CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

12 Months Ended

Dec. 31, 2012

CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY [Abstract]

CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

BALANCE SHEETS

(In US dollars)

	As of December 31,
	2011		2012
Current assets
Cash and cash equivalents	$	6,840,302	$	5,338,092
Prepaid expenses and other current assets		16,933		123,203
Total current assets		6,857,235		5,461,295
Long-term investments and amounts due from subsidiaries		264,830,167		314,738,590
Total assets	$	271,687,402	$	320,199,885
Liabilities and shareholders' equity
Current liabilities
Accrued expenses and other current liabilities		611,358		6,180,007
Amounts due to subsidiaries		23,625,681		31,135,810
Convertible senior notes, net of discount due to beneficial conversion feature		1,272,619		-
Total liabilities	$	25,509,658	$	37,315,817
Ordinary shares ($0.0000005 par value; 1,000,000,000,000 shares authorized, 1,661,939,143 and 1,678,097,663 shares issued and outstanding in 2011 and 2012, respectively)		829		832
Additional paid-in capital		131,140,682		126,786,049
Warrants		677,332		15,566,332
Accumulated other comprehensive income		46,186,277		46,618,263
Retained earnings		68,172,624		93,912,592
Total shareholders' equity		246,177,744		282,884,068
Total liabilities and shareholders' equity	$	271,687,402	$	320,199,885

KONGZHONG CORPORATION

ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

STATEMENTS OF COMPREHENSIVE INCOME

(In US dollars)

	For the years ended December 31,
	2010			2011			2012
Revenues		60,999			-			-
Sales tax		-			-			-
Cost of revenues		-			-			-
Gross profit		60,999			-			-
Operating expenses
Product development		(1,041,571	)		(614,780	)		(468,232	)
Selling and marketing		(131,396	)		(121,623	)		(374,144	)
General and administrative		(3,736,556	)		(3,793,055	)		(3,744,168	)
Total operating expenses	$	(4,909,523	)	$	(4,529,458	)	$	(4,586,544	)
Change in fair value of contingent consideration for business acquisition		10,894,533			(3,729,513	)		-
Income (loss) from operations	$	6,046,009		$	(8,258,971	)	$	(4,586,544	)
Interest income		3,987			38,454			90,639
Interest expense		(1,059,905	)		(487,763	)		(262,758	)
Impairment loss on cost method investment		(1,509,912	)		-			-
Loss on extinguishment of debt upon prepayment of convertible senior note		-			(1,567,472	)		-
Equity in earnings of subsidiaries and variable interest entities		8,443,020			2,620,890			30,498,631
Net income (loss) before income taxes	$	11,923,199		$	(7,654,862	)	$	25,739,968
Income taxes expense		-			-			-
Net income (loss)	$	11,923,199		$	(7,654,862	)	$	25,739,968
Other comprehensive income, net of tax
Foreign currency translation adjustments		9,044,087			13,871,922			431,986
Comprehensive income	$	20,967,286		$	6,217,060		$	26,171,954

KONGZHONG CORPORATION

ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In US dollars)

															Accumulated
							Additional			Shares issuable					other					Total
	Ordinary shares						paid-in			in connection					comprehensive		Retained			shareholders'
	Shares			Amount			capital			with acquisition			Warrants		income		earnings			equity
Balance as of January 1, 2010		1,409,396,360		$	705		$	83,862,222		$	1,325,917		$	677,332	$	23,270,268	$	63,904,287		$	173,040,731
Issuance of ordinary shares for share-based compensation		52,750,000			26			386,524			-			-		-		-			386,550
Issuance of ordinary shares for acquisition of businesses		48,760,213			24			15,871,493			(1,325,917	)		-		-		-			14,545,600
Share-based compensation recognized		-			-			5,000,256			-			-		-		-			5,000,256
Other comprehensive income		-			-			-			-			-		9,044,087		-			9,044,087
Net income		-			-			-			-			-		-		11,923,199			11,923,199
Balance as of January 1, 2011		1,510,906,573		$	755		$	105,120,495		$	-		$	677,332	$	32,314,355	$	75,827,486		$	213,940,423
Issuance of ordinary shares for share-based compensation		47,500,000			24			302,051			-			-		-		-			302,075
Issuance of ordinary shares for acquisitions of business		123,532,570			62			29,220,481			-			-		-		-			29,220,543
Repurchase of ordinary shares		(20,000,000	)		(12	)		(2,748,567	)		-			-		-		-			(2,748,579	)
Prepayment of convertible senior note		-			-			(5,333,300	)		-			-		-		-			(5,333,300	)
Share-based compensation recognized		-						4,579,522			-			-		-		-			4,579,522
Other comprehensive income		-			-			-			-			-		13,871,922		-			13,871,922
Net loss		-			-			-			-			-		-		(7,654,862	)		(7,654,862	)
Balance as of January 1, 2012		1,661,939,143		$	829		$	131,140,682			-		$	677,332	$	46,186,277	$	68,172,624		$	246,177,744
Issuance of ordinary shares for share-based compensation		27,500,000			14			277,295			-			-		-		-			277,309
Issuance of ordinary shares for acquisition of business		40,000,000			20			4,229,980			-			-		-		-			4,230,000
Share-based compensation recognized		-			-			4,464,497			-			-		-		-			4,464,497
Repurchase of ordinary shares		(74,141,480	)		(42	)		(14,590,313	)		-			-		-		-			(14,590,355	)
Issuance of warrants		-			-			-			-			14,889,000							14,889,000
Conversion of convertible senior note		22,800,000			11			1,263,908			-			-		-		-			1,263,919
Other comprehensive income		-			-			-			-			-		431,986		-			431,986
Net income		-			-			-			-			-		-		25,739,968			25,739,968
Balance as of December 31, 2012		1,678,097,663		$	832		$	126,786,049		$	-		$	15,566,332	$	46,618,263	$	93,912,592		$	282,884,068

KONGZHONG CORPORATION

ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

STATEMENTS OF CASH FLOWS

(In US dollars)

	For the years ended December 31,
	2010			2011			2012
Net cash provided by operating activities	$	649,007		$	22,455,668		$	22,810,827
Net cash (used in) provided by investing activities	$	(9,577,600	)	$	(9,025,640	)	$	(9,999,999	)
Net cash used in financing activities	$	(776,540	)	$	(10,189,055	)	$	(14,313,038	)
Net (decrease) increase in cash and cash equivalents		(9,705,133	)		3,240,973			(1,502,210	)
Cash and cash equivalents, beginning of year		13,304,462			3,599,329			6,840,302
Cash and cash equivalents, end of year	$	3,599,329		$	6,840,302		$	5,338,092

KONGZHONG CORPORATION

NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT

1. BASIS FOR PREPARATION

The condensed financial information of KongZhong has been prepared using the same accounting policies as set out in KongZhong's consolidated financial statements, except that KongZhong used the equity method to account for investments in its subsidiaries and variable interest entities.

2. INVESTMENTS IN SUBSIDIARIES AND VARIABLE INTEREST ENTITIES

KongZhong and its subsidiaries and variable interest entities are included in the consolidated financial statements where the inter-company balances and transactions are eliminated upon consolidation. For the purpose of KongZhong's stand-alone financial statements, its investments in subsidiaries and variable interest entities are reported using the equity method of accounting. KongZhong's share of income and losses from its subsidiaries and variable interest entities is reported as earnings from subsidiaries and variable interest entities in the accompanying condensed financial information of KongZhong.