for specific purposes and are not distributable as cash dividends.
The appropriation to these reserves
by the Group's PRC subsidiaries was $284,114, $679,927 and $1,820,080 in 2013, 2014 and 2015.
The balance of the statutory
reserves was $6,820,441 and $8,640,521 as of December 31 2014 and 2015. Such reserves have been included in the retained earnings
of the Company's consolidated balance sheet.
As a result of these PRC laws
and regulations and the requirement that distributions by PRC entities can only be paid out of distributable profits computed in
accordance with PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Group. Amounts
restricted include paid-in capital and the statutory reserves of the Company's PRC subsidiaries and VIEs. As of December 31, 2015,
the aggregate amounts restricted which represented the amount of net assets of the relevant subsidiaries and VIEs in the Group
not available for distribution was $71,700,541. As a result of the above restrictions, parent-only financials are presented on
financial statement Schedule I.
In April, 2016, the Group signed
a sale & purchase agreement with a third party, to transfer the 100% ordinary shares of iSTAR Wealth Management. The completion
of this transaction was still subject to conditions, including but not limited to obtaining the approvals and consents of CSRC
and Securities and Futures Commission of Hong Kong. The consideration of this transaction is approximately $2.9 million (HK$22.5
million, equivalently).
CHINA FINANCE ONLINE CO. LIMITED
Additional Information - Financial Statement
Schedule I
Financial information of Parent Company
Balance sheets
(In U.S. dollars, except share-related
data)
|
|
December 31,
|
|
|
2014
|
|
2015
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,383,205
|
|
|
$
|
971,500
|
|
Amounts due from subsidiaries, VIEs and VIE’s subsidiaries
|
|
|
7,492,739
|
|
|
|
7,350,974
|
|
Prepaid expenses and other current assets
|
|
|
2,479,810
|
|
|
|
290,603
|
|
Dividends receivable
|
|
|
17,541,570
|
|
|
|
16,529,639
|
|
Total current assets
|
|
|
28,897,324
|
|
|
|
25,142,716
|
|
Investments in subsidiaries, VIEs and VIE’s subsidiaries
|
|
|
48,389,562
|
|
|
|
76,682,094
|
|
Rental deposits
|
|
|
66,893
|
|
|
|
-
|
|
Total assets
|
|
$
|
77,353,779
|
|
|
$
|
101,824,810
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
296,866
|
|
|
|
279,801
|
|
Amounts due to subsidiaries, VIEs and VIE's subsidiaries
|
|
|
12,441,549
|
|
|
|
13,506,638
|
|
Total current liabilities
|
|
$
|
12,738,415
|
|
|
$
|
13,786,439
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
Ordinary shares (112,417,933 and 118,098,018 shares issued and outstanding as of December 31, 2014 and 2015, respectively)
|
|
|
56,386,606
|
|
|
|
56,856,000
|
|
Additional paid-in capital
|
|
|
24,207,606
|
|
|
|
28,145,846
|
|
Accumulated other comprehensive income
|
|
|
12,064,338
|
|
|
|
8,597,295
|
|
Retained deficits
|
|
|
(28,043,186
|
)
|
|
|
(5,560,770
|
)
|
Total shareholders' equity
|
|
|
64,615,364
|
|
|
|
88,038,371
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
77,353,779
|
|
|
$
|
101,824,810
|
|
CHINA FINANCE ONLINE CO. LIMITED
Financial information of Parent Company
Statements of Comprehensive Income
(In U.S. dollars)
|
|
December 31,
|
|
|
2013
|
|
2013
|
|
2015
|
Cost of revenues
|
|
$
|
2,584
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loss
|
|
|
(2,584
|
)
|
|
|
-
|
|
|
|
-
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,417,843
|
|
|
|
1,418,198
|
|
|
|
1,226,800
|
|
Product development
|
|
|
62,914
|
|
|
|
50,859
|
|
|
|
-
|
|
Sales and marketing
|
|
|
160,112
|
|
|
|
108,384
|
|
|
|
-
|
|
Share-based compensation
|
|
|
2,539,274
|
|
|
|
4,132,182
|
|
|
|
3,812,733
|
|
Total operating expenses
|
|
|
4,180,143
|
|
|
|
5,709,623
|
|
|
|
5,039,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
605
|
|
|
|
30
|
|
|
|
47
|
|
Equity in earnings (deficits) of subsidiaries, VIEs and VIE's subsidiaries
|
|
|
(4,985,519
|
)
|
|
|
(6,394,055
|
)
|
|
|
28,643,095
|
|
Exchange gain (loss), net
|
|
|
594,513
|
|
|
|
(76,351
|
)
|
|
|
(1,011,509
|
)
|
Other income (loss), net
|
|
|
-
|
|
|
|
674,414
|
|
|
|
(109,684
|
)
|
Gain from sales of cost method investment
|
|
|
-
|
|
|
|
4,337,736
|
|
|
|
-
|
|
Net income (loss)
|
|
$
|
(8,573,128
|
)
|
|
$
|
(7,167,849
|
)
|
|
$
|
22,482,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in foreign currency translation adjustment
|
|
|
1,195,795
|
|
|
|
(221,070
|
)
|
|
|
(3,467,043
|
)
|
Other comprehensive income (loss), net of tax
|
|
|
1,195,795
|
|
|
|
(221,070
|
)
|
|
|
(3,467,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(7,377,333
|
)
|
|
$
|
(7,388,919
|
)
|
|
$
|
19,015,373
|
|
CHINA FINANCE ONLINE CO. LIMITED
Financial Information of Parent Company
Statement of Shareholders'
Equity
(In U.S. dollars, except share data)
|
|
Ordinary shares
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
paid-in
capital
|
|
Accumulated other
comprehensive
income (loss)
|
|
Retained
deficits
|
|
Total
shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2013.
|
|
|
110,955,383
|
|
|
$
|
14,328
|
|
|
$
|
81,163,243
|
|
|
$
|
11,089,820
|
|
|
$
|
(12,302,209
|
)
|
|
$
|
79,965,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of share options by employees.
|
|
|
190,250
|
|
|
|
25
|
|
|
|
30,415
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,440
|
|
Share-based compensation.
|
|
|
-
|
|
|
|
-
|
|
|
|
2,539,274
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,539,274
|
|
Equity pick up from compensation of a subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
421,473
|
|
|
|
-
|
|
|
|
-
|
|
|
|
421,473
|
|
Business combination.
|
|
|
-
|
|
|
|
-
|
|
|
|
191,861
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,861
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,195,795
|
|
|
|
-
|
|
|
|
1,195,795
|
|
Net loss.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,573,128
|
)
|
|
|
(8,573,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
|
|
111,145,633
|
|
|
$
|
14,353
|
|
|
$
|
84,346,266
|
|
|
$
|
12,285,615
|
|
|
$
|
(20,875,337
|
)
|
|
$
|
75,770,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer share premium to share capital
|
|
|
-
|
|
|
|
55,718,184
|
|
|
|
(55,718,184
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercise of share options by employees
|
|
|
1,164,300
|
|
|
|
654,055
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
654,055
|
|
Restricted shares issued
|
|
|
108,000
|
|
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
4,132,182
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,132,182
|
|
Equity pick up from compensation of VIE's subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
408,075
|
|
|
|
-
|
|
|
|
-
|
|
|
|
408,075
|
|
Business restructure
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,960,733
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,960,733
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(221,277
|
)
|
|
|
-
|
|
|
|
(221,277
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,167,849
|
)
|
|
|
(7,167,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
|
112,417,933
|
|
|
$
|
56,386,606
|
|
|
$
|
24,207,606
|
|
|
$
|
12,064,338.00
|
|
|
$
|
(28,043,186
|
)
|
|
$
|
64,615,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of ordinary shares for the plan of stock options and restricted shares
|
|
|
4,000,000
|
|
|
|
520
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
520
|
|
Exercise of share options by employees
|
|
|
435,000
|
|
|
|
293,654
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
293,654
|
|
Exercise of share options by nonemployees
|
|
|
1,095,000
|
|
|
|
175,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
175,200
|
|
Restricted shares issued
|
|
|
150,085
|
|
|
|
20
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20
|
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
3,812,733
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,812,733
|
|
Equity pick up from compensation of VIE's subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
1,519,015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,519,015
|
|
Changes of controlling ownership interest
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,393,508
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,393,508
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,467,043
|
)
|
|
|
-
|
|
|
|
(3,467,043
|
)
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,482,416
|
|
|
|
22,482,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
|
118,098,018
|
|
|
$
|
56,856,000
|
|
|
$
|
28,145,846
|
|
|
$
|
8,597,295
|
|
|
$
|
(5,560,770
|
)
|
|
$
|
88,038,371
|
|
CHINA FINANCE ONLINE CO. LIMITED
Financial information of Parent Company
Statements of cash flows
(In U.S. dollars, except share-related
data)
|
|
December 31,
|
|
|
2013
|
|
2014
|
|
2015
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(8,573,128
|
)
|
|
$
|
(7,167,849
|
)
|
|
$
|
22,482,416
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
2,539,274
|
|
|
|
4,132,182
|
|
|
|
3,812,733
|
|
Gain from sales of cost method investment
|
|
|
-
|
|
|
|
(4,337,736
|
)
|
|
|
-
|
|
Equity in deficits (earnings) of subsidiaries, VIEs and VIE’s subsidiaries
|
|
|
4,985,519
|
|
|
|
6,394,055
|
|
|
|
(28,643,095
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(63,446
|
)
|
|
|
(143,380
|
)
|
|
|
20,339
|
|
Amounts due from subsidiaries, VIEs and VIE’s subsidiaries
|
|
|
(4,092,500
|
)
|
|
|
983,297
|
|
|
|
142,303
|
|
Rental deposits
|
|
|
(271
|
)
|
|
|
-
|
|
|
|
66,893
|
|
Accrued expenses and other current liabilities
|
|
|
34,392
|
|
|
|
10,825
|
|
|
|
(8,035
|
)
|
Amounts due to subsidiaries, VIEs and VIE’s subsidiaries
|
|
|
1,779,098
|
|
|
|
1,535,073
|
|
|
|
1,065,088
|
|
Net cash (used in) provided by operating activities.
|
|
|
(3,391,062
|
)
|
|
|
1,406,467
|
|
|
|
(1,061,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend receivable from subsidiaries
|
|
|
1,140,713
|
|
|
|
1,375,727
|
|
|
|
1,011,931
|
|
Capital injection to subsidiaries.
|
|
|
-
|
|
|
|
(2,774,315
|
)
|
|
|
(3,000,000
|
)
|
Proceeds from sales of cost method investment
|
|
|
-
|
|
|
|
-
|
|
|
|
2,168,868
|
|
Net cash provided (used in) by investing activities..
|
|
|
1,140,713
|
|
|
|
(1,398,588
|
)
|
|
|
180,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stock options exercised by employees..
|
|
|
30,440
|
|
|
|
654,055
|
|
|
|
293,654
|
|
Proceeds from stock options exercised by nonemployees..
|
|
|
-
|
|
|
|
-
|
|
|
|
175,200
|
|
Net cash provided by financing activities
|
|
|
30,440
|
|
|
|
654,055
|
|
|
|
468,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(2,219,909
|
)
|
|
|
661,934
|
|
|
|
(411,705
|
)
|
Cash and cash equivalents, beginning of the year
|
|
|
2,941,180
|
|
|
|
721,271
|
|
|
|
1,383,205
|
|
Cash and cash equivalents, end of the year
|
|
$
|
721,271
|
|
|
$
|
1,383,205
|
|
|
$
|
971,500
|
|
Note:
Basis for preparation
The parent-company Financial Information
of China Finance Online has been prepared using the same accounting policies as set out in the Group's consolidated financial
statements except that China Finance Online has used equity method to account for its investments in its subsidiaries and variable
interest entities.
F-79