Note 12 - Investment in and loan to equity investment affiliates

9 Months Ended

Sep. 30, 2011

Equity Method Investments Disclosure [Text Block]

12.   Investment in and loan to equity investment affiliates

	September 30, 2011		December 31, 2010
	US$(’000)		US$(’000)
	(Unaudited)
Investment in equity investment affiliates		588		1,112
Loan to equity investment affiliates		-		6,050
		588		7,162

The following table summarizes the movement of the investment in and advance to equity investment affiliates for the nine months ended September 30, 2011:

	Beijing  Yang Guang			Shenzhen Mingshan			Total
	US$(’000)			US$(’000)			US$(’000)
Balance as of December 31, 2010 (audited)		7,162			-			7,162
Deconsolidation of Shenzhen Mingshan		-			381			381
Gain on deconsolidation of Shenzhen Mingshan		-			229			229
Loan to Beijing Yang Guang		1,522			-			1,522
Repayment from Beijing Yang Guang		(1,547	)		-			(1,547	)
Additional investment to Shenzhen Mingshan		-			169			169
Share of earnings (losses) in equity investment affiliates		26			(206	)		(180	)
Disposal of investment in Beijing Yang Guang		(1,174	)		-			(1,174	)
Outstanding loan to Beijing Yang Guang transfer to other receivable account		(6,248	)		-			(6,248	)
Exchange translation adjustment		259			15			274
Balances as of September 30, 2011 (unaudited)		-			588			588

Beijing Yang Guang:

Beijing Yang Guang was incorporated on October 25, 2010. On December 8, 2010, one of the Company’s VIEs, Shanghai Jing Yang acquired a 49% interest in Beijing Yang Guang for a cash consideration of RMB7,350,000 (approximately US$1,112,000) and became the noncontrolling interest holder of Beijing Yang Guang.  The investment in Beijing Yang Guang was accounted for under the equity method until the Company withdrew its investment and ceased to have any noncontolling interest in Beijing Yang Guang in August 2011. As of the date the Company disposed its 49% equity interest in Beijing Yang Guang, the Company has provided RMB40,000,000 (approximately US$6,050,000) working capital loan to Beijing Yang Guang.

For the nine and three months ended September 30, 2011, before the Company disposed of its investment in Beijing Yang Guang, the Company recognized its pro-rata share of earnings and losses in Beijing Yang Guang of approximately US$26,000 income  and a US$4,000 loss, respectively, which was reflected in the caption of “Share of earnings (losses) in equity investment affiliates” in the Company’s consolidated statements of income and comprehensive income with a corresponding increase (decrease) to the carrying value of the investment in Beijing Yang Guang in the Company’s consolidated balance sheet.

In August 2011, the Company withdrew its investment in Beijing Yang Guang and sold back its 49% equity interest to the majority shareholder of Beijing Yang Guang for a cash consideration of RMB7,350,000 (approximately US$1,148,000), which was equal to the amount the Company paid for the acquisition of the 49% equity interest in December 2010. Beijing Yang Guang also agreed to distribute to the Company its pro-rata share of net income generated by Beijing Yang Guang during the period when the Company held 49% of the equity interest of Beijing Yang Guang, which was approximately US$26,000. This amount was subsequently collected in early November 2011. As of the date the Company disposed its investment in Beijing Yang Guang, the carrying amount of the investment in Beijing Yang (excluding loan to Beijing Yang Guang) was RMB7,517,000, (approximately US$1,174,000). As of September 30, 2011, the Company had received a cash consideration of RMB7,000,000 (approximately US$1,093,000) The remaining purchase consideration of RMB350,000 (approximately US$55,000) was received in October 2011.  The difference between the carrying amount of the investment in Beijing Yang and the actual payment received as of September 30, 2011 was recorded in other receivables (See Note 7).

As of September 30, 2011, there was a RMB40,000,000 (approximately US$6,248,000) working capital loan to Beijing Yang Guang remain outstanding, which was transferred to other receivable account upon disposal of the investment in Beijing Yang Guang. This loan is interest-free and will be collected within the end of fiscal 2011.

Shenzhen Mingshan:

Shenzhen Mingshan was incorporated on June 24, 2010 by one of the Company’s VIEs, Business Opportunities Online and three other individuals who were not affiliated with the Company.  Shenzhen Mingshan was 51% owned by the Company and was a consolidated subsidiary of the Company from the date of incorporation through January 6, 2011.  On January 6, 2011, an independent third party investor invested RMB15,000,000 (approximately US$2,283,070) cash into Shenzhen Mingshan and hence obtained 60% equity interest of Shenzhen Mingshan. The Company’s share of equity interest then decreased from 51% to 20.4%. The carrying value of the investment to Shenzhen Mingshan immediately after the deconsolidation, which was approximately US$381,000, was included in the balance sheet as investment in equity investment affiliates.

The deconsolidation of Shenzhen Mingshan was accounted for in accordance with ASC Topic 810 “Consolidation”.  The Company recognized a gain of approximately US$229,000 upon deconsolidation of Shenzhen Mingshan, which has been recorded as a gain on deconsolidation of subsidiary in the Company’s consolidated statements of income and comprehensive income with a corresponding increase in the carrying value of the investment in Shenzhen Mingshan in the Company’s consolidated balance sheet.  This gain represents the excess of the fair value of the Company’s retained equity interest over its carrying value as of the date of deconsolidation.

The Company determined the estimated fair value of its retained equity interest in Shenzhen Mingshan based on the valuation of Shenzhen Mingshan used when an independent third party purchased equity in Shenzhen Mingshan, which purchase price was negotiated on an arm’s length basis.  Under these circumstances, the Company estimated the fair value of their non-controlling interest based on the fair value of controlling interest purchased by the independent third party.

In August 2011, the Company made a capital injection of RMB1,080,000 (approximately US$169,000) in cash to Shenzhen Mingshan for its portion of the unpaid registered capital, which was required to be fully contributed within two years from the incorporation of Shenzhen Mingshan. This amount was recorded as an increase of investment in equity investment affiliates in the Company’s consolidated balance sheet.

The Company applied the equity method of accounting prospectively from the date immediately after the deconsolidation. For the nine and three months ended September 30, 2011, the Company recognized its pro-rata share of losses in Shenzhen Mingshan of approximately US$206,000 and US$71,000, respectively, which was reflected in the caption of “Share of earnings (losses) in equity investment affiliates” in the Company’s consolidated statements of income and comprehensive income with a corresponding decrease to the carrying value of the investment in Shenzhen Mingshan in the Company’s consolidated balance sheet.