Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

7. Related Party Transactions

Shandong Media

Loan Receivable

The Company advanced funds in the form of a loan to Music Magazine, an affiliate of our partner in Shandong Media, to fund its operations. As of June 30, 2012, we determined this loan to be uncollectible and wrote off the loan in full in the amount of $319,000.

Prepaid Expense

As of June 30, 2012 and December 31, 2011, Shandong Media prepaid $166,000 and $193,000, respectively, to Modern Movie for rental of space for company functions.

Amounts due from Shareholders

As of June 30, 2012 and December 31, 2011, amounts due from shareholders include approximately $266,000 and $415,000, respectively, representing advances to both Shandong Broadcast and to Modern Movie, our partners in Shandong Media. The amount due of approximately $107,000 and $103,000 at June 30, 2012 and December 31, 2011, respectively, from Shandong Broadcast is unsecured, interest free and has no fixed repayment terms.  As of June 30, 2012, we determined a portion of our loan to Modern Movie to be uncollectible and wrote off $155,000 related to this loan. The amount due of approximately $159,000 and $312,000 at June 30, 2012 and December 31, 2011, respectively, from Modern Movie is unsecured, interest free and is due on December 31, 2012.

Other Current Liabilities

As of June 30, 2012 and December 31, 2011, Shandong Media had a payable of approximately $102,000 and $89,000, respectively, related to a vehicle usage agreement with Shandong Broadcast & TV Weekly Press.

Jinan Broadband

Payable to Jinan Parent

During the six months ended June 30, 2012, our payable to Jinan Guangdian Jiahe Digital Television Co., Ltd. ("Jinan Parent") increased approximately $1,000, due to currency fluctuations. At June 30, 2012 and December 31, 2011, approximately $144,000 and $143,000, respectively, remained due to Jinan Parent. This amount represents the remaining balance due from the initial acquisition which is unsecured, interest free and has no fixed repayment terms.

Revenue

During the three and six months ended June 30, 2012, Jinan Broadband generated $22,000 and $124,000, respectively, and during the three and six months ended June 30, 2011, generated $32,000 and $70,000, respectively, of value-added service revenue from an affiliate, Jinan Radio and Television Networks Center ("Networks Center").   Networks Center is the owner of  Jinan Parent, who has a 49% ownership interest in Jinan Broadband.

Cost of Revenue

During the three and six months ended June 30, 2012, Jinan Broadband incurred service fees to Networks Center of approximately $11,000 and $23,000, respectively, and during the three and six months ended June 30, 2011, incurred service fees of approximately $15,000 and $25,000, respectively. To minimize administrative fees and maintain a low headcount at Jinan Broadband, Networks Center collects customer payments on behalf of Jinan Broadband and then remits the funds to Jinan Broadband. Networks Center charges Jinan Broadband a 2% service fee on the payments collected.

General and Administrative Expense

During the three and six months ended June 30, 2012, Jinan Broadband paid sales agency fees of approximately $14,000 and $36,000, respectively, and during the three and six months ended June 30, 2011, paid sales agency fees of approximately $10,000 and $21,000,  respectively, to Networks Center for revenue collection on behalf of Jinan Broadband and network maintenance.

Accounts Payable

As of June 30, 2012 and December 31, 2011, Jinan Broadband had accounts payable to Networks Center of approximately $270,000 and $268,000, respectively, relating to maintenance, network leasing and facility rental fees. Jinan Broadband's operation is located in a building that is owned by Networks Center. As such, Jinan Broadband shares the cable network usage with Networks Center. Additionally, Jinan Broadband utilizes Networks Center's staff to provide cable network maintenance support to their customers. As such, Network Center charges Jinan Broadband fees for these services and usage of their facility.

Accrued Expense

Jinan Broadband had accrued network leasing fees to Networks Center of approximately $12,000 and $47,000 as of June 30, 2012 and December 31, 2011.

Amount due from Non-controlling Interest

Subsequent to our acquisition of Sinotop Hong Kong in July 2010, Sinotop and Hua Cheng entered into a variable interest entity agreement to form and operate Zhong Hai Video with equity ownership interests of 80% and 20%, respectively, on total registered capital of RMB 50 million. We are currently in the process of  reducing the registered capital from RMB 50 million (USD 7,918,534) to RMB 12.5 million (USD 1,979,634).  As of June 30, 2012, Sinotop contributed RMB 10 million (USD 1,473,166) in cash and Hua Cheng has contributed a software management system valued at RMB 2,519,700 (USD 398,183).  Until we receive final approval which is expected in the third quarter, we have recorded an amount due from non-controlling interest in the amount of $1,184,661 based on total registered capital of RMB 50 million.