3.	Summary of significant accounting policies

Basis of presentation

The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The unaudited condensed consolidated interim financial information as of

September 30, 2018

and for the

nine

and

three

months ended

September 30, 2018

and

2017

have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form

-K for the fiscal year ended

December 31, 2017,

previously filed with the Securities and Exchange Commission (the

“2017

Form

-K”) on

April 16, 2018.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of

September 30, 2018,

its condensed consolidated results of operations for the

nine

and

three

months ended

September 30, 2018

and

2017,

and its condensed consolidated cash flows for the

nine

months ended

September 30, 2018

and

2017,

as applicable, have been made. The interim results of operations are

not

necessarily indicative of the operating results for the full fiscal year or any future periods.

Going concern

The Company incurred operating losses and had negative operating cash flows and

may

continue to incur operating losses and generate negative cash flows as the Company implements its future business plan. The Company’s net loss attributable to stockholders for the

nine

and

three

months ended

September 30, 2018

was approximately

US$12.9

million and

US$3.0

million, respectively, compared with approximately

US$4.0

million and

US$2.1

million for the

nine

and

three

months ended

September 30, 2017,

respectively. As of

September 30, 2018,

the Company has cash and cash equivalents of approximately

US$5.9

million and net cash used in operating activities during the

nine

months ended

September 30, 2018

was approximately

US$3.7

million.

The Company does

not

currently have sufficient cash or commitments for financing to sustain its operation for the

twelve

months from the issuance date of these financial statements. The Company plans to optimize its internet resources cost investment strategy to improve the gross profit margin of its core business and to further strengthen the accounts receivables collection management and negotiate with vendors for more favorable payment terms, all of which will help to substantially increase the cashflows from operations. If the Company fails to achieve these goals, the Company

may

need additional financing to execute its business plan. If additional financing is required, the Company cannot predict whether this additional financing will be in the form of equity, debt, or another form, and the Company

may

not

be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In the event that financing sources are

not

available, or that the Company is unsuccessful in increasing its gross profit margin and operating profits, the Company

may

be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on the Company’s business, prospects, financial condition and results of operations. These factors raise substantial doubt about the Company's ability to continue as a going concern within

one

year after the date that the financial statements are issued.

The unaudited condensed consolidated financial statements as of

September 30, 2018

have been prepared under the assumption that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time. The Company's ability to continue as a going concern is dependent upon its uncertain ability to increase gross profit margin and operating profits from its core business and/or obtain additional equity and/or debt financing. The accompanying financial statements as of

September 30, 2018

not

include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to continue as a going concern, it

may

have to liquidate its assets and

may

receive less than the value at which those assets are carried on the financial statements.

Principles of consolidation

The condensed consolidated interim financial statements include the financial statements of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

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 the related disclosure of contingent assets and liabilities at the date of these condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

Foreign currency translation

The exchange rates used to translate amounts in RMB into US$ for the purposes of preparing the condensed consolidated financial statements are as follows:

	September 30, 2018		December 31, 2017

Balance sheet items, except for equity accounts		6.8792		6.5342

	Nine Months Ended September 30,
	2018		2017

Items in the statements of operations and comprehensive loss, and statements of cash flows		6.5196		6.7983

	Three Months Ended September 30,
	2018		2017

Items in the statements of operations and comprehensive loss, and statements of cash flows		6.7956		6.6676

representation is made that the RMB amounts could have been, or could be converted into US$ at the above rates.

Revenue recognition

January 1, 2018,

the Company adopted ASC Topic

606,

“Revenue from Contracts with Customers”, applying the modified retrospective method. The adoption didn’t result in a material adjustment to the accumulated deficit as of

January 1, 2018.

In accordance with ASC Topic

606,

revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In determining when and how much revenue is recognized from contracts with customers, the Company performs the following

five

-step analysis: (

) identify the contract(s) with a customer; (

) identify the performance obligations in the contract; (

) determine the transaction price; (

) allocate the transaction price to the performance obligations in the contract; (

) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company’s contracts with customers do

not

include multiple performance obligations, significant financing component, variable consideration, nor any clause concerning with returns, refunds or other similar obligations.

The Company does

not

believe that significant management judgements are involved in revenue recognition, but the amount and timing of the Company’s revenues could be different for any period if management made different judgments or utilized different estimates. Generally, the Company recognizes revenue under ASC Topic

606

for each type of its performance obligation either over time (generally, the transfer of a service) or at a point in time (generally, the transfer of a good (information)) as follows:

Online advertising placement service/TV advertising service

For online advertising placement service contracts and TV advertising service contracts that are established based on a fixed price scheme with the related advertisement placements obligation, the Company provides advertisement placements in specified locations on the Company’s advertising portals for agreed periods and/or place the advertisements onto the Company’s purchased advertisement time during specific TV programs for agreed periods. Revenue is recognized ratably over the period the advertising is provided and, as such, the Company considers the services to have been delivered (“over time”).

Sales of effective sales lead information

For advertising contracts related to purchase of effective sales lead information, revenue is recognized based on a fixed price per sales lead and the quantity of effective sales lead, when information is delivered and accepted by customers (“point in time”).

Search engine marketing and data service

Revenue from search engine marketing and data services is recognized on a monthly basis based on the direct cost consumed through search engines for providing such services with a premium (“over time”). The Company recognizes the revenue on a gross basis, because the Company determines that it is a principle in the transaction who control the goods or services before they are transferred to the customers.

All of the Company’s revenues are generated from the PRC. The following tables present the Company’s revenues disaggregated by products and services and timing of revenue recognition:

	Nine Months Ended September 30,				Three Months Ended September 30,
	2018		2017		2018		2017
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Internet advertising and data service
--online advertising placement		6,897		5,920		2,346		1,987
--sales of effective sales lead information		444		1,058		161		245
Search engine marketing and data service		40,380		24,253		14,532		11,266
TV advertising service		91		-		-		-
Others		10		56		3		25
Total revenues		47,822		31,287		17,042		13,523

	Nine Months Ended September 30,				Three Months Ended September 30,
	2018		2017		2018		2017
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Revenue recognized over time		47,378		30,229		16,881		13,278
Revenue recognized at a point in time		444		1,058		161		245
Total revenues		47,822		31,287		17,042		13,523

Contract costs

For the

nine

and

three

months ended

September 30, 2018,

the Company did

not

have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers within the scope of ASC Topic

606,

that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

Contract balances

The Company evaluates overall economic conditions, its working capital status and customer specific credit and negotiates the payment terms of a contract with individual customer on a case by case basis in its normal course of business.

Advances received from customers related to unsatisfied performance obligations are recoded as contract liabilities (advance from customers), which will be realized as revenues upon the satisfaction of performance obligations through the transfer of related promised goods and services to customers.

For contracts without a full or any advance payments required, the Company bills the customers any unpaid contract price immediately upon satisfaction of the related performance obligations when revenue is recognized, and the Company normally receives payment from customers within

days after a bill is issued.

The Company does

not

have any contract assets (unbilled receivables) since revenue is recognized when control of the promised goods or services is transferred and the payment from customers is

not

contingent on a future event.

The Company’s contract liabilities consist of advance from customers related to unsatisfied performance obligations in relation to internet adverting service, search engine marketing service, as well as TV advertising service. All contract liabilities are expected to be recognized as revenue within

one

year. The table below summarized the movement of the Company’s contract liabilities for the

nine

months ended

September 30, 2018:

	Advance from customers
	US$(’000)

Balance as of January 1, 2018		3,559
Exchange translation adjustment		(178	)
Revenue recognized from beginning contract liability balance		(3,281	)
Advances received from customers related to unsatisfied performance obligations		1,932
Balance as of September 30, 2018 (Unaudited)		2,032

For the

nine

and

three

months ended

September 30, 2018,

there is

revenue recognized from performance obligations that were satisfied in prior periods.

Transaction price allocated to remaining performance obligation

The Company has elected to apply the practical expedient in paragraph ASC Topic

606

and did

not

disclose the information related to transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of

September 30, 2018,

because all performance obligations of the Company’s contracts with customers have an original expected duration of

one

year or less.

Fair value measurement

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of

September 30, 2018

is as follows:

Fair value measurement at reporting date using

As of
September 30, 2018

Quoted Prices
in Active Markets
for Identical
Assets/Liabilities
(Level 1)

Significant
Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

US$(’000)

Warrant liabilities (Note 20)

826

Assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of

September 30, 2018

is as follows:

Fair value measurement at reporting date using

As of
September 30, 2018

Quoted Prices
in Active Markets
for Identical
Assets/Liabilities
(Level 1)

Significant
Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

US$(’000)

Intangible assets (Note 10)

The Company performed impairment test on its intangible assets and goodwill as of

September 30, 2018

and

June 30, 2018

and recognized in the aggregate of approximately

US$8.7

million and

US$1.5

million impairment loss of intangible assets and goodwill for the

nine

and

three

months ended

September 30, 2018,

respectively. The Company determined the fair value of intangible asset using Multi-period Excess Earning Method and the fair value of goodwill using income approach. The following table summarizes the quantitative information about the Company’s Level

significant unobservable internally-developed inputs used in determining the fair value of its intangible assets and goodwill, respectively:

	Valuation technique(s)	Unobservable inputs	Value of inputs

		Remaining useful life (years)		7.75
Intangible assets	Multi-period Excess Earning	Discount rate		24%
		Contributory asset charge	8.9%	-	20%

		Base projection period (years)		5
Goodwill	Discounted Cash Flow	Discount rate		20%
		Terminal growth rate		3.5%

Recently issued accounting standards

February 2016,

the FASB issued ASU

No.

2016

02,

“Leases (Topic

842

)”. The amendments in this ASU requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. For public business entities, the amendments in this ASU are effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early application of the amendments in this ASU is permitted for all entities. In

July 2018,

the FASB issued ASU

No.

2018

11,

“Leases (Topic

842

) – Targeted Improvements ”, which provides entities with an additional (and optional) transition method to adopt the new leases standard and provide lessors with a practical expedient, by class of underlying asset, to

not

separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic

606

). The Company will adopt the amendments in these ASUs on

January 1, 2019

and is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments. The Company expects to complete its assessment by the end of

2018.

February 2018,

the FASB issued ASU

2018

02:

“Income Statement—Reporting Comprehensive Income (Topic

220

)-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Act”). Consequently, the amendments eliminate the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is

not

affected. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments in this ASU are effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments.

June 2018,

the FASB issued ASU

2018

07:

“Compensation—Stock Compensation (Topic

718

)-Improvements to Nonemployee Share-Based Payment Accounting”. The Board is issuing this ASU as part of its Simplification Initiative. The amendments in this ASU expand the scope of Topic

718

to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic

718

to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic

718

does

not

apply to share-based payments used to effectively provide (

) financing to the issuer or (

) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic

606,

Revenue from Contracts with Customers. The amendments in this ASU are effective for public business entities for fiscal years beginning after

December 15, 2018,

including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after

December 15, 2019,

and interim periods within fiscal years beginning after

December 15, 2020.

Early adoption is permitted, but

earlier than an entity’s adoption date of Topic

606.

An entity should only remeasure liability-classified awards that have

not

been settled by the date of adoption and equity-classified awards for which a measurement date has

not

been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The entity must

not

remeasure assets that are completed. Disclosures required at transition include the nature of and reason for the change in accounting principle and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other components of equity. The Company is currently evaluating the impact on its consolidated financial position and results of operations upon adopting these amendments.