Summary of significant accounting policies

Basis of presentation

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

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 year ended

December 31, 2018

was approximately

US$14.03

million, compared with approximately

US$10.13

million for the year ended

December 31, 2017.

As of

December 31, 2018,

the Company has cash and cash equivalents of approximately

US$3.74

million and net cash used in operating activities during the year ended

December 31, 2018

was approximately

US$5.39

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 reducing operating losses, 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 consolidated financial statements as of

December 31, 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 reduce operating loss from its core business and/or obtain additional equity and/or debt financing. The accompanying financial statements as of

December 31, 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 consolidated financial statements include the accounts 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 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 and transactions

The Company conducts substantially all of its operations through its PRC operating subsidiaries and VIEs, PRC is the primary economic environment in which the Company operates. For financial reporting purposes, the financial statements of the Company’s PRC operating subsidiaries and VIEs, which are prepared using the functional currency of the PRC, Renminbi (“RMB”), are translated into the Company’s reporting currency, the United States Dollar (“U.S. dollar”). Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in stockholders’ equity.

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the determination of net loss of the consolidated statements of operations and comprehensive loss for the respective periods.

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

	As of December 31,
	2018		2017
Balance sheet items, except for equity accounts		6.8632		6.5342

	Year Ended December 31,
	2018		2017
Items in the statements of operations and comprehensive loss, and statements of cash flows		6.6174		6.7518

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

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The Company considers all highly liquid investments with original maturities of

three

months or less at the time of purchase to be cash equivalents. As of

December 31, 2018,

the Company’s cash and cash equivalents also included an approximately

US$25,500

term deposit placed as a c

ollateral for the Company’s short-term bank loan for a

one

-year period, which will mature on

September 21, 2019.

Accounts receivable, net

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts as needed. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. For the years ended

December 31, 2018

and

2017,

the Company charged off approximately US$nil and

US$1.41

million account receivable balances against the related allowance for doubtful accounts, respectively. The Company did

not

have any off-balance-sheet credit exposure relating to its customers, suppliers or others. For the years ended

December 31, 2018

and

2017,

the Company recorded approximately

US$0.76

million and

US$1.28

million of allowances for doubtful accounts against its accounts receivable.

Other receivables, net

The Company’s other receivables primarily consists of overdue contractual deposits receivable from suppliers and short-term loans lent to

third

parties. Other receivables are recorded at carrying amount less an allowance for uncollectible accounts as needed. The loans lent by the Company to

third

parties are normally unsecured, range from

three

months to

twelve

months, and with an interest rate range from

nil

12%

per annum. The cash flows related to these loans are included within the cash flows from investing activities category in the consolidated statements of cash flows. The Company determines the allowance based on many factors, including but

not

limited to, aging data, historical collection experience, debtors’ specific facts and the general economic conditions. For the year ended

December 31, 2018,

approximately

US$0.80

million allowance for doubtful accounts was provided. For the year ended

December 31, 2017,

approximately

US$0.03

million allowance for doubtful accounts was reversed due to subsequent collection. As of

December 31, 2018

and

2017,

substantially all of the allowances for doubtful accounts are provided for the Company’s overdue contractual deposits.

Long-term investments

Equity method investments

The Company accounts for its investments in entities in which the Company can exercise significant influence but does

not

own a majority equity interest or control under the equity method of accounting in accordance with ASC Topic

323

“Investments-Equity Method and Joint Ventures”. An investment (direct or indirect) of

20%

or more of the voting stock shall lead to a presumption that in the absence of predominate evidence to the contrary an investor has the ability to exercise significant influence over an investee. Under the equity method of accounting, an investee company’s accounts are

not

reflected within the Company’s consolidated balance sheets and statements of operations and comprehensive loss; however, the Company’s pro-rata share of the income or losses of the investee company is included in the consolidated statements of operations and comprehensive loss. The Company’s carrying value (including advance to the investee) in equity method investee companies is recorded as “Long-term investments” in the Company’s consolidated balance sheets.

When the Company’s carrying value in an equity method investee company is reduced to zero,

further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will

not

record its share of such income until it equals the amount of its share of losses

not

previously recognized.

The Company assesses its equity method investments for other-than-temporary impairment in accordance with ASC

323

through

32A,

evidence of loss in value might include, but would

not

necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The impairment to be recognized is measured by the amount by which the carrying value exceed its fair value.

For the years ended

December 31, 2018

and

2017,

other-than temporary impairment loss was recorded associated with the Company’s equity method investments.

Investments in equity securities and other ownership interests

The Company’s investments in equity securities and other ownership interests (except those accounted for under the equity method of accounting or those that resulted in consolidation of the investee), i.e. investments in investee companies that are

not

consolidated, and over which the Company does

not

exercise significant influence, are accounted for in accordance with ASC Topic

321:

“Investments-Equity securities”. The Company generally owns less than

20%

interest in the voting securities of these investee companies. In accordance with ASC

321

the Company chooses to measure these investments which do

not

have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the Company and records the carrying value of these investments as “Long-term investments” in the Company’s consolidated balance sheets.

In accordance with ASC

321

the Company writes down the carrying value of these investments to its fair value if a qualitative assessment indicates that the investment is impaired, and the fair value of the investment is less than its carrying value, as determined using the guidance in ASC

321

For the years ended

December 31, 2018

and

2017,

the Company recorded approximately

US$0.45

million and

US$0.04

million of impairment loss, respectively, associated with its investments in other ownership interests that are

not

accounted for under the equity method of accounting.

Property and equipment, net

Property and equipment are recorded at cost less accumulated depreciation/amortization. Depreciation/amortization is calculated on the straight-line method after taking into account their respective estimated residual values over the following estimated useful lives:

Leasehold improvements (years)		3
Vehicles (years)		5
Office equipment (years)	3	-	5
Electronic devices (years)		5

Depreciation expenses are included in sales and marketing expenses, general and administrative expenses and research and development expenses. Leasehold improvements are amortized over the lesser of the lease term or estimated useful life.

When property and equipment are retired or otherwise disposed of, resulting gain or loss is included in net income or loss in the period of disposition. Maintenance and repairs which do

not

improve or extend the expected useful lives of the assets are charged to expenses as incurred, whereas the cost of renewals and betterments that extend the useful life of the assets are capitalized as additions to the related assets.

Intangible assets, net

The Company accounted for cost related to internal-used software in accordance with ASC Topic

350

“Intangibles-Goodwill and Other-Internal-Use Software”. Internal-use software is initially recorded at cost and amortized on a straight-line basis over the estimated useful economic life of

years.

Impairment of long-lived assets

In accordance with ASC

360

35,

long-lived assets, which include tangible long-lived assets and intangible long-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount of the asset and its fair value.

For the years ended

December 31, 2018

and

2017,

the Company recognized

US$3.33

million and

US$2.55

million impairment loss associated with its intangible assets, respectively. See Note

(p) and Note

for detailed disclosures about the impairment of intangible assets and the related valuation techniques and inputs used in the fair value measurement for the Company’s intangible assets.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company's acquisitions of interests in its consolidated VIEs.

Goodwill is

not

depreciated or amortized but is tested for impairment at the reporting unit level at least on an annual basis, and between annual tests when an event occurs, or circumstances change that could indicate that the asset might be impaired. The Company early adopted ASU

2017

04,

“Intangibles-Goodwill and Other (Topic

350

)-Simplifying the Test for Goodwill Impairment” on

January 1, 2018,

which eliminated step

of the goodwill impairment test. After adopting the amendments in ASU

2017

04,

the Company performs its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and recognizes the goodwill impairment loss for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. In accordance with ASC

350

31,

if goodwill and another asset (or asset group) of a reporting unit are tested for impairment at the same time, the other asset (or asset group) shall be tested for impairment before goodwill. If the other asset (or asset group) was impaired, the impairment loss would be recognized prior to goodwill being test for impairment.

Application of a goodwill impairment test requires significant management judgments. The judgments in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

For the year ended

December 31, 2018,

after assessing the total events or circumstances as described in ASC

350

(a) through (g), the Company determined that it was more likely than

not

that the fair value of its internet advertising and data services reporting unit was less than its carrying amount. As a result, the Company performed interim goodwill impairment test as of

June 30, 2018

and recognized an approximately

US$5.21

million of goodwill impairment loss associated with this reporting unit. See Note

(p) and Note

for detailed disclosures about the impairment of goodwill and the related valuation techniques and inputs used in the fair value measurement for the Company’s goodwill.

Changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary

The Company accounted for changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary in accordance with ASC Topic

810

“Consolidation”, subtopic

10,

which requires the transaction be accounted for as an equity transaction. Therefore,

gain or loss shall be recognized in the Company’s consolidated statements of operations and comprehensive loss. The carrying amount of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted shall be recognized in equity attributable to the parent and reallocated the subsidiary’s accumulated comprehensive income, if any, among the parent and the noncontrolling interest through an adjustment to the parent’s equity.

The Company acquired the remaining

49%

equity interest in Chuang Fu Tian Xia in

May 2018

and accounted for this transaction as an equity transaction with

gain or loss recognized in the consolidated statements of operations and comprehensive loss. The difference between the cash consideration paid and the amount by which the noncontrolling interest was adjusted to reflect the change in its ownership interest in the VIE of approximately

US$1.81

million and a reallocation of Chuang Fu Tian Xia’s accumulated comprehensive loss of approximately

US$0.03

million were recognized as losses in equity attributable to the Company included in additional paid-in capital for the year ended

December 31, 2018.

Noncontrolling interest

The Company accounts for noncontrolling interest in accordance with ASC Topic

810

45,

which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheet and the consolidated net income/(loss) attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of operations and comprehensive loss. ASC Topic

810

also requires that losses attributable to the parent and the noncontrolling interest in a subsidiary be attributed to those interests even if it results in a deficit noncontrolling interest balance.

Fair value

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables and accounts payable. The carrying values of these financial instruments approximate fair values due to their short maturities.

ASC Topic

820

"Fair Value Measurement and Disclosures," defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are

three

levels of inputs that

may

be used to measure fair value:

Level

- Quoted prices in active markets for identical assets or liabilities.

Level

- Observable inputs other than Level

prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are

not

active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level

- Unobservable inputs that are supported by little or

market activity and that are significant to the fair value of the assets or liabilities.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.

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

December 31, 2018

is as follows:

Fair value measurement at reporting date using

As of
December 31, 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 19)

606

Significant unobservable inputs utilized to determine the fair value of the Company’s warrant liabilities was disclosed in Note

19.

The Company’s intangible assets and goodwill are measured at fair value on a nonrecurring basis and they are recorded at fair value only when impairment is recognized.

The Company determined the fair value of intangible assets and goodwill using income approach. The following table summarizes the quantitative information about the Company’s Level

fair value measurements, which utilize significant unobservable internally-developed inputs:

	Valuation techniques	Unobservable inputs	Value/Range of Inputs

Year Ended December 31, 2018
		Remaining useful life (years)		7.75
Intangible assets (Note 10)	Multi-period Excess Earning	Discount rate		24%
		Contributory asset charge	8.90%	-	24%

Goodwill (Note 12)	Discounted Cash Flow	Base projection period (years)		5
		Discount rate		20%
		Terminal growth rate		3.50%

Year Ended December 31, 2017
		Remaining useful life (years)	3.25	-	8.5
Intangible assets (Note 10)	Multi-period Excess Earning	Discount rate		24%
		Contributory asset charge	15.90%	-	24%


		Base projection period (years)		5
Goodwill (Note 12)	Discounted Cash Flow	Discount rate		20%
		Terminal growth rate		3.50%

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.

Multiple performance obligations included in the Company’s contracts with customers for the distribution of the right to use search engine marketing service are neither capable of being distinct, that is, can benefit the customer on its own or together with other readily available resources, nor is distinct within the context of the contract, that is, the promise to transfer the service separately identifiable from other promises in the contract.

The Company’s contract with customers do

not

include significant financing component and any variable consideration.

Advance from customers related to unsatisfied performance obligations are generally refundable. Refund of advance from cu

stomers was insignifi

cant for both the years ended

December 31, 2018

and

2017.

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 principal 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:

	Year Ended December 31,
	2018		2017
	US$(’000)		US$(’000)
Internet advertising and data service
--distribution of the right to use search engine marketing service		47,423		37,355
--online advertising placements		9,094		7,534
--sales of effective sales lead information		494		1,345
TV advertising service		121		342
Others		14		57
Total revenues		57,146		46,633

	Year Ended December 31,
	2018		2017
	US$(’000)		US$(’000)

Revenue recognized over time		56,652		45,288
Revenue recognized at a point in time		494		1,345
Total revenues		57,146		46,633

Contract costs

For the year ended

December 31, 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, distribution of the right to use 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 year ended

December 31, 2018:

	Advance from customers
	US$(’000)

Balance as of January 1, 2018		3,559
Exchange translation adjustment		(171	)
Revenue recognized from beginning contract liability balance		(3,338	)
Advances received from customers related to unsatisfied performance obligations		1,011
Balance as of December 31, 2018		1,061

For the year ended

December 31, 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

December 31, 2018,

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

one

year or less.

Cost of revenues

Cost of revenues primarily includes the cost of internet advertising related resources, TV advertising time slots and other technical services purchased from

third

parties and other direct cost associated with providing services.

Advertising costs

Advertising costs for the Company’s own brand building are

not

includable in cost of revenues, they are expensed when incurred and are included in “sales and marketing expenses” in the statement of operations and comprehensive loss. For the years ended

December 31, 2018

and

2017,

advertising expenses for the Company’s own brand building were approximately

US$1,097,000

and

US$1,717,000,

respectively.

Research and development expenses

The Company accounts for expenses for the enhancement, maintenance and technical support to the Company’s Internet platforms and intellectual properties that are used in its daily operations in research and development expenses. Research and development costs are charged to expense when incurred. Expenses for research and development for the years ended

December 31, 2018

and

2017

were approximately

US$933,000

and

US$1,261,000,

respectively.

Income taxes

The Company follows the guidance of ASC Topic

740

“Income taxes” and uses liability method to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets, if based on the weight of available evidence, it is more-likely-than-

not

that some portion, or all, of the deferred tax assets will

not

be realized. The effect on deferred taxes of a change in tax rates is recognized in statement of operations and comprehensive loss in the period that includes the enactment date.

Uncertain tax positions

The Company follows the guidance of ASC Topic

740

“Income taxes”, which prescribes a more likely than

not

threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the impact of an uncertain income tax position 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.

The Company recognizes interest on non-payment of income taxes under requirement by tax law and penalties associated with tax positions when a tax position does

not

meet the minimum statutory threshold to avoid payment of penalties. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The tax returns of the Company’s PRC subsidiaries and VIEs are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and Collection Law, the statute of limitations is

three

years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to

five

years under special circumstances, where the underpayment of taxes is more than

RMB100,000.

In the case of transfer pricing issues, the statute of limitation is

ten

years. There is

statute of limitation in the case of tax evasion. The Company did

not

have any material interest or penalties associated with tax positions for the years ended

December 31, 2018

and

2017

and did

not

have any significant unrecognized uncertain tax positions as of

December 31, 2018

and

2017,

respectively.

Share-based Compensation

The Company accounts for share-based compensation to employees in accordance with ASC Topic

718

“Compensation-Stock Compensation” which requires that share-based payment transactions be measured based on the grant-date fair value of the equity instrument issued, net of an estimated forfeiture rate, if applicable, and therefore only recognizes compensation expenses for those equity instruments expected to vest over the requisite service period, or vesting period. Forfeitures are estimated at the time of grant and revised in the subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for equity-based payment to non-employees in accordance with ASC Topic

505,

subtopic

50.

Cost of services received from non-employees is measured at fair value at the earlier of the performance commitment date or the date service is completed and recognized over the period the service is provided. If fully vested, nonforfeitable equity instrument are issued at the date an agreement for goods or services is entered into (

specific performance is required by the grantee to retain the equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. Under such circumstances, the Company recognizes the equity instruments when they are issued (in most cases, when the agreement is entered into), the corresponding cost is recorded as a prepayment on the balance sheet in accordance with ASC

505

and amortized as share-based compensation expenses over the requisite service period. Share-based compensation expenses were recorded in sales and marketing expenses, general and administrative expenses and research and development expenses.

)

Comprehensive income (loss)

The Company accounts for comprehensive income (loss) in accordance with ASC Topic

220

“Comprehensive Income”, which establishes standards for reporting and displaying comprehensive income (loss) and its components in the consolidated financial statements. Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income, as presented in the Company’s consolidated balance sheets are the cumulative foreign currency translation adjustments.

Earnings (loss) per share

Earnings (loss) per share are calculated in accordance with ASC Topic

260,

“Earnings Per Share”. Basic earnings (loss) per share is computed by dividing income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Common shares issuable upon the conversion of the convertible preferred shares are included in the computation of diluted earnings per share on an “if-converted” basis when the impact is dilutive. The dilutive effect of outstanding common stock warrants and options are reflected in the diluted earnings per share by application of the treasury stock method when the impact is dilutive.

Commitments and contingencies

The Company has adopted ASC Topic

450

“Contingencies” subtopic

20,

in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available before financial statements are issued or are available to be issued indicates that it is probable that an asset had been impaired, or a liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is

not

probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

aa)

Recent issued or adopted accounting standards

January 2016,

the FASB issued ASU

No.

2016

01,

“Financial Instruments—Overall (Subtopic

825

): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU, among other things, required that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity

may

choose to measure equity investments that do

not

have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This ASU also simplified the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. For public business entities, the amendments in this ASU are effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. The Company has adopted the amendments in this ASU on

January 1, 2018

and the adoption of this ASU did

not

have a material impact on the Company’s consolidated financial position and results of operations.

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 provide another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date (such as

January 1, 2019,

for calendar year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, 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 adopted the amendments in these ASUs on

January 1, 2019

using the additional modified retrospective transition method provided by ASU

No.

2018

11.

The adoption didn’t result in a material adjustment to the Company’s accumulated deficit as of

January 1, 2019.

Based on the Company’s current office space lease agreements as of

December 31, 2018,

the amounts of the right-of-use asset and related lease payment liability to be recognized in

2019

was insignificant.

June 2016,

the FASB issued ASU

No.

2016

13,

“Financial Instruments-Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments”. The amendments in this ASU require the measurement and recognition of expected credit losses for financial assets held at amortized cost. The amendments in this ASU replace the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. In

November 2018,

the FASB issued ASU

No.

2018

19,

“Codification Improvements to Topic

326,

Financial Instruments-Credit Losses”, which among other things, clarifies that receivables arising from operating leases are

not

within the scope of Subtopic

326

20.

Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic

842,

Leases. For public entities, the amendments in these ASU are effective for fiscal years beginning after

December 15, 2019,

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

November 2016,

the FASB issued ASU

No.

2016

18,

“Statement of Cash Flows (Topic

230

): Restricted Cash”. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU are effective for public business entities for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years, and should be applied using a retrospective transition method to each period presented. The Company adopted the amendments in the ASU on

January

2018

using the retrospective transition method, which resulted in an approximately

US$3.1

million term deposit held by the Company as of

December 31, 2016

and matured during the year ended

December 31, 2017

being reclassified from a cash inflow from investing activities to the beginning balance of cash, cash equivalents, and restricted cash shown on the statement of cash flows for the year ended

December 31, 2017.

The adoption of ASU

No.

2016

had

impact on the Company’s statement of cash flows for the year ended

December 31, 2018.

January 2017,

the FASB issued ASU

No.

2017

04,

“Intangibles-Goodwill and Others (Topic

350

)-Simplify the Test for Goodwill Impairment”. To simplify the subsequent measurement of goodwill, the amendments in this ASU eliminated Step

from the goodwill impairment test. In computing the implied fair value of goodwill under Step

an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this ASU also eliminated the requirements for any reporting unit with a

zero

or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step

of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a

zero

or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. An entity should apply the amendments in this ASU on a prospective basis. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this ASU for its annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Company has early adopted the amendments in this ASU on

January 1, 2018,

and the adoption of this ASU did

not

have a material impact on its consolidated financial position and results of operations.

July 2017,

the FASB issued ASU

No.

2017

11,

“Earnings Per Share (Topic

260

), Distinguishing Liabilities from Equity (Topic

480

), Derivatives and Hedging (Topic

815

)-I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”. The amendments in part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic

260

to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic

470

20,

Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic

260

). The amendments in Part II of this ASU recharacterize the indefinite deferral of certain provisions of Topic

480

that now are presented as pending content in the Codification, to a scope exception. Those amendments do

not

have an accounting effect. For public business entities, the amendments in Part I of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

For all other entities, the amendments in Part I of this Update 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 for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part II of this ASU do

not

require any transition guidance because those amendments do

not

have an accounting effect. The Company has adopted the amendments in this ASU on

January 1, 2018,

when determining whether certain financial instruments issued by the Company after

January 1, 2018

should be classified as liabilities or equity instruments, a down round feature

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The adoption of the amendments in this ASU did

not

have a material impact on the Company’s consolidated financial position and results of operations.

February 2018,

the FASB issued ASU

No.

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. Based on the Company’s evaluation, the Company does

not

expect the adoption of the amendments in this ASU to have a material impact on its consolidated financial position and results of operations.

June 2018,

the FASB issued ASU

No.

2018

07:

“Compensation—Stock Compensation (Topic

718

)-Improvements to Nonemployee Share-Based Payment Accounting”. The Board is issuing this Update as part of its Simplification Initiative. The amendments in this Update 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 Update 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. Based on the Company’s evaluation, the Company does

not

expect the adoption of the amendments in this ASU to have a material impact on its consolidated financial position and results of operations.

August

2018,

the FASB issued ASU

No.

2018

13,

“Fair Value Measurement (Topic

820

): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The amendments in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements. The amendments in this ASU, among other things, require public companies to disclose the range and weighted average used to develop significant unobservable inputs for Level

fair value measurements. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019,

and entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Company does

not

expect the adoption of these amendments to have a material impact on its consolidated financial position and results of operations.