Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2019shares | |
Document and Entity Information [Abstract] | |
Document Type | 20-F |
Document Registration Statement | false |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Entity Registrant Name | The9 LTD |
Document Period End Date | Dec. 31, 2019 |
Entity Incorporation, State or Country Code | F4 |
Entity Well-known Seasoned Issuer | No |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 121,761,675 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | FY |
Entity Central Index Key | 0001296774 |
Amendment Flag | false |
Entity Interactive Data Current | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Trading Symbol | NCTY |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | 12 Months Ended | |||
Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)¥ / sharesshares | Dec. 31, 2018CNY (¥)¥ / sharesshares | Dec. 31, 2017CNY (¥)¥ / sharesshares | |
Revenues: | ||||
Revenue | $ 49,280 | ¥ 343,077 | ¥ 17,492,415 | ¥ 73,208,166 |
Sales taxes | (227) | (1,582) | (60,557) | (59,610) |
Total net revenues | 49,053 | 341,495 | 17,431,858 | 73,148,556 |
Cost of revenues | (192,804) | (1,342,266) | (16,435,590) | (23,782,054) |
Gross profit (loss) | (143,751) | (1,000,771) | 996,268 | 49,366,502 |
Operating (expenses) income: | ||||
Product development | (1,880,337) | (13,090,530) | (24,555,308) | (45,112,396) |
Sales and marketing | (303,732) | (2,114,519) | (2,325,818) | (9,089,969) |
General and administrative | (16,355,971) | (113,867,000) | (89,583,331) | (108,824,680) |
Impairment of other long-lived assets | (5,000,000) | (34,881,000) | ||
Gain on disposal of subsidiaries | 173,364 | 1,206,925 | 10,473,159 | 0 |
Total operating expenses | (23,377,018) | (162,746,124) | (105,991,298) | (163,027,045) |
Other operating income, net | 4,344 | 30,240 | 229,538 | 349,954 |
Loss from operations | (23,516,425) | (163,716,655) | (104,765,492) | (113,310,589) |
Impairment on equity investment and available-for-sale investment | (670,247) | (4,666,128) | (1,386,174) | |
Impairment on other investments | (544,549) | (3,791,039) | (7,776,157) | (9,109,312) |
Impairment on other advances | (859,087) | (5,980,788) | ||
Interest income | 2,668 | 18,576 | 193,928 | 30,525 |
Interest expense | (4,955,838) | (34,501,556) | (104,776,674) | (83,922,200) |
Fair value change onwarrants liability | 185,619 | 1,292,244 | 2,251,427 | 12,615,466 |
Gain on disposal of equity investee and available-for-sale investment | 99,777 | 694,628 | 115,349 | |
Gain on disposal of other investment | 1,929,183 | 13,430,588 | ||
Foreign exchange gain (loss) | (786,291) | (5,474,002) | (20,331,430) | 19,206,747 |
Other income, net | 1,346,297 | 9,372,652 | 1,598,663 | 4,669,587 |
Loss before income tax expense and share of loss in equity method investments | (27,768,893) | (193,321,480) | (234,991,909) | (169,704,427) |
Income tax benefit | 0 | 0 | 0 | 0 |
Recovery of equity investment in excess of cost | ¥ | 0 | 60,548,651 | ||
Share of loss in equity method investments | (408,983) | (2,847,260) | (4,292,887) | (2,937,131) |
Net loss | (28,177,876) | (196,168,740) | (239,284,796) | (112,092,907) |
Net gain (loss) attributable to noncontrolling interest | (1,941,737) | (13,517,983) | (16,332,968) | 3,955,640 |
Net gain (loss) attributable to redeemable noncontrolling interest | (697,462) | (4,855,589) | (5,858,902) | 2,117,303 |
Net loss attributable to The9 Limited | (25,538,677) | (177,795,168) | (217,092,926) | (118,165,850) |
Change in redemption value of redeemable noncontrolling interest | (1,842,569) | (12,827,598) | (40,918,773) | (57,126,233) |
Net loss attributable to holders of ordinary shares | (27,381,246) | (190,622,766) | (258,011,699) | (175,292,083) |
Other comprehensive loss, net of tax: | ||||
Currency translation adjustments | (113,984) | (793,531) | (1,314,265) | (9,525,761) |
Total comprehensive loss | (28,291,860) | (196,962,271) | (240,599,061) | (121,618,668) |
Comprehensive (loss) gain attributable to: | ||||
Noncontrolling interest | (2,835,203) | (19,738,118) | (24,888,425) | 13,457,650 |
Redeemable noncontrolling interest | (697,462) | (4,855,589) | (5,858,902) | 2,117,303 |
Total comprehensive loss | $ (24,759,195) | ¥ (172,368,564) | ¥ (209,851,734) | ¥ (137,193,621) |
Net loss attributable to holders of ordinary shares per share: | ||||
- Basic and diluted | (per share) | $ (0.26) | ¥ (1.79) | ¥ (4.15) | ¥ (5.24) |
Weighted average number of shares outstanding: | ||||
- Basic and diluted | shares | 106,407,008 | 106,407,008 | 62,114,760 | 33,426,448 |
Online Game Services [Member] | ||||
Revenues: | ||||
Revenue | $ 43,606 | ¥ 303,577 | ¥ 16,551,080 | ¥ 71,564,023 |
Other Revenues [Member] | ||||
Revenues: | ||||
Revenue | $ 5,674 | ¥ 39,500 | ¥ 941,335 | ¥ 1,644,143 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
Current assets: | |||
Cash and cash equivalents | $ 1,452,662 | ¥ 10,113,141 | ¥ 4,256,449 |
Accounts receivable, net of allowance for doubtful accounts of RMB1,149,864 and RMB1,319,331 as of December 31, 2018 and 2019, respectively | 15,863 | 110,437 | 592,897 |
Advances to suppliers | 1,615,474 | 11,246,608 | 15,808,042 |
Prepayments and other current assets, net of allowance for doubtful accounts of RMB 20,770,928 and RMB 5,343,427 as of December 31, 2018 and 2019, respectively | 1,271,012 | 8,848,534 | 6,148,787 |
Amounts due from related parties | 108,989 | 758,761 | 6,207,846 |
Assets classified as held-for-sale | 17,723,915 | 123,390,350 | 0 |
Total current assets | 22,187,915 | 154,467,831 | 33,014,021 |
Investments | 1,436,410 | 10,000,000 | 45,216,118 |
Property, equipment and software, net | 175,030 | 1,218,521 | 17,352,445 |
Land use right, net | 0 | 0 | 62,589,656 |
Operating lease right-of-use assets | 1,329,772 | 9,257,604 | |
Other long-lived assets, net | 935,850 | 6,515,200 | 6,515,200 |
TOTAL ASSETS | 26,064,977 | 181,459,156 | 164,687,440 |
Current liabilities: | |||
Short-term borrowings (including short-term borrowings of the consolidated VIEs without recourse to the Group of nil as of both December 31, 2018 and 2019) | 16,881,566 | 117,526,089 | 112,461,383 |
Accounts payable (including accounts payable of the consolidated VIEs without recourse to the Group of RMB5,920,126 and RMB as of December 31, 2018 and 2019, respectively) | 5,491,744 | 38,232,425 | 38,035,661 |
Other taxes payable (including other taxes payable of the consolidated VIEs without recourse to the Group of RMB1,398,996 and RMB as of December 31, 2018 and 2019, respectively) | 173,893 | 1,203,644 | 2,949,082 |
Advances from customers (including advances from customers of the consolidated VIEs without recourse to the Group of RMB23,976,676 and RMB as of December 31, 2018 and 2019, respectively) | 5,677,810 | 39,527,778 | 39,631,950 |
Other advances (including other advances of the consolidated VIEs without recourse to the Group of nil as of both December 31, 2018 and 2019) | 8,083,570 | 56,276,200 | |
Amounts due to related parties (including amounts due to related parties of the consolidated VIEs without recourse to the Group of RMB62,268,751 and RMB as of December 31, 2018 and 2019, respectively) | 10,683,951 | 74,379,529 | 71,849,633 |
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to the Group of nil and nil as of December 31, 2018 and 2019, respectively) | 159,125 | ||
Refund of game points (including refund of game points of the consolidated VIEs without recourse to the Group of RMB169,998,682 as of both December 31, 2018 and 2019) | 24,418,783 | 169,998,682 | 169,998,682 |
Warrants (including warrants of consolidated VIEs without recourse to the Group of nil as of both December 31, 2018 and 2019) | 28,527 | 200,000 | 1,490,844 |
Remaining outstanding balance of convertible notes | 59,485,752 | 414,127,908 | 375,257,140 |
Interest payable (including interest payable of consolidated VIEs without recourse to the Group of nil as of both December 31, 2018 and 2019) | 771,630 | 5,371,931 | 15,298,961 |
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to the Group of RMB67,862,435 and RMB as of December 31, 2018 and 2019, respectively) | 13,378,845 | 93,140,843 | 81,291,306 |
Operating lease liabilities- current portion | 489,481 | 3,407,670 | |
Liabilities directly associated with assets held for sale | 6,419,503 | 44,691,296 | 0 |
Total current liabilities | 151,984,055 | 1,058,082,595 | 908,423,767 |
Operating lease liabilities-non-current portion | 898,001 | 6,251,705 | |
TOTAL LIABILITIES | 152,882,056 | 1,064,334,300 | 908,423,767 |
Commitments and contingencies (Note 30) | |||
Redeemable noncontrolling interest (Note 28) | 50,137,400 | 349,046,548 | 341,074,539 |
SHAREHOLDERS' EQUITY (DEFICIT): | |||
Ordinary shares (US$0.01 par value; 91,315,465 and 106,407,008 shares issued and outstanding as of December 31, 2018 and 2019, respectively) | 6,502,658 | ||
Additional paid-in capital | 364,783,889 | 2,539,552,478 | 2,496,069,065 |
Statutory reserves | 4,032,288 | 28,071,982 | 28,071,982 |
Accumulated other comprehensive loss | (542,669) | (3,777,952) | (9,204,556) |
Accumulated deficit | (489,938,842) | (3,410,856,231) | (3,233,061,063) |
The9 Limited shareholders' deficit | (120,520,543) | (839,039,915) | (711,621,914) |
Noncontrolling interest | (56,433,936) | (392,881,777) | (373,188,952) |
Total shareholders' deficit | (176,954,479) | (1,231,921,692) | (1,084,810,866) |
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY | 26,064,977 | 181,459,156 | ¥ 164,687,440 |
Class A ordinary shares | |||
SHAREHOLDERS' EQUITY (DEFICIT): | |||
Ordinary shares (US$0.01 par value; 91,315,465 and 106,407,008 shares issued and outstanding as of December 31, 2018 and 2019, respectively) | 1,051,610 | 7,321,099 | |
Class B ordinary shares | |||
SHAREHOLDERS' EQUITY (DEFICIT): | |||
Ordinary shares (US$0.01 par value; 91,315,465 and 106,407,008 shares issued and outstanding as of December 31, 2018 and 2019, respectively) | $ 93,181 | ¥ 648,709 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)shares | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CNY (¥)shares |
Accounts receivable, allowance for doubtful accounts | $ 5,343,427 | ¥ 1,149,864 | $ 20,770,928 | ¥ 1,149,864 |
Short-term borrowings, consolidated VIEs | 16,881,566 | 117,526,089 | 112,461,383 | |
Current portion of operating lease liabilities | 489,481 | 3,407,670 | ||
Non current portion of operating lease liabilities | 898,001 | 6,251,705 | ||
Other advances | 8,083,570 | 56,276,200 | ||
Accounts payable, consolidated VIEs | 5,491,744 | 38,232,425 | 38,035,661 | |
Other taxes payable, consolidated VIEs | 173,893 | 1,203,644 | 2,949,082 | |
Advances from customers, consolidated VIEs | 5,677,810 | 39,527,778 | 39,631,950 | |
Amounts due to related parties, consolidated VIEs | 10,683,951 | 74,379,529 | 71,849,633 | |
Deferred revenue, consolidated VIEs | 159,125 | |||
Refund of game points, consolidated VIEs | 24,418,783 | 169,998,682 | $ 24,400,000 | 169,998,682 |
Warrants, consolidated VIEs | 28,527 | 200,000 | 1,490,844 | |
Convertible notes, consolidated VIEs | 59,485,752 | 414,127,908 | 375,257,140 | |
Interest payables, consolidated VIEs | 771,630 | 5,371,931 | 15,298,961 | |
Accrued expense and other current liabilities, consolidated VIEs | $ 13,378,845 | ¥ 93,140,843 | ¥ 81,291,306 | |
Ordinary shares, par value | $ / shares | $ 0.01 | $ 0.01 | ||
Ordinary shares, shares issued | shares | 106,407,008 | 106,407,008 | 350,000,000 | 350,000,000 |
Ordinary shares, shares outstanding | shares | 91,315,465 | 91,315,465 | ||
Variable Interest Entity, Primary Beneficiary | ||||
Short-term borrowings, consolidated VIEs | ¥ 0 | ¥ 0 | ||
Current portion of operating lease liabilities | 34,227 | |||
Non current portion of operating lease liabilities | $ | $ 18,287 | |||
Other advances | $ | $ 0 | $ 0 | ||
Accounts payable, consolidated VIEs | 5,920,126 | 5,920,126 | ||
Other taxes payable, consolidated VIEs | 1,398,996 | 1,398,996 | ||
Advances from customers, consolidated VIEs | 23,976,676 | 23,976,676 | ||
Amounts due to related parties, consolidated VIEs | 62,268,751 | 62,268,751 | ||
Deferred revenue, consolidated VIEs | 0 | 0 | ||
Refund of game points, consolidated VIEs | 169,998,682 | 169,998,682 | ||
Warrants, consolidated VIEs | 0 | 0 | ||
Convertible notes, consolidated VIEs | 0 | 0 | ||
Interest payables, consolidated VIEs | 0 | 0 | ||
Accrued expense and other current liabilities, consolidated VIEs | ¥ 67,862,435 | ¥ 67,862,435 | ||
Class A ordinary shares | ||||
Ordinary shares, par value | $ / shares | $ 0.01 | $ 0.01 | ||
Common Stock, Shares Authorized | shares | 4,300,000,000 | 4,300,000,000 | ||
Ordinary shares, shares issued | shares | 103,737,691 | 103,737,691 | 0 | 0 |
Ordinary shares, shares outstanding | shares | 103,737,691 | 103,737,691 | 0 | 0 |
Class B ordinary shares | ||||
Ordinary shares, par value | $ / shares | $ 0.01 | $ 0.01 | ||
Common Stock, Shares Authorized | shares | 600,000,000 | 600,000,000 | ||
Ordinary shares, shares issued | shares | 9,192,011 | 9,192,011 | 0 | 0 |
Ordinary shares, shares outstanding | shares | 9,192,011 | 9,192,011 | 0 | 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | Ordinary sharesUSD ($)shares | Ordinary sharesCNY (¥)shares | Additional paid-in capitalCNY (¥) | Statutory reservesCNY (¥) | Accumulated other comprehensive income (loss)CNY (¥) | Accumulated deficitCNY (¥) | Equity (deficit) attributable to The9 limitedCNY (¥) | Noncontrolling interestCNY (¥) | USD ($) | CNY (¥) |
Balance at Dec. 31, 2016 | ¥ 1,931,642 | ¥ 2,525,599,832 | ¥ 28,071,982 | ¥ 2,582,023 | ¥ (2,897,802,287) | ¥ (339,616,808) | ¥ (362,437,649) | ¥ (702,054,457) | ||
Balance (in shares) at Dec. 31, 2016 | shares | 23,915,501 | 23,915,501 | ||||||||
Net loss | (118,165,850) | (118,165,850) | 3,955,640 | (114,210,210) | ||||||
Currency translation adjustments | (19,027,771) | (19,027,771) | 9,502,010 | (9,525,761) | ||||||
Minority interest change in redemption value | (57,126,233) | |||||||||
Disposal of Yunmei Partnership | 117,983 | 117,983 | ||||||||
Contributions from noncontrolling interest | 20,000,000 | 20,000,000 | ||||||||
Exercise of options | ¥ 425,483 | (425,483) | ||||||||
Exercise of options (in shares) | shares | 6,328,535 | 6,328,535 | ||||||||
Share-based compensation | 37,727,861 | 37,727,861 | 301,852 | 38,029,713 | ||||||
Change in redemption value of redeemable noncontrolling interest | (57,126,233) | (57,126,233) | (57,126,233) | |||||||
Change in equity interest attributable to noncontrolling interest | (7,060) | (7,060) | 7,060 | (7,060) | ||||||
Issuance of shares | ¥ 971,727 | 21,446,398 | 22,418,125 | 22,418,125 | ||||||
Issuance of shares, (in shares) | shares | 14,300,000 | 14,300,000 | ||||||||
Balance at Dec. 31, 2017 | ¥ 3,328,852 | 2,527,215,315 | 28,071,982 | (16,445,748) | (3,015,968,137) | (473,797,736) | (328,553,104) | (802,350,840) | ||
Balance (in shares) at Dec. 31, 2017 | shares | 44,544,036 | 44,544,036 | ||||||||
Net loss | (217,092,926) | (217,092,926) | (16,332,968) | (233,425,894) | ||||||
Currency translation adjustments | 7,241,192 | 7,241,192 | (8,555,457) | (1,314,265) | ||||||
Minority interest change in redemption value | (40,918,773) | |||||||||
Derecognition of noncontrolling interests | (20,000,000) | (20,000,000) | ||||||||
Share-based compensation | 3,645,751 | 3,645,751 | 252,577 | 3,898,328 | ||||||
Change in redemption value of redeemable noncontrolling interest | (40,918,773) | (40,918,773) | (40,918,773) | |||||||
Change in equity interest attributable to noncontrolling interest | 0 | |||||||||
Issuance of shares | ¥ 3,173,806 | 6,126,772 | 9,300,578 | 9,300,578 | ||||||
Issuance of shares, (in shares) | shares | 46,771,429 | 46,771,429 | ||||||||
Balance at Dec. 31, 2018 | ¥ 6,502,658 | 2,496,069,065 | 28,071,982 | (9,204,556) | (3,233,061,063) | (711,621,914) | (373,188,952) | (1,084,810,866) | ||
Balance (in shares) at Dec. 31, 2018 | shares | 91,315,465 | 91,315,465 | ||||||||
Net loss | (177,795,168) | (177,795,168) | (13,517,983) | (191,313,151) | ||||||
Currency translation adjustments | 5,426,604 | 5,426,604 | (6,220,135) | $ (113,984) | (793,531) | |||||
Minority interest change in redemption value | (1,842,569) | (12,827,598) | ||||||||
Share-based compensation | $ 6,169,355 | ¥ 425,593 | 21,279,647 | 21,705,240 | 45,293 | 21,750,533 | ||||
Change in redemption value of redeemable noncontrolling interest | (12,827,598) | (12,827,598) | (12,827,598) | |||||||
Change in equity interest attributable to noncontrolling interest | 0 | 0 | ||||||||
Issuance of shares | ¥ 1,041,557 | 35,031,364 | 36,072,921 | 36,072,921 | ||||||
Issuance of shares, (in shares) | shares | 15,444,882 | 15,444,882 | ||||||||
Balance at Dec. 31, 2019 | ¥ 7,969,808 | ¥ 2,539,552,478 | ¥ 28,071,982 | ¥ (3,777,952) | ¥ (3,410,856,231) | ¥ (839,039,915) | ¥ (392,881,777) | $ (176,954,479) | ¥ (1,231,921,692) | |
Balance (in shares) at Dec. 31, 2019 | shares | 112,929,702 | 112,929,702 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
Cash flows from operating activities: | ||||
Net loss | $ (28,177,876) | ¥ (196,168,740) | ¥ (239,284,796) | ¥ (112,092,907) |
Adjustments for: | ||||
Loss (gain) on disposal of property, equipment and software | (309,282) | (2,153,158) | (183,767) | 18,460 |
Gain on disposal of subsidiaries | (173,364) | (1,206,925) | (10,473,159) | 0 |
Gain on disposal of other investments | (1,929,183) | (13,430,588) | 0 | 0 |
Share-based compensation expenses | 3,124,269 | 21,750,533 | 3,898,328 | 38,029,713 |
Impairment on equity investments | 670,247 | 4,666,128 | 1,386,174 | 0 |
Impairment on other investments and available-for-sale investments | 544,549 | 3,791,039 | 7,776,157 | 9,109,312 |
Impairment on other long-lived assets | 5,010,342 | 34,881,000 | 0 | 0 |
Provision for doubtful accounts receivable | 24,335 | 169,416 | 109,939 | 47,948 |
Impairment on advances to suppliers | 7,765,482 | 0 | ||
Impairment on other advances | 859,086 | 5,980,787 | 0 | 0 |
Provision for doubtful other receivables | 21,042,700 | 0 | ||
Consulting fee paid by issuance of shares | 5,040,605 | 35,091,686 | 4,172,800 | 13,454,692 |
Depreciation and amortization of property, equipment and software | 400,000 | 2,778,778 | 3,650,261 | 5,299,059 |
Amortization of land use right | 200,000 | 1,440,682 | 1,920,910 | 1,920,910 |
Recovery of equity investment in excess of cost | 0 | (60,548,651) | ||
Share of loss in equity method investments | 408,983 | 2,847,260 | 4,292,887 | 2,937,131 |
Gain on disposal of investment in equity investee and available-for-sales investment | (99,777) | (694,628) | (115,349) | |
Gain on disposal of investment in equity investee and available-for-sales investment | (99,777) | (694,628) | 0 | (115,349) |
Foreign currency exchange (gain) loss | 786,291 | 5,474,002 | 20,331,430 | (19,206,747) |
Fair value change on warrant liability | (185,619) | (1,292,244) | (2,251,427) | (12,615,466) |
Amortization of discount and interest on convertible notes | 4,762,302 | 33,154,191 | 98,308,205 | 76,990,826 |
Non-cash lease expense | 58,756 | 409,048 | 0 | 0 |
Changes in operating assets and liabilities: | ||||
Change in accounts receivable | 44,966 | 313,044 | 1,904,732 | 5,742,365 |
Change in advances to suppliers | (203,877) | (1,419,353) | (1,400,665) | 2,462,761 |
Change in prepayments and other current assets | (952,181) | (6,628,897) | (20,575,190) | 3,169,076 |
Change in right-of-use assets | (1,388,528) | (9,666,652) | 0 | 0 |
Change in other long-lived assets | 6,220 | 0 | ||
Change in accounts payable | 35,445 | 246,764 | 905,990 | 2,073,797 |
Change in amounts due to related parties | 451,623 | 3,144,106 | (1,628,877) | (53,060,754) |
Change in other taxes payable | (70,544) | (491,112) | 1,234,090 | 1,430,998 |
Change in advances from customers | (2,282) | (15,887) | (2,336,252) | 21,137,125 |
Change in deferred revenue | (22,857) | (159,125) | (5,417,144) | (10,345,604) |
Change in interest payable | 209,401 | 1,457,811 | 6,053,191 | 5,452,770 |
Change in accrued expenses and other current liabilities | 1,708,802 | 11,896,337 | (2,408,745) | (7,943,127) |
Change in lease liabilities | 1,387,482 | 9,659,375 | 0 | 0 |
Net cash used in operating activities | (7,781,799) | (54,175,322) | (101,200,526) | (86,651,662) |
Cash flows from investing activities | ||||
Proceeds from disposal of other investment | 5,318,524 | 37,026,498 | 0 | 1,158,040 |
Proceeds from disposal of equity investee and available-for-sale investment | 99,777 | 694,628 | 0 | 115,349 |
Purchase of other investments | (5,300,000) | (4,000,000) | ||
Deposit for joint venture arrangement | (5,010,342) | (34,881,000) | 0 | 0 |
Advances to subscribe tokens (Note 5) | (14,070,581) | 0 | ||
Disbursement for loans receivable from a related party | (600,000) | (4,000,000) | ||
Collection of loans receivable from related party | 0 | 3,000,000 | ||
Proceeds from disposal of property, equipment and software | 380,399 | 2,648,259 | 81,848 | 292,074 |
Proceeds from disposal of assets and liabilities classified as held- for- sale | 7,081,502 | 49,300,000 | 2,800,000 | 0 |
Proceed from tokens transferred | 989,387 | 6,887,915 | 0 | 0 |
Settlement payment from investee | 0 | 165,812,500 | ||
Purchase of property, equipment and software | (114,470) | (796,921) | (226,717) | (454,560) |
Net cash provided by (used in) investing activities | 8,744,777 | 60,879,379 | (17,315,450) | 161,923,403 |
Cash flows from financing activities: | ||||
Repayments of bank borrowings | 0 | (25,528,388) | ||
Loans from a related party | 2,307,647 | 16,065,376 | 11,030,602 | 73,930,427 |
Repayment of loan from a related party | (1,439,797) | (10,023,576) | (29,127,540) | (23,950,421) |
Proceeds from other loans | 5,010,342 | 34,881,000 | 0 | 19,881,900 |
Repayments of other loans | (260,073) | (20,260,085) | ||
Contribution from noncontrolling interest | 0 | 20,000,000 | ||
Net cash provided by (used in) financing activities | 5,878,192 | 40,922,800 | (18,357,011) | 44,073,433 |
Effect of foreign exchange rate changes on cash and cash equivalents | 180,601 | 1,257,310 | (1,494,584) | 4,527,918 |
Cash reclassified as held for sale | (6,180,510) | (43,027,475) | 0 | (20,127,148) |
Net change in cash and cash equivalents | 841,261 | 5,856,692 | (138,367,571) | 103,745,944 |
Cash and cash equivalents, beginning of year | 611,401 | 4,256,449 | 142,624,020 | 38,878,076 |
Cash and cash equivalents, end of year | 1,452,662 | 10,113,141 | 4,256,449 | 142,624,020 |
Supplemental disclosure of cash flow information: | ||||
Interest paid | 260,073 | 892,159 | ||
Income taxes paid | 0 | 0 | ||
Non-cash investing and financing activities | ||||
Receivable related to the disposition of a subsidiary | 0 | 1,600,000 | ||
Shares issued for equity investments and other investments | 33,995 | 236,667 | 3,091,986 | 0 |
Cash paid for amounts included in the measurement of operating lease liabilities | $ 182,678 | ¥ 1,271,769 | ¥ 0 | ¥ 0 |
ORGANIZATION AND NATURE OF OPER
ORGANIZATION AND NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2019 | |
ORGANIZATION AND NATURE OF OPERATIONS | |
ORGANIZATION AND NATURE OF OPERATIONS | 1. ORGANIZATION AND NATURE OF OPERATIONS The accompanying consolidated financial statements include the financial statements of The9 Limited (“the Company”), which was incorporated on December 22, 1999 in the Cayman Islands, its subsidiaries and variable interest entities (“VIE subsidiaries” or ”VIEs”), collectively referred to as the “Group”. The Group is principally engaged in the development and operation of online games and internet related businesses. In 2019, the Group attempted enter into electric vehicle industry and now aims to become a diversified high-tech Internet company. The Company’s principal subsidiaries and VIEs are as follows as of December 31, 2019: Date of Place of Legal Name of Entity Registration Registration Ownership Principal subsidiaries: GameNow.net (Hong Kong) Ltd. (“ GameNow Hong Kong ”) January‑2000 Hong Kong 100 % China The9 Interactive Limited (“ C9I ”) October‑2003 Hong Kong 100 % China The9 Interactive (Shanghai) Limited (“ C9I Shanghai ”) February‑2005 People’s Republic of China (“PRC”) 100 % China The9 Interactive (Beijing) Ltd. (“ C9I Beijing ”) March‑2007 PRC 100 % JiuTuo (Shanghai) Information Technology Ltd. ( "Jiu Tuo" ) July‑2007 PRC 100 % China Crown Technology Ltd. ( "China Crown Technology" ) November‑2007 Hong Kong 100 % Asian Development Ltd. ( “Asian Development” ) January‑2007 Hong Kong 100 % Asian Way Development Ltd. (“Asian Way”) November‑2007 Hong Kong 100 % New Star International Development Ltd. ( “New Star” ) January‑2008 Hong Kong 100 % Red 5 Studios, Inc. ( “Red 5” ) (Note 2.2) June‑2005 USA 34.71 % Red 5 Singapore Pte. Ltd. (“ Red 5 Singapore ”) (Note 2.2) April‑2010 Singapore 34.71 % The9 Interactive, Inc. (“ The9 Interactive ”) June‑2010 USA 100 % Shanghai Jiu Gang Electronic technology Ltd. (“Jiu Gang”) December‑2014 PRC 100 % City Channel Ltd. (“ City Channel ”) June‑2006 Hong Kong 100 % The9 Singapore Pte. Ltd. (“The9 Singapore”) April‑2010 Singapore 100 % Fast Supreme Development Limited (“ Fast Supreme ”) July‑2017 Hong Kong 99.99 % Ninebit Inc. (“ Ninebit ”) January -2018 Cayman Islands 100 % 1111 Limited (“ 1111 ”) January -2018 Hong Kong 100 % Supreme Exchange Limited (“ Supreme ”) December‑2018 Malta 90 % BET 111 Ltd. ("Bet 111") Jan-2019 Malta 90 % Coin Exchange Ltd ("Coin") Jan-2019 Malta 90 % The9 EV Limited ("The9 EV") May-2019 Hong Kong 100 % Comtec Solar(China)Investment Holding Limited ("Comtec Solar") June-2019 Hong Kong 100 % FF The9 China Joint Venture Limited ("FF The9") September-2019 Hong Kong 50 % Huiling Computer Technology Consulting (Shanghai) Co.Ltd. ("Huiling") March-2019 PRC 100 % Leixian Information Technology (Shanghai) Co., Ltd. ("Leixian") March-2019 PRC 100 % Variable interest entity: Shanghai The9 Information Technology Co., Ltd. (“ Shanghai IT ”) (Note 4) September‑2000 PRC N/A Subsidiaries and VIEs of Shanghai IT: Legal Date of Place of Ownership Held Name of Entity Registration Registration by Shanghai IT Shanghai Jiushi Interactive Network Technology Co., Ltd. ( “Jiushi” ) July‑2011 PRC 80 % Shanghai ShencaiChengjiu Information Technology Co., Ltd. (“ SH Shencai ”) May‑2015 PRC 60 % Wuxi Interest Dynamic Network Technology Co., Ltd. (“ Wuxi Qudong ”) June‑2016 PRC 100 % Changsha Quxiang Network Technology Co., Ltd. (“ Changsha Quxiang ”) July‑2016 PRC 100 % Silver Express Investments Ltd. (“ Silver Express ”) November‑2007 Hong Kong 100 % The9 Computer Technology Consulting (Shanghai) Co., Ltd. ("The9 Computer") June-2000 PRC 100 % Shanghai Kaie Information Technology Co., Ltd. ("Shanghai Kaie") January-2019 PRC 100 % |
PRINCIPAL ACCOUNTING POLICIES
PRINCIPAL ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
PRINCIPAL ACCOUNTING POLICIES | |
PRINCIPAL ACCOUNTING POLICIES | Cash and cash equivalents
Cash and cash equivalents represent cash on hand and highly liquid investments with a maturity date when acquired of three months or less. As of December 31, 2018 and 2019, cash and cash equivalents were comprised primarily of bank deposits where cash is deposited with reputable financial institutions. Included in cash and cash equivalents as of December 31, 2018 and 2019 are amounts denominated in U.S. dollar totaling US$0.08 million and US$0.35 million, respectively.
The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PBOC, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in China’s foreign exchange trading system market. The Group’s aggregate amount of cash and cash equivalents denominated in RMB amounted to RMB3.6 million and RMB7.6 million (US$1.1 million) as of December 31, 2018 and 2019, respectively.
<6> Allowance for doubtful accounts
Accounts receivable mainly consist of receivables from third-party game platforms, and other receivables, which are included in prepayments and other current assets, both of which are recorded net of allowance for doubtful accounts. The Group determines the allowances for doubtful accounts when facts and circumstances indicate that the receivable is unlikely to be collected. Allowances for doubtful accounts are charged to general and administrative expenses. If the financial condition of the Group’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company provided an allowance for doubtful accounts of RMB0.05 million, RMB21.2 million and RMB0.2 million (US$0.01 million) for the years ended December 2017, 2018 and 2019, respectively.
<7> Investments in equity method investee and loan to equity method investee
Equity investments are comprised of investments in privately held companies. The Group uses the equity method to account for an equity investment over which it has the ability to exert significant influence but does not otherwise have control. The Group records equity method investments at the cost of acquisition, plus the Group’s share in undistributed earnings and losses since acquisition. For equity investments over which the Group does not have significant influence or control, the cost method of accounting is used.
The Group has historically provided financial support to certain equity investees in the form of loans. If the Group’s share of the undistributed losses exceeds the carrying amount of an investment accounted for by the equity method, the Group continues to report losses up to the investment carrying amount, including any loans balance due from the equity investees.
The Group assesses its equity investments and loans to equity investees for impairment on a periodic basis by considering factors including, but not limited to, current economic and market conditions, the operating performance of the investees including current earnings trends, the technological feasibility of the investee’s products and technologies, the general market conditions in the investee’s industry or geographic area, factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, cash burn rate, and other company-specific information including recent financing rounds. If it has been determined that the equity investment is less than its related fair value and that this decline is other-than-temporary, the carrying value of the investment and loan to equity investee is adjusted downward to reflect these declines in value.
<8> Available-for-sale investments
Investments in debt and equity securities are, on initial recognition, classified into the three categories: held-to-maturity securities, trading securities and available-for-sale securities. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income.
When there is objective evidence that an available-for-sale investment is impaired, the cumulative losses from declines in fair value that had been recognized directly in other comprehensive income are removed from equity and recognized in earnings. When the available-for-sale investment is sold, the cumulative fair value adjustments previously recognized in accumulated other comprehensive income are recognized in the current period operating results. When the Group determines that the impairment of an available-for-sale equity security is other-than-temporary, the Group recognizes an impairment loss in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. When other-than-temporary impairment has occurred for an available-for-sale debt security and the Group intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, an impairment loss is recognized in earnings equal to the difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The new cost basis will not be changed for subsequent recoveries in fair value. To determine whether a loss is other-than-temporary, the Group reviews the cause and duration of the impairment, the extent to which fair value is less than cost, the financial condition and near-term prospects of the issuer, and the Group’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost.
<9> Property, equipment and software, net
Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:
Leasehold improvements
Shorter of respective lease term or estimated useful life
Computer and equipment
3 to 4 years
Software
5 years
Office furniture and fixtures
3 years
Motor vehicles
5 years
Office buildings
10 to 20 years
In September 2019, the Group entered into an agreement with Kapler Pte. Ltd., a third-party, to sell three subsidiaries which hold land use rights and office buildings located at Zhangjiang, Shanghai. As of December 31, 2019, the transaction was in process and the Group has presented both the land use rights and office buildings as assets held-for-sale (see Note 7).
<10> 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 Group’s business acquisitions. Goodwill is not depreciated or amortized but is tested for impairment at the reporting unit level on an annual basis, and between annual tests when an event or circumstances change occurs that indicate the asset might be impaired. In 2010, the Group recognized goodwill of US$1.6 million in connection with the acquisition of Red 5 and provided a full valuation allowance against that goodwill in 2016. Subsequently, the Group has not recognized additional goodwill.
<11> Assets held for sale
Assets and asset disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Long-lived assets to be sold are classified as held for sale if all the recognition criteria in Accounting Standards Codification (“ASC”) 360-10-45-9 are met:
·
Management, having the authority to approve the action, commits to a plan to sell the asset;
·
The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;
·
An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated;
·
The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year;
·
The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and
·
Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Assets and liabilities classified as held-for-sale are measured at lower of their carrying amount or fair value less costs to sell.
<12> Intangible assets, net
Intangible assets consist primarily of acquired game licenses and acquired game development costs from business combinations.
Acquired game licenses are amortized on a straight-line basis over the shorter of the useful economic life of the relevant online game or license period, which range from two to seven years. Amortization of acquired game licenses commences upon monetization of the related online game. In September 2011, the Group paid US$10.0 million and guaranteed an additional payment of US$12.7 million due within four years to the third-party game publisher to acquire game licenses. In addition, the Group is subject to additional contingent payments to be calculated based on certain percentages of the proceeds received from future game licensing and royalties, if any. The total consideration paid, including the US$10.0 million and the guaranteed amount of US$12.7 million, was recorded as an acquired game license. The contingent payments will be recorded as cost of services when incurred. The remaining payable related to this game license fee was US$3.1 million as of both December 31, 2018 and 2019. The acquired game licenses were fully amortized or impaired in 2016.
The Group recognizes intangible assets acquired through business acquisitions as assets separate from goodwill. Acquired in-process research and development costs are initially considered an indefinite-lived asset. Upon completion of the research and development efforts, these costs are recorded as acquired game development costs and are amortized on a straight-line basis over the estimated useful economic life of the relevant online game. Amortization of acquired game development cost commences upon monetization of the related online game. The acquired game development cost was fully amortized or impaired in 2016.
<13> Land use rights, net
Land use rights represents operating lease prepayments to the PRC’s Land Bureau for usage of the parcel of land located at Zhangjiang, Shanghai. Amortization is calculated using the straight-line method over the estimated land use rights period of 44 years.
In September 2019, the Group entered into a sale purchase agreement with Kapler Pte. Ltd. to sell three subsidiaries which hold the land use rights and office buildings located at Zhangjiang, Shanghai. As of December 31, 2019, the transaction was in process and the Group has presented both the land use right and office buildings as assets held-for sale (see Note 7).
<14> Impairment of long-lived assets
The Group evaluates its long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or that the useful life is shorter than the Group had originally estimated. The Group assesses the recoverability of the long-lived assets by comparing the carrying amount to the estimated future undiscounted cash flow expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets.
Indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess.
<15> Revenue recognition
On January 1, 2018, the Group adopted ASC 606, Revenue from Contracts with Customers , applying the modified retrospective method to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period results are not adjusted.
Revenues are recognized when control of the promised goods or services is transferred to the Group’s customers, in an amount that reflects the consideration of the Group expects to be entitled to in exchange for those goods or services. Depending on the terms of the contract and the laws that apply to the contract, control of the goods or services may be transferred over time or at a point in time.
Online game services
The Group earns revenue from provision of online game operation services to players on the Group’s game servers and third-party platforms and overseas licensing of the online game to other operators. The Group grants operation right on authorized games, together with associated services which are rendered to the customers over time. The Group adopts virtual item / service consumption model for the online game services. Players can access certain games free of charge, but many purchase game points to acquire in-game premium features. The Group may act as principal or agent through the various transaction arrangements.
The determination on whether to record the revenue gross or net is based on an assessment of various factors, including but not limited to whether the Group (i) is the primary obligor in the arrangement; (ii) has general inventory risk; (iii) changes the product or performs part of the services; (iv) has latitude in establishing the selling price; (v) has involvement in the determination of product or service specifications. The assessment is performed for all licensed online games.
When acting as principal
Revenues from online game operation operated through telecom carriers and certain online games operators are recognized upon consumption of the in-game premium features based on gross revenue sharing-payments to third-party operators, but net of value-added tax (“VAT”). The Group earns revenue from the sale of in-game virtual items. Revenues are recognized as the virtual items are consumed or over the estimated lives of the virtual items, which are estimated by considering the average period that players are active and players’ behavior patterns derived from operating data. Accordingly, commission fees paid to third-party operators are recorded as cost of revenues.
When acting as agent
With respect to games license arrangements entered into by third-party operators, if the terms provide that (i) third-party operators are responsible for providing game desired by the game players; (ii) the hosting and maintenance of game servers for running the games is the responsibility of third-party operators; (iii) third-party operators have the right to review and approve the pricing of in-game virtual items and the specification, modification or update of the game made by the Group; and (iv) publishing, providing payment solution and market promotion services are the responsibilities of third-party operators and the Group is responsible to provide intellectual property licensing and subsequent technical services, then the Group considers itself as an agent of the third-party operators in such arrangement with game players. Accordingly, the Group records the game revenues from these licensed games, net of amounts paid to the third-party operators.
Licensing revenue
The Group licenses its online games, most of which are developed in house, to third parties. The Group receives monthly revenue-based royalty payments from the third-party licensee operators. Monthly revenue-based royalty payments are recognized when the relevant services are delivered, provided that collectability is reasonably assured. The Group views the third-party licensee operators as its customers and recognizes revenues on a net basis, as the Group does not have the primary responsibility for fulfillment and acceptability of the game services. The Group receives additional up-front license fees from certain third-party licensee operators who are entitled to an exclusive right to access the games where initial license fee is allocated solely on the license. License fees are recognized as revenue evenly throughout the license period after commencement of the game, given that the Group’s intellectual property rights subject to the license are considered to be symbolic and the licensee has the right to access such intellectual property rights as they exist over time when the license is granted.
Technical services
Technical services are blockchain-related consulting services where the Group is to provide designing, programming, drafting of white papers, and related services to customers. These revenues are recognized when delivery of the services has occurred or when services have been rendered and the collection of the related fees is reasonably assured.
Contract balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced and revenue recognized prior to invoicing, where the Group has satisfied its performance obligations and has the unconditional right to payment.
Deferred revenue related to unsatisfied performance obligations at the end of the period primarily consists of fees received from game players for online game services and technical services. For deferred revenue, due to the generally short-term duration of the contracts, the majority of the performance obligations are satisfied in the following reporting period. Of the deferred revenue balance at the beginning of the period, revenue of RMB5.4 million and RMB0.2 million (US$0.02 million) was recognized during the years ended December 31, 2018 and 2019, respectively.
<16> Advances from customers
The Group licenses proprietary games to operators in other countries and receives license fees and royalty income. License fees received in advance of the monetization of the game is recorded in advances from customers.
<17> Convertible notes and warrants
Convertible Notes and Beneficial Conversion Feature ("BCF")
The Group issued convertible notes and warrants in December 2015. The Group has evaluated whether the conversion feature of the notes is considered an embedded derivative instrument subject to bifurcation in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities . Based on the Group’s evaluation, the conversion feature is not considered an embedded derivative instrument subject to bifurcation as the conversion option does not provide t he holder of the notes with means to net settle the contracts. Convertible notes, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective rate of conversion per the terms of the convertible notes agreement is below market value. In these instances, the value of the BCF is determined as the intrinsic value of the conversion feature is recorded as deduction to the carrying amount of the notes and credited to additional paid-in-capital. For convertible notes issued with detachable warrants, a portion of the note’s proceeds is allocated to the warrant based on the fair value of the warrants at the date of issuance. The allocated fair value for the warrants and the value of the BCF are both recorded in the consolidated financial statements as a debt discount from the face amount of the notes, which is then accreted to interest expense over the life of the related debt using the effective interest method.
The Group present the occurred debt issuance costs as a direct deduction from the convertible notes. Amortization of the costs is reported as interest expense.
Warrants
The Group accounts for the detachable warrants issued in connection " id="sjs-B4" xml:space="preserve">2. PRINCIPAL ACCOUNTING POLICIES <1> Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below. The accompanying consolidated financial statements have been prepared on a going concern basis. The Group has accumulated deficit of approximately RMB3,410.9 million (US$489.9 million) and total current liabilities exceeded total assets by approximately RMB876.6 million (US$125.9 million) as of December 31, 2019. The Group also suffered a net loss of approximately RMB196.2 million (US$28.2 million) for the year ended December 31, 2019. The Group expects to continue to incur product development and sales and marketing expenses for licensed and proprietary new games in order to achieve overall revenue growth. To meet its working capital needs, the Group is considering multiple alternatives, including, but not limited to, additional equity financing, settlement of secured convertibles notes, launch of new games and new operations, and cost controls as outlined below. There can be no assurance that the Group will be able to complete any such transaction on acceptable terms or otherwise. If the Group is unable to obtain the necessary capital, it will need to pursue a plan to license or sell its assets, seek to be acquired by another entity, or cease operations. These factors raise substantial doubt about the Group’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset or liability amounts that might result from the outcome of this uncertainty. Additional Equity Financing The Group intends to obtain financial support from Mr. Jun Zhu, CEO and Chairman of the Group, if needed in 2020. Settlement of Secured Convertibles Notes (see Note 19) On November 24, 2015, the Group entered into an agreement with Splendid Days Limited for a private placement of secured convertible notes for gross proceeds of US$40,050,000. This transaction closed on December 11, 2015. Pursuant to the terms of the agreement, the convertible notes matured in December 2018, subject to a two-year extension at the discretion of the investor. In March 2019, the Group entered into a deed of settlement agreement relating to the settlement of convertible notes which matured in December 2018, pursuant to which the convertible notes should be repaid by May 31, 2019 through the proceeds from the sale of the Group’s subsidiaries that hold office buildings located at Zhangjiang, Shanghai. In November 2019, Splendid Days Limited agreed to extend the repayment date to December 31, 2019 as disposal of those Group subsidiaries was still in process. Subsequent to December 31, 2019, the Group completed disposal of those Group subsidiaries, has repaid the principal and interest due on the entrusted bank loan and has repaid US$4.8 million to the issuer of convertible notes. The Group plans to use proceeds from the above sale to settle remaining outstanding balance of convertible notes amounting to US$55.5 million. Launch of New Games and New Operations The Group plans to launch our proprietary online mobile games on different platforms, including the CrossFire New Mobile Game and Audition. In November 2017, the Group entered into an exclusive publishing agreement with two third-party companies, pursuant to which these third-party companies were granted an exclusive right to publish CrossFire New Mobile Game and Audition in the PRC. The Group has invested significant financial and personnel resources in development of our proprietary CrossFire New Mobile Game and the Group expects to obtain regulatory approval to launch this game in 2020. In February 2018, the Group subscribed for a total of 5,297,157 tokens to be issued by Telegram Inc. at a consideration of US$2.0 million with a third-party company and the tokens were expected to be issued in 2019. In October 2019, Telegram notified participants of the tokens offering that the U.S. Securities and Exchange Commission (“SEC”) filed a lawsuit against them in United States and that the expected launch date has been extended to April 2020. As of December 31, 2019, the Group has provided a valuation allowance on these subscribed tokens. As of the issuance date of these consolidated financial statements, these subscribed tokens have not been issued. Telegram may further extend the launch date or may enter into a termination arrangement depending on the development of the future events. In March 2019, the Group entered into a joint venture agreement with Faraday & Future Inc. (“F&F”), and subsequently attempted to enter into electric vehicle business. The Group has established a joint venture with F&F to manufacture, market, distribute and sell certain of F&F’s car models in the PRC. As of December 31, 2019, the Group has not entered into a license agreement with F&F and has not fulfilled its first installment capital commitment to the development of the joint venture. While the joint venture arrangement remains effective, the Group is currently in the process of identifying alternative business development areas. Cost Controls Currently, a significant portion of our cash outflows is attributable to administrative expenses. The Group has the ability to control the level of discretionary spending on administrative expenses by implementation of cost savings on non-essential expenses from the day-to-day business operations. <2> Consolidation The consolidated financial statements include the financial statements of The9 Limited, its subsidiaries and VIEs in which it has a controlling financial interest. A subsidiary is consolidated from the date on which the Group obtained control and continues to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity. If the Group demonstrates its ability to control a VIE through its rights to all the residual benefits of the VIE and its obligation to fund losses of the VIE, then the VIE is consolidated. All intercompany balances and transactions between The9 Limited, its subsidiaries and VIEs have been eliminated in consolidation. In April 2010, the Group acquired a controlling interest in Red 5. In June 2016, the Group completed a share exchange transaction with L&A International Holding Limited (“L&A”) and certain other shareholders of Red 5 (see Note 9). After the transaction, the Group owned 34.71% shareholding in Red 5. As the Group controls a majority of Board of Director seats and only a majority vote is required to approve Board of Director resolutions, and as the Group has continuously funded the operation of Red 5, the Group still retained effective control over Red 5. Red 5 remained as a consolidated entity of the Group as of December 31, 2019. PRC laws and regulations currently prohibit or restrict foreign ownership of internet-related business. In September 2009, the General Administration of Press and Publication Radio, Film and Television (“GAPPRFT”) further promulgated the Circular Regarding the Implementation of the Department Reorganization Regulation by State Council and Relevant Interpretation by State Commission Office for Public Sector Reform to Further Strengthen the Administration of Pre-approval on Online Games and Approval on Import Online Games (the “GAPP Circular”). Pursuant to Administrative Measures on Network Publication (the “Network Publication Measures”) jointly issued by GAPPRFT and the Ministry of Information Industry (which has subsequently been reorganized as the Ministry of Industry and Information Technology) (“MIIT”) on February 4, 2016, effective from March 2016, wholly foreign-owned enterprises, Sino-foreign equity joint ventures and Sino-foreign cooperative enterprises shall not engage in the provision of web publishing services, including online game services. Prior examination and approval by GAPPRFT are required on project cooperation involving internet publishing services between an internet publishing services and a wholly foreign-owned enterprise, Sino-foreign equity joint venture, or Sino-foreign cooperative enterprise within China or an overseas organization or individual. It is unclear whether PRC authorities will deem our VIE structure as a kind of such “manners of cooperation” by foreign investors to gain control over or participate in domestic online game operators, and it is not clear whether GAPPRFT and MIIT have regulatory authority over the ownership structures of online game companies based in China and online game operations in China. Therefore, the Group believes that its ability to direct those activities of its VIEs that most significantly impact their economic performance is not affected by the GAPP Circular. <3> Use of estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reported periods. Significant accounting estimates reflected in the Group’s consolidated financial statements include the valuation of non-marketable equity investments and determination of other-than-temporary impairment, allowance for doubtful accounts, revenue recognition, assessment of impairment of other long-lived assets, assessment of impairment of advances to suppliers and other advances, incremental borrowing rates for lease assessment, fair value of redeemable noncontrolling interest, fair value of the warrants, share-based compensation expenses, consolidation of VIEs, valuation allowances for deferred tax assets, and contingencies. Such accounting policies are affected significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements, and actual results could differ materially from these estimates. <4> Foreign currency translation The Group’s reporting currency is the Renminbi (“RMB”). The Group’s functional currency, with the exception of its subsidiaries, Red 5, The9 Interactive, and Red 5 Singapore, is the RMB. The functional currency of Red 5, The9 Interactive, and Red 5 Singapore, is the United States dollar ("US$" or "U.S. dollar"), U.S. dollar, and Singapore dollar, respectively. Assets and liabilities of Red 5, The9 Interactive, and Red 5 Singapore, are translated at the current exchange rates quoted by the People’s Bank of China (the “PBOC”) in effect at the balance sheet dates. Equity accounts are translated at historical exchange rates and revenues and expenses are translated at the average exchange rates in effect during the reporting period to RMB. Gains and losses resulting from foreign currency translation to reporting currency are recorded in accumulated other comprehensive income (loss) in the consolidated statements of changes in equity for the years presented. Transactions denominated in currencies other than functional currencies, are translated into functional currencies at the exchange rates prevailing at the dates of the transactions. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations and comprehensive loss. Monetary assets and liabilities denominated in foreign currencies are translated into functional currencies using the applicable exchange rates at the balance sheet dates. All such exchange gains and losses are included in foreign exchange (loss) gain in the consolidated statements of operations and comprehensive loss. <5> Cash and cash equivalents Cash and cash equivalents represent cash on hand and highly liquid investments with a maturity date when acquired of three months or less. As of December 31, 2018 and 2019, cash and cash equivalents were comprised primarily of bank deposits where cash is deposited with reputable financial institutions. Included in cash and cash equivalents as of December 31, 2018 and 2019 are amounts denominated in U.S. dollar totaling US$0.08 million and US$0.35 million, respectively. The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PBOC, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in China’s foreign exchange trading system market. The Group’s aggregate amount of cash and cash equivalents denominated in RMB amounted to RMB3.6 million and RMB7.6 million (US$1.1 million) as of December 31, 2018 and 2019, respectively. <6> Allowance for doubtful accounts Accounts receivable mainly consist of receivables from third-party game platforms, and other receivables, which are included in prepayments and other current assets, both of which are recorded net of allowance for doubtful accounts. The Group determines the allowances for doubtful accounts when facts and circumstances indicate that the receivable is unlikely to be collected. Allowances for doubtful accounts are charged to general and administrative expenses. If the financial condition of the Group’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company provided an allowance for doubtful accounts of RMB0.05 million, RMB21.2 million and RMB0.2 million (US$0.01 million) for the years ended December 2017, 2018 and 2019, respectively. <7> Investments in equity method investee and loan to equity method investee Equity investments are comprised of investments in privately held companies. The Group uses the equity method to account for an equity investment over which it has the ability to exert significant influence but does not otherwise have control. The Group records equity method investments at the cost of acquisition, plus the Group’s share in undistributed earnings and losses since acquisition. For equity investments over which the Group does not have significant influence or control, the cost method of accounting is used. The Group has historically provided financial support to certain equity investees in the form of loans. If the Group’s share of the undistributed losses exceeds the carrying amount of an investment accounted for by the equity method, the Group continues to report losses up to the investment carrying amount, including any loans balance due from the equity investees. The Group assesses its equity investments and loans to equity investees for impairment on a periodic basis by considering factors including, but not limited to, current economic and market conditions, the operating performance of the investees including current earnings trends, the technological feasibility of the investee’s products and technologies, the general market conditions in the investee’s industry or geographic area, factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, cash burn rate, and other company-specific information including recent financing rounds. If it has been determined that the equity investment is less than its related fair value and that this decline is other-than-temporary, the carrying value of the investment and loan to equity investee is adjusted downward to reflect these declines in value. <8> Available-for-sale investments Investments in debt and equity securities are, on initial recognition, classified into the three categories: held-to-maturity securities, trading securities and available-for-sale securities. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income. When there is objective evidence that an available-for-sale investment is impaired, the cumulative losses from declines in fair value that had been recognized directly in other comprehensive income are removed from equity and recognized in earnings. When the available-for-sale investment is sold, the cumulative fair value adjustments previously recognized in accumulated other comprehensive income are recognized in the current period operating results. When the Group determines that the impairment of an available-for-sale equity security is other-than-temporary, the Group recognizes an impairment loss in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. When other-than-temporary impairment has occurred for an available-for-sale debt security and the Group intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, an impairment loss is recognized in earnings equal to the difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The new cost basis will not be changed for subsequent recoveries in fair value. To determine whether a loss is other-than-temporary, the Group reviews the cause and duration of the impairment, the extent to which fair value is less than cost, the financial condition and near-term prospects of the issuer, and the Group’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost. <9> Property, equipment and software, net Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives: Leasehold improvements Shorter of respective lease term or estimated useful life Computer and equipment 3 to 4 years Software 5 years Office furniture and fixtures 3 years Motor vehicles 5 years Office buildings 10 to 20 years In September 2019, the Group entered into an agreement with Kapler Pte. Ltd., a third-party, to sell three subsidiaries which hold land use rights and office buildings located at Zhangjiang, Shanghai. As of December 31, 2019, the transaction was in process and the Group has presented both the land use rights and office buildings as assets held-for-sale (see Note 7). <10> 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 Group’s business acquisitions. Goodwill is not depreciated or amortized but is tested for impairment at the reporting unit level on an annual basis, and between annual tests when an event or circumstances change occurs that indicate the asset might be impaired. In 2010, the Group recognized goodwill of US$1.6 million in connection with the acquisition of Red 5 and provided a full valuation allowance against that goodwill in 2016. Subsequently, the Group has not recognized additional goodwill. <11> Assets held for sale Assets and asset disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Long-lived assets to be sold are classified as held for sale if all the recognition criteria in Accounting Standards Codification (“ASC”) 360-10-45-9 are met: · Management, having the authority to approve the action, commits to a plan to sell the asset; · The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets; · An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated; · The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year; · The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and · Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Assets and liabilities classified as held-for-sale are measured at lower of their carrying amount or fair value less costs to sell. <12> Intangible assets, net Intangible assets consist primarily of acquired game licenses and acquired game development costs from business combinations. Acquired game licenses are amortized on a straight-line basis over the shorter of the useful economic life of the relevant online game or license period, which range from two to seven years. Amortization of acquired game licenses commences upon monetization of the related online game. In September 2011, the Group paid US$10.0 million and guaranteed an additional payment of US$12.7 million due within four years to the third-party game publisher to acquire game licenses. In addition, the Group is subject to additional contingent payments to be calculated based on certain percentages of the proceeds received from future game licensing and royalties, if any. The total consideration paid, including the US$10.0 million and the guaranteed amount of US$12.7 million, was recorded as an acquired game license. The contingent payments will be recorded as cost of services when incurred. The remaining payable related to this game license fee was US$3.1 million as of both December 31, 2018 and 2019. The acquired game licenses were fully amortized or impaired in 2016. The Group recognizes intangible assets acquired through business acquisitions as assets separate from goodwill. Acquired in-process research and development costs are initially considered an indefinite-lived asset. Upon completion of the research and development efforts, these costs are recorded as acquired game development costs and are amortized on a straight-line basis over the estimated useful economic life of the relevant online game. Amortization of acquired game development cost commences upon monetization of the related online game. The acquired game development cost was fully amortized or impaired in 2016. <13> Land use rights, net Land use rights represents operating lease prepayments to the PRC’s Land Bureau for usage of the parcel of land located at Zhangjiang, Shanghai. Amortization is calculated using the straight-line method over the estimated land use rights period of 44 years. In September 2019, the Group entered into a sale purchase agreement with Kapler Pte. Ltd. to sell three subsidiaries which hold the land use rights and office buildings located at Zhangjiang, Shanghai. As of December 31, 2019, the transaction was in process and the Group has presented both the land use right and office buildings as assets held-for sale (see Note 7). <14> Impairment of long-lived assets The Group evaluates its long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or that the useful life is shorter than the Group had originally estimated. The Group assesses the recoverability of the long-lived assets by comparing the carrying amount to the estimated future undiscounted cash flow expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets. Indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess. <15> Revenue recognition On January 1, 2018, the Group adopted ASC 606, Revenue from Contracts with Customers , applying the modified retrospective method to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period results are not adjusted. Revenues are recognized when control of the promised goods or services is transferred to the Group’s customers, in an amount that reflects the consideration of the Group expects to be entitled to in exchange for those goods or services. Depending on the terms of the contract and the laws that apply to the contract, control of the goods or services may be transferred over time or at a point in time. Online game services The Group earns revenue from provision of online game operation services to players on the Group’s game servers and third-party platforms and overseas licensing of the online game to other operators. The Group grants operation right on authorized games, together with associated services which are rendered to the customers over time. The Group adopts virtual item / service consumption model for the online game services. Players can access certain games free of charge, but many purchase game points to acquire in-game premium features. The Group may act as principal or agent through the various transaction arrangements. The determination on whether to record the revenue gross or net is based on an assessment of various factors, including but not limited to whether the Group (i) is the primary obligor in the arrangement; (ii) has general inventory risk; (iii) changes the product or performs part of the services; (iv) has latitude in establishing the selling price; (v) has involvement in the determination of product or service specifications. The assessment is performed for all licensed online games. When acting as principal Revenues from online game operation operated through telecom carriers and certain online games operators are recognized upon consumption of the in-game premium features based on gross revenue sharing-payments to third-party operators, but net of value-added tax (“VAT”). The Group earns revenue from the sale of in-game virtual items. Revenues are recognized as the virtual items are consumed or over the estimated lives of the virtual items, which are estimated by considering the average period that players are active and players’ behavior patterns derived from operating data. Accordingly, commission fees paid to third-party operators are recorded as cost of revenues. When acting as agent With respect to games license arrangements entered into by third-party operators, if the terms provide that (i) third-party operators are responsible for providing game desired by the game players; (ii) the hosting and maintenance of game servers for running the games is the responsibility of third-party operators; (iii) third-party operators have the right to review and approve the pricing of in-game virtual items and the specification, modification or update of the game made by the Group; and (iv) publishing, providing payment solution and market promotion services are the responsibilities of third-party operators and the Group is responsible to provide intellectual property licensing and subsequent technical services, then the Group considers itself as an agent of the third-party operators in such arrangement with game players. Accordingly, the Group records the game revenues from these licensed games, net of amounts paid to the third-party operators. Licensing revenue The Group licenses its online games, most of which are developed in house, to third parties. The Group receives monthly revenue-based royalty payments from the third-party licensee operators. Monthly revenue-based royalty payments are recognized when the relevant services are delivered, provided that collectability is reasonably assured. The Group views the third-party licensee operators as its customers and recognizes revenues on a net basis, as the Group does not have the primary responsibility for fulfillment and acceptability of the game services. The Group receives additional up-front license fees from certain third-party licensee operators who are entitled to an exclusive right to access the games where initial license fee is allocated solely on the license. License fees are recognized as revenue evenly throughout the license period after commencement of the game, given that the Group’s intellectual property rights subject to the license are considered to be symbolic and the licensee has the right to access such intellectual property rights as they exist over time when the license is granted. Technical services Technical services are blockchain-related consulting services where the Group is to provide designing, programming, drafting of white papers, and related services to customers. These revenues are recognized when delivery of the services has occurred or when services have been rendered and the collection of the related fees is reasonably assured. Contract balances Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced and revenue recognized prior to invoicing, where the Group has satisfied its performance obligations and has the unconditional right to payment. Deferred revenue related to unsatisfied performance obligations at the end of the period primarily consists of fees received from game players for online game services and technical services. For deferred revenue, due to the generally short-term duration of the contracts, the majority of the performance obligations are satisfied in the following reporting period. Of the deferred revenue balance at the beginning of the period, revenue of RMB5.4 million and RMB0.2 million (US$0.02 million) was recognized during the years ended December 31, 2018 and 2019, respectively. <16> Advances from customers The Group licenses proprietary games to operators in other countries and receives license fees and royalty income. License fees received in advance of the monetization of the game is recorded in advances from customers. <17> Convertible notes and warrants Convertible Notes and Beneficial Conversion Feature ("BCF") The Group issued convertible notes and warrants in December 2015. The Group has evaluated whether the conversion feature of the notes is considered an embedded derivative instrument subject to bifurcation in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities . Based on the Group’s evaluation, the conversion feature is not considered an embedded derivative instrument subject to bifurcation as the conversion option does not provide t he holder of the notes with means to net settle the contracts. Convertible notes, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective rate of conversion per the terms of the convertible notes agreement is below market value. In these instances, the value of the BCF is determined as the intrinsic value of the conversion feature is recorded as deduction to the carrying amount of the notes and credited to additional paid-in-capital. For convertible notes issued with detachable warrants, a portion of the note’s proceeds is allocated to the warrant based on the fair value of the warrants at the date of issuance. The allocated fair value for the warrants and the value of the BCF are both recorded in the consolidated financial statements as a debt discount from the face amount of the notes, which is then accreted to interest expense over the life of the related debt using the effective interest method. The Group present the occurred debt issuance costs as a direct deduction from the convertible notes. Amortization of the costs is reported as interest expense. Warrants The Group accounts for the detachable warrants issued in connection |
CONVENIENCE TRANSLATION
CONVENIENCE TRANSLATION | 12 Months Ended |
Dec. 31, 2019 | |
CONVENIENCE TRANSLATION | |
CONVENIENCE TRANSLATION | 3. CONVENIENCE TRANSLATION The Group, with the exception of its subsidiaries, Red 5, The9 Interactive and Red 5 Singapore, maintains its accounting records and prepares its financial statements in RMB. The U.S. dollar amounts disclosed in the accompanying financial statements are presented solely for the convenience of the readers at the rate of US$1.00 = RMB6.9618, representing the noon buying rate in New York for cable transfers of RMB, as certified for customs purposes by the Federal Reserve Bank of New York, on December 31, 2019. Such translations should not be construed as representations that the RMB amounts represent, or have been or could be converted into, United States dollars at that or any other rate. |
VARIABLE INTEREST ENTITIES
VARIABLE INTEREST ENTITIES | 12 Months Ended |
Dec. 31, 2019 | |
VARIABLE INTEREST ENTITIES | |
VARIABLE INTEREST ENTITIES | 4. VARIABLE INTEREST ENTITIES The Group is the primary beneficiary of its VIEs, including Shanghai IT which was designed by the Group to comply with PRC regulations that prohibit direct foreign ownership of businesses that operate online and TV games in the PRC. Shanghai IT and its VIE subsidiaries There are certain key contractual arrangements between the Group’s subsidiary, Huiling (wholly-owned foreign enterprise, the "WOFE") and each of the VIEs that provide the Group with control over the VIEs. As a result of these contracts, the Group concluded that it is required to consolidate the VIEs pursuant to the guidance in ASC 810. A summary of these contractual agreements is as follows: 1) Loan agreement. The WOFE entered into loan agreements with each shareholder of the relevant VIEs. Pursuant to the terms of these loan agreements, the WOFE granted an interest-free loan to each shareholder of the VIEs for the explicit purpose of making a capital contribution to the VIEs. These loans have an unspecified term and will remain outstanding for the shorter of the duration of WOFE or that of the VIE, or until such time that the WOFE elects to terminate the agreement (which is at the WOFE’s sole discretion), at which point the loans are payable on demand. The shareholders of the VIEs may not prepay all or any portion of the loans without the WOFE’s prior written request. 2) Equity pledge agreement. The shareholders of the VIEs entered into equity pledge agreements with the WOFE. Under the equity pledge agreements, the shareholders of the VIEs pledged all of their equity interests in the VIEs to the WOFE as collateral for all of their payments due to the WOFE and to secure performance of all obligations of the VIEs and their shareholders under the above loan agreements. In addition, the dividend distributions to the shareholders of VIEs, if any, will be deposited in an escrow account over which the WOFE has exclusive control. The pledge shall remain effective until all obligations under such agreements have been fully performed. The shareholders have the obligation to maintain ownership and effective control over the pledged equity. Under no circumstances, without the prior written consent of the WOFE, may the shareholder transfer or otherwise encumber any equity interests in the VIEs. If any event of default as provided for therein occurs, the WOFE, as the pledgee, will be entitled to dispose of the pledged equity interests through transfer or assignment and use the proceeds to repay the loans or make other payments due under the above loan agreements up to the loan amounts. 3) Call option agreement. The VIEs and their shareholders entered into equity call option agreements with the WOFE. Pursuant to such agreements, the shareholders of the VIEs grant the WOFE an irrevocable and exclusive option to purchase the shares of VIEs at a purchase price equal to the amount of the registered capital of the VIE or the loan provided by the WOFE, permissible by the then-applicable PRC laws and regulations. WOFE may exercise such right at any time during the term of the agreement. Moreover, under the call option agreements, neither the VIEs nor their shareholders may take actions that could materially affect the VIEs’ assets, liabilities, operations, equity or other legal rights without the prior written approval of the WOFE, including, without limitation, declaration and distribution of dividends and profits; sale, assignment, mortgage or disposition of, or encumbrances on, the VIE’s equity; merger or consolidation; acquisition of and investment in any third-party entities; creation, assumption, guarantee or incurrence of any indebtedness; entering into other materials contracts. The agreements shall not expire until such time as the WOFE acquires all equity interests of the relevant VIEs subject to applicable PRC laws. 4) Shareholder voting proxy agreement. Each of the VIE’s shareholders executed an irrevocable power of proxy to appoint the WOFE as the attorney-in-fact to act on his or her behalf on all matters pertaining to the VIEs and to exercise all of his or her rights as a shareholder of the VIEs, including the right to attend shareholders meetings, to exercise voting rights and to appoint directors, a general manager, and other senior management of the VIEs. The power of proxy is irrevocable and may only be terminated at the discretion of the WOFE. 5) Exclusive technical service agreement. Under the exclusive technical service agreement, the VIEs agreed to engage the WOFE as their exclusive provider of technology consulting and other services for a service fee equal to 90% of all operating profit generated by the VIEs. According to the relevant PRC rules and regulations, related party transactions should be negotiated at the arm’s length basis and apply reasonable transfer pricing methods. The determination of service fees, however, is under the sole discretion of the WOFE. These agreements do not have specific clauses on renewal but do have an initial term of 20 years (with the earliest expiration date being December 31, 2029). By virtue of the governance rights the WOFE maintains over the VIEs, through the terms of the other agreements noted above, the Group is able to unilaterally renew, extend or amend the service agreements at its discretion. The Group shall be deemed to have a controlling financial interest in a VIE if it has both of the following characteristics: a. The power to direct the activities of a VIE that most significantly impact the VIE’s economic performance; and b. The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. In determining that the Group has "the power to direct the activities of the VIE that most significantly impact the VIEs’ economic performance", the Group looked to the specific provisions of the call option agreement and shareholder voting proxy agreement. These agreements, as summarized above, provide the WOFE effective control over all of the corporate and operating decisions of the VIEs, and as such, the Group’s management concluded that the WOFE has the requisite power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance. In assessing the Group’s obligation to absorb losses, the Group notes that it has funded through the loan agreements all of the entities’ share capital and also provides financial support as necessary to the entities through intercompany transactions. The Group’s rights to receive economic benefits that are significant to the VIEs are embodied firstly in the equity pledge agreements that secure the equity owners’ obligations under the relevant agreements, and ascribes to the WOFE all of the economic benefits of the equity interests including rights to any dividends declared. Secondly, the exclusive technical service agreement further secures the ability of WOFE to receive substantially all of the economic benefits from each of the VIEs on behalf of the Group. In conclusion, because the Group, through its wholly owned subsidiary Huiling, has (1) the power to direct the activities of the VIEs that most significantly affect the VIE’s economic performance, and (2) the right to receive benefits from the VIEs that could potentially be significant to the VIEs, the Group has been deemed to be the primary beneficiary of the VIEs and has consolidated the VIEs since the date of execution of such agreements. Shareholders of the VIEs may potentially have conflicts of interest with the Company, and they may breach their contracts with the PRC subsidiaries or cause such contracts to be amended in a manner contrary to the interests of the Group. As a result, the Group may have to initiate legal proceedings, which involve significant uncertainty. Such disputes and proceedings may significantly disrupt the Groups business operations and adversely affect the Group’s ability to control the VIEs. As most of the shareholders of the VIEs are directors, officers, shareholders or employees of the Group, management is of the view that the risk that misaligned interests may lead to deconsolidation in the foreseeable future is remote and insignificant. PRC laws and regulations currently limit foreign ownership of companies that provide Internet content services, which include operating online games. In addition, foreign invested enterprises are currently not eligible to apply for the required licenses to operate online games in the PRC. The9 Limited is incorporated in the Cayman Islands and is considered a foreign entity under PRC laws. Due to restrictions on foreign ownership of companies that provide online games, the Group has entered into contractual arrangements with Shanghai IT to conduct its online games business through its VIEs in the PRC. Shanghai IT holds the necessary licenses and approvals that are essential for the online game business in China. Shanghai IT is principally owned by certain shareholder and employee of the Company. Pursuant to certain other agreements and undertakings, The9 Limited in substance controls Shanghai IT. The Group believes that its current ownership structures and contractual arrangements with Shanghai IT and its equity owners, as well as its operations, are in compliance with all existing PRC laws and regulations. There may, however, be changes and other developments in the PRC laws and regulations or their interpretation. Specifically, following the recent promulgation of the GAPPRFT Circular, it is unclear whether the authorities will deem our VIE structure and contractual arrangements with Shanghai IT as an “indirect or disguised” way for foreign investors to gain control over or participate in domestic online game operators, and challenge our VIE structure accordingly. If the Group is found to be in violation of any existing or future PRC laws or regulations, or fails to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including requiring the Group to undergo a costly and disruptive restructuring, such as forcing The9 Limited to transfer its equity interest in the VIEs to a domestic entity or invalidating the VIE agreements. If the PRC government authorities impose penalties which cause the Group to lose its rights to direct the activities of and receive economic benefits from the VIEs, the Group may lose the ability to consolidate and reflect in its financial statements the financial position, and results of operation of the VIEs. The Group, however, does not believe such actions would result in the liquidation or dissolution of the Group, the WOFEs or VIEs. The aforementioned contractual arrangements with the VIEs and their respective shareholders are subject to risks and uncertainties: · The VIEs or their shareholders could fail to obtain the proper operating licenses or fail to comply with other regulatory requirements. As a result, the PRC government could impose fines, new requirements or other penalties on the VIEs or the Group mandate a change in ownership structure or operations for the VIEs or the Group, restrict the VIEs or the Group’s use of financing sources, or otherwise restrict the VIEs or the Group’s ability to conduct business. · The aforementioned contractual agreements may be unenforceable or difficult to enforce. The equity pledge agreements may be deemed improperly registered or the VIEs or the Group may fail to meet other requirements. Even if the agreements are enforceable, they may be difficult to enforce given the uncertainties in the PRC legal system. · The PRC government may declare the aforementioned contractual agreements invalid. They may modify the relevant regulation, have a different interpretation of such regulations, or otherwise determine that the Group or the VIEs have failed to comply with the legal obligations required to effectuate such contractual arrangements. · It may be difficult to finance the VIEs by means of loans or capital contributions. Loans from The9 Limited to the VIEs must be approved by the relevant PRC government body and such approval may be difficult or impossible to obtain. The VIEs are domestic PRC enterprises owned by nominee shareholders, thus the Group is not likely to finance activities of the VIEs by means of direct capital contributions. Summary financial information of the VIE subsidiaries included in the accompanying consolidated financial statements with intercompany balances and transactions eliminated are as follows: December 31, 2018 December 31, 2019 December 31, 2019 RMB RMB US$ (Note 3) Total assets 80,531,978 150,615,709 21,634,593 Total liabilities 335,980,249 60,889,508 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Net revenues 19,995,118 16,567,372 182,119 26,160 Net loss (71,839,112) (49,024,050) (51,667,515) (7,421,574) The VIEs contributed an aggregate of 27.3%, 95.0% % and 53.3% of the consolidated net revenues for the years ended December 31, 2017, 2018 and 2019, respectively. As of the fiscal years ended December 31, 2018 and 2019, the VIEs accounted for an aggregate of 48.9% and 83.0%, respectively, of the consolidated total assets, and 37.0% and 39.8%, respectively, of the consolidated total liabilities. The VIE’s assets are not used as collateral for the VIE’s obligations and can only be used to settle the VIE’s obligations. Relevant PRC laws and regulations restrict the VIE subsidiaries from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and share capital, to the Group in the form of loans and advances or cash dividends. See Note 27 for disclosure of restricted net assets. |
ADVANCES TO SUPPLIERS
ADVANCES TO SUPPLIERS | 12 Months Ended |
Dec. 31, 2019 | |
ADVANCES TO SUPPLIERS | |
ADVANCES TO SUPPLIERS | 5. ADVANCES TO SUPPLIERS Advances to suppliers are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Advance to subscribe tokens 14,070,581 10,094,972 1,450,052 Company registration fee 1,383,962 794,692 114,150 Advertising fee 255,259 255,259 36,666 Financing fee — — — Other 98,240 101,685 14,606 15,808,042 11,246,608 1,615,474 The Group has obtained financing for the early phase development of CrossFire New Mobile Game from the Inner Mongolia Culture Assets and Equity Exchange. As of December 31, 2019, the Group had paid RMB7.5 million (US$1.1 million) as the financing fee of the total funds raised and to be raised amounting to RMB157.5 million (US$22.6 million). According to the agreement, the Group paid the total financing fee of RMB7.5 million (US$1.1 million) upon receipt of the first payment in October 2016 (see Note 17). Due to unforeseen circumstances, the Group is not planning to finance the remaining RMB100.0 million (US$14.4 million) and due to non-recovery of the advance financing fee, the Group has fully impaired the advance financing fee in 2018. On February 6, 2018, the Group entered into an agreement with a third-party company to subscribe to a total of 5,297,157 tokens for digital assets at a consideration of RMB14.1 million (US$2.0 million). The issuer was expected to issue the tokens in April 2020 or to further extend the launch date or enter into a termination arrangement depending on the development of the events. In July 2019, the Group received an advance of RMB7.0 million (US$1.0 million) from a third-party to transfer approximately 2,222,222 tokens to this third-party. This advanced amount has been presented as other advances as of December 31, 2019 on the consolidated balance sheets. Due to unexpected events to the development for issuance of tokens by the issuer, the Group has performed an impairment assessment to consider on the recoverable amount. The Group has provided an impairment loss of nil and RMB6.0 million (US$0.9 million) for the years ended December 31, 2018 and 2019, respectively. |
PREPAYMENTS AND OTHER CURRENT A
PREPAYMENTS AND OTHER CURRENT ASSETS, NET | 12 Months Ended |
Dec. 31, 2019 | |
PREPAYMENTS AND OTHER CURRENT ASSETS, NET | |
PREPAYMENTS AND OTHER CURRENT ASSETS, NET | 6. PREPAYMENTS AND OTHER CURRENT ASSETS, NET Prepayments and other current assets are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Employee advances 2,158,987 1,648,197 236,749 Prepayments and deposits 693,111 1,488,463 213,804 Input VAT recoverable 1,448,075 1,441,700 207,087 Refundable withholding tax — 1,297,016 186,305 Other receivables, net of allowance for doubtful accounts of RMB 20,770,928 and RMB 5,343,427 as of December 31, 2018 and 2019, respectively 1,848,614 2,973,158 427,067 6,148,787 8,848,534 1,271,012 |
ASSETS HELD-FOR-SALE AND LIABIL
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE | 12 Months Ended |
Dec. 31, 2019 | |
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE | |
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE | 7. ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE On September 26, 2019, the Group entered into an agreement with Kapler Pte. Ltd. to sell three subsidiaries, namely The9 Computer, C9I Shanghai and Shanghai Kaie for total consideration of RMB493.0 million (US$70.8 million). These subsidiaries hold land use rights and office buildings located at Zhangjiang, Shanghai. Proceeds from the disposal will be used to repay both the outstanding entrusted bank loan and convertible notes, with the residual to be used as working capital for the Group’s operations. As of December 31, 2019, Shanghai IT had received an advance of RMB49.3 million, which is 10% of total consideration and accounted under other advances on the consolidated balance sheets. The sale of the subsidiaries was subsequently completed on February 21, 2020. As of the issuance date of these consolidated financial statements, the Group had collected 90% of proceeds from Kapler Pte. Ltd. and the remaining 10% of proceeds is expected to be received in May 2020. As of the issuance date of these consolidated financial statements, the Group has repaid the principal and interest due on the entrusted bank loan and has repaid US$4.8 million to the issuer of convertible notes. The Group plans to use proceeds from the above sale to settle the remaining outstanding balance of convertible notes amounting to US$55.5 million. December 31, 2019 December 31, 2019 RMB US$ (Note 3) Assets classified as held-for-sale Cash and cash equivalents 43,027,475 6,180,510 Prepayments and other current assets 5,162,857 741,598 Property, equipment and software, net 14,051,044 2,018,306 Land use rights, net 61,148,974 8,783,501 Total assets classified as held-for-sale 123,390,350 17,723,915 Liabilities directly associated with assets held-for-sale Accounts payable 50,000 7,182 Other taxes payable 1,585,095 227,685 Other payables and accruals 46,800 6,722 Interest payable 11,384,841 1,635,330 Long-term borrowing due within one year 31,624,560 4,542,584 Total liabilities directly associated with assets held-for-sale 44,691,296 6,419,503 |
INVESTMENTS
INVESTMENTS | 12 Months Ended |
Dec. 31, 2019 | |
INVESTMENTS | |
INVESTMENTS |
—
—
—
Shanghai Big Data Cultures & Media Co., Ltd. (“Big Data”) <2>
6,146,104
—
—
Maxline Holdings Limited (“Maxline”) <6>
1,367,285
—
—
Leading Choice Holdings Limited (“Leading Choice”) <7>
—
—
—
Investments accounted for under cost method:
Shanghai Institute of Visual Art of Fudan University (“SIVA”)
10,000,000
10,000,000
1,436,410
T3 Entertainment Co., Ltd. (“T3”) <3>
24,892,921
—
—
Smartposting Co, Ltd. (“Smartposting”) <4>
2,809,808
—
—
Beijing Ti Knight Network Technology Co., Ltd. (“Beijing Ti Knight”) <5>
—
—
—
Shanghai The9 Education Technology Co., Ltd. (“The9 Education Technology”) <8>
—
—
—
Shanghai Ronglei Culture Communication Co., Ltd. (“Shanghai Ronglei”) <9>
—
—
—
Plutux Limited (“Plutux”) <10>
—
—
—
Zhenjiang Kexin Power System Design and Research Co., Ltd. ("Zhenjiang Kexin") <11>
—
—
—
Total
45,216,118
10,000,000
1,436,410
<1> System Link
In August 2015, System Link entered into an agreement with Smilegate Entertainment, Inc. (“Smilegate”) to form a joint venture company, Oriental Shiny Star Limited (“Oriental Shiny”), for the operation of the CrossFire 2 game. In the event of a successful commercial launch of CrossFire 2, Smilegate would receive a 30% equity share of Oriental Shiny.
In November 2015, Oriental Shiny entered into a license and distribution agreement with Smilegate for publishing and operating CrossFire 2 on an exclusive basis for a five-year term in the PRC (the “License Agreement”). In consideration for the exclusive license, Oriental Shiny made an upfront payment of US$50.0 million and was to make additional payments totaling US$450.0 million based on certain development and operation milestones of CrossFire 2. The payment of license fees was guaranteed by the Group and Qihoo 360 Technology Co., Ltd. (“Qihoo 360”) proportional to their equity interest in System Link.
In October 2017, Oriental Shiny and Smilegate agreed to terminate the License Agreement. In November 2017, Smilegate made a settlement payment of US$25.0 million to both the Group and Qihoo 360, total of US$50.0 million. A settlement agreement was signed among the Group, Qihoo 360 and Smilegate whereby subsequent to the payment of US$50.0 million, the joint venture agreement signed among Oriental Shiny and Smilegate was terminated. During 2017, the Group offset its 2017 share of losses in System Link against the US$25.0 million recovery and reduced its investment in System Link to nil, with the remaining portion of the recovery, RMB60.5 million (US$8.7 million), recorded as gain as the Group then had no future funding obligation to System Link or Oriental Shiny.
As of December 31, 2018, System Link met the criteria as a significant subsidiary in accordance with Rule 3-09 of SEC Regulation S-X but the Group has applied for and received a waiver from the SEC dated June 13, 2019 to not provide separate financial statements of System Link for the fiscal year ended December 31, 2018 and any other filings that would require such separate financial statements for the three years ended December 31, 2018.
<2> Big Data
Shanghai Jiucheng Advertisement Co., Ltd. (“Jiucheng Advertisement”) was previously a subsidiary of the Company. In 2015, the Company granted 33.3% equity interest of Jiucheng Advertisement to two of its employees as share-based compensation and share exchange transaction with Fei Fan Information Technology Co., Ltd. (“Fei Fan”), whereby Jiucheng Advertisement acquired 100% equity interest in Fei Fan in exchange of 30% equity interest in Jiucheng Advertisement. Upon completion of the exchange, the Group’s equity interest in Jiucheng Advertisement was diluted to 46.7%. In November 2015, the Group’s equity interest in Jiucheng Advertisement was further diluted to 42.0% as a result of capital injection by other shareholders. In August 2016, Jiucheng Advertisement raised capital from the Group and a third-party, and as a result, the Group’s equity interest in Jiucheng Advertisement became 43.7%. In October 2016, the Group’s equity interest in Jiucheng Advertisement further increased to 44.5% after the execution of certain terms under the investment agreements among certain investors of Jiucheng Advertisement.
In December 2016, the Group entered into an agreement with third-party investors of Jiucheng Advertisement. According to the agreement, the Group would repurchase an additional 19.11% equity interest in Jiucheng Advertisement for RMB18.3 million (US$2.6 million) from those third-party investors if Jiucheng Advertisement is not listed on the PRC’s National Equities Exchange and Quotations (“NEEQ”), commonly known as the New Third Board, before December 31, 2017. In March 2017, Jiucheng Advertisement was renamed as Shanghai Big Data Cultures & Media Co., Ltd. (“Big Data”). In September 2017, Big Data listed its shares on NEEQ. As Big Data has listed its shares on NEEQ and has fulfilled its obligation, the Group was relieved of its obligation to repurchase 19.11% equity interest in Big Data from those third-party investors. After the listing, the Group holds a 44.46% equity interest in Big Data. In 2019, there was no change in the equity interest of Big Data and the Group has recorded share of loss on Big Data amounting to RMB2.8 million (US$0.4 million) was recognized.
In 2019, due to weaker than expected operating performance, the investment in Big Data was fully impaired and an impairment loss of RMB3.4 million (US$0.5 million) was recorded for the year ended December 31, 2019.
<3> T3
In April 2008, the Group, through China Crown Technology, acquired 3,031,232 preferred shares issued by G10 Incorporation (“G10”), an established Korean online game developer and operator, which accounted for less than 20% of the equity interest in G10 and accounted the investment under cost method. In December 2011, pursuant to the agreement between the shareholders of G10 and T3, a wholly-owned subsidiary of G10, G10 was spun off and the shareholders of G10 became shareholders of T3 at the same shareholding percentages. In February 2012, the changes in shareholding structures of G10 and T3 was completed and the Group owned 32,290 ordinary shares of T3, which reflects the same percentage of equity the Group owned in G10 on as an converted basis.
In July 2019, China Crown Technology disposed all of its ordinary shares in T3 to third-parties for a total consideration of KRW6,092.8 million, approximately US$5.2 million, and recorded a gain on disposal of RMB10.4 million (US$1.5 million).
<4> Smartposting
In June 2017, the Group completed a share exchange transaction with IE Limited (“IE”), which was a listed company on Korean Securities Dealers Automated Quotations of Korea Exchange (“KOSDAQ”) for issuance and sale of 12,500,000 ordinary shares of the Company with a 10-year lock-up period. In exchange, IE transferred 14.55% equity interest in Smartposting, a wholly-owned subsidiary of IE. The fair value of 14.55% equity interest in Smartposting was considered to be the value of the assets surrendered to the Group in this non-monetary exchange transaction. Due to weaker than expected operating performance of Smartposting, the Group recorded an impairment of RMB5.1 million, RMB1.1million and RMB2.8 million (US$0.4 million) for the years ended December 31, 2017, 2018 and 2019, respectively.
<5> Beijing Ti Knight
In June 2017, the Group entered into an investment agreement with shareholders of Beijing Ti Knight where the Group invested a total of RMB9.0 million (US$1.3 million) in Beijing Ti Knight. As of December 31, 2018, the Group has invested RMB4.9 million (US$0.7 million). Due to weaker than expected operating performance, the investment in Beijing Ti Knight was fully impaired and impairment losses of RMB4.0 million, RMB0.9 million and nil were recorded for the years ended December 31, 2017, 2018 and 2019, respectively (see Note 30.1).
<6> Maxline
In January 2018, the Group completed a share exchange transaction with Red Ace Limited (“Red Ace”), which was a private company incorporated under the laws of the British Virgin Islands for issuance and sale of 3,571,429 ordinary shares of the Company with a specific lock-up period. In exchange, Red Ace transferred 29% equity interest in Maxline, an associate of Red Ace. The fair value of 29% equity interest in Maxline was considered to be the value of the assets surrendered to the Group in this nonmonetary exchange transaction. In 2019, due to weaker than expected operating performance of Maxline, the Group recorded an impairment loss of RMB1.3 million (US$0.2 million).
<7> Leading Choice
In September 2018, the Group completed a share exchange transaction with Leading Choice, which is a private company incorporated under the laws of Hong Kong for issuance and sale of 21,000,000 ordinary shares of the Company with a specific lock-up period. In exchange, the Company obtained 20% equity interest in Leading Choice. The fair value of 20% equity interest in Leading Choice was considered to be the nominal value of ordinary shares of the Group in the nonmonetary exchange transaction. In 2018, due to weaker than expected operating performance of Leading Choice, the Group recorded a full impairment loss of RMB1.4 million (US$0.2 million).
<8> The9 Education Technology
In April 2018, the Group invested RMB0.4 million (US$0.1 million) in The9 Education Technology. Due to weaker than expected operating performance, the investment in The9 Education Technology was fully impaired and an impairment loss of RMB0.4 million (US$0.1 million) was recorded for the year ended December 31, 2018.
<9> Shanghai Ronglei
In December 2017, the Group has entered into an investment agreement with a shareholder of Shanghai Ronglei, where the Group agreed to invest a total of RMB5.0 million (US$0.7 million) in Shanghai Ronglei. As of December 31, 2018, the Group has invested RMB4.0 million (US$0.6 million) but due to weaker than expected operating performance, the investment in Shanghai Ronglei was fully impaired and the impairment of RMB4.0 million (US$0.6 million) was recorded for the year ended December 31, 2018. In June 2019, both the Group and shareholder of Shanghai Ronglei has agreed to terminate the investment agreement and the shareholder of Shanghai Ronglei agreed to repurchase the shares issued to the Group at original cost. The Group disposed of its equity interest in Shanghai Ronglei and received RMB3.0 million (US$0.4 million) for the year ended December 31, 2019.
<10> Plutux
In September 2018, the Group completed a share exchange transaction with Plutux Labs Limited ("Plutux Labs"), which was a private company incorporated under the laws of Cayman Islands for issuance and sale of 21,000,000 ordinary shares of the Company with a specific lock-up period. In exchange, Plutux Labs transferred 8% equity interest in Plutux, a wholly-owned subsidiary of Plutux Labs. The fair value of 8% equity interest in Plutux was considered to be the nominal value of ordinary shares of the Group in the nonmonetary exchange transaction. In 2018, due to weaker than expected operating performance of Plutux, the Group recorded a full impairment loss of RMB1.4 million (US$0.2 million). Cyrus Jun-Ming Wen is a director of Plutux Labs according to the Schedule 13G filed by Plutux Labs on September 13, 2018. According to the Schedule 13D filed by Splendid Days Limited, the Group’s convertible notes investor (see Note 19), on February 21, 2019, Cyrus Jun-Ming Wen is also a director of Truth Beauty Limited, the shareholder of Splendid Days Limited.
<11> Zhenjiang Kexin
In June 2019, the Group completed a share exchange transaction with Comtec Windpark Renewable (Holdings) Co., Ltd. ("Comtec"), which was a private company incorporated under the laws of British Virgin Islands for issuance and sale of 3,444,882 ordinary shares of the Group. In exchange, Comtec transferred 9.9% equity interest in Zhenjiang Kexin, a company incorporated under the laws of PRC. The fair value of 9.9% equity interest in Zhenjiang Kexin was considered to be the value of the assets surrendered to the Group in the nonmonetary exchange transaction. In 2019, due to weaker than expected operating performance of Zhenjiang Kexin, the Group recorded an impairment loss of RMB1.0 million (US$0.1 million).
In total, the Group recorded impairment charges relating to its investments in equity and other of RMB9.1 million, RMB9.2 million and RMB8.5 million (US$1.2 million) for the years ended December 31, 2017, 2018 and 2019, respectively." id="sjs-B4">8. INVESTMENTS The Group’s investments comprise the following: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ ( Note 3) Investments accounted for under equity method: ZTE9 Network Technology Co., Ltd., Wuxi (“ZTE9”) — — — System Link Corporation Limited ("System Link") <1> — — — Shanghai Big Data Cultures & Media Co., Ltd. (“Big Data”) <2> 6,146,104 — — Maxline Holdings Limited (“Maxline”) <6> 1,367,285 — — Leading Choice Holdings Limited (“Leading Choice”) <7> — — — Investments accounted for under cost method: Shanghai Institute of Visual Art of Fudan University (“SIVA”) 10,000,000 10,000,000 1,436,410 T3 Entertainment Co., Ltd. (“T3”) <3> 24,892,921 — — Smartposting Co, Ltd. (“Smartposting”) <4> 2,809,808 — — Beijing Ti Knight Network Technology Co., Ltd. (“Beijing Ti Knight”) <5> — — — Shanghai The9 Education Technology Co., Ltd. (“The9 Education Technology”) <8> — — — Shanghai Ronglei Culture Communication Co., Ltd. (“Shanghai Ronglei”) <9> — — — Plutux Limited (“Plutux”) <10> — — — Zhenjiang Kexin Power System Design and Research Co., Ltd. ("Zhenjiang Kexin") <11> — — — Total 45,216,118 10,000,000 1,436,410 <1> System Link In August 2015, System Link entered into an agreement with Smilegate Entertainment, Inc. (“Smilegate”) to form a joint venture company, Oriental Shiny Star Limited (“Oriental Shiny”), for the operation of the CrossFire 2 game. In the event of a successful commercial launch of CrossFire 2, Smilegate would receive a 30% equity share of Oriental Shiny. In November 2015, Oriental Shiny entered into a license and distribution agreement with Smilegate for publishing and operating CrossFire 2 on an exclusive basis for a five-year term in the PRC (the “License Agreement”). In consideration for the exclusive license, Oriental Shiny made an upfront payment of US$50.0 million and was to make additional payments totaling US$450.0 million based on certain development and operation milestones of CrossFire 2. The payment of license fees was guaranteed by the Group and Qihoo 360 Technology Co., Ltd. (“Qihoo 360”) proportional to their equity interest in System Link. In October 2017, Oriental Shiny and Smilegate agreed to terminate the License Agreement. In November 2017, Smilegate made a settlement payment of US$25.0 million to both the Group and Qihoo 360, total of US$50.0 million. A settlement agreement was signed among the Group, Qihoo 360 and Smilegate whereby subsequent to the payment of US$50.0 million, the joint venture agreement signed among Oriental Shiny and Smilegate was terminated. During 2017, the Group offset its 2017 share of losses in System Link against the US$25.0 million recovery and reduced its investment in System Link to nil, with the remaining portion of the recovery, RMB60.5 million (US$8.7 million), recorded as gain as the Group then had no future funding obligation to System Link or Oriental Shiny. As of December 31, 2018, System Link met the criteria as a significant subsidiary in accordance with Rule 3-09 of SEC Regulation S-X but the Group has applied for and received a waiver from the SEC dated June 13, 2019 to not provide separate financial statements of System Link for the fiscal year ended December 31, 2018 and any other filings that would require such separate financial statements for the three years ended December 31, 2018. <2> Big Data Shanghai Jiucheng Advertisement Co., Ltd. (“Jiucheng Advertisement”) was previously a subsidiary of the Company. In 2015, the Company granted 33.3% equity interest of Jiucheng Advertisement to two of its employees as share-based compensation and share exchange transaction with Fei Fan Information Technology Co., Ltd. (“Fei Fan”), whereby Jiucheng Advertisement acquired 100% equity interest in Fei Fan in exchange of 30% equity interest in Jiucheng Advertisement. Upon completion of the exchange, the Group’s equity interest in Jiucheng Advertisement was diluted to 46.7%. In November 2015, the Group’s equity interest in Jiucheng Advertisement was further diluted to 42.0% as a result of capital injection by other shareholders. In August 2016, Jiucheng Advertisement raised capital from the Group and a third-party, and as a result, the Group’s equity interest in Jiucheng Advertisement became 43.7%. In October 2016, the Group’s equity interest in Jiucheng Advertisement further increased to 44.5% after the execution of certain terms under the investment agreements among certain investors of Jiucheng Advertisement. In December 2016, the Group entered into an agreement with third-party investors of Jiucheng Advertisement. According to the agreement, the Group would repurchase an additional 19.11% equity interest in Jiucheng Advertisement for RMB18.3 million (US$2.6 million) from those third-party investors if Jiucheng Advertisement is not listed on the PRC’s National Equities Exchange and Quotations (“NEEQ”), commonly known as the New Third Board, before December 31, 2017. In March 2017, Jiucheng Advertisement was renamed as Shanghai Big Data Cultures & Media Co., Ltd. (“Big Data”). In September 2017, Big Data listed its shares on NEEQ. As Big Data has listed its shares on NEEQ and has fulfilled its obligation, the Group was relieved of its obligation to repurchase 19.11% equity interest in Big Data from those third-party investors. After the listing, the Group holds a 44.46% equity interest in Big Data. In 2019, there was no change in the equity interest of Big Data and the Group has recorded share of loss on Big Data amounting to RMB2.8 million (US$0.4 million) was recognized. In 2019, due to weaker than expected operating performance, the investment in Big Data was fully impaired and an impairment loss of RMB3.4 million (US$0.5 million) was recorded for the year ended December 31, 2019. <3> T3 In April 2008, the Group, through China Crown Technology, acquired 3,031,232 preferred shares issued by G10 Incorporation (“G10”), an established Korean online game developer and operator, which accounted for less than 20% of the equity interest in G10 and accounted the investment under cost method. In December 2011, pursuant to the agreement between the shareholders of G10 and T3, a wholly-owned subsidiary of G10, G10 was spun off and the shareholders of G10 became shareholders of T3 at the same shareholding percentages. In February 2012, the changes in shareholding structures of G10 and T3 was completed and the Group owned 32,290 ordinary shares of T3, which reflects the same percentage of equity the Group owned in G10 on as an converted basis. In July 2019, China Crown Technology disposed all of its ordinary shares in T3 to third-parties for a total consideration of KRW6,092.8 million, approximately US$5.2 million, and recorded a gain on disposal of RMB10.4 million (US$1.5 million). <4> Smartposting In June 2017, the Group completed a share exchange transaction with IE Limited (“IE”), which was a listed company on Korean Securities Dealers Automated Quotations of Korea Exchange (“KOSDAQ”) for issuance and sale of 12,500,000 ordinary shares of the Company with a 10-year lock-up period. In exchange, IE transferred 14.55% equity interest in Smartposting, a wholly-owned subsidiary of IE. The fair value of 14.55% equity interest in Smartposting was considered to be the value of the assets surrendered to the Group in this non-monetary exchange transaction. Due to weaker than expected operating performance of Smartposting, the Group recorded an impairment of RMB5.1 million, RMB1.1million and RMB2.8 million (US$0.4 million) for the years ended December 31, 2017, 2018 and 2019, respectively. <5> Beijing Ti Knight In June 2017, the Group entered into an investment agreement with shareholders of Beijing Ti Knight where the Group invested a total of RMB9.0 million (US$1.3 million) in Beijing Ti Knight. As of December 31, 2018, the Group has invested RMB4.9 million (US$0.7 million). Due to weaker than expected operating performance, the investment in Beijing Ti Knight was fully impaired and impairment losses of RMB4.0 million, RMB0.9 million and nil were recorded for the years ended December 31, 2017, 2018 and 2019, respectively (see Note 30.1). <6> Maxline In January 2018, the Group completed a share exchange transaction with Red Ace Limited (“Red Ace”), which was a private company incorporated under the laws of the British Virgin Islands for issuance and sale of 3,571,429 ordinary shares of the Company with a specific lock-up period. In exchange, Red Ace transferred 29% equity interest in Maxline, an associate of Red Ace. The fair value of 29% equity interest in Maxline was considered to be the value of the assets surrendered to the Group in this nonmonetary exchange transaction. In 2019, due to weaker than expected operating performance of Maxline, the Group recorded an impairment loss of RMB1.3 million (US$0.2 million). <7> Leading Choice In September 2018, the Group completed a share exchange transaction with Leading Choice, which is a private company incorporated under the laws of Hong Kong for issuance and sale of 21,000,000 ordinary shares of the Company with a specific lock-up period. In exchange, the Company obtained 20% equity interest in Leading Choice. The fair value of 20% equity interest in Leading Choice was considered to be the nominal value of ordinary shares of the Group in the nonmonetary exchange transaction. In 2018, due to weaker than expected operating performance of Leading Choice, the Group recorded a full impairment loss of RMB1.4 million (US$0.2 million). <8> The9 Education Technology In April 2018, the Group invested RMB0.4 million (US$0.1 million) in The9 Education Technology. Due to weaker than expected operating performance, the investment in The9 Education Technology was fully impaired and an impairment loss of RMB0.4 million (US$0.1 million) was recorded for the year ended December 31, 2018. <9> Shanghai Ronglei In December 2017, the Group has entered into an investment agreement with a shareholder of Shanghai Ronglei, where the Group agreed to invest a total of RMB5.0 million (US$0.7 million) in Shanghai Ronglei. As of December 31, 2018, the Group has invested RMB4.0 million (US$0.6 million) but due to weaker than expected operating performance, the investment in Shanghai Ronglei was fully impaired and the impairment of RMB4.0 million (US$0.6 million) was recorded for the year ended December 31, 2018. In June 2019, both the Group and shareholder of Shanghai Ronglei has agreed to terminate the investment agreement and the shareholder of Shanghai Ronglei agreed to repurchase the shares issued to the Group at original cost. The Group disposed of its equity interest in Shanghai Ronglei and received RMB3.0 million (US$0.4 million) for the year ended December 31, 2019. <10> Plutux In September 2018, the Group completed a share exchange transaction with Plutux Labs Limited ("Plutux Labs"), which was a private company incorporated under the laws of Cayman Islands for issuance and sale of 21,000,000 ordinary shares of the Company with a specific lock-up period. In exchange, Plutux Labs transferred 8% equity interest in Plutux, a wholly-owned subsidiary of Plutux Labs. The fair value of 8% equity interest in Plutux was considered to be the nominal value of ordinary shares of the Group in the nonmonetary exchange transaction. In 2018, due to weaker than expected operating performance of Plutux, the Group recorded a full impairment loss of RMB1.4 million (US$0.2 million). Cyrus Jun-Ming Wen is a director of Plutux Labs according to the Schedule 13G filed by Plutux Labs on September 13, 2018. According to the Schedule 13D filed by Splendid Days Limited, the Group’s convertible notes investor (see Note 19), on February 21, 2019, Cyrus Jun-Ming Wen is also a director of Truth Beauty Limited, the shareholder of Splendid Days Limited. <11> Zhenjiang Kexin In June 2019, the Group completed a share exchange transaction with Comtec Windpark Renewable (Holdings) Co., Ltd. ("Comtec"), which was a private company incorporated under the laws of British Virgin Islands for issuance and sale of 3,444,882 ordinary shares of the Group. In exchange, Comtec transferred 9.9% equity interest in Zhenjiang Kexin, a company incorporated under the laws of PRC. The fair value of 9.9% equity interest in Zhenjiang Kexin was considered to be the value of the assets surrendered to the Group in the nonmonetary exchange transaction. In 2019, due to weaker than expected operating performance of Zhenjiang Kexin, the Group recorded an impairment loss of RMB1.0 million (US$0.1 million). In total, the Group recorded impairment charges relating to its investments in equity and other of RMB9.1 million, RMB9.2 million and RMB8.5 million (US$1.2 million) for the years ended December 31, 2017, 2018 and 2019, respectively. |
AVAILABLE-FOR-SALE INVESTMENTS
AVAILABLE-FOR-SALE INVESTMENTS | 12 Months Ended |
Dec. 31, 2019 | |
AVAILABLE-FOR-SALE INVESTMENTS | |
AVAILABLE-FOR-SALE INVESTMENTS | 9. AVAILABLE-FOR-SALE INVESTMENTS Investment in L&A In June 2016, the Group along with certain other shareholders of Red 5 completed a share exchange transaction with L&A, a Cayman Islands company with shares publicly listed on the Growth Enterprise Market of the Hong Kong Stock Exchange (Stock Code: 8195). The Group exchanged approximately 30.6% equity interest (on a fully-diluted basis) in Red 5 for a total of 723,313,020 (after a one-to-five stock split) newly issued shares of L&A, after deducting 6% of shares received (46,168,920 shares) as payment of a service fee to a third-party consultant. In June 2016, Asian Development, a wholly-owned subsidiary of the Group incorporated in Hong Kong, borrowed a total of HK$92.3 million from a financial services company, which was secured by a pledge of 417,440,000 shares of L&A (see Note 16). In 2016, Asian Development was in default on the loan due to a sharp decline in share price of L&A. The lender is entitled to foreclose on the pledged shares and become the legal and beneficial owner of the pledged shares (see Note 30.2). In 2016, the Group provided a full impairment allowance of RMB244.8 million (US$35.2 million) on the investment in L&A. In 2019, the loan remained in default and the lender has not made any claim against Asian Development to recover any outstanding amounts under the agreement. In 2017, the Group sold 18,360,000 shares in L&A for consideration of RMB0.1 million (US$0.01 million). In an extraordinary general meeting in October 2017, Board of Directors of L&A passed a resolution to consolidate every twenty issued and unissued shares into one share. The Group owned 14,375,651 shares in L&A after the share consolidation. In 2019, the Group sold all of its shares in L&A for consideration of RMB0.7 million (US$0.1 million). As of December 31, 2019, the Group has no available-for-sale investments. |
PROPERTY, EQUIPMENT AND SOFTWAR
PROPERTY, EQUIPMENT AND SOFTWARE, NET | 12 Months Ended |
Dec. 31, 2019 | |
PROPERTY, EQUIPMENT AND SOFTWARE, NET | |
PROPERTY, EQUIPMENT AND SOFTWARE, NET | 10. PROPERTY, EQUIPMENT AND SOFTWARE, NET Property, equipment and software and related accumulated depreciation and amortization are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Office buildings 69,341,652 69,341,652 9,960,305 Computers and equipment 84,134,612 5,181,577 744,287 Leasehold improvements 10,365,904 9,359,857 1,344,459 Office furniture and fixtures 6,194,658 1,787,549 256,765 Motor vehicles 7,038,397 5,031,201 722,687 Software 15,832,264 14,542,095 2,088,842 Less: accumulated depreciation and amortization (175,555,042) (89,974,366) (12,924,009) Less: property, equipment and software, net, held-for-sale — (14,051,044) (2,018,306) Net book value 17,352,445 1,218,521 175,030 Depreciation and amortization charges for the years ended December 31, 2017, 2018 and 2019 amounting to RMB5.3 million, RMB3.7 million and RMB2.8 million (US$0.4 million), respectively. In 2019, the Group has disposed large quantity of computers and equipment which are not in-use and the value of these assets have been fully depreciated or impaired in the past. The Group has recorded a gain on disposal of property, equipment and software amounting to RMB0.02 million, RMB0.2 million, RMB2.2 million (US$0.3 million), as other income, net for the years ended December 31, 2017, 2018 and 2019. The office buildings were mortgaged as collateral for the convertible notes and entrusted bank loan in 2015 (see Note 19 and Note 16). Property, equipment and software classified as held-for-sale represents office buildings held by The9 Computer, C9I Shanghai and Shanghai Kaie which are in the process of disposal as of December 31, 2019 (see Note 7). |
LAND USE RIGHT, NET
LAND USE RIGHT, NET | 12 Months Ended |
Dec. 31, 2019 | |
LAND USE RIGHT, NET | |
LAND USE RIGHT, NET | 11. LAND USE RIGHTS, NET Gross carrying amount, accumulated amortization and net book value of land use rights are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Land use rights 85,160,348 85,160,348 12,232,519 Less: accumulated amortization (22,570,692) (24,011,374) (3,449,018) Less: land use right, net, held-for-sale — (61,148,974) (8,783,501) Net book value 62,589,656 — — Amortization charge for the years ended December 31, 2017, 2018 and 2019 amounting to RMB1.9 million, RMB1.9 million and RMB1.4 million (US$0.2 million), respectively. The land use rights were mortgaged for the convertible notes and entrusted bank loan in 2015 (see Note 19 and Note 16). Land use rights classified as held-for-sale represented land use rights held by The9 Computer, C9I Shanghai and Shanghai Kaie in relation to the office buildings located at Zhangjiang, Shanghai which are in the process of disposal as of December 31, 2019 (see Note 7). |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2019 | |
LEASES | |
LEASES | 12. LEASES The Group has operating leases primarily for office space, parking lots and warehouse after relocation of their principal office in August 2019. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the lease payments over the lease term at commencement date. As the leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at commencement date, to determine the present value of lease payments. The incremental borrowing rates approximate the rate the Group would pay to borrow in the currency of the lease payments for the weighted-average life of the lease. The operating lease ROU assets also include any lease payments made prior to lease commencement and excludes lease incentives and initial direct costs incurred if any. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Operating lease costs are recognized on a straight-line basis over the lease term. As of December 31, 2019, the prepaid rental expense of RMB0.01 million (US$0.01 million) was recorded in operating lease right-of-use assets. As of December 31, 2019, the items related to operating lease in the consolidated balance sheet are summarized below: December 31, 2019 December 31, 2019 RMB US$ (Note 3) Operating lease right-of-use assets 9,257,604 1,329,772 Operating lease liabilities- current portion 3,407,670 489,481 Operating lease liabilities-non-current portion 6,251,705 898,001 Lease cost recognized in the Group’s consolidated statements of operations and comprehensive loss is summarized as follows: Classification in Consolidated Statements of Operations and Comprehensive Loss December 31, 2019 December 31, 2019 RMB US$ (Note 3) Operating lease cost Operating expenses 1,606,340 230,736 Cost of other leases with terms less than one year Operating expenses 82,232 11,812 Total 1,688,572 242,548 Maturities of operating lease liabilities are as follows: December 31, 2019 December 31, 2019 RMB US$ (Note 3) Due within one year 3,779,845 542,941 Due in the second year 3,995,768 573,956 Due in the third year 2,502,839 359,510 Total lease payments 10,278,452 1,476,407 Less: imputed interest (619,077) (88,925) Total 9,659,375 1,387,482 As of December 31, 2019, the Group does not have any significant operating or finance leases that have not yet commenced. The Group’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Supplemental cash flow information related to operating leases is as follows: December 31, 2019 December 31, 2019 RMB US$ (Note 3) Cash paid for amounts included in the measurement of operating lease liabilities 1,271,769 182,678 |
OTHER LONG-LIVED ASSETS, NET
OTHER LONG-LIVED ASSETS, NET | 12 Months Ended |
Dec. 31, 2019 | |
OTHER LONG-LIVED ASSETS, NET | |
OTHER LONG-LIVED ASSETS, NET | 13. OTHER LONG-LIVED ASSETS, NET Other long-lived assets are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Prepaid license fee 6,515,200 6,515,200 935,850 Prepaid deposit for joint venture — — — Total 6,515,200 6,515,200 935,850 Prepaid license fee represents the payment made by the Group pursuant to an IP license agreement with an online game company in January 2016 to use its IP to develop a mobile game for a period of two years after commercialization of the game. The contract is effective through October 31, 2020 for the development phase and the mobile game is expected to be launched in second half of 2020. Amortization of the license will be commenced upon the commercialization of the game over its license period. The Group has been monitoring its licensed games that have not commercially launched, including but not limited to their market acceptance and operational performance in other regions where they are commercially launched and operated by other operators. The Group incorporates these factors into its continuous evaluation of the forecasted results of the respective games and takes into account the Group’s expected commercial launch and cash flows in the evaluation of potential impairment of the carrying value of upfront licensing fees. Based on the Group’s impairment tests, there was no impairment of upfront licensing fees in 2017, 2018 and 2019. In March 2019, the Group entered into a joint venture agreement with F&F in an attempt to enter the electric vehicle business. The Group paid an initial deposit of US$5.0 million to F&F through an interest-free loan fromArk Pacific Associates Limited in April 2019. In accordance with the joint venture agreement, in the event the Group cannot make the required capital contribution in accordance with the joint venture agreement, the total amount of capital contribution that has been made by the Group will automatically convert into Class B ordinary shares in Smart King Limited, the holding company of F&F at a pre-agreed conversion price set forth in the joint venture agreement. As of December 31, 2019, as the actual progress of the joint venture is below expectations and the Group recorded a full impairment loss of RMB34.9 million (US$5.0 million) (see Note 30.1). |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2019 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 14. FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The fair values of common stock warrants were measured using the Black-Scholes Model (see Note 23). Inputs used to determine estimated fair value of the warrant liabilities include the estimated fair value of the underlying stock at the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liability are the fair value of the underlying stock at the valuation date and the estimated term of the warrants. The fair value of convertible note is based on a discounted cash flow model with an unobservable input of discount rate. (Level 3) In 2015, the Group issued warrants in connection with its convertible notes. The warrants are recorded at fair market value at the date of issuance and subsequently at each reporting date. The following table presents the change in the warrants liability that were measured at fair value on a recurring basis using significant Level 3 inputs during 2018 and 2019 (see Note 20). December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Balance at issuance date/beginning of year 3,742,271 1,490,844 214,146 Fair value change on warrants liability recognized in other comprehensive income (2,251,427) (1,292,244) (185,619) Balance at the end of the year 1,490,844 198,600 28,527 |
TAXATION
TAXATION | 12 Months Ended |
Dec. 31, 2019 | |
TAXATION | |
TAXATION | 15. TAXATION Cayman Islands Under the current tax laws of the Cayman Islands, the Group is not subject to tax on its income or capital gains. In addition, upon payment of dividends by The9 Limited to its shareholders, no Cayman Islands withholding tax will be imposed. Hong Kong The Group’s subsidiaries incorporated in Hong Kong did not have assessable profits that were derived in Hong Kong during the years ended December 31, 2017, 2018 and 2019. Therefore, no Hong Kong income tax has been provided for in the years presented. Singapore The Group’s subsidiaries incorporated in Singapore did not have assessable profits that were derived in Singapore during the years ended December 31, 2017, 2018 and 2019. Therefore, no Singapore income tax has been provided for in the years presented. PRC The Group’s subsidiaries and VIE subsidiaries incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) on the taxable income as reported in their respective statutory financial statements adjusted in accordance with the PRC Enterprise Income Tax Law (“EIT Law”), which went into effect as of January 1, 2008. The Group’s subsidiaries and VIE subsidiaries in the PRC are generally subject to EIT at a statutory rate of 25%. The subsidiaries that hold a “High and New Technology Enterprise” (“HNTE”) qualification are subject to a 15% preferential EIT rate. The HNTE qualification is valid for three years and every qualified HNTE company is required to re-apply for it in the three years after receiving approval. In October 2017, Shanghai IT renewed its HNTE qualification and obtained approval in 2018, which entitles Shanghai IT to enjoy a preferential EIT rate of 15% during the period from 2018 to 2020. As Shanghai IT did not have taxable income for the years ended December 31, 2017, 2018 and 2019, Shanghai IT has not benefited from this preferential income tax rate. United States The Group’s subsidiaries incorporated in the U.S. are registered in the state of California and are subject to U.S. federal corporate marginal income tax rate of 21% and state income tax rate of 0.28%, respectively. On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including a federal corporate rate reduction from 34% to 21%; limitations on the deductibility of interest expense and executive compensation; creation of the base erosion anti-abuse tax (“BEAT”), a new minimum tax; and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system. A majority of the provisions in the Tax Act are effective January 1, 2018. The Tax Act creates a new requirement that certain income such as Global Intangible Low-Taxed Income (“GILTI”) earned by a controlled foreign corporation (“CFC”) must be included in the gross income of the CFC U.S. shareholder. The Group has evaluated these provisions of the Tax Act and whether taxes due on future U.S. inclusions related to GILTI be recorded as current-period expense when incurred, or factored into measurement of deferred taxes. The Group concluded that the Tax Act had no material effect to the financial statements. Composition of income tax expense The current and deferred portions of income tax expense included in the consolidated statements of operations and comprehensive loss are as follows: For the year ended December 31, 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Current income tax expense PRC — — — — Other jurisdictions — — — — Deferred tax assets PRC (84,042,632) (39,763,083) (5,772,005) (829,097) Other jurisdictions (124,313,755) (19,816,235) (15,151,553) (2,176,384) Subtotal (208,356,387) (59,579,318) (20,923,558) (3,005,481) Change in valuation allowance PRC 84,042,632 39,763,083 5,772,005 829,097 Other jurisdictions 124,313,755 19,816,235 15,151,553 2,176,384 Subtotal 208,356,387 59,579,318 20,923,558 3,005,481 Income tax expense — — — — Reconciliation of the differences between statutory tax rate and the effective tax rate Reconciliation between the statutory EIT rate and the Group’s effective tax rate is as follows: For the year ended For the year ended For the year ended December 31, December 31, December 31, 2017 2018 2019 PRC statutory EIT rate 25 % 25 % 25 % Effect of different tax rates in other jurisdictions (2) % 2 % 1 % Change in future tax rate (upon expiration of preferential rate) (22) % 1 % 2 % Change of prior year deferred tax assets (8) % (11) % (15) % Change of valuation allowance 61 % (2) % (18) % Income not subject to tax and non-deductible expenses, net (1) % 0 % 0 % Effect of expired net operating loss (53) % (15) % 5 % Effective EIT rate 0 % 0 % 0 % Significant components of deferred tax assets For the year ended For the year ended For the year ended December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Temporary differences related to expenses and accruals 1,087,421 1,076,708 154,659 Temporary differences related to impairment on advances to suppliers 2,451,767 3,438,597 493,924 Temporary differences related to provision for doubtful accounts 3,077,784 1,078,742 154,952 Others 7,152,217 8,771,868 1,260,000 Temporary differences related to depreciation, amortization, and impairment of equipment and intangible assets 23,165,631 24,890,416 3,575,285 Startup expenses and advertising fees 608,399 199,704 28,686 Temporary differences related to research and development credits 1,106,956 1,120,850 161,000 Temporary differences related to equity investments 3,978,269 5,069,035 728,121 Foreign tax credits — — — Temporary differences related to provision for prepayment for equipment 5,000,000 5,000,000 718,205 Tax loss carry forwards 294,535,956 270,594,922 38,868,529 Total deferred tax assets 342,164,400 321,240,842 46,143,361 Less: Valuation allowance (342,164,400) (321,240,842) (46,143,361) Total deferred tax assets — — — Movement of valuation allowance on deferred tax assets For the year ended For the year ended For the year ended December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Beginning balance 401,743,718 342,164,400 49,148,842 Decrease in valuation allowance (59,579,318) (20,923,558) (3,005,481) Ending balance 342,164,400 321,240,842 46,143,361 For the years ended December 31, 2018 and 2019, the Group recorded a reversal of valuation allowance of approximately RMB59.6 million and RMB 20.9 million (US$3.0 million), respectively. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry forward periods, the Group’s experience with tax attributes expiring as unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more-likely-than-not threshold. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. As of December 31, 2019, the Group’s PRC subsidiaries had net operating loss carry forwards amounting to RMB343.7 million which will expire from 2020 to 2029. The Group has provided a full valuation allowance as it is not more likely than not that the net operating losses can be utilized before expiry. According to Caishui [2018] No. 76, with effect from January 1, 2018, losses of qualified HNTE in the current year occurred five years before the year in which the entity qualified for HNTE and have not been made up shall be allowed to be carried forward to subsequent years to be made up, and the maximum carry-forward period shall be extended from five years to ten years. As of December 31, 2019, Red 5 had net operating loss carry forwards for federal and state income tax purposes of approximately US$126.4 million and US$68.5 million, respectively, which will begin to expire in 2026 and 2028, respectively. Red 5 also had credits for increasing research activities available to offset future federal and state taxes payable of approximately US$0.1 million and US$0.1 million, respectively, that will begin to expire in 2026 for federal purposes and which have no expiration for state purposes. Red 5 had foreign tax credits for federal purposes of approximately US$2.5 million, which expired in 2018. Pursuant to US tax laws and regulations, the utilization of an acquired entity’s net operating losses and credits are subject to annual limitation computed based on the fair value of the acquired entity. As a result of the limitation, the Group provided a full valuation allowance on its deferred tax assets as it is not more likely than not that the net operating losses and credits carried forward can be utilized before expiration. In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008, are subject to a 10% withholding income tax. In addition, under tax treaty between the PRC and Hong Kong, if the foreign investor is incorporated in Hong Kong and qualifies as the beneficial owner, the applicable withholding tax rate is reduced to 5%, if the investor holds at least 25% in the FIE, or 10%, if the investor holds less than 25% in the FIE. A deferred tax liability should be recognized for the undistributed profits of PRC companies unless the Group has sufficient evidence to demonstrate that the undistributed dividends will be reinvested and the remittance of the dividends will be postponed indefinitely. The Group plans to indefinitely reinvest undistributed profits earned after December 31, 2007 from its PRC subsidiaries with operations in the PRC. Therefore, no withholding income taxes for undistributed profits of the Company’s subsidiaries established in PRC have been provided as of December 31, 2018 and 2019. Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting basis over tax basis in a domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means. The Group has not recorded any such deferred tax liability attributable to the undistributed earnings of its financial interests in VIEs because these VIEs do not have any accumulated earnings as of December 31, 2018 and 2019. The Group made its assessment of the level of authority for each tax position (including the potential application of interests and penalties) based on the tax positions’ technical merits, and measured the unrecognized benefits associated with the tax positions. The Group did not have any unrecognized tax benefits as of December 31, 2018 and 2019. The Group does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months. For the years ended December 31, 2017, 2018 and 2019, the Group did not have any material interest and penalties associated with its tax positions. According to 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 withholding agent. The statute of limitations will be extended five years under special circumstances, which are not clearly defined (but an underpayment of tax liability exceeding RMB 0.1 million is specifically listed as a special circumstance). In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. From inception to 2019, the Group is subject to examination by the PRC tax authorities. Red 5’s U.S. federal income tax returns and state income tax returns for 2015 through 2019 are open tax years, subject to examination by the relevant tax authorities. |
SHORT-TERM BORROWINGS
SHORT-TERM BORROWINGS | 12 Months Ended |
Dec. 31, 2019 | |
SHORT-TERM BORROWINGS | |
SHORT-TERM BORROWINGS | 16. SHORT-TERM BORROWINGS Short-term borrowings are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Pledged loan 80,836,823 82,645,089 11,871,224 Interest-free loan — 34,881,000 5,010,342 Long-term borrowing due within one year 31,624,560 31,624,560 4,542,584 Less: borrowing classified as held for sale — (31,624,560) (4,542,584) Total 112,461,383 117,526,089 16,881,566 In June 2016, the Group completed a share exchange transaction with L&A for a total of 769,481,940 (after a 1 to 5 stock split) newly issued shares of L&A. In June 2016, Asian Development borrowed a total of HK$92.3 million from a financial services company at an annual interest rate of 2% for a term of 24 months, which is secured by a pledge of 417,440,000 shares of L&A. The outstanding balance as of December 31, 2019 is RMB88.0 million (US$13.0 million), which includes RMB5.4 million (US$0.8 million) of interest payable and the pledged loan was due in June 2018. Asian Development has defaulted the loan in June 2016 due to a sharp decline in share price of L&A (see Note 30.2) In December 2015, the Group entered an entrusted bank loan agreement, amounted to RMB31.6 million (US$4.6 million), with a subsidiary of the investor holding the convertible notes (see Note 19) and China Merchants Bank as entrustment bank. The borrowing agreement matured in December 2018, with the annual interest rate of 12% continuing after maturity of the loan. The loan is secured by the Group’s office buildings. The outstanding balance as of December 31, 2019 is RMB43.0 million (US$6.0 million), including RMB11.4 million (US$1.6 million) of interest payable. In December 2019, the Group signed a confirmation letter with the lender regarding settlement. According to the confirmation letter, if the total amount of principal and interest of the entrusted bank loan amounted to RMB43.0 million is repaid before December 31, 2019, the overdue interest since December 2018 will be exempted. The parties agreed to extend the payment period from December 31, 2019 to February 29, 2020 to allow for completion of the disposal transaction with Kapler Pte. Ltd. (see Note 7). Both the principal and interest of the entrusted bank loan was repaid on February 11, 2020 and the overdue interest has been exempted. In March 2019, the Group entered into a joint venture agreement with F&F, to establish a joint venture in China to manufacture and distribute electric vehicles designed and developed by F&F with a committed capital investment amounting to US$600.0 million. The Group made the initial deposit of US$5.0 million to F&F in April 2019 through an interest-free loan granted from Ark Pacific Associates Limited, an entity affiliated with the Group’s former president as of the issuance date of these consolidated financial statements, for a period of one year. The loan was due on March 31, 2020 and the Group is still in negotiation with Ark Pacific Associates Limited regarding settlement of the interest-free loan. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2019 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 17. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Funds raised for CrossFire New Mobile Game 57,499,910 57,499,910 8,259,345 Professional services 6,879,775 11,844,738 1,701,390 Staff cost related payables 4,245,967 9,851,024 1,415,011 Office expenses 3,377,709 3,543,495 508,991 Other payables 1,840,000 3,540,000 508,489 Utility fees 1,547,898 1,646,394 236,490 Product development services 892,216 906,906 130,269 Others 5,007,831 4,308,376 618,860 Total 81,291,306 93,140,843 13,378,845 The Group has financed the early phase development of CrossFire New Mobile Game through fundraising from the Inner Mongolia Culture Assets and Equity Exchange. As of December 31, 2019, the Group had raised RMB57.5 million (US$8.3 million). The Group continues to cooperate with a third-party company for development and operation of CrossFire New Mobile Game. The Group plans to apply for a license (“Banhao”) from GAPPRPT for CrossFire New Mobile Game as soon as development of the game is finalized to launch the game. The Group does not plan to finance the remaining RMB100.0 million (US$14.4 million) from the planned fund raising arrangement, and due to non-recovery of the advance financing fee, the Group fully impaired the advance financing fee in 2018. In November 2017, the Group entered into an exclusive publishing agreement with a third-party company, pursuant to which this third-party company was granted an exclusive right to publish the CrossFire New Mobile Game in China. Upon commercialization of the game, the Group will share certain percentages of the revenues from CrossFire New Mobile Game with investors providing funding to the Group. In April 2020, Inner Mongolia Culture Assets and Equity Exchange filed a civil claim against Wuxi Qudong and Shanghai IT based on the cooperation agreement entered in September 2016. Inner Mongolia Culture Assets and Equity Exchange claims refund of RMB57.5 million (US$8.3 million), which the Group has previously raised through Inner Mongolia Culture Assets and Equity Exchange to finance the early phase development of CrossFire New Mobile Game with compensation of interest on the principal financed (see Note 32). |
Refund of WoW game points
Refund of WoW game points | 12 Months Ended |
Dec. 31, 2019 | |
Refund of WoW game points | |
Refund of WoW game points | 18. Refund of WoW game points As a result of the loss of the World of Warcraft (“WoW”) license on June 7, 2009, the Group announced a refund plan in connection with inactivated WoW game point cards, which the Group recorded as refund of game points. According to the plan, inactivated WoW game point card holders are eligible to receive a cash refund from the Group. The Group recorded a liability in connection with both inactivated points cards and activated but unconsumed point cards of approximately RMB200.4 million (US$28.8 million). Upon the loss of the WoW license, the Group concluded the nature of the obligation substantively changed from deferred revenue, for which the Group had the responsibility to satisfy the underlying performance obligation, to an obligation to refund players for their unconsumed points. The Group has accounted for this refund liability by applying the derecognition guidance specified in ASC 405‑20. In accordance with this guidance, the refund liability associated with these WoW game points, to the extent not refunded, will be recorded as other operating income after the Group is legally released from the obligation to refund amounts under the applicable laws. In consultation with its legal counsel, the Group concluded the legal liability relating to the inactivated WoW game point cards was extinguished in September 2011 on the basis that the legal liability lapsed two years from the date the Group publicly announced the refund policy that applied to these cards. Accordingly, the associated liability amounting to RMB26.0 million (US$3.7 million) was recognized as other operating income for the year ended December 31, 2011. With respect to the remaining refund liability, based on current PRC laws, to the extent not refunded, the Company, in consultation with legal counsel, has determined that it will be legally released from this liability in September 2029, which represents 20 years from the discontinuation of WoW in 2009. However, if the Group were to publicly announce a refund policy, the Group would be legally released from any remaining liability for these activated, but unconsumed points that remained two years from the date of such announcement. To date, the Group has determined not to publicly announce any refund policy with respect to this remaining liability, and no refunds have been claimed. The remaining refund liability relating to the activated, but unconsumed WoW game points is RMB170.0 million (US$24.4 million) as of both December 31, 2018 and 2019. |
CONVERTIBLE NOTES
CONVERTIBLE NOTES | 12 Months Ended |
Dec. 31, 2019 | |
CONVERTIBLE NOTES | |
CONVERTIBLE NOTES | 19. CONVERTIBLE NOTES On November 24, 2015, the Group entered into an agreement with Splendid Days Limited for a private placement of secured convertible notes and warrants for gross proceeds of US$40,050,000. The transaction closed on December 11, 2015. Pursuant to the terms of the agreement, the convertible notes shall mature in December 2018, subject to an extension for two years at the discretion of the investor. The convertible notes accrue interest at a rate of 12% per annum and are payable upon maturity of the notes. According to the Schedule 13D filed by Splendid Days Limited on March 5, 2018, Splendid Days Limited’s equity was transferred from Ark Pacific Special Opportunities Fund I, L.P. an entity affiliated with the Group's former president as of the issuance date of these consolidated financial statements to Truth Beauty Limited. The notes are secured by the equity interest of the Group’s subsidiaries (The9 Computer and C9I Shanghai), and the Group’s office buildings with a total net book value of RMB14.1 million as of December 31, 2019. The net book value of office buildings has been classified as assets held-for-sale as of December 31, 2019. Splendid Days Limited is entitled to put the convertible notes to the Group upon a change in control and upon an event of default. The Group has entered into a deed of settlement with the Splendid Days Limited on March 12, 2019 wherein the Group will proceed to dispose of office buildings and use the proceeds to repay both convertible notes and the entrusted bank loan. Annual interest rate on the loan remained at 12% up to settlement date. In September 2019, the Group entered into an agreement with Kapler Pte. Ltd. to sell three subsidiaries, namely The9 Computer, C9I Shanghai and Shanghai Kaie for total consideration of RMB493.0 million (US$70.8 million). These subsidiaries hold land use rights and office buildings located at Zhangjiang, Shanghai. The transaction was subsequently completed on February 21, 2020. As of the issuance date of these consolidated financial statements, the Group has repaid the principal and interest due on the entrusted bank loan and has repaid US$4.8 million to the issuer of convertible notes and is planning to use the consideration received for payment of the remaining outstanding balance of convertible notes amounting to US$55.5 million. The notes are divided into three tranches and can be converted into a total of 11,695,513 shares of the Group’s ADS at any time as follows: Convertible Notes Principal Amount Conversion Price Tranche A US$ 22,250,000 US$ 2.60 Tranche B US$ 13,350,000 US$ 5.20 Tranche C US$ 4,450,000 US$ 7.80 The conversion prices are subject to anti-dilution adjustments in the event the Group issues ordinary shares at a price per share lower than the applicable conversion price in effect immediately prior to the issuance. As of December 31, 2019, no adjustments to the conversion prices had occurred. The Group has determined that there was BCF attributable to the Tranche A convertible loan as the conversion price is lower than market value at the date of issuance of the convertible notes. The value of the BCF is determined to be US$8.1 million, which is equal to the intrinsic value of the conversion feature. The convertible notes are recorded at net carrying value at the date of issuance as follows: Principal Amount US$ 40,050,000 Less: Fair value allocated to warrants (Note 21) 8,821,883 Beneficial conversion feature 8,112,556 Issuance cost 3,200,000 Net carrying value US$ 19,915,561 The fair value of warrants, BCF and issuance costs are recorded as debt discount and accreted to interest expense over three years using the effective interest method. The convertible notes should be repaid with principal and interest based on the agreement. As of December 31, 2018 and 2019, the total carrying amount of the convertible notes principal and interest payable is RMB375.3 million and RMB414.1 million (US$59.5 million), respectively. Interest expenses recognized on the convertible notes are RMB77.0 million, RMB98.3 million, and RMB33.2 million (US$4.8 million) for the years ended December 31, 2017, 2018 and 2019, respectively. |
WARRANTS ON CONVERTIBLE NOTES
WARRANTS ON CONVERTIBLE NOTES | 12 Months Ended |
Dec. 31, 2019 | |
WARRANTS ON CONVERTIBLE NOTES | |
WARRANTS ON CONVERTIBLE NOTES | 20. WARRANTS ON CONVERTIBLE NOTES The warrants are exercisable at any time after the commitment date to purchase up to 4,778,846 shares of the Group’s ADS as follows: Warrants Principal Amount Exercise Price Tranche I US$ 5,000,000 US$ 1.50 Tranche A US$ 2,750,000 US$ 2.60 Tranche B US$ 1,650,000 US$ 5.20 Tranche C US$ 550,000 US$ 7.80 For the tranches A, B and C, the expiration date is the third anniversary of the issuance date or if the holder has exercised its option to extend the maturity date of all or any portion of the convertible notes in accordance with the terms and conditions thereof, the fifth anniversary of the issuance date. Tranches A, B and C expired on December 20, 2018. Tranche I will expire in December 2020. The exercise prices of the warrants are subject to anti-dilution adjustments in the event the Company issue ordinary shares at a price per share lower than the applicable exercise price in effect immediately prior to the issuance. As of December 31, 2019, no adjustments to the exercise prices had occurred. The Group performs valuations of the warrants using a probability weighted Black-Scholes Model. This model requires input of assumptions including the risk-free interest rates, volatility, expected life and dividend rates, and has also considered the likelihood of "down-round" financings. Selection of these inputs involves management’s judgment and may affect net income. The assumptions used in the Black-Scholes option pricing model for Tranche I was as follows: Warrants Tranche I Risk-free interest rate 1.59 % Expected volatility of common stock 93.67 % Dividend yield 0.00 % Expected life of warrants 0.9 years The fair value of the warrants as of issuance date, December 31, 2018 and 2019 is RMB1.5 million and RMB0.2 million (US$0.03 million), respectively. The change in fair value of the warrants liability resulted in a loss of RMB12.6 million, RMB2.3 million and RMB1.3 million (US$0.2 million) for the years ended December 31, 2017, 2018 and 2019, respectively. |
SHAREHOLDER RIGHTS PLAN
SHAREHOLDER RIGHTS PLAN | 12 Months Ended |
Dec. 31, 2019 | |
SHAREHOLDER RIGHTS PLAN | |
SHAREHOLDER RIGHTS PLAN | 21. SHAREHOLDER RIGHTS PLAN On January 8, 2009, the Company adopted a shareholder rights plan. The shareholder rights plan is designed to protect the best interests of the Company and its shareholders by discouraging third-parties from seeking to obtain control of the Company in a tender offer or similar hostile transaction. The shareholder rights plan was amended on March 9, 2009, June 8, 2017, and June 16, 2017. Pursuant to the terms of the shareholder rights plan, as amended, one right was distributed with respect to each ordinary share of the Company outstanding at the close of business on January 22, 2009. The rights will become exercisable only if a person or group (the “Acquiring Person”) obtains ownership of 15% or more of the Company’s voting securities (including by acquisition of the Company’s ADSs representing ordinary shares) (a “Triggering Event”), subject to certain exceptions. In the case of a Triggering Event, the rights plan entitles shareholders other than the Acquiring Person to purchase, for an exercise price of US$19.50, a number of shares with a value twice that of the exercise price. The number of shares each such shareholder will be entitled to purchase is equal to the product of (i) the number of shares then owned by such shareholder and (ii) two times the exercise price divided by the then current market price per share. The rights plan expired on January 8, 2019. The plan has not been exercisable as of the expiration date and has not been extended. On May 6, 2019, an extraordinary general meeting was held to adjust the authorized share capital and to adopt a dual-class share structure, consisting of Class A ordinary shares and Class B ordinary shares. Each Class A ordinary share is entitled to one vote per share on all matters subject to vote at general meetings of the Group. Each Class B ordinary share is entitled to fifty (50) votes per share on all matters subject to vote at general meetings of the Group. Class A ordinary shares and Class B ordinary shares were split from the ordinary shares issued at the time of change. No new shares were issued. Only Mr. Jun Zhu and Incsight Limited (“Incsight”) hold Class B ordinary shares. As of December 31, 2019, there were 112,929,702 ordinary shares issued or outstanding, being the sum of 103,737,691 Class A ordinary shares and 9,192,011 Class B ordinary shares. |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended |
Dec. 31, 2019 | |
EMPLOYEE BENEFITS | |
EMPLOYEE BENEFITS | 22. EMPLOYEE BENEFITS Full-time employees of the Group’s subsidiaries and VIE subsidiaries registered in the PRC are entitled to statutory staff welfare benefits, including medical care, welfare subsidies, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. These subsidiaries and VIE subsidiaries are required to accrue for these benefits based on certain percentages of the employees’ salaries in accordance with the relevant regulations, and to make contributions to the state-sponsored pension and medical plans out of the amounts accrued for medical and pension benefits. The total amounts charged to the consolidated statements of operations and comprehensive loss for such employee benefits amounted to RMB12.9 million, RMB7.9 million and RMB4.5 million (US$0.6 million) for the years ended December 31, 2017, 2018 and 2019, respectively. The PRC government is responsible for the medical benefits and ultimate pension liability to these employees. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2019 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 23. SHARE-BASED COMPENSATION 23.1 Share Option Plan On December 15, 2004, in connection with its initial public offering, the Company adopted a share option plan (“2004 Option Plan”). As of December 31, 2013, the total number of ordinary shares reserved in the 2004 Option Plan was 6,449,614 shares. The maximum contractual term of the awards under this plan shall be no more than five years from the date of grant. The options granted under this plan shall be at the money on the date of grant and typically vest over a three-year period, with one third of the options to vest on the each of the anniversary after the grant date. The 2004 Option Plan was amended in November 2015 to increase the maximum aggregate number of ordinary shares to 14,449,614 shares. The 2004 Option Plan was amended in August 2016 to increase the maximum aggregate number of ordinary shares to 34,449,614 shares. On June 6, 2017, the Group and optionees have entered into certain stock option agreements, pursuant to which the Group has granted to the optionees options to acquire the ordinary shares, par value US$0.01 each, of the Group. According to the agreements, 6,328,535 options were exercised to ordinary shares, and 10,806,665 options were canceled. In December 2018, the 2004 Option Plan was amended to increase the maximum aggregate number of ordinary shares to 100,000,000 shares. As of December 31, 2019, options to purchase 1,050,000 ordinary shares are outstanding and options to purchase 64,527,118 ordinary shares are available for future grant under the 2004 Option Plan. Stock Options The following table summarizes the Group’s share option activities with its employees and directors: Weighted-Average Remaining Number of Weighted-Average Contractual Term Aggregate Options Exercise Price (years) Intrinsic Value Outstanding as of January 1, 2019 50,000 US$ 0.93 4.07 Nil Granted — — — Nil Exercised — — — Nil Forfeited — — — Nil Outstanding as of December 31, 2019 50,000 US$ 0.93 Nil Vested and expected to vest as of December 31, 2019 50,000 US$ 0.93 Nil Exercisable as of December 31, 2019 50,000 US$ 0.93 Nil The options expected to vest are estimated by applying the pre-vesting forfeiture rate assumptions to total unvested options. The total intrinsic value of options exercised during the year was nil for years ended December 31, 2017, 2018 and 2019. On January 24, 2018, as approved by the Board of Directors, the Group granted share options totaling 5,750,000 shares to directors, officers and consultants. The remaining shares shall become vested in a series of 36 successive equal monthly installments upon grantees’ completion of each month of service to the Company over the 36‑month period measured from the grant date. On September 4, 2018, the Group canceled a portion of the options totaling 4,700,000 share options granted to directors, officers and consultants. The remaining 1,000,000 share options were forfeited due to the resignation of directors. The weighted-average grant-date fair value of options granted during 2018 was US$0.51. The fair value of the share options were measured on the respective grant dates based on the Black-Scholes option pricing model, with below assumptions made regarding expected term and volatility, risk-free interest rate and dividend yield: Risk-free interest rate 2.19 % Expected life (years) Expected dividend yield % Volatility 78.55 % Fair value of options at grant date US$ 0.51 On August 6, 2016, the Group granted share options totaling 6,000,000 shares to Mr. Jun Zhu, chairman and chief executive officer, and a third-party consultant as a reward for facilitating the Mongolia funding platform with total funding amount of RMB157.5 million (US$22.6 million) to the Group. According to ASC 718, the share option was applicable to the performance condition due to the share options would be vested in line with the percentage of funding received by the Group. In 2017, the options totaling 5,000,000 granted to Mr. Jun Zhu were canceled. Stock options to purchase 1,000,000 shares issued to the third-party consultant were canceled on January 22, 2019. On January 24, 2018, as approved by the Board of Directors, the Group granted share options totaling 2,500,000 shares to directors and consultant, subject to performance conditions, of which 1,000,000 shares granted will vest upon the success of improvement on the Group’s online game business and 1,500,000 shares will vest upon the success of the Group’s fund raising efforts. On September 4, 2018, the Group canceled 1,500,000 share options granted to director and consultant. The following table summarizes the share option activities subject to performance condition: Weighted-Average Remaining Number of Weighted-Average Contractual Term Aggregate Intrinsic Options Exercise Price (years) Value Outstanding as of January 1, 2019 2,000,000 US$ 1.86 2.06 Nil Granted — — — Nil Exercised — — — Nil Forfeited (1,000,000) US$ 0.93 — Nil Outstanding as of December 31, 2019 1,000,000 US$ 0.93 3.07 Nil Vested and expected to vest as of December 31, 2019 1,000,000 US$ 0.93 3.07 Nil Exercisable as of December 31, 2019 — — — Nil The grant-date fair value of share options with performance condition during 2018 was US$0.51. The fair value of the awards that are based on the performance condition was calculated using the Black-Scholes option pricing model with the following assumptions: Risk-free interest rate 2.19 % Expected life (years) 2.93 Expected dividend yield 0.00 % Volatility 78.55 % Fair value of options at grant date US$ 0.51 Cancelation and Acceleration Vesting of Share-Based Awards On June 6, 2017, the Group canceled a portion of the options totaling 10,806,665 and accelerated the vesting and exercise of the remaining options totaling 6,328,535 for options granted to 15 directors, officers and employees. The exercise price was modified to US$0.00, which the original exercise price of the accelerated vesting options ranged from US$1.53 to US$1.86. The incremental compensation cost recognized due to the cancelation and acceleration vesting of options was RMB33.0 million (US$4.7 million) in 2017. The fair value of the options canceled and accelerated vested under service and performance condition was measured on the modification date using Binomial Tree Pricing Model with the following assumptions: Risk-free interest rate 1.16%‑1.62 % Expected life (years) 4.49‑5.00 Expected dividend yield 0.00 % Volatility 62%‑74 % Fair value of options at modification date US$0.06‑US$0.31 The fair value of the options canceled and accelerated vested under market condition was measured on the modification date using the Monte Carlo Simulation model with the following assumptions: Risk-free interest rate 1.52 % Expected life (years) 5.00 Expected dividend yield 0.00 % Volatility 72 % Fair value of options at modification date US$0.18‑US$0.25 Restricted Ordinary Shares On September 4, 2018, the Group granted an aggregate amount of 30,000,000 restricted ordinary shares to directors, officers and consultants. In exchange for such restricted ordinary shares granted, the Group forfeited and canceled the stock options in the total amount of 6,200,000 shares previously granted on January 24, 2018. Half of each individual’s shares will only vest if the Group meets certain target on non-GAAP profit before tax in 2019. If the Group fails to achieve this target, such half of each individual’s shares will be forfeited and canceled. The remaining half of each individual’s shares is subjected to a half year lock-up period. After the half year lock-up period, such remaining shares shall become vested in 36 successive equal monthly installments upon grantees’ completion of each month of service to the Group measured from the last day of each month after the vesting commencement date. On January 21, 2019, the Group forfeited and canceled an aggregate amount of 15,000,000 restricted ordinary shares with the vesting condition that the Group meets certain target on non-GAAP profit before tax in 2019 previously granted on September 4, 2018. The vesting conditions of the remaining 15,000,000 ordinary shares are subjected to a half year lock-up period. After the half year lock-up period, such remaining shares shall become vested in 24 successive equal monthly installments instead of 36 installments upon grantees’ completion of each month of service to the Group measured from the last day of each month after the Vesting Commencement Date dated on March 5, 2019. Share-Based Compensation For the years ended December 31, 2017, 2018 and 2019, the Group recorded share-based compensation of RMB38.0 million, RMB3.9 million and RMB21.3 million (US$3.1 million), respectively, for options granted to the Group’s employees and directors. As of December 31, 2019, there was approximately RMB35.0 million (US$5.0 million) unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested options and restricted shares with performance condition. Total unrecognized compensation cost may be adjusted for future changes in estimated forfeitures. 23.2 Ordinary Shares Granted to Incsight Incsight is a company incorporated in the British Virgin Islands and wholly owned by Mr. Jun Zhu. On December 8, 2010, as approved by the Board of Directors, the Company granted 1,500,000 ordinary shares to Incsight, subject to performance conditions, of which 500,000 ordinary shares granted will vest when the Group achieves breakeven and 1,000,000 ordinary shares will vest when the Group’s cumulative profit reaches US$5.0 million in a quarter subsequent to the quarter in which the Group breaks even. The ordinary shares granted are not entitled to receive dividends until vested. The Board of Directors considered the grant of ordinary shares as an incentive to retain Mr. Jun Zhu’s services with the Group. The awarded non-vested shares would be valid for five years from December 8, 2010. For the quarter ended September 30, 2014, the Group achieved breakeven. It was considered probable the performance targets would be met for the total of 1,500,000 ordinary shares. The fair value of the granted non-vested shares was US$6.48 per share, the market price on the date of grant. On December 7, 2015, 500,000 ordinary shares granted to Incsight were vested. The awarded non-vested shares were valid for additional three years and expired on December 7, 2018. The Group recorded share-based compensation of RMB0.5 million, nil and nil for the years ended December 31, 2017, 2018 and 2019, respectively. As of December 31, 2019, there was no outstanding non-vested shares granted to Incsight. 23.3 Stock Options and Ordinary Shares Granted by Red 5 In February 2006, Red 5 adopted a Stock Incentive Plan (“Red 5 Stock Incentive Plan”) under which Red 5 may grant to its employees, director and consultants stock options to purchase common shares or restricted shares. As of December 31, 2010, 13,626,955 shares were reserved under Red 5 Stock Incentive Plan. In September 2011, Red 5 further increased the number of common shares reserved to 22,855,591. If an option shall expire or terminate for any reason without having been exercised in full, the reserved shares subject to such option shall again be available for subsequent option grants under the plan. From the inception of this plan to December 31, 2019, Red 5 granted a total of 38,191,879 options to its employees and directors at the exercise price ranging from US$0.0001 to US$0.2450 per share, which vest over four years commencing from grant date. Options expire within a period of not more than ten years from the grant date. An option granted to a person who is a greater than 10% shareholder on the date of grant may not be exercisable more than five years after the grant date. As of December 31, 2019, options to purchase 5,111,250 shares of common stock were outstanding and options to purchase 15,480,087 shares of common stock were available for future grant. The following table summarizes the Red 5’s share option activities with its employees and directors for the year ended December 31, 2019: Weighted-Average Weighted-Average Remaining Number of Exercise Price per Contractual Term Aggregate Options Option (years) Intrinsic Value Outstanding as of January 1, 2019 5,111,250 US$ 0.049 2.24 Nil Granted — — — Nil Exercised — — — Nil Forfeited — — — Nil Outstanding as of December 31, 2019 5,111,250 US$ 0.049 Nil Vested and expected to vest as of December 31, 2019 5,111,250 US$ 0.049 Nil Exercisable as of December 31, 2019 5,111,250 US$ 0.049 Nil The option’s intrinsic value was calculated by the excess of the estimated fair value of Red 5’s common shares, which was determined by the Group with the assistance of an independent valuation firm. The options expected to vest are estimated by applying the pre-vesting forfeiture rate assumptions to total unvested options. The total intrinsic value of options exercised for the year ended December 31, 2017, 2018 and 2019 were nil. The fair value of options granted at US$0.0178, measured on the grant date based on the Black-Scholes option pricing model with assumptions made regarding expected term and volatility, risk-free interest rate and dividend yield: Risk-free interest rate 0.78 % Expected life (years) 4.00 Expected dividend yield 0.00 % Volatility 45.70 % Red 5 recorded share-based compensation of RMB0.3 million, RMB0.04 million and RMB0.05 million (US$0.01 million) for options and shares of restricted common stock granted for the years ended December 31, 2017, 2018 and 2019, respectively. The share-based payment awards were recorded as a component of noncontrolling interest in the consolidated financial statements. As of December 31, 2019, unrecognized compensation cost related to share-based awards granted to Red 5 grantees was nil. |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND BALANCES | 12 Months Ended |
Dec. 31, 2019 | |
RELATED PARTY TRANSACTIONS AND BALANCES | |
RELATED PARTY TRANSACTIONS AND BALANCES | 24. RELATED PARTY TRANSACTIONS AND BALANCES Transaction with equity investee In 2013, the Group entered into an agreement with ZTE9, an equity investee of the Group, to jointly operate IPTV games in the PRC. According to the agreement, the Group pays ZTE9 a royalty fee for providing game contents on IPTV. Net royalty and other service fees related to IPTV business charged by ZTE9 to the Group amounted to RMB5.2million and nil for the years ended December 31, 2018 and 2019, respectively. The Group provided IPTV related supporting service to ZTE9 of RMB0.2 million and nil for the years ended December 31, 2018 and 2019, respectively. Total amount due to ZTE9 for IPTV business was RMB5.1 million and RMB0.2 million (US$0.03 million) as of December 31, 2018 and 2019, respectively. The Group lent RMB0.6 million and nil to ZTE9 to fund its operations in 2018 and 2019, respectively. ZTE9 has repaid RMB1.7 million and nil in 2018 and 2019, respectively. Total amount due from ZTE9 for outstanding loans was RMB1.0 million and RMB1.0 million (US$0.1 million) as of December 31, 2018 and 2019, respectively. The Group charged service fees to Big Data of RMB0.05 million and RMB0.02 million (US$0.01 million) for the years ended December 31, 2018 and 2019, respectively. The Group charged outsourcing service fee of RMB0.4 million and nil for the years ended December 31, 2018 and 2019, respectively. Total amount due from Big Data was RMB0.1 million and RMB0.1 million (US$0.02 million) as of December, 2018 and 2019 , respectively . In 2014, the Group entered into a license agreement with System Link, a 50% joint venture of the Group, for publishing and operating Firefall for a five-year term in the PRC. Under this license agreement, System Link is expected to pay Red 5 and Red 5 Singapore a total of no less than US$160.0 million (including license fee and royalties) during the term of the agreement. In 2015, System Link paid US$10.0 million to the Group as a license fee. The Group recorded the US$10.0 million as amount due to the related party and was to amortize the amount over the five-year period. System Link has been dormant since the cessation of Firefall in March 2016 and the termination of CrossFire 2 license in November 2017. Red 5 Singapore filed a lawsuit against System Link in 2016. Due to ongoing litigation and non-operation of Firefall, Red 5 was no longer required to render any service to System Link in relation to the operation of Firefall. As such, Red 5 recognized the remaining unamortized license fee as revenue in 2017. The balance due to System Link (non-current) was nil as both of December 31, 2018 and 2019. The Group recognized licensing revenue of RMB51.1 million, nil and nil for the years ended December 31, 2017, 2018 and 2019, respectively. In 2019, the Group has reached an out-of-court settlement with Qihoo 360 where Red 5 Singapore has withdrawn the litigation from Shanghai Intellectual Property Court in May 2019 and the Group is implementing a mediation agreement with Qihoo 360 to settle the arbitration proceeding in Hong Kong as of the issuance date of these consolidated financial statements (see Note 30.2). Transaction with T3 In 2016, Asian Way entered into a license agreement with T3, an equity investee of the Group, for developing a game using augmented reality (“AR”) technologies based on the intellectual property relating to the game. Upon commercial launch, Asian Way will share certain percentages of revenues of the game to T3. The game is still under development as of December 31, 2019. The Group has sold all its equity interest in T3 during the year. Transaction with Mr. Jun Zhu Mr. Jun Zhu, the chairman and chief executive officer, provided loans of RMB11.0 million and RMB16.1 million (US$2.3 million) to the Group in 2018 and 2019, respectively. The loans were interest-free and the outstanding balance of RMB57.1 million and RMB63.2 million (US$9.1 million) remained as of December 31, 2018 and 2019, respectively. In May 2019, the issued and outstanding ordinary shares then held by Incsight, which is wholly owned by Mr. Jun Zhu, and the issued and outstanding ordinary shares then held by Mr. Jun Zhu himself, were re-designated and re-classified as Class B ordinary shares. All other ordinary shares then issued and outstanding were re-designated and re-classified as Class A ordinary shares. On the same date, the Company amended and restated then effective Amended and Restated Memorandum of Association and Articles of Association in their entirety and adopted the Second Amended and Restated Memorandum and Articles of Association which reflect, among other things, the changes to the capital structure of the Company. As a result of such changes, Mr. Jun Zhu holds the majority of our outstanding voting power and we became a “controlled company” as defined under Nasdaq Stock Market Rules. Transaction with Comtec In June 2019, the Group entered into a share purchase agreement with Comtec, a wholly-owned subsidiary of Comtec Solar Systems Group Limited (SEHK: 00712) (“Comtec Group”), an entity affiliated with Kwok Keung Chau, independent director of the Company. Pursuant to the share purchase agreement, the Company has issued 3,444,882 Class A ordinary shares to purchase 9.9% equity interest in Zhenjiang Kexin, a lithium battery management system and power storage system supplier. |
LOSS PER SHARE
LOSS PER SHARE | 12 Months Ended |
Dec. 31, 2019 | |
LOSS PER SHARE | |
LOSS PER SHARE | 25. LOSS PER SHARE Loss per share is calculated as follows: For the year For the year For the year For the year ended December ended December ended December ended December 31, 2017 31, 2018 31, 2019 31, 2019 RMB RMB RMB US$ (Note 3) Numerator: Net loss attributable to ordinary shareholders before change in redeemable noncontrolling interest (118,165,850) (217,092,926) (177,795,168) (25,538,677) Change in redeemable noncontrolling interest (57,126,233) (40,918,773) (12,827,598) (1,842,569) Net loss attributable to ordinary shareholders (175,292,083) (258,011,699) (190,622,766) (27,381,246) Denominator: Denominator for basic and diluted loss per share – weighted-average shares outstanding 33,426,448 62,114,760 106,407,008 106,407,008 Loss per share - Basic and diluted (5.24) (4.15) (1.79) (0.26) The Company had 5,778,846, 20,383,333 and 13,213,978 stock options, warrants and non-vested shares outstanding as of December 31, 2017, 2018 and 2019, respectively, which were excluded in the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive due to the net loss reported in such periods. |
RESTRICTED NET ASSETS
RESTRICTED NET ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
RESTRICTED NET ASSETS | |
RESTRICTED NET ASSETS | 26. RESTRICTED NET ASSETS Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries and the VIEs of the Group established in the PRC must make appropriations from after-tax profit to non-distributable reserved funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserved fund reaches 50% of their registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of enterprise expansion, and the staff bonus and welfare are not distributable as cash dividends. The appropriation to these reserves by the Group’s PRC entities was nil for the years ended December 31, 2017, 2018 and 2019. The accumulated reserves as of December 31, 2019 were RMB3.8 million (US$0.5 million). In addition, due to restrictions on the distribution of registered capital from the Company’s PRC subsidiaries, the PRC subsidiaries’ registered capital of RMB11.5 million (US$1.6 million) as of December 31, 2019, were considered restricted. As a result of these PRC laws and regulations, as of December 31, 2019, approximately RMB7.7 million (US$1.1 million), were not available for distribution to the Company by its PRC subsidiaries in the form of dividends, loans or advances. |
NONCONTROLLING INTEREST
NONCONTROLLING INTEREST | 12 Months Ended |
Dec. 31, 2019 | |
NONCONTROLLING INTEREST | |
NONCONTROLLING INTEREST | 27. NONCONTROLLING INTEREST As of December 31, 2019, the Group’s noncontrolling interests mainly included equity interest in Red 5 and equity awards granted as compensation by the Group’s subsidiaries. The following schedule shows the effects of changes in the ownership interest of The9 Limited in its subsidiaries on equity attributed to The9 Limited for the years ended December 31, 2017, 2018 and 2019. December 31, December 31, December 31, December 31, 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Net loss attributable to The9 Limited (118,165,850) (217,092,926) (177,795,168) (25,538,677) Transfers (to) from the noncontrolling interest: Change in The9 Limited’s additional paid-in capital for adjustment on noncontrolling interest as a result of issuance of common shares of Red 5 upon vesting of stock options and restricted shares (1) (7,060) — — — Change from net loss attributable to The9 Limited and transfers to noncontrolling interests (118,172,910) (217,092,926) (177,795,168) (25,538,677) In June 2016, the Group completed a share exchange transaction with L&A and certain other shareholders of Red 5, whereby the Group exchanged approximately 30.6% equity interest (on a fully-diluted basis) owned in Red 5 for a total of 723,313,020 (after a one-to-five stock split) of newly issued shares of L&A, after deducting a 6% of total shares received (769,481,940 shares) for the payment of a service fee to a third-party consultant. As a result, the percentage of noncontrolling interest in Red 5 changed from 10.4% to 58.1%, after deducting shares of Series B redeemable convertible preferred shares (“SBPS”) from total shares of Red 5. |
REDEEMABLE NONCONTROLLING INTER
REDEEMABLE NONCONTROLLING INTEREST | 12 Months Ended |
Dec. 31, 2019 | |
REDEEMABLE NONCONTROLLING INTEREST | |
REDEEMABLE NONCONTROLLING INTEREST | 28. REDEEMABLE NONCONTROLLING INTEREST In January 2014, Red 5 issued 27,438,952 SBPS to a third-party investor, Shanghai Oriental Pearl Culture Development Co., Ltd., ("Oriental Pearl"), for an aggregate consideration of RMB118.3 million (US$17.0 million). In conjunction with the issuance of SBPS, Oriental Pearl also purchased 5,948,488 common shares of Red 5 from two executives of Red 5 at the same per share price as the per share price of SBPS for an aggregate consideration of RMB25.6 million (US$3.7 million). The purchase price for these common shares was determined to be less than fair value as the transaction was contemplated in conjunction with the issuance of the SPBS. The difference between the purchase price and fair value of SBPS as determined by the Group with the assistance of an independent valuation firm, amounted to RMB131.3 million (US$18.9 million), was recognized as a compensation paid to the two executives in the amount of RMB13.0 million (US$1.9 million). Due to share exchange transaction with L&A in 2016, a 37% share of SBPS was owned by L&A. As of December 31, 2019, the holders of SBPS were as follows: December 31, December 31, Holder 2018 2019 Number of Number of Shares Shares L&A International Holdings Limited 10,180,553 10,180,553 Shanghai Oriental Pearl Culture Development Co., Ltd. 17,258,399 17,258,399 As of December 31, 2014, the Group considered the redemption of the SBPS to be probable. The Group accreted the carrying value of SBPS to redemption value using the effective interest rate method over the period from the issuance date to the redemption date. The key terms of the SBPS are as follows: Conversion Each SBPS may be converted at any time into common shares at the then applicable conversion price. The initial conversion ratio is 1:1, subject to adjustment in the event of (i) share splits, share combinations, share dividends or distribution, other dividends, recapitalizations and similar events, or (ii) issuance of common shares at a price per share less than the conversion price in effect on the date of or immediately prior to such issuance. In that case, the conversion price shall be reduced concurrently to the subscription price of such issuance. The SBPS shall be automatically converted into common shares immediately prior to the consummation of a public offering of Red 5’s shares wherein gross proceeds are at least US$30,000,000, immediately following the public offering (the “Qualifying IPO”). The conversion option can only be settled by issuance of common shares except that fractional shares may be settled in cash. Dividends The holder of each share of SBPS shall be entitled to receive dividends at the rate per share of $0.038237 per annum if and when a dividend is declared on common shares. The preferred shares participate in dividends on an as-converted basis and must be paid prior to any payment on common shares. Upon conversion, any declared or accrued but unpaid dividends will be converted into common shares at the same applicable conversion price. Redemption At any time on or after April 1, 2017, if requested by at least 50% of the holders of SBPS then outstanding, Red 5 shall redeem all of the outstanding SBPS at a redemption price equal to 200% of the issuance price in three equal annual installments. The full amount of the redemption price due but not paid shall accrue interest daily at a rate of 10% per annum from the issuance date of SBPS (see Note 30.2). Voting Each SBPS has voting rights equivalent to the number of common shares to which it is convertible at the record date. The holders of SBPS shall vote together with the common shareholders, and not as a separate class or series, on all matters put before the shareholders. Liquidation The holders of SBPS have preference over holders of common shares with respect to distribution of assets upon voluntary or involuntary liquidation of Red 5. The holders of SBPS shall be entitled to receive 100% of the original issue price ("preferred liquidation"). The holders of SBPS are also entitled to distribution of remaining assets from preferred liquidation, along with other shareholders, while the total distribution entitled to the holders of SBPS should not exceed 200% of the original issue price. A reconciliation of redeemable noncontrolling interest is as follows: For the year ended For the year ended For the year ended December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Redeemable noncontrolling interest opening balance 306,014,668 341,074,539 48,992,293 Net loss attributable to redeemable noncontrolling interest (5,858,902) (4,855,589) (697,462) Change in redeemable noncontrolling interest 40,918,773 12,827,598 1,842,569 Redeemable noncontrolling interest ending balance 341,074,539 349,046,548 50,137,400 |
DISPOSAL OF SUBSIDIARIES
DISPOSAL OF SUBSIDIARIES | 12 Months Ended |
Dec. 31, 2019 | |
DISPOSAL OF SUBSIDIARIES | |
DISPOSAL OF SUBSIDIARIES | 29. DISPOSAL OF SUBSIDIARIES On September 26, 2019, the Group entered into an agreement with Kapler Pte. Ltd. to sell three subsidiaries namely The9 Computer, C9I Shanghai and Shanghai Kaie for total consideration of RMB493.0 million (US$70.8 million). These subsidiaries hold the land use rights and office buildings located at Zhangjiang, Shanghai. Proceeds from the disposal will be used to repay both the outstanding entrusted bank loan and convertible notes, with the residual to be used as working capital for the Group’s operations. As of December 31, 2019, the transaction was under process and the equity interest of The9 Computer, C9I Shanghai and Shanghai Kaie have been transferred to Kapler Pte. Ltd. The Group, however, continued to manage operation of these subsidiaries, including subsequent repayment of the entrusted bank loan, until final completion of the transaction in February 2020. As of December 31, 2019, the Group still retained power over decisions that most significantly impact the economic activities and potential to receive significant benefits or absorb significant losses of these subsidiaries. As such, these subsidiaries are part of consolidated entities of the Group as of December 31, 2019 and the Group has presented the assets and liabilities of these subsidiaries as held-for-sale. The transaction was subsequently completed on February 21, 2020. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 30. COMMITMENTS AND CONTINGENCIES 30.1 Other operating commitments In October 2016, the Group had raised RMB57.5 million (US$8.3 million), and the Group planned to raise an additional RMB100.0 million (US$14.4 million) until CrossFire New Mobile Game is launched. Under this fundraising arrangement, the Group will share certain percentages of revenues from CrossFire New Mobile Game to investors providing funding to the Group. In August 2016, the Group granted a third-party consultant 1,000,000 options to acquire shares of the Group as payment for consulting services related to the RMB157.5 million (US$22.6 million) financing plan of CrossFire Mobile Game with Inner Mongolia Culture Assets and Equity Exchange. The options will vest in accordance with the schedule of the actual funding to be received. In October 2016, 365,079 options were vested after the Group received the first funding of RMB57.5 million (US$8.3 million). The Group continues to cooperate with a third-party company for development and operation of CrossFire Mobile Game. The Group plans to apply for a license (“Banhao”) from GAPPRPT for CrossFire New Mobile Game as soon as development of the game is finalized to launch the game. The Group does not plan to finance the remaining RMB100.0 million (US$14.4 million) from the planned fund raising arrangement, and due to non-recovery of the advance financing fee, the Group fully impaired the advance finance fee in 2018. In January 2019, total 1,000,000 options granted to the third-party consultant were canceled. The Group is obligated to pay an amount of US$2.0 million within 30 days after commercial launch date of the game to Smilegate as minimum guarantee for royalty. In June 2017, Shanghai IT has entered into an investment agreement with the shareholders of Beijing Ti Knight where Shanghai IT will invest a total of RMB9.0 million (US$1.3 million) in Beijing Ti Knight. As of December 31, 2019, Shanghai IT has invested RMB4.9 million (US$0.7 million) and has a remaining capital contribution commitment amounting to RMB4.1 million (US$0.6 million). Shanghai IT’s purchase commitment amounting to RMB6.8 million (US$1.0 million) for the outsourcing development agreement entered on October 9, 2016 with Beijing Ti Knight will be waived if Shanghai IT’s accumulated investment in Beijing Ti Knight is more than RMB6.0 million (US$0.9 million). Hence, as of December 31, 2019, the Group has both a capital commitment and a purchase commitment amounting to RMB4.1 million (US$0.6 million) and RMB6.8 million (US$1.0 million), respectively, but the purchase commitment will be waived under the condition that accumulated investment in Beijing Ti Knight by Shanghai IT is more than RMB6.0 million (US$0.9 million). As of December 31, 2019 the agreements have not been terminated but the related outsourcing development of the related game has been transferred to a third-party company. In 2019, Jiu Gang has signed a joint venture agreement with Shenzhen EN-plus Technologies Co., Ltd. ("EN+"), an electric vehicle charging equipment company incorporated in the PRC, to establish a joint venture to engage in sales of new energy electric vehicle charging equipment, investment, construction and operation of charging stations, and provision of operational services for urban charging equipment and platforms for electric vehicles. According to the joint venture agreement, the Group will make a cash investment of RMB50.0 million (US$7.2 million) in the joint venture in consideration for which it will receive 80% equity interest in the joint venture, and EN+ will contribute its current and future proprietary electric vehicle charging technology to the joint venture in consideration for which it will receive a 20% equity interest of the joint venture. As of December 31, 2019, the joint venture has not been commenced and no progress on the joint venture. In March 2019, the Group entered into a joint venture agreement with F&F to establish a joint venture to manufacture, market, distribute and sell electric cars in the PRC. Under the terms of joint venture agreement, the Group will make capital contribution of up to US$600.0 million in three equal installments to the joint venture, and F&F will make contributions including its use rights for a piece of land in the PRC to manufacture electric cars and will grant the joint venture an exclusive license to manufacture, market, distribute and sell certain F&F’s car models and other potential selected car models in the PRC, in each case subject to the satisfaction of certain conditions, such as establishment of the joint venture and funding arrangements. As of December 31, 2019, the Group has paid the initial deposit of US$5.0 million and has not paid remaining capital contribution. In October 2019, the Group entered into a development agreement with F&F to establish a development plan for the joint venture’s business conduct in the PRC. Under the terms of development agreement, the Group shall pay an amount of US$18.0 million as development fee in four-equal installments. The first installment of US$6.0 million shall be paid within 2 business days following the receipt by the Group of the proceeds from its proposed offering under that certain Registration Statement on Form F-1 filed with the U.S SEC on June 24, 2019. The Group has applied to withdraw the Registration Statement on From F-1 in February 2020. 30.2 Contingencies In June 2016, Asian Development borrowed HK$92.3 million (US$11.9 million) from a financial services company at an annual interest rate of 2% for a term of 24 months. This loan is secured by 417,440,000 shares of L&A (see Note 16). Pursuant to the financing agreement (“Agreement”), such loan is considered to be in default since the market price of the pledged shares had fallen below the collateralized stock price by more than 35% for ten consecutive trading days. Asian Development had not made any remediation pursuant to the Agreement. Upon default, the lender shall be entitled to foreclose the pledged shares and become the legal and beneficial owner of the pledged shares. If the market value of the pledged shares cannot cover the total outstanding amount owed by Asian Development to the lender under the Agreement, the lender may claim against Asian Development to recover any outstanding amounts under the Agreement, in addition to foreclosure of the pledged shares as mentioned above. As mentioned in Note 24, Red 5 and its affiliates are currently in dispute with Qihoo 360 and its affiliates regarding System Link and Firefall and various legal proceedings have been initiated and are ongoing in connection with such dispute since 2016 where litigations have been filed with both Intellectual Property Court of Shanghai and Hong Kong International Arbitration Centre. In May 2019, the Group has entered into an out-of-court settlement with Qihoo 360 where both the Group and Qihoo 360 agreed to withdraw litigations filed in relation to the dispute over Firefall and to liquidate the joint venture, System Link. As of December 31, 2019, the Group has withdrew all the claims against Qihoo 360 and settled the litigation proceedings in Shanghai in May 2019. In August 2019, the Group has received a refund from Intellectual Property Court of Shanghai on court acceptance fee paid in 2016 and recognized other income amounting to RMB3.8 million (US$0.5 million) for the year ended December 31, 2019. As of the issuance date of these consolidated financial statements, the Group is implementing the mediation agreement with Qihoo 360 to settle the arbitration proceeding in Hong Kong. Shanghai Oh Yeah Information Technology Co., Ltd. (“Shanghai Oh Yeah”) filed several related civil claims against joint defendants including Shanghai IT, ZTE9 and a third-party defendant, regarding copy-right infringements of their intellectual property to the Intellectual Property Court of Shanghai with a total aggregated claim amount of RMB3.0 million (US$0.4 million). These civil claims are still in process as of December 31, 2019. The Group has assessed the likelihood of the outcome and has accrued an amount for the contingency. The Group may be subject to other legal or administrative proceedings in the ordinary course of business. The Group does not believe that any currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on the business or financial condition. As described in Note 28, in August 2014, Red 5 issued 27,438,952 Series B redeemable convertible preferred shares of Red 5 to a new investor, Oriental Pearl. Due to the stock exchange transaction with L&A in 2016, a 37% share of the SBPS was owned by L&A as of December 31, 2019 (see Note 28). Per Articles of Association of Red 5, major holders of SBPS, at any time on or after April 1, 2017 (the “Redemption Election”), can require Red 5 to redeem all, but not less than all, of the outstanding shares of SBPS, as applicable, in three equal annual installments. New Star, a wholly owned subsidiary of the Group, owns 39,766,589 Series A redeemable convertible preferred shares which have similar terms with the Series B redeemable convertible preferred shares. The redemption value of SBPS was US$16.5 million for the first installment, US$18.1 million for the second installment and US$19.9 million for the third installment. Since Red 5 is in a net liability position, the Group does not believe the preferred shareholders will request such redemption. As of the issuance date of these consolidated financial statements, there was no such preferred shareholder requiring Red 5 to redeem the preferred shares. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2019 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | 31. SEGMENT REPORTING The Group operates in one segment whose business is developing and operating online games and related services. The Group’s chief operating decision maker is the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. The Group generates its revenues from customers in the Greater China (including PRC, Taiwan, Hong Kong and Macau), North America and other areas for the years ended December 31, 2017, 2018 and 2019. The following geographic area information includes revenue based on location of players for the years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Greater China 19,690,716 16,430,205 182,107 26,158 North America 51,156,109 — — — Other areas 2,301,731 1,001,653 159,388 22,895 Total 73,148,556 17,431,858 341,495 49,053 The majority of the Group’s assets are located in Greater China. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2019 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 32. SUBSEQUENT EVENTS In February 2020, the Group completed the sale of three subsidiaries, namely The9 Computer, C9I Shanghai and Shanghai Kaie that held the mortgaged office buildings located at Zhangjiang, Shanghai to Kapler Pte. Ltd. As of the issuance date of these consolidated financial statements, the Group has received 90% of sale proceeds from Kapler Pte. Ltd. amounting to RMB443.7 million. The Group has repaid the principal and interest due on the entrusted bank loan and has repaid US$4.8 million to the issuer of convertible notes. The Group plans to use proceeds from the above sale to settle the remaining outstanding balance of convertible notes amounting to US$55.5 million. In February 2020, the Group issued and sold (i) a one-year convertible note in a principal amount of US$500,000, (ii) 70,000 ADSs, and (iii) 3,300,000 Class A ordinary shares, for an aggregate consideration of US$500,000 at an initial conversion price of US$1.05 per ADS to Iliad Research and Trading, L.P. (“Iliad”). The convertible note bears interest at a rate of 6.0% per year, compounded daily. Iliad has the right, at its sole discretion, for any time after six months from the purchase date until the outstanding balance has been paid in full, to convert all or any portion of the outstanding balance up to US$150,000 per calendar month into ADSs of the Group at an initial conversion price of US$1.05 per ADS, subject to adjustment. Beginning on the date that is six months from the note purchase date, Iliad has the right, exercisable at any time in its sole and absolute discretion, to redeem any portion of the convertible note. The Group could pay the redemption amount to Illiad in cash or the Group’s ADSs. In the events the principal amount and interest accrued for the convertible note issued to Iliad are fully repaid, the Company has the right to repurchase the remaining Class A ordinary shares held by Iliad that are unsold at US$0.0001 per share. On March 6, 2020, the Company received a letter from the Listing Qualifications Department of Nasdaq, notifying that the minimum bid price per ADS, each representing three Class A ordinary shares of the Company, was below US$1.00 for a period of 30 consecutive business days and the Company did not meet the minimum bid price requirement set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules. The Group has a compliance period of 180 calendar days, or until September 2, 2020, to regain compliance with Nasdaq’s minimum bid price requirement. If the Company fail to satisfy Nasdaq Capital Market’s continued listing requirements and fail to regain compliance on a timely basis, the ADSs could be delisted from Nasdaq Capital Market. On April 13, 2020, the Company received a letter from the Listing Qualifications Department of Nasdaq indicating that the Company no longer met the continued listing requirement of minimum MVLS for the Nasdaq Global Market because the market value of the Company’s securities listed on Nasdaq for the last 30 consecutive business days was below the minimum requirement of US$35.0 million. Pursuant to the relevant Nasdaq listing rules, the Company has a compliance period of 180 calendar days, or until October 12, 2020, to regain minimum MVLS requirements. If the Company fails to satisfy Nasdaq Global Market’s continued listing requirements and fail to regain compliance on a timely basis, the ADSs could be delisted from Nasdaq Global Market. On April 17, 2020, the Company received a notification letter from the Listing Qualifications Department of Nasdaq indicating that Nasdaq has determined to toll the compliance period for minimum bid price and market value of publicly held shares requirements through June 30, 2020. As a result of the tolling of the compliance period, the Company will have until November 16, 2020 to regain compliance. The Company can regain compliance, either during the tolling period or during the compliance period resuming after the tolling period, by evidencing compliance with the minimum bid price requirement for a minimum of ten consecutive trading days. In April 2020, Inner Mongolia Culture Assets and Equity Exchange filed a civil claim against Wuxi Qudong and Shanghai IT to recover RMB57.5 million (US$8.3 million) of principal and interest that it previously raised to finance the early phase development of CrossFire New Mobile Game. The Group is cooperating with a third-party company for the development and operation of CrossFire Mobile Game. The Group plans to apply for a license (“Banhao”) from GAPPRPT for CrossFire New Mobile Game as soon as development of the game is finalized. The Group may seek to meditate and settle this claim amid ongoing game development. The Group does not expect this case to significantly affect the business operations. Starting from January 2020, a novel strain of coronavirus, later named COVID-19, has spread worldwide. Government-imposed measures such as travel restrictions, extended holidays and delay of business resumption have interrupted normal operation of businesses in various regions. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. This pandemic may cause pressure on the Group due to delayed ability to identify alternative business opportunities and to obtain additional financing to support business transitions. Travel restrictions have affected Group management’s progress of discussions with its business partners regarding potential cooperation to facilitate transition into a different industry. Consequently, the Group is unable to accurately predict the impact that the pandemic will have on our financial condition and results of operations due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by government authorities, the impact to the business of our customers, and other factors. |
FINANCIAL INFORMATION OF PARENT
FINANCIAL INFORMATION OF PARENT COMPANY | 12 Months Ended |
Dec. 31, 2019 | |
FINANCIAL INFORMATION OF PARENT COMPANY | |
FINANCIAL INFORMATION OF PARENT COMPANY | CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) REVENUE — — — — Cost of revenues — — — — Gross loss — — — — Operating expenses: Product development (43,710) — — — Sales and marketing (231,884) — — — General and administrative (62,979,090) (21,435,150) (68,165,230) (9,791,323) Total operating expenses (63,254,684) (21,435,150) (68,165,230) (9,791,323) Loss from operations (63,254,684) (21,435,150) (68,165,230) (9,791,323) Interest expenses (76,989,899) (98,308,205) (33,154,189) (4,762,301) Fair value change on warrants liability 12,615,466 2,251,427 1,292,243 185,619 Foreign exchange gain (loss) 35,473,519 1,963,364 (1,648,652) (236,814) Other expenses, net (21,649,514) (18,180,060) (1,636,394) (235,053) Loss before income tax expense and share of loss in equity method investments (113,805,112) (133,708,624) (103,312,222) (14,839,872) Income tax benefit — — — — Recovery of equity investment in excess of cost 60,548,651 — — — Equity in loss of subsidiaries and VIEs (64,909,389) (83,384,302) (74,482,946) (10,698,805) Net loss (118,165,850) (217,092,926) (177,795,168) (25,538,677) Other comprehensive (loss) income, net of tax: Currency translation adjustments (19,027,771) 7,241,192 5,426,604 779,483 Total comprehensive loss (137,193,621) (209,851,734) (172,368,564) (24,759,194) CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 2018 AND 2019 December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) ASSETS Current assets: Cash and cash equivalents 18 143,896 20,669 Prepayments and other current assets, net 61,979 63,873 9,175 Amounts due from intercompany 1,305,838,856 1,303,065,115 187,173,592 Total current assets 1,305,900,853 1,303,272,884 187,203,436 Investments in subsidiaries and VIEs (1,635,525,945) (1,681,526,537) (241,536,174) Total assets (329,625,092) (378,253,653) (54,332,738) LIABILITIES Current liabilities: Short-term borrowings — 34,881,000 5,010,342 Accrued expenses and other current liabilities 5,248,838 11,578,754 1,663,184 Warrants 1,490,844 198,600 28,527 Convertible notes 375,257,140 414,127,908 59,485,752 Total current liabilities 381,996,822 460,786,262 66,187,805 Total liabilities 381,996,822 460,786,262 66,187,805 SHAREHODERS’ EQUITY (DEFICIT) Ordinary shares 6,502,658 — — Class A ordinary shares — 7,321,099 1,051,610 Class B ordinary shares — 648,709 93,181 Additional paid-in capital 2,496,069,065 2,539,552,478 364,783,889 Statutory reserves 28,071,982 28,071,982 4,032,288 Accumulated other comprehensive loss (9,204,556) (3,777,952) (542,669) Accumulated deficit (3,233,061,063) (3,410,856,231) (489,938,842) Total shareholders’ deficit (711,621,914) (839,039,915) (120,520,543) Total liabilities and shareholders’ equity (329,625,092) (378,253,653) (54,332,738) CONDENSED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 2018 AND 2019 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Cash flows from operating activities: Net loss (118,165,850) (217,092,926) (177,795,168) (25,538,678) Adjustments for: Share-based compensation expenses 37,727,861 3,645,751 21,705,240 3,117,763 Fair value change on warrants liability (12,615,466) (2,251,427) (1,292,244) (185,619) Amortization of discount and interest on convertible notes 76,990,826 98,308,205 33,154,191 4,762,302 Foreign exchange (gain) loss (35,473,519) (1,963,364) 1,648,652 236,813 Recovery of equity investment in excess of cost (60,548,651) — — — Equity in loss of subsidiaries and VIEs 64,909,389 83,384,302 74,482,946 10,698,806 Consulting fee paid by issuance of shares 13,454,692 4,172,800 35,091,686 5,040,605 Change in prepayments and other current assets 915,269 (2,971) (1,894) (272) Change in amounts due from intercompany (130,954,737) 30,882,203 (28,060,447) (4,030,631) Change in accrued expenses and other current liabilities (2,092,500) 898,712 6,329,916 909,236 Net cash used in operating activities (165,852,686) (18,715) (34,737,122) (4,989,675) Cash flows from investing activity: Settlement payment from investee 165,812,500 — — — Cash flows from financing activities: Proceeds from other loans — — 34,881,000 5,010,341 Net cash provided by (used in) financing activities — — 34,881,000 5,010,341 Net change in cash and cash equivalents (40,186) (18,715) 143,878 20,666 Cash and cash equivalents, beginning of year 58,919 18,733 18 3 Cash and cash equivalents, end of year 18,733 18 20,669 Supplement disclosure of cash flow information: Interest paid — — — — Income taxes paid — — — — |
PRINCIPAL ACCOUNTING POLICIES (
PRINCIPAL ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
PRINCIPAL ACCOUNTING POLICIES | |
Basis of presentation | <1> Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below. The accompanying consolidated financial statements have been prepared on a going concern basis. The Group has accumulated deficit of approximately RMB3,410.9 million (US$489.9 million) and total current liabilities exceeded total assets by approximately RMB876.6 million (US$125.9 million) as of December 31, 2019. The Group also suffered a net loss of approximately RMB196.2 million (US$28.2 million) for the year ended December 31, 2019. The Group expects to continue to incur product development and sales and marketing expenses for licensed and proprietary new games in order to achieve overall revenue growth. To meet its working capital needs, the Group is considering multiple alternatives, including, but not limited to, additional equity financing, settlement of secured convertibles notes, launch of new games and new operations, and cost controls as outlined below. There can be no assurance that the Group will be able to complete any such transaction on acceptable terms or otherwise. If the Group is unable to obtain the necessary capital, it will need to pursue a plan to license or sell its assets, seek to be acquired by another entity, or cease operations. These factors raise substantial doubt about the Group’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset or liability amounts that might result from the outcome of this uncertainty. Additional Equity Financing The Group intends to obtain financial support from Mr. Jun Zhu, CEO and Chairman of the Group, if needed in 2020. Settlement of Secured Convertibles Notes (see Note 19) On November 24, 2015, the Group entered into an agreement with Splendid Days Limited for a private placement of secured convertible notes for gross proceeds of US$40,050,000. This transaction closed on December 11, 2015. Pursuant to the terms of the agreement, the convertible notes matured in December 2018, subject to a two-year extension at the discretion of the investor. In March 2019, the Group entered into a deed of settlement agreement relating to the settlement of convertible notes which matured in December 2018, pursuant to which the convertible notes should be repaid by May 31, 2019 through the proceeds from the sale of the Group’s subsidiaries that hold office buildings located at Zhangjiang, Shanghai. In November 2019, Splendid Days Limited agreed to extend the repayment date to December 31, 2019 as disposal of those Group subsidiaries was still in process. Subsequent to December 31, 2019, the Group completed disposal of those Group subsidiaries, has repaid the principal and interest due on the entrusted bank loan and has repaid US$4.8 million to the issuer of convertible notes. The Group plans to use proceeds from the above sale to settle remaining outstanding balance of convertible notes amounting to US$55.5 million. Launch of New Games and New Operations The Group plans to launch our proprietary online mobile games on different platforms, including the CrossFire New Mobile Game and Audition. In November 2017, the Group entered into an exclusive publishing agreement with two third-party companies, pursuant to which these third-party companies were granted an exclusive right to publish CrossFire New Mobile Game and Audition in the PRC. The Group has invested significant financial and personnel resources in development of our proprietary CrossFire New Mobile Game and the Group expects to obtain regulatory approval to launch this game in 2020. In February 2018, the Group subscribed for a total of 5,297,157 tokens to be issued by Telegram Inc. at a consideration of US$2.0 million with a third-party company and the tokens were expected to be issued in 2019. In October 2019, Telegram notified participants of the tokens offering that the U.S. Securities and Exchange Commission (“SEC”) filed a lawsuit against them in United States and that the expected launch date has been extended to April 2020. As of December 31, 2019, the Group has provided a valuation allowance on these subscribed tokens. As of the issuance date of these consolidated financial statements, these subscribed tokens have not been issued. Telegram may further extend the launch date or may enter into a termination arrangement depending on the development of the future events. In March 2019, the Group entered into a joint venture agreement with Faraday & Future Inc. (“F&F”), and subsequently attempted to enter into electric vehicle business. The Group has established a joint venture with F&F to manufacture, market, distribute and sell certain of F&F’s car models in the PRC. As of December 31, 2019, the Group has not entered into a license agreement with F&F and has not fulfilled its first installment capital commitment to the development of the joint venture. While the joint venture arrangement remains effective, the Group is currently in the process of identifying alternative business development areas. Cost Controls Currently, a significant portion of our cash outflows is attributable to administrative expenses. The Group has the ability to control the level of discretionary spending on administrative expenses by implementation of cost savings on non-essential expenses from the day-to-day business operations. |
Consolidation | <2> Consolidation The consolidated financial statements include the financial statements of The9 Limited, its subsidiaries and VIEs in which it has a controlling financial interest. A subsidiary is consolidated from the date on which the Group obtained control and continues to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity. If the Group demonstrates its ability to control a VIE through its rights to all the residual benefits of the VIE and its obligation to fund losses of the VIE, then the VIE is consolidated. All intercompany balances and transactions between The9 Limited, its subsidiaries and VIEs have been eliminated in consolidation. In April 2010, the Group acquired a controlling interest in Red 5. In June 2016, the Group completed a share exchange transaction with L&A International Holding Limited (“L&A”) and certain other shareholders of Red 5 (see Note 9). After the transaction, the Group owned 34.71% shareholding in Red 5. As the Group controls a majority of Board of Director seats and only a majority vote is required to approve Board of Director resolutions, and as the Group has continuously funded the operation of Red 5, the Group still retained effective control over Red 5. Red 5 remained as a consolidated entity of the Group as of December 31, 2019. PRC laws and regulations currently prohibit or restrict foreign ownership of internet-related business. In September 2009, the General Administration of Press and Publication Radio, Film and Television (“GAPPRFT”) further promulgated the Circular Regarding the Implementation of the Department Reorganization Regulation by State Council and Relevant Interpretation by State Commission Office for Public Sector Reform to Further Strengthen the Administration of Pre-approval on Online Games and Approval on Import Online Games (the “GAPP Circular”). Pursuant to Administrative Measures on Network Publication (the “Network Publication Measures”) jointly issued by GAPPRFT and the Ministry of Information Industry (which has subsequently been reorganized as the Ministry of Industry and Information Technology) (“MIIT”) on February 4, 2016, effective from March 2016, wholly foreign-owned enterprises, Sino-foreign equity joint ventures and Sino-foreign cooperative enterprises shall not engage in the provision of web publishing services, including online game services. Prior examination and approval by GAPPRFT are required on project cooperation involving internet publishing services between an internet publishing services and a wholly foreign-owned enterprise, Sino-foreign equity joint venture, or Sino-foreign cooperative enterprise within China or an overseas organization or individual. It is unclear whether PRC authorities will deem our VIE structure as a kind of such “manners of cooperation” by foreign investors to gain control over or participate in domestic online game operators, and it is not clear whether GAPPRFT and MIIT have regulatory authority over the ownership structures of online game companies based in China and online game operations in China. Therefore, the Group believes that its ability to direct those activities of its VIEs that most significantly impact their economic performance is not affected by the GAPP Circular. |
Use of estimates | <3> Use of estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reported periods. Significant accounting estimates reflected in the Group’s consolidated financial statements include the valuation of non-marketable equity investments and determination of other-than-temporary impairment, allowance for doubtful accounts, revenue recognition, assessment of impairment of other long-lived assets, assessment of impairment of advances to suppliers and other advances, incremental borrowing rates for lease assessment, fair value of redeemable noncontrolling interest, fair value of the warrants, share-based compensation expenses, consolidation of VIEs, valuation allowances for deferred tax assets, and contingencies. Such accounting policies are affected significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements, and actual results could differ materially from these estimates. |
Foreign currency translation | <4> Foreign currency translation The Group’s reporting currency is the Renminbi (“RMB”). The Group’s functional currency, with the exception of its subsidiaries, Red 5, The9 Interactive, and Red 5 Singapore, is the RMB. The functional currency of Red 5, The9 Interactive, and Red 5 Singapore, is the United States dollar ("US$" or "U.S. dollar"), U.S. dollar, and Singapore dollar, respectively. Assets and liabilities of Red 5, The9 Interactive, and Red 5 Singapore, are translated at the current exchange rates quoted by the People’s Bank of China (the “PBOC”) in effect at the balance sheet dates. Equity accounts are translated at historical exchange rates and revenues and expenses are translated at the average exchange rates in effect during the reporting period to RMB. Gains and losses resulting from foreign currency translation to reporting currency are recorded in accumulated other comprehensive income (loss) in the consolidated statements of changes in equity for the years presented. Transactions denominated in currencies other than functional currencies, are translated into functional currencies at the exchange rates prevailing at the dates of the transactions. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations and comprehensive loss. Monetary assets and liabilities denominated in foreign currencies are translated into functional currencies using the applicable exchange rates at the balance sheet dates. All such exchange gains and losses are included in foreign exchange (loss) gain in the consolidated statements of operations and comprehensive loss. |
Cash and cash equivalents | <5> Cash and cash equivalents Cash and cash equivalents represent cash on hand and highly liquid investments with a maturity date when acquired of three months or less. As of December 31, 2018 and 2019, cash and cash equivalents were comprised primarily of bank deposits where cash is deposited with reputable financial institutions. Included in cash and cash equivalents as of December 31, 2018 and 2019 are amounts denominated in U.S. dollar totaling US$0.08 million and US$0.35 million, respectively. The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PBOC, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in China’s foreign exchange trading system market. The Group’s aggregate amount of cash and cash equivalents denominated in RMB amounted to RMB3.6 million and RMB7.6 million (US$1.1 million) as of December 31, 2018 and 2019, respectively. |
Allowance for doubtful accounts | <6> Allowance for doubtful accounts Accounts receivable mainly consist of receivables from third-party game platforms, and other receivables, which are included in prepayments and other current assets, both of which are recorded net of allowance for doubtful accounts. The Group determines the allowances for doubtful accounts when facts and circumstances indicate that the receivable is unlikely to be collected. Allowances for doubtful accounts are charged to general and administrative expenses. If the financial condition of the Group’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company provided an allowance for doubtful accounts of RMB0.05 million, RMB21.2 million and RMB0.2 million (US$0.01 million) for the years ended December 2017, 2018 and 2019, respectively. |
Investments in equity method investee and loan to equity method investee | <7> Investments in equity method investee and loan to equity method investee Equity investments are comprised of investments in privately held companies. The Group uses the equity method to account for an equity investment over which it has the ability to exert significant influence but does not otherwise have control. The Group records equity method investments at the cost of acquisition, plus the Group’s share in undistributed earnings and losses since acquisition. For equity investments over which the Group does not have significant influence or control, the cost method of accounting is used. The Group has historically provided financial support to certain equity investees in the form of loans. If the Group’s share of the undistributed losses exceeds the carrying amount of an investment accounted for by the equity method, the Group continues to report losses up to the investment carrying amount, including any loans balance due from the equity investees. The Group assesses its equity investments and loans to equity investees for impairment on a periodic basis by considering factors including, but not limited to, current economic and market conditions, the operating performance of the investees including current earnings trends, the technological feasibility of the investee’s products and technologies, the general market conditions in the investee’s industry or geographic area, factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, cash burn rate, and other company-specific information including recent financing rounds. If it has been determined that the equity investment is less than its related fair value and that this decline is other-than-temporary, the carrying value of the investment and loan to equity investee is adjusted downward to reflect these declines in value. |
Available-for-sale investments | <8> Available-for-sale investments Investments in debt and equity securities are, on initial recognition, classified into the three categories: held-to-maturity securities, trading securities and available-for-sale securities. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses recognized in accumulated other comprehensive income. When there is objective evidence that an available-for-sale investment is impaired, the cumulative losses from declines in fair value that had been recognized directly in other comprehensive income are removed from equity and recognized in earnings. When the available-for-sale investment is sold, the cumulative fair value adjustments previously recognized in accumulated other comprehensive income are recognized in the current period operating results. When the Group determines that the impairment of an available-for-sale equity security is other-than-temporary, the Group recognizes an impairment loss in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. When other-than-temporary impairment has occurred for an available-for-sale debt security and the Group intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, an impairment loss is recognized in earnings equal to the difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The new cost basis will not be changed for subsequent recoveries in fair value. To determine whether a loss is other-than-temporary, the Group reviews the cause and duration of the impairment, the extent to which fair value is less than cost, the financial condition and near-term prospects of the issuer, and the Group’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost. |
Property, equipment and software, net | <9> Property, equipment and software, net Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives: Leasehold improvements Shorter of respective lease term or estimated useful life Computer and equipment 3 to 4 years Software 5 years Office furniture and fixtures 3 years Motor vehicles 5 years Office buildings 10 to 20 years In September 2019, the Group entered into an agreement with Kapler Pte. Ltd., a third-party, to sell three subsidiaries which hold land use rights and office buildings located at Zhangjiang, Shanghai. As of December 31, 2019, the transaction was in process and the Group has presented both the land use rights and office buildings as assets held-for-sale (see Note 7). |
Goodwill | <10> 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 Group’s business acquisitions. Goodwill is not depreciated or amortized but is tested for impairment at the reporting unit level on an annual basis, and between annual tests when an event or circumstances change occurs that indicate the asset might be impaired. In 2010, the Group recognized goodwill of US$1.6 million in connection with the acquisition of Red 5 and provided a full valuation allowance against that goodwill in 2016. Subsequently, the Group has not recognized additional goodwill. |
Assets held for sale | <11> Assets held for sale Assets and asset disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Long-lived assets to be sold are classified as held for sale if all the recognition criteria in Accounting Standards Codification (“ASC”) 360-10-45-9 are met: · Management, having the authority to approve the action, commits to a plan to sell the asset; · The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets; · An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated; · The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year; · The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and · Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Assets and liabilities classified as held-for-sale are measured at lower of their carrying amount or fair value less costs to sell. |
Intangible assets | <12> Intangible assets, net Intangible assets consist primarily of acquired game licenses and acquired game development costs from business combinations. Acquired game licenses are amortized on a straight-line basis over the shorter of the useful economic life of the relevant online game or license period, which range from two to seven years. Amortization of acquired game licenses commences upon monetization of the related online game. In September 2011, the Group paid US$10.0 million and guaranteed an additional payment of US$12.7 million due within four years to the third-party game publisher to acquire game licenses. In addition, the Group is subject to additional contingent payments to be calculated based on certain percentages of the proceeds received from future game licensing and royalties, if any. The total consideration paid, including the US$10.0 million and the guaranteed amount of US$12.7 million, was recorded as an acquired game license. The contingent payments will be recorded as cost of services when incurred. The remaining payable related to this game license fee was US$3.1 million as of both December 31, 2018 and 2019. The acquired game licenses were fully amortized or impaired in 2016. The Group recognizes intangible assets acquired through business acquisitions as assets separate from goodwill. Acquired in-process research and development costs are initially considered an indefinite-lived asset. Upon completion of the research and development efforts, these costs are recorded as acquired game development costs and are amortized on a straight-line basis over the estimated useful economic life of the relevant online game. Amortization of acquired game development cost commences upon monetization of the related online game. The acquired game development cost was fully amortized or impaired in 2016. |
Land use right, net | <13> Land use rights, net Land use rights represents operating lease prepayments to the PRC’s Land Bureau for usage of the parcel of land located at Zhangjiang, Shanghai. Amortization is calculated using the straight-line method over the estimated land use rights period of 44 years. In September 2019, the Group entered into a sale purchase agreement with Kapler Pte. Ltd. to sell three subsidiaries which hold the land use rights and office buildings located at Zhangjiang, Shanghai. As of December 31, 2019, the transaction was in process and the Group has presented both the land use right and office buildings as assets held-for sale (see Note 7). |
Impairment of long-lived assets | <14> Impairment of long-lived assets The Group evaluates its long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or that the useful life is shorter than the Group had originally estimated. The Group assesses the recoverability of the long-lived assets by comparing the carrying amount to the estimated future undiscounted cash flow expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets. Indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess. |
Revenue recognition | <15> Revenue recognition On January 1, 2018, the Group adopted ASC 606, Revenue from Contracts with Customers , applying the modified retrospective method to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period results are not adjusted. Revenues are recognized when control of the promised goods or services is transferred to the Group’s customers, in an amount that reflects the consideration of the Group expects to be entitled to in exchange for those goods or services. Depending on the terms of the contract and the laws that apply to the contract, control of the goods or services may be transferred over time or at a point in time. Online game services The Group earns revenue from provision of online game operation services to players on the Group’s game servers and third-party platforms and overseas licensing of the online game to other operators. The Group grants operation right on authorized games, together with associated services which are rendered to the customers over time. The Group adopts virtual item / service consumption model for the online game services. Players can access certain games free of charge, but many purchase game points to acquire in-game premium features. The Group may act as principal or agent through the various transaction arrangements. The determination on whether to record the revenue gross or net is based on an assessment of various factors, including but not limited to whether the Group (i) is the primary obligor in the arrangement; (ii) has general inventory risk; (iii) changes the product or performs part of the services; (iv) has latitude in establishing the selling price; (v) has involvement in the determination of product or service specifications. The assessment is performed for all licensed online games. When acting as principal Revenues from online game operation operated through telecom carriers and certain online games operators are recognized upon consumption of the in-game premium features based on gross revenue sharing-payments to third-party operators, but net of value-added tax (“VAT”). The Group earns revenue from the sale of in-game virtual items. Revenues are recognized as the virtual items are consumed or over the estimated lives of the virtual items, which are estimated by considering the average period that players are active and players’ behavior patterns derived from operating data. Accordingly, commission fees paid to third-party operators are recorded as cost of revenues. When acting as agent With respect to games license arrangements entered into by third-party operators, if the terms provide that (i) third-party operators are responsible for providing game desired by the game players; (ii) the hosting and maintenance of game servers for running the games is the responsibility of third-party operators; (iii) third-party operators have the right to review and approve the pricing of in-game virtual items and the specification, modification or update of the game made by the Group; and (iv) publishing, providing payment solution and market promotion services are the responsibilities of third-party operators and the Group is responsible to provide intellectual property licensing and subsequent technical services, then the Group considers itself as an agent of the third-party operators in such arrangement with game players. Accordingly, the Group records the game revenues from these licensed games, net of amounts paid to the third-party operators. Licensing revenue The Group licenses its online games, most of which are developed in house, to third parties. The Group receives monthly revenue-based royalty payments from the third-party licensee operators. Monthly revenue-based royalty payments are recognized when the relevant services are delivered, provided that collectability is reasonably assured. The Group views the third-party licensee operators as its customers and recognizes revenues on a net basis, as the Group does not have the primary responsibility for fulfillment and acceptability of the game services. The Group receives additional up-front license fees from certain third-party licensee operators who are entitled to an exclusive right to access the games where initial license fee is allocated solely on the license. License fees are recognized as revenue evenly throughout the license period after commencement of the game, given that the Group’s intellectual property rights subject to the license are considered to be symbolic and the licensee has the right to access such intellectual property rights as they exist over time when the license is granted. Technical services Technical services are blockchain-related consulting services where the Group is to provide designing, programming, drafting of white papers, and related services to customers. These revenues are recognized when delivery of the services has occurred or when services have been rendered and the collection of the related fees is reasonably assured. Contract balances Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced and revenue recognized prior to invoicing, where the Group has satisfied its performance obligations and has the unconditional right to payment. Deferred revenue related to unsatisfied performance obligations at the end of the period primarily consists of fees received from game players for online game services and technical services. For deferred revenue, due to the generally short-term duration of the contracts, the majority of the performance obligations are satisfied in the following reporting period. Of the deferred revenue balance at the beginning of the period, revenue of RMB5.4 million and RMB0.2 million (US$0.02 million) was recognized during the years ended December 31, 2018 and 2019, respectively. |
Advances from customers and deferred revenue | <16> Advances from customers The Group licenses proprietary games to operators in other countries and receives license fees and royalty income. License fees received in advance of the monetization of the game is recorded in advances from customers. |
Convertible notes and warrants | <17> Convertible notes and warrants Convertible Notes and Beneficial Conversion Feature ("BCF") The Group issued convertible notes and warrants in December 2015. The Group has evaluated whether the conversion feature of the notes is considered an embedded derivative instrument subject to bifurcation in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities . Based on the Group’s evaluation, the conversion feature is not considered an embedded derivative instrument subject to bifurcation as the conversion option does not provide t he holder of the notes with means to net settle the contracts. Convertible notes, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective rate of conversion per the terms of the convertible notes agreement is below market value. In these instances, the value of the BCF is determined as the intrinsic value of the conversion feature is recorded as deduction to the carrying amount of the notes and credited to additional paid-in-capital. For convertible notes issued with detachable warrants, a portion of the note’s proceeds is allocated to the warrant based on the fair value of the warrants at the date of issuance. The allocated fair value for the warrants and the value of the BCF are both recorded in the consolidated financial statements as a debt discount from the face amount of the notes, which is then accreted to interest expense over the life of the related debt using the effective interest method. The Group present the occurred debt issuance costs as a direct deduction from the convertible notes. Amortization of the costs is reported as interest expense. Warrants The Group accounts for the detachable warrants issued in connection with convertible notes under the authoritative guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock. The Group classifies warrants in its consolidated balance sheet as a liability which is revalued at each balance sheet date subsequent to the initial issuance. The Group uses the Black-Scholes-Merton pricing model (the “Black-Scholes Model”) to value the warrants. Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable judgment. A small change in the estimates used may cause a relatively large change in the estimated valuation. The estimated volatility of the Group’s common stock at the date of issuance, and at each subsequent reporting period, is based on historical fluctuations in the Company’s stock price. The risk-free interest rate is based on United States Treasury zero-coupon issues with a maturity similar to the expected remaining life of the warrants at the valuation date. The expected life of the warrants is based on the historical pattern of exercises of warrants. |
Cost of revenues | <18> Cost of revenues Cost of revenues consists primarily of online game royalties, payroll, revenue sharing to third-party game platform, telecom carriers and other suppliers, maintenance and rental of Internet data center sites, depreciation and amortization of computer equipment and software, and other overhead expenses directly attributable to the services provided. |
Product development costs | <19> Product development costs For software development costs, including online games, to be sold or marketed to customers, the Group expenses software development costs incurred prior to reaching technological feasibility. Once a software product has reached technological feasibility, all subsequent software costs for that product are capitalized until that product is released for marketing. After an online game is released, the capitalized product development costs are amortized over the estimated product life. For the years ended December 31, 2017, 2018 and 2019, although software products has reached technological feasibility, total software costs incurred subsequent to reaching technological feasibility amounted to be immaterial and therefore not capitalized. For website and internally used software development costs, the Group expenses all costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance of the existing websites and software. Costs incurred in the application and infrastructure development phase are capitalized and amortized over the estimated product life. Since the inception of the Group, the amount of internally generated costs qualifying for capitalization has been immaterial and, as a result, all website and internally used software development costs have been expensed as incurred. Product development costs consist primarily of outsourced research and development, payroll, depreciation charges and other overhead for the development of the Group’s proprietary games. Other overhead product development costs include costs incurred by the Group to develop, maintain, monitor, and manage its websites. |
Sales and marketing expenses | <20> Sales and marketing expenses Sales and marketing expenses consist primarily of advertising and promotional expenses, payroll and other overhead expenses incurred by the Group’s sales and marketing personnel. Advertising expenses in the amount of RMB0.9 million, RMB0.3 million and RMB0.2 million (US$0.04 million) for the years ended December 31, 2017, 2018 and 2019, respectively, were expensed as incurred. |
Government grants | <21> Government grants Unrestricted government subsidies from local government agencies allowing the Group full discretion to utilize the funds were RMB2.3 million, RMB1.6 million and RMB1.2 million (US$0.2 million) for the years ended December 31, 2017, 2018 and 2019, respectively, which were recorded in other income, net in the consolidated statements of operations and comprehensive loss. |
Share-based compensation | <22> Share-based compensation The Group has granted share-based compensation awards to certain employees under several equity plans. The Group measures the cost of employee services received in exchange for an equity award, based on the fair value of the award at the date of grant. Share-based compensation expense is recognized net of estimated forfeitures, determined based on historical experience. The Group recognizes share-based compensation expense over the requisite service period. For performance and market-based awards which also require a service period, the Group uses graded vesting over the longer of the derived service period or when the performance condition is considered probable. The Company determines the grant date fair value of stock options using a Black-Scholes Model with assumptions made regarding expected term, volatility, risk-free interest rate, and dividend yield. The fair value of the stock options containing a market condition is estimated using a Monte Carlo simulation model. For options awarded by private subsidiaries of the Group, the fair value of shares is estimated based on the equity value of the subsidiary. The Group evaluates the fair value of the subsidiary by making judgments and assumptions about the projected financial and operating results of the subsidiary. Once the equity value of the subsidiary is determined, it is allocated (as applicable) into the various classes of shares and options using the option-pricing method, which is one of the generally accepted valuation methodologies. On January 1, 2019, the Group adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvement to Nonemployee Share-based Payment Accounting to amend the accounting for share-based payment awards issued to nonemployees. Under ASU 2018-07, the accounting for awards to non-employees is similar to the model for employee awards. The expected term represents the period of time that stock-based awards granted are expected to be outstanding. The expected term of stock-based awards granted is determined based on historical data on employee exercise and post-vesting employment termination behavior. Expected volatilities are based on historical volatilities of the Company’s ordinary shares. Risk-free interest rate is based on United States government bonds issued with maturity terms similar to the expected term of the stock-based awards. The Group recognizes compensation expense, net of estimated forfeitures, on all share-based awards on a straight-line basis over the requisite service period, which is generally a one-to-four year vesting period or in the case of market-based awards, over the greater of the vesting period or derived service period. Forfeiture rate is estimated based on historical forfeiture patterns and adjusted to reflect future changes in circumstances and facts, if any. If actual forfeitures differ from those estimates, the estimates may need to be revised in subsequent periods. The Group uses historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. For stock option modifications, the Group compares the fair value of the original award immediately before and after the modification. For modifications, or probable-to-probable vesting conditions, the incremental fair value of fully vested awards is recognized as expense on the date of the modification, with the incremental fair value of unvested awards recognized ratably over the new service period. On June 6, 2017, the Board of Directors of the Group approved cancellation of a portion of the options and accelerated vesting of the remaining options in addition to the repricing of the exercise price which was US$0.00. Pursuant to the option agreement entered with the optionees, options totaling 6,328,535 were exercised and options totaling 10,806,665 were canceled. An independent appraiser engaged by the Group prepared a valuation report assessing the fair value of the options. The cancellation and acceleration of the options were considered as an option modification. Subject to ASC 718‑20‑35, the remaining unrecognized compensation cost of unvested stock option measured at grant date shall be recognized at the date of modification. The incremental compensation cost which is the excess of the fair value of the replacement award over the fair value of the canceled award was recognized at the date of cancelation. |
Leases | <23> Leases The Group applied ASC 842, Leases, on January 1, 2019 on a modified retrospective basis and has elected not to recast comparative periods. Right-of-use ("ROU") assets represent the Group's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. The operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. As most of the Group's leases do not provide an implicit rate, the Company uses the PBOC's incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Group's lease terms may include options to extend or terminate the lease. Renewal options are considered within the ROU assets and lease liability when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For operating leases with a term of one year or less, the Group has elected to not recognize a lease liability or ROU asset on its consolidated balance sheet. Instead, it recognizes the lease payments as expense on a straight-line basis over the lease term. Short-term lease expense is immaterial to its consolidated statements of operations, comprehensive loss, and cash flows. The Group has operating lease agreements with insignificant non-lease components and has elected the practical expedient to combine and account for lease and non-lease components as a single lease component. On January 1, 2019, the effective date of ASC 842, the Group has no lease assets and lease liabilities to be recognized as the Group has no lease contracts that require transition. There was no impact to retained earnings at adoption. |
Income taxes | <24> Income taxes Current income taxes are provided for in accordance with the laws and regulations applicable to the Group as enacted by the relevant tax authorities. Income taxes are accounted for under the asset and liability method. Deferred taxes are determined based upon differences between the financial reporting and tax bases of assets and liabilities at currently enacted statutory tax rates for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized as income in the period of change. A valuation allowance is provided on deferred tax assets to the extent that it is more likely than not that such deferred tax assets will not be realized. The total income tax provision includes current tax expenses under applicable tax regulations and the change in the balance of deferred tax assets and liabilities. The Group recognizes the impact of an uncertain income tax position at the largest amount that is more-likely-than not to be sustained upon audit by the relevant tax authority. Income tax related interest is classified as interest expenses and penalties as income tax expense. |
Redeemable noncontrolling interests | <25> Redeemable noncontrolling interests Redeemable noncontrolling interests are equity interests of our consolidated subsidiary not attributable to the Group that has redemption features that are not solely within the Group’s control. These interests are classified as temporary equity because their redemption is considered probable. These interests are measured at the greater of estimated redemption value at the end of each reporting period or the initial carrying amount of the redeemable noncontrolling interests adjusted for cumulative earnings (loss) allocations. |
Noncontrolling interest | <26> Noncontrolling interest A noncontrolling interest in a subsidiary or VIE of the Group represents the portion of the equity (net assets) in the subsidiary or VIE not directly or indirectly attributable to the Group. Noncontrolling interests are presented as a separate component of equity in the consolidated balance sheet and modifies the presentation of net income by requiring earnings and other comprehensive income loss to be attributed to controlling and noncontrolling interest. |
Loss per share | <27> Loss per share Basic loss per share is computed by dividing net loss attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted loss per share is calculated by dividing net income attributable to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. Ordinary share equivalents of stock options and warrants are calculated using the treasury stock method and are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded. |
Segment reporting | <28> Segment reporting The Group has one operating segment whose business is developing and operating online games and related services. The Group’s chief operating decision maker is the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. The Group generates its revenues from customers in Greater China, North America, and other areas. |
Certain risks and concentration | <29> Certain risks and concentration Financial instruments that potentially subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and prepayments and other current assets. As of December 31, 2018 and 2019, substantially all of the Group’s cash and cash equivalents were held by major financial institutions, which management believes are of high credit worthiness. |
Fair value measurements | <30> Fair value measurements Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The fair value measurement guidance provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows: Level 1 inputs are unadjusted quoted prices in active markets for identical assets that the management has the ability to access at the measurement date. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 inputs include unobservable inputs to the valuation methodology that reflect management’s assumptions about the assumptions that market participants would use in pricing the asset. Management develops these inputs based on the best information available, including their own data. |
Financial instruments | <31> Financial instruments Financial instruments primarily consist of cash and cash equivalents, investments, accounts receivable, accounts payable, short-term borrowings, warrants and convertible notes. The carrying value of the Group’s cash and cash equivalents, investments, accounts receivable, accounts payable and short-term borrowings approximate their market values due to the short-term nature of these instruments. Warrants are recorded in the consolidated balance sheets based on fair value. Both carrying value and fair value of convertible notes as of December 31, 2019 were RMB414.1 million (US$59.5 million). |
Recent accounting pronouncements | <32> Recent accounting pronouncements Financial Instruments – Credit Losses In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (“ASU 2016-13”). Further, as clarification of the new guidance, the FASB issued several subsequent amendments and updates to ASU 2016-13. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will adopt ASU 2016-13 beginning January 1, 2020 by applying the modified retrospective method with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Group’s adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements. Fair Value Measurements In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement,” which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. The new guidance is effective for the fiscal years and interim reporting periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for the adoption of either the entire ASU or only the provisions that eliminate or modify the requirements. The Group’s adoption of ASU 2018-13 did not have a material impact to the consolidated financial statements. Income Taxes In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Group is currently evaluating the impact of ASU 2019-12 on its financial position, results of operations, and cash flow. |
ORGANIZATION AND NATURE OF OP_2
ORGANIZATION AND NATURE OF OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ORGANIZATION AND NATURE OF OPERATIONS | |
Schedule of Group's principal subsidiaries and VIE subsidiaries | The Company’s principal subsidiaries and VIEs are as follows as of December 31, 2019: Date of Place of Legal Name of Entity Registration Registration Ownership Principal subsidiaries: GameNow.net (Hong Kong) Ltd. (“ GameNow Hong Kong ”) January‑2000 Hong Kong 100 % China The9 Interactive Limited (“ C9I ”) October‑2003 Hong Kong 100 % China The9 Interactive (Shanghai) Limited (“ C9I Shanghai ”) February‑2005 People’s Republic of China (“PRC”) 100 % China The9 Interactive (Beijing) Ltd. (“ C9I Beijing ”) March‑2007 PRC 100 % JiuTuo (Shanghai) Information Technology Ltd. ( "Jiu Tuo" ) July‑2007 PRC 100 % China Crown Technology Ltd. ( "China Crown Technology" ) November‑2007 Hong Kong 100 % Asian Development Ltd. ( “Asian Development” ) January‑2007 Hong Kong 100 % Asian Way Development Ltd. (“Asian Way”) November‑2007 Hong Kong 100 % New Star International Development Ltd. ( “New Star” ) January‑2008 Hong Kong 100 % Red 5 Studios, Inc. ( “Red 5” ) (Note 2.2) June‑2005 USA 34.71 % Red 5 Singapore Pte. Ltd. (“ Red 5 Singapore ”) (Note 2.2) April‑2010 Singapore 34.71 % The9 Interactive, Inc. (“ The9 Interactive ”) June‑2010 USA 100 % Shanghai Jiu Gang Electronic technology Ltd. (“Jiu Gang”) December‑2014 PRC 100 % City Channel Ltd. (“ City Channel ”) June‑2006 Hong Kong 100 % The9 Singapore Pte. Ltd. (“The9 Singapore”) April‑2010 Singapore 100 % Fast Supreme Development Limited (“ Fast Supreme ”) July‑2017 Hong Kong 99.99 % Ninebit Inc. (“ Ninebit ”) January -2018 Cayman Islands 100 % 1111 Limited (“ 1111 ”) January -2018 Hong Kong 100 % Supreme Exchange Limited (“ Supreme ”) December‑2018 Malta 90 % BET 111 Ltd. ("Bet 111") Jan-2019 Malta 90 % Coin Exchange Ltd ("Coin") Jan-2019 Malta 90 % The9 EV Limited ("The9 EV") May-2019 Hong Kong 100 % Comtec Solar(China)Investment Holding Limited ("Comtec Solar") June-2019 Hong Kong 100 % FF The9 China Joint Venture Limited ("FF The9") September-2019 Hong Kong 50 % Huiling Computer Technology Consulting (Shanghai) Co.Ltd. ("Huiling") March-2019 PRC 100 % Leixian Information Technology (Shanghai) Co., Ltd. ("Leixian") March-2019 PRC 100 % Variable interest entity: Shanghai The9 Information Technology Co., Ltd. (“ Shanghai IT ”) (Note 4) September‑2000 PRC N/A Subsidiaries and VIEs of Shanghai IT: Legal Date of Place of Ownership Held Name of Entity Registration Registration by Shanghai IT Shanghai Jiushi Interactive Network Technology Co., Ltd. ( “Jiushi” ) July‑2011 PRC 80 % Shanghai ShencaiChengjiu Information Technology Co., Ltd. (“ SH Shencai ”) May‑2015 PRC 60 % Wuxi Interest Dynamic Network Technology Co., Ltd. (“ Wuxi Qudong ”) June‑2016 PRC 100 % Changsha Quxiang Network Technology Co., Ltd. (“ Changsha Quxiang ”) July‑2016 PRC 100 % Silver Express Investments Ltd. (“ Silver Express ”) November‑2007 Hong Kong 100 % The9 Computer Technology Consulting (Shanghai) Co., Ltd. ("The9 Computer") June-2000 PRC 100 % Shanghai Kaie Information Technology Co., Ltd. ("Shanghai Kaie") January-2019 PRC 100 % |
PRINCIPAL ACCOUNTING POLICIES_2
PRINCIPAL ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
PRINCIPAL ACCOUNTING POLICIES | |
Schedule of estimated useful lives | Depreciation and amortization are computed using the straight-line method over the following estimated useful lives: Leasehold improvements Shorter of respective lease term or estimated useful life Computer and equipment 3 to 4 years Software 5 years Office furniture and fixtures 3 years Motor vehicles 5 years Office buildings 10 to 20 years |
VARIABLE INTEREST ENTITIES (Tab
VARIABLE INTEREST ENTITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
VARIABLE INTEREST ENTITIES | |
Schedule of financial information of VIE subsidiaries included in consolidated financial statements with intercompany balances and transactions eliminated | Summary financial information of the VIE subsidiaries included in the accompanying consolidated financial statements with intercompany balances and transactions eliminated are as follows: December 31, 2018 December 31, 2019 December 31, 2019 RMB RMB US$ (Note 3) Total assets 80,531,978 150,615,709 21,634,593 Total liabilities 335,980,249 60,889,508 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Net revenues 19,995,118 16,567,372 182,119 26,160 Net loss (71,839,112) (49,024,050) (51,667,515) (7,421,574) |
ADVANCES TO SUPPLIERS (Tables)
ADVANCES TO SUPPLIERS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ADVANCES TO SUPPLIERS | |
Summary of advances to suppliers | Advances to suppliers are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Advance to subscribe tokens 14,070,581 10,094,972 1,450,052 Company registration fee 1,383,962 794,692 114,150 Advertising fee 255,259 255,259 36,666 Financing fee — — — Other 98,240 101,685 14,606 15,808,042 11,246,608 1,615,474 |
PREPAYMENTS AND OTHER CURRENT_2
PREPAYMENTS AND OTHER CURRENT ASSETS, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
PREPAYMENTS AND OTHER CURRENT ASSETS, NET | |
Schedule of prepayments and other current assets | Prepayments and other current assets are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Employee advances 2,158,987 1,648,197 236,749 Prepayments and deposits 693,111 1,488,463 213,804 Input VAT recoverable 1,448,075 1,441,700 207,087 Refundable withholding tax — 1,297,016 186,305 Other receivables, net of allowance for doubtful accounts of RMB 20,770,928 and RMB 5,343,427 as of December 31, 2018 and 2019, respectively 1,848,614 2,973,158 427,067 6,148,787 8,848,534 1,271,012 |
ASSETS HELD-FOR-SALE AND LIAB_2
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE | |
Summary of assets and liabilities held for sale | December 31, 2019 December 31, 2019 RMB US$ (Note 3) Assets classified as held-for-sale Cash and cash equivalents 43,027,475 6,180,510 Prepayments and other current assets 5,162,857 741,598 Property, equipment and software, net 14,051,044 2,018,306 Land use rights, net 61,148,974 8,783,501 Total assets classified as held-for-sale 123,390,350 17,723,915 Liabilities directly associated with assets held-for-sale Accounts payable 50,000 7,182 Other taxes payable 1,585,095 227,685 Other payables and accruals 46,800 6,722 Interest payable 11,384,841 1,635,330 Long-term borrowing due within one year 31,624,560 4,542,584 Total liabilities directly associated with assets held-for-sale 44,691,296 6,419,503 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
INVESTMENTS | |
Schedule of Investments in equity investees |
—
—
—
Shanghai Big Data Cultures & Media Co., Ltd. (“Big Data”) <2>
6,146,104
—
—
Maxline Holdings Limited (“Maxline”) <6>
1,367,285
—
—
Leading Choice Holdings Limited (“Leading Choice”) <7>
—
—
—
Investments accounted for under cost method:
Shanghai Institute of Visual Art of Fudan University (“SIVA”)
10,000,000
10,000,000
1,436,410
T3 Entertainment Co., Ltd. (“T3”) <3>
24,892,921
—
—
Smartposting Co, Ltd. (“Smartposting”) <4>
2,809,808
—
—
Beijing Ti Knight Network Technology Co., Ltd. (“Beijing Ti Knight”) <5>
—
—
—
Shanghai The9 Education Technology Co., Ltd. (“The9 Education Technology”) <8>
—
—
—
Shanghai Ronglei Culture Communication Co., Ltd. (“Shanghai Ronglei”) <9>
—
—
—
Plutux Limited (“Plutux”) <10>
—
—
—
Zhenjiang Kexin Power System Design and Research Co., Ltd. ("Zhenjiang Kexin") <11>
—
—
—
Total
45,216,118
10,000,000
1,436,410" id="sjs-B4">The Group’s investments comprise the following: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ ( Note 3) Investments accounted for under equity method: ZTE9 Network Technology Co., Ltd., Wuxi (“ZTE9”) — — — System Link Corporation Limited ("System Link") <1> — — — Shanghai Big Data Cultures & Media Co., Ltd. (“Big Data”) <2> 6,146,104 — — Maxline Holdings Limited (“Maxline”) <6> 1,367,285 — — Leading Choice Holdings Limited (“Leading Choice”) <7> — — — Investments accounted for under cost method: Shanghai Institute of Visual Art of Fudan University (“SIVA”) 10,000,000 10,000,000 1,436,410 T3 Entertainment Co., Ltd. (“T3”) <3> 24,892,921 — — Smartposting Co, Ltd. (“Smartposting”) <4> 2,809,808 — — Beijing Ti Knight Network Technology Co., Ltd. (“Beijing Ti Knight”) <5> — — — Shanghai The9 Education Technology Co., Ltd. (“The9 Education Technology”) <8> — — — Shanghai Ronglei Culture Communication Co., Ltd. (“Shanghai Ronglei”) <9> — — — Plutux Limited (“Plutux”) <10> — — — Zhenjiang Kexin Power System Design and Research Co., Ltd. ("Zhenjiang Kexin") <11> — — — Total 45,216,118 10,000,000 1,436,410 |
PROPERTY, EQUIPMENT AND SOFTW_2
PROPERTY, EQUIPMENT AND SOFTWARE, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
PROPERTY, EQUIPMENT AND SOFTWARE, NET | |
Schedule of property, equipment and software and related accumulated depreciation and amortization | Property, equipment and software and related accumulated depreciation and amortization are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Office buildings 69,341,652 69,341,652 9,960,305 Computers and equipment 84,134,612 5,181,577 744,287 Leasehold improvements 10,365,904 9,359,857 1,344,459 Office furniture and fixtures 6,194,658 1,787,549 256,765 Motor vehicles 7,038,397 5,031,201 722,687 Software 15,832,264 14,542,095 2,088,842 Less: accumulated depreciation and amortization (175,555,042) (89,974,366) (12,924,009) Less: property, equipment and software, net, held-for-sale — (14,051,044) (2,018,306) Net book value 17,352,445 1,218,521 175,030 |
LAND USE RIGHT, NET (Tables)
LAND USE RIGHT, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
LAND USE RIGHT, NET | |
Schedule of gross carrying amount, accumulated amortization and net book value of intangible asset | Gross carrying amount, accumulated amortization and net book value of land use rights are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Land use rights 85,160,348 85,160,348 12,232,519 Less: accumulated amortization (22,570,692) (24,011,374) (3,449,018) Less: land use right, net, held-for-sale — (61,148,974) (8,783,501) Net book value 62,589,656 — — |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
LEASES | |
Schedule of items related to operating lease in consolidated balance sheet | December 31, 2019 December 31, 2019 RMB US$ (Note 3) Operating lease right-of-use assets 9,257,604 1,329,772 Operating lease liabilities- current portion 3,407,670 489,481 Operating lease liabilities-non-current portion 6,251,705 898,001 |
Schedule of lease cost | Classification in Consolidated Statements of Operations and Comprehensive Loss December 31, 2019 December 31, 2019 RMB US$ (Note 3) Operating lease cost Operating expenses 1,606,340 230,736 Cost of other leases with terms less than one year Operating expenses 82,232 11,812 Total 1,688,572 242,548 |
Schedule of maturities of operating lease liabilities | December 31, 2019 December 31, 2019 RMB US$ (Note 3) Due within one year 3,779,845 542,941 Due in the second year 3,995,768 573,956 Due in the third year 2,502,839 359,510 Total lease payments 10,278,452 1,476,407 Less: imputed interest (619,077) (88,925) Total 9,659,375 1,387,482 |
Schedule of supplemental cash flow information related to operating leases | December 31, 2019 December 31, 2019 RMB US$ (Note 3) Cash paid for amounts included in the measurement of operating lease liabilities 1,271,769 182,678 |
OTHER LONG-LIVED ASSETS, NET (T
OTHER LONG-LIVED ASSETS, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
OTHER LONG-LIVED ASSETS, NET | |
Schedule of other long-lived assets | Other long-lived assets are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Prepaid license fee 6,515,200 6,515,200 935,850 Prepaid deposit for joint venture — — — Total 6,515,200 6,515,200 935,850 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
FAIR VALUE MEASUREMENTS | |
Schedule of changes in warrants liability measured at fair value on a recurring basis using significant level 3 inputs | The following table presents the change in the warrants liability that were measured at fair value on a recurring basis using significant Level 3 inputs during 2018 and 2019 (see Note 20). December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Balance at issuance date/beginning of year 3,742,271 1,490,844 214,146 Fair value change on warrants liability recognized in other comprehensive income (2,251,427) (1,292,244) (185,619) Balance at the end of the year 1,490,844 198,600 28,527 |
TAXATION (Tables)
TAXATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
TAXATION | |
Schedule of composition of income tax expense | The current and deferred portions of income tax expense included in the consolidated statements of operations and comprehensive loss are as follows: For the year ended December 31, 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Current income tax expense PRC — — — — Other jurisdictions — — — — Deferred tax assets PRC (84,042,632) (39,763,083) (5,772,005) (829,097) Other jurisdictions (124,313,755) (19,816,235) (15,151,553) (2,176,384) Subtotal (208,356,387) (59,579,318) (20,923,558) (3,005,481) Change in valuation allowance PRC 84,042,632 39,763,083 5,772,005 829,097 Other jurisdictions 124,313,755 19,816,235 15,151,553 2,176,384 Subtotal 208,356,387 59,579,318 20,923,558 3,005,481 Income tax expense — — — — |
Schedule of reconciliation between statutory EIT rate and Group's effective tax rate | Reconciliation between the statutory EIT rate and the Group’s effective tax rate is as follows: For the year ended For the year ended For the year ended December 31, December 31, December 31, 2017 2018 2019 PRC statutory EIT rate 25 % 25 % 25 % Effect of different tax rates in other jurisdictions (2) % 2 % 1 % Change in future tax rate (upon expiration of preferential rate) (22) % 1 % 2 % Change of prior year deferred tax assets (8) % (11) % (15) % Change of valuation allowance 61 % (2) % (18) % Income not subject to tax and non-deductible expenses, net (1) % 0 % 0 % Effect of expired net operating loss (53) % (15) % 5 % Effective EIT rate 0 % 0 % 0 % |
Schedule of significant components of deferred tax assets and liabilities | Significant components of deferred tax assets For the year ended For the year ended For the year ended December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Temporary differences related to expenses and accruals 1,087,421 1,076,708 154,659 Temporary differences related to impairment on advances to suppliers 2,451,767 3,438,597 493,924 Temporary differences related to provision for doubtful accounts 3,077,784 1,078,742 154,952 Others 7,152,217 8,771,868 1,260,000 Temporary differences related to depreciation, amortization, and impairment of equipment and intangible assets 23,165,631 24,890,416 3,575,285 Startup expenses and advertising fees 608,399 199,704 28,686 Temporary differences related to research and development credits 1,106,956 1,120,850 161,000 Temporary differences related to equity investments 3,978,269 5,069,035 728,121 Foreign tax credits — — — Temporary differences related to provision for prepayment for equipment 5,000,000 5,000,000 718,205 Tax loss carry forwards 294,535,956 270,594,922 38,868,529 Total deferred tax assets 342,164,400 321,240,842 46,143,361 Less: Valuation allowance (342,164,400) (321,240,842) (46,143,361) Total deferred tax assets — — — |
Schedule of movement of valuation allowance on deferred tax assets | Movement of valuation allowance on deferred tax assets For the year ended For the year ended For the year ended December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Beginning balance 401,743,718 342,164,400 49,148,842 Decrease in valuation allowance (59,579,318) (20,923,558) (3,005,481) Ending balance 342,164,400 321,240,842 46,143,361 |
SHORT-TERM BORROWINGS (Tables)
SHORT-TERM BORROWINGS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
SHORT-TERM BORROWINGS | |
Schedule of short-term bank borrowings | Short-term borrowings are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Pledged loan 80,836,823 82,645,089 11,871,224 Interest-free loan — 34,881,000 5,010,342 Long-term borrowing due within one year 31,624,560 31,624,560 4,542,584 Less: borrowing classified as held for sale — (31,624,560) (4,542,584) Total 112,461,383 117,526,089 16,881,566 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued expenses and other current liabilities | Accrued expenses and other current liabilities are as follows: December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Funds raised for CrossFire New Mobile Game 57,499,910 57,499,910 8,259,345 Professional services 6,879,775 11,844,738 1,701,390 Staff cost related payables 4,245,967 9,851,024 1,415,011 Office expenses 3,377,709 3,543,495 508,991 Other payables 1,840,000 3,540,000 508,489 Utility fees 1,547,898 1,646,394 236,490 Product development services 892,216 906,906 130,269 Others 5,007,831 4,308,376 618,860 Total 81,291,306 93,140,843 13,378,845 |
CONVERTIBLE NOTES (Tables)
CONVERTIBLE NOTES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
CONVERTIBLE NOTES | |
Schedule of convertible note | The notes are divided into three tranches and can be converted into a total of 11,695,513 shares of the Group’s ADS at any time as follows: Convertible Notes Principal Amount Conversion Price Tranche A US$ 22,250,000 US$ 2.60 Tranche B US$ 13,350,000 US$ 5.20 Tranche C US$ 4,450,000 US$ 7.80 |
Schedule of convertible notes at net carrying value at date of issuance | The convertible notes are recorded at net carrying value at the date of issuance as follows: Principal Amount US$ 40,050,000 Less: Fair value allocated to warrants (Note 21) 8,821,883 Beneficial conversion feature 8,112,556 Issuance cost 3,200,000 Net carrying value US$ 19,915,561 |
WARRANTS ON CONVERTIBLE NOTES (
WARRANTS ON CONVERTIBLE NOTES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
WARRANTS ON CONVERTIBLE NOTES | |
Schedule of warrants exercisable at any time after commitment date to purchase shares of the Group's ADS | The warrants are exercisable at any time after the commitment date to purchase up to 4,778,846 shares of the Group’s ADS as follows: Warrants Principal Amount Exercise Price Tranche I US$ 5,000,000 US$ 1.50 Tranche A US$ 2,750,000 US$ 2.60 Tranche B US$ 1,650,000 US$ 5.20 Tranche C US$ 550,000 US$ 7.80 |
Schedule of assumptions used in Black-Scholes option pricing model for warrants | Warrants Tranche I Risk-free interest rate 1.59 % Expected volatility of common stock 93.67 % Dividend yield 0.00 % Expected life of warrants 0.9 years |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stock Options | |
Schedule of share option activities | The following table summarizes the Group’s share option activities with its employees and directors: Weighted-Average Remaining Number of Weighted-Average Contractual Term Aggregate Options Exercise Price (years) Intrinsic Value Outstanding as of January 1, 2019 50,000 US$ 0.93 4.07 Nil Granted — — — Nil Exercised — — — Nil Forfeited — — — Nil Outstanding as of December 31, 2019 50,000 US$ 0.93 Nil Vested and expected to vest as of December 31, 2019 50,000 US$ 0.93 Nil Exercisable as of December 31, 2019 50,000 US$ 0.93 Nil |
Schedule of fair value of options valuation assumptions | The fair value of the share options were measured on the respective grant dates based on the Black-Scholes option pricing model, with below assumptions made regarding expected term and volatility, risk-free interest rate and dividend yield: Risk-free interest rate 2.19 % Expected life (years) Expected dividend yield % Volatility 78.55 % Fair value of options at grant date US$ 0.51 |
Performance conditions | |
Schedule of share option activities | The following table summarizes the share option activities subject to performance condition: Weighted-Average Remaining Number of Weighted-Average Contractual Term Aggregate Intrinsic Options Exercise Price (years) Value Outstanding as of January 1, 2019 2,000,000 US$ 1.86 2.06 Nil Granted — — — Nil Exercised — — — Nil Forfeited (1,000,000) US$ 0.93 — Nil Outstanding as of December 31, 2019 1,000,000 US$ 0.93 3.07 Nil Vested and expected to vest as of December 31, 2019 1,000,000 US$ 0.93 3.07 Nil Exercisable as of December 31, 2019 — — — Nil |
Schedule of fair value of options valuation assumptions | The fair value of the awards that are based on the performance condition was calculated using the Black-Scholes option pricing model with the following assumptions: Risk-free interest rate 2.19 % Expected life (years) 2.93 Expected dividend yield 0.00 % Volatility 78.55 % Fair value of options at grant date US$ 0.51 |
Stock options and ordinary shares granted by Red 5 | |
Schedule of share option activities | The following table summarizes the Red 5’s share option activities with its employees and directors for the year ended December 31, 2019: Weighted-Average Weighted-Average Remaining Number of Exercise Price per Contractual Term Aggregate Options Option (years) Intrinsic Value Outstanding as of January 1, 2019 5,111,250 US$ 0.049 2.24 Nil Granted — — — Nil Exercised — — — Nil Forfeited — — — Nil Outstanding as of December 31, 2019 5,111,250 US$ 0.049 Nil Vested and expected to vest as of December 31, 2019 5,111,250 US$ 0.049 Nil Exercisable as of December 31, 2019 5,111,250 US$ 0.049 Nil |
Schedule of fair value of options valuation assumptions | Risk-free interest rate 0.78 % Expected life (years) 4.00 Expected dividend yield 0.00 % Volatility 45.70 % |
Options Cancelled and Accelerated Vested Under Service and Performance Condition | |
Schedule of fair value of options valuation assumptions | The fair value of the options canceled and accelerated vested under service and performance condition was measured on the modification date using Binomial Tree Pricing Model with the following assumptions: Risk-free interest rate 1.16%‑1.62 % Expected life (years) 4.49‑5.00 Expected dividend yield 0.00 % Volatility 62%‑74 % Fair value of options at modification date US$0.06‑US$0.31 |
Options Cancelled and Accelerated Vested Under Market Condition | |
Schedule of fair value of options valuation assumptions | The fair value of the options canceled and accelerated vested under market condition was measured on the modification date using the Monte Carlo Simulation model with the following assumptions: Risk-free interest rate 1.52 % Expected life (years) 5.00 Expected dividend yield 0.00 % Volatility 72 % Fair value of options at modification date US$0.18‑US$0.25 |
LOSS PER SHARE (Tables)
LOSS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
LOSS PER SHARE | |
Schedule of loss per share calculation | Loss per share is calculated as follows: For the year For the year For the year For the year ended December ended December ended December ended December 31, 2017 31, 2018 31, 2019 31, 2019 RMB RMB RMB US$ (Note 3) Numerator: Net loss attributable to ordinary shareholders before change in redeemable noncontrolling interest (118,165,850) (217,092,926) (177,795,168) (25,538,677) Change in redeemable noncontrolling interest (57,126,233) (40,918,773) (12,827,598) (1,842,569) Net loss attributable to ordinary shareholders (175,292,083) (258,011,699) (190,622,766) (27,381,246) Denominator: Denominator for basic and diluted loss per share – weighted-average shares outstanding 33,426,448 62,114,760 106,407,008 106,407,008 Loss per share - Basic and diluted (5.24) (4.15) (1.79) (0.26) |
NONCONTROLLING INTEREST (Tables
NONCONTROLLING INTEREST (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
NONCONTROLLING INTEREST | |
Schedule of effects of changes in ownership interest of subsidiaries | The following schedule shows the effects of changes in the ownership interest of The9 Limited in its subsidiaries on equity attributed to The9 Limited for the years ended December 31, 2017, 2018 and 2019. December 31, December 31, December 31, December 31, 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Net loss attributable to The9 Limited (118,165,850) (217,092,926) (177,795,168) (25,538,677) Transfers (to) from the noncontrolling interest: Change in The9 Limited’s additional paid-in capital for adjustment on noncontrolling interest as a result of issuance of common shares of Red 5 upon vesting of stock options and restricted shares (1) (7,060) — — — Change from net loss attributable to The9 Limited and transfers to noncontrolling interests (118,172,910) (217,092,926) (177,795,168) (25,538,677) |
REDEEMABLE NONCONTROLLING INT_2
REDEEMABLE NONCONTROLLING INTEREST (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
REDEEMABLE NONCONTROLLING INTEREST | |
Schedule of holders of SBPS | Due to share exchange transaction with L&A in 2016, a 37% share of SBPS was owned by L&A. As of December 31, 2019, the holders of SBPS were as follows: December 31, December 31, Holder 2018 2019 Number of Number of Shares Shares L&A International Holdings Limited 10,180,553 10,180,553 Shanghai Oriental Pearl Culture Development Co., Ltd. 17,258,399 17,258,399 |
Schedule of reconciliation of redeemable noncontrolling interest | A reconciliation of redeemable noncontrolling interest is as follows: For the year ended For the year ended For the year ended December 31, December 31, December 31, 2018 2019 2019 RMB RMB US$ (Note 3) Redeemable noncontrolling interest opening balance 306,014,668 341,074,539 48,992,293 Net loss attributable to redeemable noncontrolling interest (5,858,902) (4,855,589) (697,462) Change in redeemable noncontrolling interest 40,918,773 12,827,598 1,842,569 Redeemable noncontrolling interest ending balance 341,074,539 349,046,548 50,137,400 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
SEGMENT REPORTING | |
Schedule of geographic area information includes revenue | The following geographic area information includes revenue based on location of players for the years ended December 31, 2017, 2018 and 2019: 2017 2018 2019 2019 RMB RMB RMB US$ (Note 3) Greater China 19,690,716 16,430,205 182,107 26,158 North America 51,156,109 — — — Other areas 2,301,731 1,001,653 159,388 22,895 Total 73,148,556 17,431,858 341,495 49,053 |
ORGANIZATION AND NATURE OF OP_3
ORGANIZATION AND NATURE OF OPERATIONS (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Entity Incorporation, State or Country Code | F4 |
GameNow.net (Hong Kong) Ltd ("GameNow Hong Kong") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2000-01 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
China The9 Interactive Limited ("C9I") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2003-10 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
China The9 Interactive (Shanghai) Limited ("C9I Shanghai") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2005-02 |
Place of registration | People’s Republic of China (“PRC”) |
Legal Ownership | 100.00% |
China The9 Interactive (Beijing) Ltd ("C9I Beijing") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2007-03 |
Place of registration | PRC |
Legal Ownership | 100.00% |
JiuTuo (Shanghai) Information Technology Ltd ("Jiu Tuo") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2007-07 |
Place of registration | PRC |
Legal Ownership | 100.00% |
China Crown Technology Ltd ("China Crown Technology") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2007-11 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
Asian Development Ltd ("Asian Development") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2007-01 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
Asian Way Development Ltd ("Asian Way") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2007-11 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
New Star International Development Ltd ("New Star") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2008-01 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
Red 5 Studios, Inc. ("Red 5") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2005-06 |
Place of registration | USA |
Legal Ownership | 34.71% |
Red 5 Singapore Pte. Ltd. ("Red 5 Singapore") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2010-04 |
Place of registration | Singapore |
Legal Ownership | 34.71% |
The9 Interactive, Inc. ("The9 Interactive") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2010-06 |
Place of registration | USA |
Legal Ownership | 100.00% |
Jiu Gang | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2014-12 |
Place of registration | PRC |
Legal Ownership | 100.00% |
The9 Singapore Pte ltd ("The9 Singapore") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2010-04 |
Place of registration | Singapore |
Legal Ownership | 100.00% |
Fast Supreme Development Limited ("Fast Supreme") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2017-07 |
Place of registration | Hong Kong |
Legal Ownership | 99.99% |
Ninebit Inc. ("Ninebit") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2018-01 |
Place of registration | Cayman Islands |
Legal Ownership | 100.00% |
1111 Limited ("1111") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2018-01 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
Supreme Exchange Limited ("Supreme") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2018-12 |
Place of registration | Malta |
Legal Ownership | 90.00% |
BET 111 Ltd. ("Bet 111") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-01 |
Place of registration | Malta |
Legal Ownership | 90.00% |
Coin Exchange Ltd ("Coin") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-01 |
Place of registration | Malta |
Legal Ownership | 90.00% |
The9 EV Limited | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-05 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
Comtec Solar(China)Investment Holding Limited | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-06 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
FF The9 China JointVentureLimited | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-09 |
Place of registration | Hong Kong |
Legal Ownership | 50.00% |
Huiling Computer Technology Consulting (Shanghai) Co.Ltd. | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-03 |
Place of registration | PRC |
Legal Ownership | 100.00% |
Leixian Information Technology (Shanghai) Ltd. | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-03 |
Place of registration | PRC |
Legal Ownership | 100.00% |
Shanghai The9 Information Technology Co., Ltd. ("Shanghai IT") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2000-09 |
Place of registration | PRC |
Shanghai Jiushi Interactive Network Technology Co., Ltd. ("Jiushi") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2011-07 |
Place of registration | PRC |
Legal Ownership | 80.00% |
Shanghai ShencaiChengjiu Information Technology co., Ltd. ("SH Shencai") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2015-05 |
Place of registration | PRC |
Legal Ownership | 60.00% |
Wuxi Interest Dynamic Network Technology Co Ltd ("Wuxi Qudong") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2016-06 |
Place of registration | PRC |
Legal Ownership | 100.00% |
Changsha Quxiang Network Technology Co Ltd | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2016-07 |
Place of registration | PRC |
Legal Ownership | 100.00% |
Silver Express Investments Ltd. ("Silver Express") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2007-11 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
Shanghai Kaie Information Technology Co Ltd [Member] | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2019-01 |
Place of registration | PRC |
Legal Ownership | 100.00% |
City Channel Ltd. ("City Channel") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2006-06 |
Place of registration | Hong Kong |
Legal Ownership | 100.00% |
The9 Computer Technology Consulting Shanghai Co Ltd [Member] | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of registration | 2000-06 |
Place of registration | PRC |
Legal Ownership | 100.00% |
PRINCIPAL ACCOUNTING POLICIES -
PRINCIPAL ACCOUNTING POLICIES - Estimated useful life (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Leasehold improvements | |
Property, equipment and software, net | |
Property plant and equipment, useful life | Shorter of respective lease term or estimated useful life |
Computer and equipment | Minimum | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 3 years |
Computer and equipment | Maximum | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 4 years |
Software | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 5 years |
Office furniture and fixtures | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 3 years |
Motor vehicles | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 5 years |
Office buildings | Minimum | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 10 years |
Office buildings | Maximum | |
Property, equipment and software, net | |
Property plant and equipment, useful life | 20 years |
PRINCIPAL ACCOUNTING POLICIES_3
PRINCIPAL ACCOUNTING POLICIES - Additional Information (Details) | Feb. 21, 2020USD ($) | Jan. 01, 2020USD ($) | Jan. 01, 2019CNY (¥) | Feb. 06, 2018USD ($)item | Feb. 06, 2018CNY (¥)item | Jun. 06, 2017$ / sharesshares | Nov. 24, 2015USD ($) | Nov. 24, 2015USD ($) | Feb. 29, 2020subsidiary | Sep. 30, 2019subsidiary | Feb. 28, 2018USD ($)item | Sep. 30, 2011USD ($) | Dec. 31, 2019USD ($)itemsegment | Dec. 31, 2019CNY (¥)itemsegment | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2016CNY (¥) | Dec. 31, 2010USD ($) |
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Accumulated deficit | $ (489,938,842) | ¥ (3,410,856,231) | ¥ (3,233,061,063) | ||||||||||||||||||
Current liabilities exceeded total assets | 125,900,000 | 876,600,000 | |||||||||||||||||||
Net loss | (28,177,876) | ¥ (196,168,740) | ¥ (239,284,796) | ¥ (112,092,907) | |||||||||||||||||
Cash equivalents, bank deposits | 350,000 | $ 80,000 | |||||||||||||||||||
Cash and cash equivalents | 1,452,662 | 142,624,020 | 10,113,141 | 611,401 | 4,256,449 | ¥ 38,878,076 | |||||||||||||||
Allowance for doubtful accounts receivable | 24,335 | 169,416 | 109,939 | 47,948 | |||||||||||||||||
Payments to acquire game licenses | $ 10,000,000 | ||||||||||||||||||||
Additional payment to acquire game licenses due in four years | $ 12,700,000 | ||||||||||||||||||||
Game license fee payable | 3,100,000 | $ 3,100,000 | |||||||||||||||||||
Advertising expenses | 40,000 | 200,000 | 300,000 | 900,000 | |||||||||||||||||
Unrestricted government subsidies from local government | 200,000 | ¥ 1,200,000 | ¥ 1,600,000 | ¥ 2,300,000 | |||||||||||||||||
Exercise price | $ / shares | $ 0 | ||||||||||||||||||||
Options exercised | shares | 6,328,535 | ||||||||||||||||||||
Options canceled | shares | 10,806,665 | ||||||||||||||||||||
Carrying value of convertible notes | 59,500,000 | 414,100,000 | |||||||||||||||||||
Deferred Revenue | 20,000 | 200,000 | 5,400,000 | ||||||||||||||||||
Convertible Notes Payable, Current | $ 59,485,752 | 414,127,908 | 375,257,140 | ||||||||||||||||||
Number of Tokens Subscribed | item | 5,297,157 | 5,297,157 | 5,297,157 | 2,222,222 | 2,222,222 | ||||||||||||||||
Payments for Subscription of Tokens | $ 2,000,000 | ¥ 14,100,000 | $ 2,000,000 | ||||||||||||||||||
Number of subsidiaries disposed off | subsidiary | 3 | ||||||||||||||||||||
Lease assets | $ 1,329,772 | 9,257,604 | |||||||||||||||||||
Lease liabilities | $ 1,387,482 | 9,659,375 | |||||||||||||||||||
Number of operating segment | segment | 1 | 1 | |||||||||||||||||||
12% Convertible Senior Notes Due 2018 | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Principal amount | $ 40,050,000 | $ 40,050,000 | |||||||||||||||||||
Notes due date | 2018 | ||||||||||||||||||||
Notes extension | 2 years | 2 years | |||||||||||||||||||
Controlled by PRC State Administration for Foreign Exchange, under authority of People's Bank of China | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Cash and cash equivalents | $ 1,100,000 | ¥ 7,600,000 | ¥ 3,600,000 | ||||||||||||||||||
Red 5 Studios, Inc. ("Red 5") | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Ownership interest (as a percent) | 34.71% | 34.71% | |||||||||||||||||||
Goodwill | $ 1,600,000 | ||||||||||||||||||||
Subsequent Event | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Number of subsidiaries disposed off | subsidiary | 3 | ||||||||||||||||||||
Subsequent Event | 12% Convertible Senior Notes Due 2018 | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Repayments of Long-term Debt | $ 4,800,000 | $ 4,800,000 | |||||||||||||||||||
Convertible Notes Payable, Current | $ 55,500,000 | $ 55,500,000 | |||||||||||||||||||
Accounting Standards Update 2016-02 [Member] | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Lease assets | ¥ | ¥ 0 | ||||||||||||||||||||
Lease liabilities | ¥ | 0 | ||||||||||||||||||||
Impact on retained earnings | ¥ | ¥ 0 | ||||||||||||||||||||
Minimum | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Share-based awards vesting period | 1 year | 1 year | |||||||||||||||||||
Maximum | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Share-based awards vesting period | 4 years | 4 years | |||||||||||||||||||
Land use right | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Intangible Assets, useful life | 44 years | 44 years | |||||||||||||||||||
Acquired game licenses | Minimum | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Intangible Assets, useful life | 2 years | 2 years | |||||||||||||||||||
Acquired game licenses | Maximum | |||||||||||||||||||||
PRINCIPAL ACCOUNTING POLICIES | |||||||||||||||||||||
Intangible Assets, useful life | 7 years | 7 years |
CONVENIENCE TRANSLATION (Detail
CONVENIENCE TRANSLATION (Details) | Dec. 31, 2019 |
CONVENIENCE TRANSLATION | |
Exchange rates used to translate amounts from RMB to US$ | 6.9618 |
VARIABLE INTEREST ENTITIES (Det
VARIABLE INTEREST ENTITIES (Details) | 12 Months Ended | ||||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | |
VARIABLE INTEREST ENTITIES | |||||
Total assets | $ 26,064,977 | ¥ 164,687,440 | ¥ 181,459,156 | ||
Total liabilities | 152,882,056 | 908,423,767 | 1,064,334,300 | ||
Revenue | 49,280 | ¥ 343,077 | 17,492,415 | ¥ 73,208,166 | |
Net loss | (25,538,677) | (177,795,168) | (217,092,926) | (118,165,850) | |
Variable Interest Entity, Primary Beneficiary | Before elimination of intercompany balances and transactions | |||||
VARIABLE INTEREST ENTITIES | |||||
Total assets | 21,634,593 | 80,531,978 | 150,615,709 | ||
Total liabilities | 60,889,508 | 335,980,249 | ¥ 423,900,573 | ||
Revenue | 26,160 | 182,119 | 16,567,372 | 19,995,118 | |
Net loss | $ (7,421,574) | ¥ (51,667,515) | ¥ (49,024,050) | ¥ (71,839,112) |
VARIABLE INTEREST ENTITIES - Ad
VARIABLE INTEREST ENTITIES - Additional Information (Details) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
VARIABLE INTEREST ENTITIES | |||
Percentage of operating profit generated by the VIEs | 90.00% | ||
Initial term of exclusive technical service agreement | 20 years | ||
VIEs contribution on net revenue | 53.30% | 95.00% | 27.30% |
VIEs account on total assets | 83.00% | 48.90% | |
VIEs account on total liabilities | 39.80% | 37.00% |
ADVANCES TO SUPPLIERS (Details)
ADVANCES TO SUPPLIERS (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
Advances to suppliers | |||
Advances to suppliers | $ 1,615,474 | ¥ 11,246,608 | ¥ 15,808,042 |
Advance to subscribe tokens | |||
Advances to suppliers | |||
Advances to suppliers | 1,450,052 | 10,094,972 | 14,070,581 |
Company registration fee | |||
Advances to suppliers | |||
Advances to suppliers | 114,150 | 794,692 | 1,383,962 |
Advertising Fee | |||
Advances to suppliers | |||
Advances to suppliers | 36,666 | 255,259 | 255,259 |
Others | |||
Advances to suppliers | |||
Advances to suppliers | $ 14,606 | ¥ 101,685 | ¥ 98,240 |
ADVANCES TO SUPPLIERS - Additio
ADVANCES TO SUPPLIERS - Additional Information (Detail) ¥ in Millions, $ in Millions | Feb. 06, 2018USD ($)item | Feb. 06, 2018CNY (¥)item | Jul. 31, 2019USD ($) | Jul. 31, 2019CNY (¥) | Feb. 28, 2018USD ($)item | Oct. 31, 2016USD ($) | Oct. 31, 2016CNY (¥) | Dec. 31, 2019USD ($)item | Dec. 31, 2019CNY (¥)item | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2019CNY (¥) | Aug. 06, 2016USD ($) | Aug. 06, 2016CNY (¥) |
Advances to suppliers | ||||||||||||||
Number of Tokens Subscribed | 5,297,157 | 5,297,157 | 5,297,157 | 2,222,222 | 2,222,222 | |||||||||
Advance received | $ 1 | ¥ 7 | ||||||||||||
Payments for Subscription of Tokens | $ 2 | ¥ 14.1 | $ 2 | |||||||||||
Impairment On Advances To Suppliers | $ 0.9 | ¥ 6 | ¥ 0 | |||||||||||
CrossFire New Mobile Game | Inner Mongolia Culture Assets and Equity Exchange | ||||||||||||||
Advances to suppliers | ||||||||||||||
Financing service fee paid | $ 1.1 | ¥ 7.5 | 1.1 | ¥ 7.5 | ||||||||||
Funds required for the development of CrossFire new mobile game | $ 22.6 | ¥ 157.5 | $ 22.6 | ¥ 157.5 | ||||||||||
Non Recovery Of Advance Financing Fee | $ 14.4 | ¥ 100 |
PREPAYMENTS AND OTHER CURRENT_3
PREPAYMENTS AND OTHER CURRENT ASSETS, NET (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
PREPAYMENTS AND OTHER CURRENT ASSETS, NET | |||
Employee advances | $ 236,749 | ¥ 1,648,197 | ¥ 2,158,987 |
Prepayments and deposits | 213,804 | 1,488,463 | 693,111 |
Input VAT recoverable | 207,087 | 1,441,700 | 1,448,075 |
Refundable withholding tax | 186,305 | 1,297,016 | |
Other receivables, net of allowance for doubtful accounts of RMB 20,770,928 and RMB 5,343,427 as of December 31, 2018 and 2019, respectively | 427,067 | 2,973,158 | 1,848,614 |
Prepayments and other current assets, total | $ 1,271,012 | 8,848,534 | 6,148,787 |
Other receivables, allowance for doubtful accounts | ¥ 5,343,427 | ¥ 20,770,928 |
ASSETS HELD-FOR-SALE AND LIAB_3
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE - Additional Information (Details) ¥ in Millions, $ in Millions | Feb. 21, 2020USD ($) | Jan. 01, 2020USD ($) | Dec. 31, 2019CNY (¥) | Sep. 26, 2019USD ($)subsidiary | Feb. 29, 2020CNY (¥)subsidiary | Sep. 30, 2019subsidiary | Sep. 26, 2019CNY (¥) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Number of subsidiaries disposed of | 3 | ||||||
Subsequent Event | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Number of subsidiaries disposed of | 3 | ||||||
12% Convertible Senior Notes Due 2018 | Subsequent Event | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Repayment of convertible notes | $ | $ 4.8 | $ 4.8 | |||||
Amount of remaining outstanding balance of convertible notes | $ | $ 55.5 | ||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Number of subsidiaries disposed of | 3 | ||||||
Total consideration | $ 70.8 | ¥ 493 | |||||
Percentage of consideration received | 90.00% | ||||||
Remaining percentage of consideration expected to be received in May 2020 | 10.00% | ||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Total consideration | $ 70.8 | ¥ 493 | |||||
Advance consideration | ¥ | ¥ 49.3 | ||||||
Percentage of consideration received in advance | 10.00% | ||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | Subsequent Event | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Total consideration | ¥ | ¥ 443.7 |
ASSETS HELD-FOR-SALE AND LIAB_4
ASSETS HELD-FOR-SALE AND LIABILITIES HELD-FOR-SALE (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
Assets classified as held-for-sale | |||
Total assets classified as held-for-sale | $ 17,723,915 | ¥ 123,390,350 | ¥ 0 |
Liabilities directly associated with assets held-for-sale | |||
Long-term borrowing due within one year | (4,542,584) | (31,624,560) | |
Total liabilities directly associated with assets held-for-sale | 6,419,503 | 44,691,296 | ¥ 0 |
The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | |||
Assets classified as held-for-sale | |||
Cash and cash equivalents | 6,180,510 | 43,027,475 | |
Prepayments and other current assets | 741,598 | 5,162,857 | |
Property, equipment and software, net | 2,018,306 | 14,051,044 | |
Land use rights, net | 8,783,501 | 61,148,974 | |
Total assets classified as held-for-sale | 17,723,915 | 123,390,350 | |
Liabilities directly associated with assets held-for-sale | |||
Accounts payable | 7,182 | 50,000 | |
Other taxes payable | 227,685 | 1,585,095 | |
Other payables and accruals | 6,722 | 46,800 | |
Interest payable | 1,635,330 | 11,384,841 | |
Long-term borrowing due within one year | 4,542,584 | 31,624,560 | |
Total liabilities directly associated with assets held-for-sale | $ 6,419,503 | ¥ 44,691,296 |
INVESTMENTS (Details)
INVESTMENTS (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
Schedule of Investments [Line Items] | |||
Investments in equity investees | $ 1,436,410 | ¥ 10,000,000 | ¥ 45,216,118 |
Shanghai Big Data Cultures Media Co | |||
Schedule of Investments [Line Items] | |||
Equity method investments | 6,146,104 | ||
Maxline Holdings Limited Maxline | |||
Schedule of Investments [Line Items] | |||
Equity method investments | 1,367,285 | ||
Shanghai Institute of Visual Art of Fudan University ("SIVA") | |||
Schedule of Investments [Line Items] | |||
Cost method investments | $ 1,436,410 | ¥ 10,000,000 | 10,000,000 |
T3 Entertainment Co., Ltd. | |||
Schedule of Investments [Line Items] | |||
Cost method investments | 24,892,921 | ||
Smartposting Co, Ltd. | |||
Schedule of Investments [Line Items] | |||
Cost method investments | ¥ 2,809,808 |
INVESTMENTS - Additional Inform
INVESTMENTS - Additional Information (Details) ₩ in Millions | 1 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||
Jul. 31, 2019KRW (₩) | Jul. 31, 2019USD ($) | Jul. 31, 2019CNY (¥) | Jun. 30, 2019shares | Nov. 30, 2017USD ($) | Jun. 30, 2017USD ($)shares | Dec. 31, 2016 | Nov. 30, 2015USD ($) | Jun. 30, 2015 | Apr. 30, 2008shares | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2018CNY (¥) | Sep. 30, 2018shares | Apr. 30, 2018USD ($) | Apr. 30, 2018CNY (¥) | Jan. 31, 2018shares | Dec. 31, 2017CNY (¥) | Jun. 30, 2017CNY (¥) | Oct. 31, 2016 | Aug. 31, 2016 | Oct. 31, 2015 | Aug. 31, 2015 | Dec. 31, 2014USD ($) | Feb. 29, 2012shares | |
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | $ 544,549 | ¥ 3,791,039 | ¥ 7,776,157 | ¥ 9,109,312 | ||||||||||||||||||||||||||||
Share of loss in equity method investments | (408,983) | (2,847,260) | (4,292,887) | (2,937,131) | ||||||||||||||||||||||||||||
Proceeds from disposal of equity method investees | 99,777 | 694,628 | 0 | 115,349 | ||||||||||||||||||||||||||||
Impairment charges relating to its investments in equity and other | 1,200,000 | 8,500,000 | 9,200,000 | 9,100,000 | ||||||||||||||||||||||||||||
Beijing Ti Knight | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Cost method investment | $ 700,000 | |||||||||||||||||||||||||||||||
Oriental Shiny Star Limited | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | $ 8,700,000 | |||||||||||||||||||||||||||||||
Red Ace Limited [Member] | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of assets | ¥ | 1,300,000 | |||||||||||||||||||||||||||||||
Condition One | Shanghai Jiucheng Advertisement Co., Ltd. ("Shanghai Jiucheng Advertisement") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Equity method investment, ownership to be acquired | $ 2,600,000 | |||||||||||||||||||||||||||||||
License Agreement | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Amount received for license agreement | $ 10,000,000 | |||||||||||||||||||||||||||||||
System Link Corporation Limited ('System Link") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Shareholdings to be received by Smilegate in Oriental Shiny Star Limited | 30.00% | |||||||||||||||||||||||||||||||
System Link Corporation Limited ('System Link") | Oriental Shiny Star Limited | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Amount refunded | $ 50,000,000 | |||||||||||||||||||||||||||||||
Liability waived off | 25,000,000 | |||||||||||||||||||||||||||||||
Impairment of investment | ¥ | 60,500,000 | |||||||||||||||||||||||||||||||
System Link Corporation Limited ('System Link") | Oriental Shiny Star Limited | Smilegate Entertainment Inc | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Amount refunded | $ 25,000,000 | |||||||||||||||||||||||||||||||
System Link Corporation Limited ('System Link") | License Agreement | Oriental Shiny Star Limited | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
License agreement, term | 5 years | |||||||||||||||||||||||||||||||
Amount received for license agreement | $ 50,000,000 | |||||||||||||||||||||||||||||||
Potential License Payment | $ 450,000,000 | |||||||||||||||||||||||||||||||
Shanghai Big Data Cultures Media Co | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | 500,000 | 3,400,000 | ||||||||||||||||||||||||||||||
Share of loss in equity method investments | $ 400,000 | ¥ 2,800,000 | ||||||||||||||||||||||||||||||
Shanghai Big Data Cultures Media Co | Shanghai Jiucheng Advertisement Co., Ltd. ("Shanghai Jiucheng Advertisement") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Sale of equity method investment ownership percentage | 33.30% | |||||||||||||||||||||||||||||||
Shanghai Big Data Cultures Media Co | Shanghai Jiucheng Advertisement Co., Ltd. ("Shanghai Jiucheng Advertisement") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Equity interest acquired in Fei Fan | 100.00% | |||||||||||||||||||||||||||||||
Equity interest exchanged | 30.00% | |||||||||||||||||||||||||||||||
Investment in joint venture, ownership percentage | 42.00% | 44.50% | 43.70% | 46.70% | ||||||||||||||||||||||||||||
Shanghai Big Data Cultures Media Co | Condition One | Shanghai Jiucheng Advertisement Co., Ltd. ("Shanghai Jiucheng Advertisement") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Investment in joint venture, ownership percentage | 44.46% | 44.46% | ||||||||||||||||||||||||||||||
Equity method investment, ownership percentage to be acquired | 19.11% | |||||||||||||||||||||||||||||||
Equity method investment, ownership to be acquired | ¥ | ¥ 18,300,000 | |||||||||||||||||||||||||||||||
T3 Entertainment Company Ltd | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Subscription to preferred shares | shares | 3,031,232 | |||||||||||||||||||||||||||||||
Ordinary shares owned | shares | 32,290 | |||||||||||||||||||||||||||||||
Total consideration | ₩ 6,092.8 | $ 5,200,000 | ||||||||||||||||||||||||||||||
Gain on disposal | $ 1,500,000 | ¥ 10,400,000 | ||||||||||||||||||||||||||||||
Smartposting Co, Ltd. | IE Limited [Member] | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | $ 400,000 | ¥ 2,800,000 | 1,100,000 | 5,100,000 | ||||||||||||||||||||||||||||
Equity interest exchanged | 14.55% | 14.55% | ||||||||||||||||||||||||||||||
Shares issued and sold | shares | 12,500,000 | |||||||||||||||||||||||||||||||
Lock-up period of agreement | 10 years | |||||||||||||||||||||||||||||||
Beijing Ti Knight Network Technology Co., Ltd. ("Beijing Ti Knight") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | ¥ | 0 | 900,000 | ¥ 4,000,000 | |||||||||||||||||||||||||||||
Cost method investment | $ 1,300,000 | ¥ 4,900,000 | ¥ 9,000,000 | |||||||||||||||||||||||||||||
Maxline Holdings Limited Maxline | Red Ace Limited [Member] | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Equity interest exchanged | 29.00% | |||||||||||||||||||||||||||||||
Maxline Holdings Limited Maxline | Red Ace Limited [Member] | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | 200,000 | 1,300,000 | ||||||||||||||||||||||||||||||
Maxline Holdings Limited Maxline | Red Ace Limited [Member] | Smilegate Entertainment Inc | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Common Stock, Shares Subscribed but Unissued | shares | 3,571,429 | |||||||||||||||||||||||||||||||
Leading Choice Holdings Limited | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | 200,000 | 1,400,000 | ||||||||||||||||||||||||||||||
Common Stock, Shares Subscribed but Unissued | shares | 21,000,000 | |||||||||||||||||||||||||||||||
Equity interest acquired in Fei Fan | 20.00% | |||||||||||||||||||||||||||||||
Shanghai The9 Education Technology Co., Ltd. ("The9 Education Technology") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | 100,000 | 400,000 | ||||||||||||||||||||||||||||||
Cost method investment | $ 100,000 | ¥ 400,000 | ||||||||||||||||||||||||||||||
Shanghai Ronglei Culture Communication Co., Ltd. ("Shanghai Ronglei") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | 600,000 | 4,000,000 | ||||||||||||||||||||||||||||||
Cost method investment | 600,000 | $ 700,000 | ¥ 4,000,000 | ¥ 5,000,000 | ||||||||||||||||||||||||||||
Proceeds from disposal of equity method investees | 400,000 | 3,000,000 | ||||||||||||||||||||||||||||||
Plutux Limited ("Plutux") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | $ 200,000 | ¥ 1,400,000 | ||||||||||||||||||||||||||||||
Common Stock, Shares Subscribed but Unissued | shares | 21,000,000 | |||||||||||||||||||||||||||||||
Plutux Limited ("Plutux") | Plutux Limited ("Plutux") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Equity interest exchanged | 8.00% | |||||||||||||||||||||||||||||||
Zhenjiang Kexin Power System Design and Research Co., Ltd. ("Zhenjiang Kexin") | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Impairment of investment | $ 100,000 | ¥ 1,000,000 | ||||||||||||||||||||||||||||||
Common Stock, Shares Subscribed but Unissued | shares | 3,444,882 | |||||||||||||||||||||||||||||||
Percentage of equity interest | 9.90% | |||||||||||||||||||||||||||||||
Minimum | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Potential License Payment | $ 160,000,000 | |||||||||||||||||||||||||||||||
Maximum | T3 Entertainment Company Ltd | ||||||||||||||||||||||||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||||||||||||||||||||||||
Percentage of equity interest | 20.00% |
AVAILABLE-FOR-SALE INVESTMENTS
AVAILABLE-FOR-SALE INVESTMENTS (Details) $ in Millions | 1 Months Ended | 12 Months Ended | ||||||
Jun. 30, 2016HKD ($)shares | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017USD ($)shares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2016USD ($) | Dec. 31, 2016CNY (¥) | |
AVAILABLE-FOR-SALE INVESTMENTS | ||||||||
Impairment charges of investment in equity investees | $ 670,247 | ¥ 4,666,128 | ¥ 1,386,174 | ¥ 0 | ||||
Consideration received on disposal | 100,000 | 700,000 | ||||||
Noncash or Part Noncash Divestiture, Amount of Consideration Received | $ 100,000 | ¥ 700,000 | ||||||
L&A International Holding Limited | ||||||||
AVAILABLE-FOR-SALE INVESTMENTS | ||||||||
Equity interest exchanged by company | 30.60% | 30.60% | ||||||
Ordinary shares of L&A | 723,313,020 | |||||||
Conversion ratio basis | one-to-five stock split | |||||||
Amount of shares pledged | 417,440,000 | |||||||
L&A International Holding Limited | Youjia | ||||||||
AVAILABLE-FOR-SALE INVESTMENTS | ||||||||
Ordinary shares of L&A | 723,313,020 | 18,360,000 | 18,360,000 | |||||
Conversion ratio basis | one-to-five stock split | |||||||
Percentage of deduction total shares received | 6.00% | |||||||
Share received related to payment of service fee | 46,168,920 | |||||||
Impairment charges of investment in equity investees | $ 35,200,000 | ¥ 244,800,000 | ||||||
Consideration received on disposal | $ 10,000 | ¥ 100,000 | ||||||
Ordinary shares owned | 14,375,651 | 14,375,651 | 14,375,651 | |||||
Stockholders' Equity Note, Stock Split, Conversion Ratio | 20 | 20 | ||||||
Noncash or Part Noncash Divestiture, Amount of Consideration Received | $ 10,000 | ¥ 100,000 | ||||||
Asian Development | Youjia | ||||||||
AVAILABLE-FOR-SALE INVESTMENTS | ||||||||
Borrowings from financial institutions | $ | $ 92.3 |
PROPERTY, EQUIPMENT AND SOFTW_3
PROPERTY, EQUIPMENT AND SOFTWARE, NET (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
Property, equipment and software, net | |||
Less: accumulated depreciation and amortization | $ (12,924,009) | ¥ (89,974,366) | ¥ (175,555,042) |
Property, equipment and software, net, held for sale | (2,018,306) | (14,051,044) | 0 |
Property plant and equipment, net | 175,030 | 1,218,521 | 17,352,445 |
Office buildings | |||
Property, equipment and software, net | |||
Property plant and equipment, gross | 9,960,305 | 69,341,652 | 69,341,652 |
Computer and equipment | |||
Property, equipment and software, net | |||
Property plant and equipment, gross | 744,287 | 5,181,577 | 84,134,612 |
Leasehold improvements | |||
Property, equipment and software, net | |||
Property plant and equipment, gross | 1,344,459 | 9,359,857 | 10,365,904 |
Office furniture and fixtures | |||
Property, equipment and software, net | |||
Property plant and equipment, gross | 256,765 | 1,787,549 | 6,194,658 |
Motor vehicles | |||
Property, equipment and software, net | |||
Property plant and equipment, gross | 722,687 | 5,031,201 | 7,038,397 |
Software | |||
Property, equipment and software, net | |||
Property plant and equipment, gross | $ 2,088,842 | ¥ 14,542,095 | ¥ 15,832,264 |
PROPERTY, EQUIPMENT AND SOFTW_4
PROPERTY, EQUIPMENT AND SOFTWARE, NET - Additional Information (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
PROPERTY, EQUIPMENT AND SOFTWARE, NET | ||||
Depreciation and amortization of property, equipment and software | $ 400,000 | ¥ 2,778,778 | ¥ 3,650,261 | ¥ 5,299,059 |
Gain (Loss) on Disposition of Property Plant Equipment | $ 300,000 | ¥ 2,200,000 | ¥ 200,000 | ¥ 20,000 |
LAND USE RIGHT, NET (Details)
LAND USE RIGHT, NET (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
LAND USE RIGHT, NET | |||
Land use right | $ 12,232,519 | ¥ 85,160,348 | ¥ 85,160,348 |
Less: accumulated amortization | (3,449,018) | (24,011,374) | (22,570,692) |
Less: land use right, net, held-for-sale | (8,783,501) | (61,148,974) | |
Net book value | $ 0 | ¥ 0 | ¥ 62,589,656 |
LEASES - Operating leases recog
LEASES - Operating leases recognized in balance sheet (Details) - Dec. 31, 2019 | USD ($) | CNY (¥) |
LEASES | ||
Operating lease right-of-use assets | $ 1,329,772 | ¥ 9,257,604 |
Operating lease liabilities- current portion | 489,481 | 3,407,670 |
Operating lease liabilities-non-current portion | $ 898,001 | ¥ 6,251,705 |
LAND USE RIGHT, NET - Additiona
LAND USE RIGHT, NET - Additional Information (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
LAND USE RIGHT, NET | ||||
Amortization of land use right | $ 200,000 | ¥ 1,440,682 | ¥ 1,920,910 | ¥ 1,920,910 |
LEASES - Lease cost (Details)
LEASES - Lease cost (Details) - 12 months ended Dec. 31, 2019 | USD ($) | CNY (¥) |
LEASES | ||
Operating lease cost | $ 230,736 | ¥ 1,606,340 |
Cost of other leases with terms less than one year | 11,812 | 82,232 |
Total | $ 242,548 | ¥ 1,688,572 |
LEASES - Maturities of operatin
LEASES - Maturities of operating lease liabilities (Details) - Dec. 31, 2019 | USD ($) | CNY (¥) |
LEASES | ||
Due within one year | $ 542,941 | ¥ 3,779,845 |
Due in the second year | 573,956 | 3,995,768 |
Due in the third year | 359,510 | 2,502,839 |
Total lease payments | 1,476,407 | 10,278,452 |
Less: imputed interest | (88,925) | (619,077) |
Total | $ 1,387,482 | ¥ 9,659,375 |
LEASES - Supplemental cash flow
LEASES - Supplemental cash flow information related to operating leases (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
LEASES | ||||
Cash paid for amounts included in the measurement of operating lease liabilities | $ 182,678 | ¥ 1,271,769 | ¥ 0 | ¥ 0 |
OTHER LONG-LIVED ASSETS, NET (D
OTHER LONG-LIVED ASSETS, NET (Details) | 1 Months Ended | 12 Months Ended | ||||
Apr. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | |
OTHER LONG-LIVED ASSETS, NET | ||||||
Prepaid license fee | $ 935,850 | ¥ 6,515,200 | ¥ 6,515,200 | |||
Other | 0 | 0 | 0 | |||
Total | 935,850 | 6,515,200 | ¥ 6,515,200 | |||
Initial deposit for joint venture arrangement | $ 5,000,000 | 5,010,342 | ¥ 34,881,000 | ¥ 0 | ¥ 0 | |
Impairment loss on joint venture arrangement | $ 5,000,000 | ¥ 34,881,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) | 12 Months Ended | ||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | |
FAIR VALUE MEASUREMENTS | |||
Balance at issuance date/beginning of year | $ 214,146 | ¥ 1,490,844 | ¥ 3,742,271 |
Fair value change on warrants liability recognized in other comprehensive income | (185,619) | (1,292,244) | (2,251,427) |
Balance at the end of the year | $ 28,527 | ¥ 198,600 | ¥ 1,490,844 |
TAXATION - Composition of incom
TAXATION - Composition of income tax expense (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
Income Taxes [Line Items] | ||||
Deferred taxation | $ (3,005,481) | ¥ (20,923,558) | ¥ (59,579,318) | ¥ (208,356,387) |
Change in valuation allowance | 3,005,481 | 20,923,558 | 59,579,318 | 208,356,387 |
Income tax benefit | 0 | 0 | 0 | 0 |
Domestic tax authority | ||||
Income Taxes [Line Items] | ||||
Current income tax (expense) benefit | 0 | 0 | 0 | 0 |
Deferred taxation | (829,097) | (5,772,005) | (39,763,083) | (84,042,632) |
Change in valuation allowance | 829,097 | 5,772,005 | 39,763,083 | 84,042,632 |
Foreign tax authority | ||||
Income Taxes [Line Items] | ||||
Current income tax (expense) benefit | 0 | 0 | 0 | 0 |
Deferred taxation | (2,176,384) | (15,151,553) | (19,816,235) | (124,313,755) |
Change in valuation allowance | $ 2,176,384 | ¥ 15,151,553 | ¥ 19,816,235 | ¥ 124,313,755 |
TAXATION - Reconciliation (Deta
TAXATION - Reconciliation (Details) | 1 Months Ended | 12 Months Ended | ||
Dec. 22, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
TAXATION | ||||
PRC statutory EIT rate | 34.00% | 25.00% | 25.00% | 25.00% |
Effect of different tax rates in other jurisdictions | 1.00% | 2.00% | (2.00%) | |
Effect of future tax rate change | 2.00% | 1.00% | (22.00%) | |
Change of prior year deferred tax assets | (15.00%) | (11.00%) | (8.00%) | |
Change of valuation allowance | (18.00%) | (2.00%) | 61.00% | |
Income not subject to tax and non-deductible expenses, net | 0.00% | 0.00% | (1.00%) | |
Effect of expired net operating loss | 5.00% | (15.00%) | (53.00%) | |
Effective EIT rate | 0.00% | 0.00% | 0.00% |
TAXATION - Components of deferr
TAXATION - Components of deferred tax assets (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) |
TAXATION | |||||
Temporary differences related to expenses and accruals | $ 154,659 | ¥ 1,076,708 | ¥ 1,087,421 | ||
Temporary differences related to impairment on advances to suppliers | 493,924 | 3,438,597 | 2,451,767 | ||
Temporary differences related to provision for doubtful accounts | 154,952 | 1,078,742 | 3,077,784 | ||
Others | 1,260,000 | 8,771,868 | 7,152,217 | ||
Temporary differences related to depreciation, amortization, and impairment of equipment and intangible assets | 3,575,285 | 24,890,416 | 23,165,631 | ||
Startup expenses and advertising fees | 28,686 | 199,704 | 608,399 | ||
Temporary differences related to research and development credits | 161,000 | 1,120,850 | 1,106,956 | ||
Temporary differences related to equity investments | 728,121 | 5,069,035 | 3,978,269 | ||
Foreign tax credits | 0 | 0 | 0 | ||
Temporary differences related to provision for prepayment for equipment | 718,205 | 5,000,000 | 5,000,000 | ||
Tax loss carry forwards | 38,868,529 | 270,594,922 | 294,535,956 | ||
Total deferred tax assets | 46,143,361 | 321,240,842 | 342,164,400 | ||
Less: Valuation allowance | (46,143,361) | (321,240,842) | $ (49,148,842) | (342,164,400) | ¥ (401,743,718) |
Total deferred tax assets | $ 0 | ¥ 0 | ¥ 0 |
TAXATION - Valuation allowance
TAXATION - Valuation allowance (Details) | 12 Months Ended | ||||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
TAXATION | |||||
Beginning Balance | $ 49,148,842 | ¥ 342,164,400 | ¥ 401,743,718 | ||
Decrease in valuation allowance | (3,005,481) | (20,923,558) | $ 3,000,000 | (59,579,318) | ¥ 59,600,000 |
Ending Balance | $ 46,143,361 | ¥ 321,240,842 | $ 49,148,842 | ¥ 342,164,400 | ¥ 401,743,718 |
TAXATION - Additional Informati
TAXATION - Additional Information (Details) | 1 Months Ended | 12 Months Ended | ||||||||
Dec. 22, 2017 | Oct. 31, 2017 | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | |
Income Taxes [Line Items] | ||||||||||
Statutory tax rate | 34.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | |||
Preferential enterprise income tax rate for three years | 15.00% | 15.00% | ||||||||
Increase (decrease) in valuation allowance | $ (3,005,481) | ¥ (20,923,558) | $ 3,000,000 | ¥ (59,579,318) | ¥ 59,600,000 | |||||
Effective Income Tax Rate Reconciliation, Equity in Earnings (Losses) of Unconsolidated Subsidiary, Amount | $ 0 | $ 0 | ||||||||
Net operating loss carry forwards | ¥ | ¥ 343,700,000 | |||||||||
Deferred taxation | $ (3,005,481) | ¥ (20,923,558) | ¥ (59,579,318) | ¥ (208,356,387) | ||||||
Withholding income tax rate for dividends from profits of foreign invested enterprises | 10.00% | 10.00% | ||||||||
Income tax, statute of limitation, underpayment of tax liability to be considered as special circumstance | ¥ | ¥ 100,000 | |||||||||
Income tax, statute of limitation under special circumstance | 10 years | 10 years | ||||||||
Scenario, Plan [Member] | ||||||||||
Income Taxes [Line Items] | ||||||||||
Statutory tax rate | 21.00% | |||||||||
Minimum | ||||||||||
Income Taxes [Line Items] | ||||||||||
Period for Carry Forward of Qualified HNTE Losses | 5 years | 5 years | ||||||||
Withholding income tax rate for dividends from profits of foreign invested enterprises | 5.00% | 5.00% | ||||||||
Percentage of beneficial interest owned | 25.00% | 25.00% | ||||||||
Income tax, statute of limitation | 3 years | 3 years | ||||||||
Maximum | ||||||||||
Income Taxes [Line Items] | ||||||||||
Period for Carry Forward of Qualified HNTE Losses | 10 years | 10 years | ||||||||
Withholding income tax rate for dividends from profits of foreign invested enterprises | 10.00% | 10.00% | ||||||||
Percentage of beneficial interest owned | 25.00% | 25.00% | ||||||||
Income tax, statute of limitation | 5 years | 5 years | ||||||||
Shanghai The9 Information Technology Co., Ltd. ("Shanghai IT") | ||||||||||
Income Taxes [Line Items] | ||||||||||
Preferential enterprise income tax rate for three years | 15.00% | |||||||||
CAYMAN ISLANDS | ||||||||||
Income Taxes [Line Items] | ||||||||||
Accrued Withholding Income Tax Amount | $ 0 | |||||||||
Hong Kong | ||||||||||
Income Taxes [Line Items] | ||||||||||
Accrued Withholding Income Tax Amount | 0 | $ 0 | 0 | |||||||
Singapore | ||||||||||
Income Taxes [Line Items] | ||||||||||
Accrued Withholding Income Tax Amount | $ 0 | 0 | $ 0 | |||||||
United states | ||||||||||
Income Taxes [Line Items] | ||||||||||
Statutory tax rate | 21.00% | 21.00% | ||||||||
State income tax rate | 0.28% | 0.28% | ||||||||
Federal tax | ||||||||||
Income Taxes [Line Items] | ||||||||||
Net operating loss carry forwards | 126,400,000 | |||||||||
Net operating loss carry forwards, expiration year | 2026 | 2026 | ||||||||
Tax credit available to offset future taxes payable | 100,000 | |||||||||
State income tax | ||||||||||
Income Taxes [Line Items] | ||||||||||
Net operating loss carry forwards | 68,500,000 | |||||||||
Net operating loss carry forwards, expiration year | 2028 | 2028 | ||||||||
Tax credit available to offset future taxes payable | 100,000 | |||||||||
Foreign tax authority | ||||||||||
Income Taxes [Line Items] | ||||||||||
Deferred taxation | $ (2,176,384) | ¥ (15,151,553) | ¥ (19,816,235) | ¥ (124,313,755) | ||||||
Foreign tax credit available to offset future taxes payable | $ 2,500,000 | |||||||||
Tax credit available to offset future taxes payable, expiration date | 2018 | 2018 |
SHORT-TERM BORROWINGS (Details)
SHORT-TERM BORROWINGS (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
SHORT-TERM BORROWINGS | |||
Short-term borrowings | $ 16,881,566 | ¥ 117,526,089 | ¥ 112,461,383 |
Long-term borrowings due within one year | 4,542,584 | 31,624,560 | 31,624,560 |
Less: borrowing classified as held for sale | (4,542,584) | (31,624,560) | |
Pledged Loan | |||
SHORT-TERM BORROWINGS | |||
Short-term borrowings | 11,871,224 | 82,645,089 | ¥ 80,836,823 |
Interest-free loan | |||
SHORT-TERM BORROWINGS | |||
Short-term borrowings | $ 5,010,342 | ¥ 34,881,000 |
SHORT-TERM BORROWINGS - Additio
SHORT-TERM BORROWINGS - Additional Information (Details) $ in Millions | 1 Months Ended | 12 Months Ended | ||||||||||||
Apr. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Jun. 30, 2016HKD ($)shares | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Jun. 30, 2016USD ($) | Jun. 30, 2016CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015CNY (¥) | |
SHORT-TERM BORROWINGS | ||||||||||||||
Long-term borrowings due within one year | $ 4,542,584 | ¥ 31,624,560 | ¥ 31,624,560 | |||||||||||
Initial deposit for joint venture arrangement | $ 5,000,000 | 5,010,342 | ¥ 34,881,000 | ¥ 0 | ¥ 0 | |||||||||
Interest payable | 771,630 | 5,371,931 | 15,298,961 | |||||||||||
Joint venture to manufacture, market, distribute and sell electric cars | ||||||||||||||
SHORT-TERM BORROWINGS | ||||||||||||||
Initial deposit for joint venture arrangement | $ | $ 5,000,000 | |||||||||||||
Maximum | Joint venture to manufacture, market, distribute and sell electric cars | ||||||||||||||
SHORT-TERM BORROWINGS | ||||||||||||||
Committed capital investment in joint venture | $ | $ 600,000,000 | |||||||||||||
L&A International Holding Limited | ||||||||||||||
SHORT-TERM BORROWINGS | ||||||||||||||
Line of credit annual interest rate | 2.00% | 2.00% | 2.00% | |||||||||||
Share received related to payment of service fee | shares | 769,481,940 | |||||||||||||
Conversion ratio basis | One-to-five stock split | |||||||||||||
Line of credit amount | $ 92.3 | $ 13,000,000 | ¥ 88,000,000 | |||||||||||
Line of credit , duration | 24 months | |||||||||||||
Amount of shares pledged | shares | 417,440,000 | |||||||||||||
Entrusted Bank Borrowing Agreement | ||||||||||||||
SHORT-TERM BORROWINGS | ||||||||||||||
Line of credit annual interest rate | 12.00% | 12.00% | ||||||||||||
Bank borrowing amount | $ 4,600,000 | ¥ 31,600,000 | ||||||||||||
Long-term borrowings due within one year | ¥ 43,000,000 | $ 6,000,000 | ||||||||||||
Interest payable | $ 1,600,000 | ¥ 11,400,000 | $ 800,000 | ¥ 5,400,000 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||
Funds raised for CrossFire New Mobile Game | $ 8,259,345 | ¥ 57,499,910 | ¥ 57,499,910 |
Professional services | 1,701,390 | 11,844,738 | 6,879,775 |
Staff cost related payables | 1,415,011 | 9,851,024 | 4,245,967 |
Office expenses | 508,991 | 3,543,495 | 3,377,709 |
Other payables | 508,489 | 3,540,000 | 1,840,000 |
Utility Fee | 236,490 | 1,646,394 | 1,547,898 |
Product development services | 130,269 | 906,906 | 892,216 |
Others | 618,860 | 4,308,376 | 5,007,831 |
Total | $ 13,378,845 | ¥ 93,140,843 | ¥ 81,291,306 |
ACCRUED EXPENSES AND OTHER CU_4
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Additional Information (Details) | 1 Months Ended | ||||||
Apr. 30, 2020USD ($) | Apr. 30, 2020CNY (¥) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Oct. 31, 2016USD ($) | Oct. 31, 2016CNY (¥) | |
Accounts Payable and Accrued Liabilities | |||||||
Funds raised for the development of CrossFire new mobile game | $ 8,259,345 | ¥ 57,499,910 | ¥ 57,499,910 | ||||
Inner Mongolia Culture Assets and Equity Exchange | CrossFire New Mobile Game | |||||||
Accounts Payable and Accrued Liabilities | |||||||
Funds raised for the development of CrossFire new mobile game | 8,300,000 | 57,500,000 | $ 8,300,000 | ¥ 57,500,000 | |||
Additional funds aimed to be raised for the development of CrossFire new mobile game | $ 14,400,000 | ¥ 100,000,000 | $ 14,400,000 | ¥ 100,000,000 | |||
Inner Mongolia Culture Assets and Equity Exchange | CrossFire New Mobile Game | Subsequent Event | |||||||
Accounts Payable and Accrued Liabilities | |||||||
Refund claimed through civil suit | $ 8,300,000 | ¥ 57,500,000 |
Refund of WoW Game Points (Deta
Refund of WoW Game Points (Details) | 12 Months Ended | |||||||
Dec. 31, 2011USD ($) | Dec. 31, 2011CNY (¥) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2009USD ($) | Dec. 31, 2009CNY (¥) | |
Acquired Finite-Lived Intangible Assets | ||||||||
Liability related to refund of WOW game points | $ 24,418,783 | ¥ 169,998,682 | $ 24,400,000 | ¥ 169,998,682 | ||||
Other operating income | $ 3,700,000 | ¥ 26,000,000 | ||||||
Legal liability | 2 years | 2 years | ||||||
Liability related to refund of WOW game points, release period | 20 years | 20 years | ||||||
World of Warcraft ("WoW") | ||||||||
Acquired Finite-Lived Intangible Assets | ||||||||
Liability related to refund of WOW game points | ¥ 170,000,000 | ¥ 170,000,000 | $ 28,800,000 | ¥ 200,400,000 |
CONVERTIBLE NOTES (Details)
CONVERTIBLE NOTES (Details) | Dec. 31, 2019USD ($)$ / shares |
Tranche A | |
Debt Instrument [Line Items] | |
Principal Amount | $ | $ 22,250,000 |
Conversion Price | $ / shares | $ 2.60 |
Tranche B | |
Debt Instrument [Line Items] | |
Principal Amount | $ | $ 13,350,000 |
Conversion Price | $ / shares | $ 5.20 |
Tranche C | |
Debt Instrument [Line Items] | |
Principal Amount | $ | $ 4,450,000 |
Conversion Price | $ / shares | $ 7.80 |
CONVERTIBLE NOTES - Carrying va
CONVERTIBLE NOTES - Carrying value (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Nov. 24, 2015USD ($) |
Debt Instrument [Line Items] | ||||
Fair value allocated to warrants (Note 21) | $ 28,527 | ¥ 200,000 | ¥ 1,490,844 | |
Beneficial conversion feature | $ 8,100,000 | |||
12% Convertible Senior Notes Due 2018 | ||||
Debt Instrument [Line Items] | ||||
Principal Amount | 40,050,000 | |||
Fair value allocated to warrants (Note 21) | 8,821,883 | |||
Beneficial conversion feature | 8,112,556 | |||
Issuance Cost | 3,200,000 | |||
Net carrying value | $ 19,915,561 |
CONVERTIBLE NOTES - Net Carryin
CONVERTIBLE NOTES - Net Carrying Value at Date of Issuance (Details) | Feb. 21, 2020USD ($) | Jan. 01, 2020USD ($) | Sep. 26, 2019USD ($)subsidiary | Nov. 24, 2015USD ($) | Nov. 24, 2015USD ($) | Feb. 29, 2020CNY (¥)subsidiary | Sep. 30, 2019subsidiary | Dec. 31, 2019USD ($)tranche$ / shares | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016USD ($) | Dec. 31, 2019CNY (¥)tranche | Sep. 26, 2019CNY (¥) | Nov. 24, 2015CNY (¥) |
Debt Instrument [Line Items] | |||||||||||||||
Number of subsidiaries disposed off | subsidiary | 3 | ||||||||||||||
Remaining outstanding balance of convertible notes | $ 59,485,752 | ¥ 375,257,140 | ¥ 414,127,908 | ||||||||||||
Beneficial conversion feature | $ 8,100,000 | $ 8,100,000 | |||||||||||||
Subsequent Event | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Number of subsidiaries disposed off | subsidiary | 3 | ||||||||||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Number of subsidiaries disposed off | subsidiary | 3 | ||||||||||||||
Total consideration | $ 70,800,000 | ¥ 493,000,000 | |||||||||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Total consideration | $ 70,800,000 | ¥ 493,000,000 | |||||||||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | Subsequent Event | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Total consideration | ¥ | ¥ 443,700,000 | ||||||||||||||
12% Convertible Senior Notes Due 2018 | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Principal amount | $ 40,050,000 | $ 40,050,000 | |||||||||||||
Notes due date | 2018 | ||||||||||||||
Notes extension | 2 years | 2 years | |||||||||||||
Interest rate (as a percent) | 12.00% | 12.00% | 12.00% | ||||||||||||
Total net book value as secured notes | ¥ | ¥ 14,100,000 | ||||||||||||||
Convertible shares of Group's ADS | 11,695,513 | ||||||||||||||
Beneficial conversion feature | $ 8,112,556 | $ 8,112,556 | |||||||||||||
Carrying amount of convertible notes and interest payable | 59,500,000 | 375,300,000 | ¥ 414,100,000 | ||||||||||||
Interest expense recognized related to convertible note | $ 4,800,000 | ¥ 33,200,000 | ¥ 98,300,000 | ¥ 77,000,000 | |||||||||||
Number of tranches | tranche | 3 | 3 | |||||||||||||
Adjustment to conversion price | $ / shares | $ 0 | ||||||||||||||
12% Convertible Senior Notes Due 2018 | Subsequent Event | |||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||
Repayment of convertible notes | $ 4,800,000 | $ 4,800,000 | |||||||||||||
Remaining outstanding balance of convertible notes | $ 55,500,000 | $ 55,500,000 |
WARRANTS ON CONVERTIBLE NOTES_2
WARRANTS ON CONVERTIBLE NOTES (Details) - $ / shares | Dec. 31, 2019 | Dec. 31, 2009 |
SHAREHOLDER RIGHTS PLAN | ||
Exercise Price | $ 19.50 | |
Tranche I | ||
SHAREHOLDER RIGHTS PLAN | ||
Principal Amount | 5,000,000 | |
Exercise Price | $ 1.50 | |
Tranche A | ||
SHAREHOLDER RIGHTS PLAN | ||
Principal Amount | 2,750,000 | |
Exercise Price | $ 2.60 | |
Tranche B | ||
SHAREHOLDER RIGHTS PLAN | ||
Principal Amount | 1,650,000 | |
Exercise Price | $ 5.20 | |
Tranche C | ||
SHAREHOLDER RIGHTS PLAN | ||
Principal Amount | 550,000 | |
Exercise Price | $ 7.80 |
WARRANTS ON CONVERTIBLE NOTES -
WARRANTS ON CONVERTIBLE NOTES - Assumptions (Details) - Tranche I | 12 Months Ended |
Dec. 31, 2019 | |
SHAREHOLDER RIGHTS PLAN | |
Risk-free interest rate | 1.59% |
Expected volatility of common stock | 93.67% |
Dividend yield | 0.00% |
Expected life of warrants | 10 months 24 days |
WARRANTS ON CONVERTIBLE NOTES_3
WARRANTS ON CONVERTIBLE NOTES - Additional Information (Details) | 12 Months Ended | |||||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | Dec. 31, 2016shares | |
SHAREHOLDER RIGHTS PLAN | ||||||
Fair value of warrants | $ 28,527 | ¥ 1,490,844 | ¥ 200,000 | |||
Fair value change on warrants liability | $ (185,619) | ¥ (1,292,244) | ¥ (2,251,427) | ¥ (12,615,466) | ||
Maximum | ||||||
SHAREHOLDER RIGHTS PLAN | ||||||
Warrants issued to purchase of Group's ADS | 4,778,846 |
SHAREHOLDER RIGHTS PLAN (Detail
SHAREHOLDER RIGHTS PLAN (Details) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2009 |
SHAREHOLDER RIGHTS PLAN | |||
Exercise price of shareholders rights plan | $ 19.50 | ||
Ordinary shares, shares issued | 106,407,008 | 350,000,000 | |
Ordinary shares, shares outstanding | 91,315,465 | ||
Minimum | |||
SHAREHOLDER RIGHTS PLAN | |||
Shareholders rights plan, ownership interest for rights to be exercisable | 15.00% | ||
Class A ordinary shares | |||
SHAREHOLDER RIGHTS PLAN | |||
Ordinary shares, shares issued | 103,737,691 | 0 | |
Ordinary shares, shares outstanding | 103,737,691 | 0 | |
Class B ordinary shares | |||
SHAREHOLDER RIGHTS PLAN | |||
Ordinary shares, shares issued | 9,192,011 | 0 | |
Ordinary shares, shares outstanding | 9,192,011 | 0 |
EMPLOYEE BENEFITS (Details)
EMPLOYEE BENEFITS (Details) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
EMPLOYEE BENEFITS | ||||
Employee benefits expenses related to full-time employees of subsidiaries and VIE subsidiaries incorporated in PRC | $ 0.6 | ¥ 4.5 | ¥ 7.9 | ¥ 12.9 |
SHARE-BASED COMPENSATION - Shar
SHARE-BASED COMPENSATION - Share option activities (Details) | Sep. 04, 2018shares | Jan. 24, 2018shares | Jun. 06, 2017$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)¥ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017USD ($) | Dec. 31, 2019CNY (¥)shares |
Number of Options | |||||||||
Exercised | (6,328,535) | ||||||||
Forfeited | (10,806,665) | ||||||||
Weighted-Average Exercise Price | |||||||||
Exercisable at end of period | $ / shares | $ 0 | ||||||||
Stock Options | |||||||||
Number of Options | |||||||||
Outstanding at beginning of period | 50,000 | 50,000 | |||||||
Granted | 5,750,000 | 0 | 0 | ||||||
Exercised | 0 | 0 | |||||||
Forfeited | (4,700,000) | 0 | 0 | ||||||
Outstanding at end of period | 50,000 | 50,000 | 50,000 | 50,000 | |||||
Vested and expected at end of period | 50,000 | 50,000 | |||||||
Exercisable at end of period | 50,000 | 50,000 | |||||||
Weighted-Average Exercise Price | |||||||||
Outstanding at beginning of period | $ / shares | $ 0.93 | ||||||||
Granted | $ / shares | 0 | ||||||||
Exercised | $ / shares | 0 | ||||||||
Forfeited | $ / shares | 0 | ||||||||
Outstanding at end of period | $ / shares | 0.93 | $ 0.93 | |||||||
Vested and expected at end of period | $ / shares | 0.93 | ||||||||
Exercisable at end of period | $ / shares | $ 0.93 | ||||||||
Weighted-Average Remaining Contractual Term (years) | |||||||||
Outstanding at beginning of period | 3 years 26 days | 3 years 26 days | 4 years 26 days | 4 years 26 days | |||||
Vested and expected to vest at end of period | 3 years 26 days | 3 years 26 days | |||||||
Exercisable at end of period | 3 years 26 days | 3 years 26 days | |||||||
Aggregate Intrinsic Value | |||||||||
Outstanding at beginning of period | ¥ | ¥ 0 | ||||||||
Granted | ¥ / shares | ¥ 0 | ||||||||
Exercised | $ 0 | ¥ 0 | $ 0 | $ 0 | |||||
Forfeited | ¥ | 0 | ||||||||
Outstanding at end of period | ¥ | ¥ 0 | ¥ 0 | |||||||
Vested and expected to vest at end of period | ¥ | ¥ 0 | ||||||||
Exercisable at end of period | ¥ | ¥ 0 | ||||||||
Performance conditions | |||||||||
Number of Options | |||||||||
Outstanding at beginning of period | 2,000,000 | 2,000,000 | |||||||
Granted | 0 | 0 | |||||||
Exercised | 0 | 0 | |||||||
Forfeited | (1,000,000) | (1,000,000) | |||||||
Outstanding at end of period | 1,000,000 | 1,000,000 | 2,000,000 | 2,000,000 | |||||
Vested and expected at end of period | 1,000,000 | 1,000,000 | |||||||
Weighted-Average Exercise Price | |||||||||
Outstanding at beginning of period | $ / shares | $ 1.86 | ||||||||
Granted | $ / shares | 0 | ||||||||
Exercised | $ / shares | 0 | ||||||||
Forfeited | $ / shares | 0.93 | ||||||||
Outstanding at end of period | $ / shares | 0.93 | $ 1.86 | |||||||
Vested and expected at end of period | $ / shares | $ 0.93 | ||||||||
Weighted-Average Remaining Contractual Term (years) | |||||||||
Outstanding at beginning of period | 3 years 26 days | 3 years 26 days | 2 years 22 days | 2 years 22 days | |||||
Vested and expected to vest at end of period | 3 years 26 days | 3 years 26 days | |||||||
Exercisable at end of period | 0 years | 0 years | |||||||
Aggregate Intrinsic Value | |||||||||
Outstanding at beginning of period | ¥ | ¥ 0 | ||||||||
Granted | ¥ / shares | ¥ 0 | ||||||||
Exercised | ¥ | ¥ 0 | ||||||||
Forfeited | ¥ | 0 | ||||||||
Outstanding at end of period | ¥ | ¥ 0 | ¥ 0 | |||||||
Vested and expected to vest at end of period | ¥ | ¥ 0 | ||||||||
Exercisable at end of period | ¥ | ¥ 0 | ||||||||
Stock options and ordinary shares granted by Red 5 | |||||||||
Number of Options | |||||||||
Outstanding at beginning of period | 5,111,250 | 5,111,250 | |||||||
Granted | 0 | 0 | |||||||
Exercised | 0 | 0 | |||||||
Forfeited | 0 | 0 | |||||||
Outstanding at end of period | 5,111,250 | 5,111,250 | 5,111,250 | 5,111,250 | |||||
Vested and expected at end of period | 5,111,250 | 5,111,250 | |||||||
Exercisable at end of period | 5,111,250 | 5,111,250 | |||||||
Weighted-Average Exercise Price | |||||||||
Outstanding at beginning of period | $ / shares | $ 0.049 | ||||||||
Granted | $ / shares | 0 | ||||||||
Exercised | $ / shares | 0 | ||||||||
Forfeited | $ / shares | 0 | ||||||||
Outstanding at end of period | $ / shares | 0.049 | $ 0.049 | |||||||
Vested and expected at end of period | $ / shares | 0.049 | ||||||||
Exercisable at end of period | $ / shares | $ 0.049 | ||||||||
Weighted-Average Remaining Contractual Term (years) | |||||||||
Outstanding at beginning of period | 1 year 2 months 27 days | 1 year 2 months 27 days | 2 years 2 months 27 days | 2 years 2 months 27 days | |||||
Vested and expected to vest at end of period | 1 year 2 months 27 days | 1 year 2 months 27 days | |||||||
Exercisable at end of period | 1 year 2 months 27 days | 1 year 2 months 27 days | |||||||
Aggregate Intrinsic Value | |||||||||
Outstanding at beginning of period | $ | $ 0 | ||||||||
Granted | ¥ / shares | ¥ 0 | ||||||||
Exercised | $ | 0 | $ 0 | $ 0 | ||||||
Forfeited | $ | 0 | ||||||||
Outstanding at end of period | $ | 0 | $ 0 | |||||||
Vested and expected to vest at end of period | $ | 0 | ||||||||
Exercisable at end of period | $ | $ 0 |
SHARE-BASED COMPENSATION - Blac
SHARE-BASED COMPENSATION - Black-Scholes option pricing model (Details) - $ / shares | Jun. 06, 2017 | Dec. 31, 2019 | Dec. 31, 2018 |
Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | 2.19% | ||
Expected life (years) | 2 years 11 months 5 days | ||
Expected dividend yield | 0.00% | ||
Volatility | 78.55% | ||
Fair value of options at modification date | $ 0.51 | ||
Performance conditions | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | 2.19% | ||
Expected life (years) | 2 years 11 months 5 days | ||
Expected dividend yield | 0.00% | ||
Volatility | 78.55% | ||
Fair value of options at modification date | $ 0.51 | ||
Options Cancelled and Accelerated Vested Under Market Condition | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | 1.52% | ||
Risk-free interest rate, minimum | 1.16% | ||
Risk-free interest rate, maximum | 1.62% | ||
Expected life (years) | 5 years | ||
Expected dividend yield | 0.00% | 0.00% | |
Volatility | 72.00% | ||
Volatility, minimum | 62.00% | ||
Volatility, maximum | 74.00% | ||
Options Cancelled and Accelerated Vested Under Market Condition | Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected life (years) | 4 years 5 months 27 days | ||
Fair value of options at modification date | $ 0.06 | $ 0.18 | |
Options Cancelled and Accelerated Vested Under Market Condition | Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected life (years) | 5 years | ||
Fair value of options at modification date | $ 0.31 | $ 0.25 | |
Stock options and ordinary shares granted by Red 5 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | 0.78% | ||
Risk-free interest rate, minimum | 0.78% | ||
Expected life (years) | 4 years | ||
Expected dividend yield | 0.00% | ||
Volatility | 45.70% | ||
Volatility, minimum | 45.70% | ||
Stock options and ordinary shares granted by Red 5 | Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected life (years) | 4 years |
SHARE-BASED COMPENSATION - Addi
SHARE-BASED COMPENSATION - Additional Information (Details) | Jan. 21, 2019shares | Sep. 04, 2018shares | Jan. 24, 2018shares | Jun. 06, 2017$ / sharesshares | Aug. 06, 2016USD ($)shares | Dec. 07, 2015 | Dec. 08, 2010USD ($)$ / sharesshares | Jan. 31, 2019shares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)shares | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CNY (¥) | Dec. 31, 2017USD ($)shares | Dec. 31, 2017CNY (¥)shares | Dec. 31, 2019CNY (¥)shares | Aug. 31, 2016shares | Aug. 06, 2016CNY (¥) | Nov. 30, 2015shares | Dec. 31, 2013shares | Sep. 30, 2011shares | Dec. 31, 2010shares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Ordinary shares, par value | $ / shares | $ 0.01 | $ 0.01 | |||||||||||||||||||
Number of options exercised | 6,328,535 | ||||||||||||||||||||
Number of options canceled | 10,806,665 | ||||||||||||||||||||
Incremental compensation cost recognized | ¥ 33,000,000 | $ 4,700,000 | |||||||||||||||||||
Share-based compensation | $ 3,124,269 | ¥ 21,750,533 | 3,898,328 | ¥ 38,029,713 | |||||||||||||||||
Equity granted | 15,000,000 | 30,000,000 | |||||||||||||||||||
Zhu Jun [Member] | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 1,000,000 | ||||||||||||||||||||
Number of options canceled | 5,000,000 | 5,000,000 | |||||||||||||||||||
Directors, officers and consultants | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Number of options canceled | 15,000,000 | 6,200,000 | |||||||||||||||||||
Third-party consultant | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Number of options canceled | 1,000,000 | ||||||||||||||||||||
Ordinary Shares Granted to Incsight | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Share-based compensation | ¥ | ¥ 0 | 0 | ¥ 500,000 | ||||||||||||||||||
Equity granted | 1,500,000 | ||||||||||||||||||||
Stock award term | 3 years | 5 years | |||||||||||||||||||
Fair value of equity granted | $ / shares | $ 6.48 | ||||||||||||||||||||
Cumulative profit | $ | $ 5,000,000 | ||||||||||||||||||||
Ordinary Shares Granted to Incsight | Vest when Group achieves breakeven | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Equity granted | 500,000 | ||||||||||||||||||||
Ordinary Shares Granted to Incsight | Vest when cumulative profit reaches US$5 million in a quarter subsequent to the quarter in which Group breaks even | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Equity granted | 1,000,000 | ||||||||||||||||||||
CrossFire New Mobile Game | Inner Mongolia Culture Assets and Equity Exchange | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Funds required for the development of CrossFire new mobile game | $ 22,600,000 | $ 22,600,000 | ¥ 157,500,000 | ¥ 157,500,000 | |||||||||||||||||
2004 Option Plan | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Maximum aggregate number of ordinary shares approved for issuance | 100,000,000 | 34,449,614 | 14,449,614 | 6,449,614 | |||||||||||||||||
Stock options contractual term | 5 years | 5 years | |||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 1,050,000 | 1,050,000 | |||||||||||||||||||
Options to purchase ordinary shares, available for future grants | 64,527,118 | 64,527,118 | |||||||||||||||||||
Ordinary shares, par value | $ / shares | $ 0.01 | ||||||||||||||||||||
Number of options exercised | 6,328,535 | ||||||||||||||||||||
Number of options canceled | 10,806,665 | ||||||||||||||||||||
Stock options, exercise price | $ / shares | $ 0 | ||||||||||||||||||||
Share-based compensation | $ 3,100,000 | ¥ 21,300,000 | 3,900,000 | 38,000,000 | |||||||||||||||||
Stock Options | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Total instrinsic value of options exercised | $ 0 | ¥ 0 | $ 0 | $ 0 | |||||||||||||||||
Options to purchase ordinary share, outstanding shares | 50,000 | 50,000 | 50,000 | ||||||||||||||||||
Number of options exercised | 0 | 0 | |||||||||||||||||||
Number of options canceled | 4,700,000 | 0 | 0 | ||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.51 | ||||||||||||||||||||
Share options granted | 5,750,000 | 0 | 0 | ||||||||||||||||||
Shares vested period | 36 months | ||||||||||||||||||||
Share options forfeited | 1,000,000 | ||||||||||||||||||||
Accelerated Vesting Options | Maximum | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Stock options, exercise price | $ / shares | 1.86 | ||||||||||||||||||||
Accelerated Vesting Options | Minimum | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Stock options, exercise price | $ / shares | $ 1.53 | ||||||||||||||||||||
Stock options and ordinary shares granted by Red 5 | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Maximum aggregate number of ordinary shares approved for issuance | 22,855,591 | 13,626,955 | |||||||||||||||||||
Total instrinsic value of options exercised | $ | $ 0 | $ 0 | $ 0 | ||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 5,111,250 | 5,111,250 | 5,111,250 | ||||||||||||||||||
Options to purchase ordinary shares, available for future grants | 15,480,087 | 15,480,087 | |||||||||||||||||||
Number of options exercised | 0 | 0 | |||||||||||||||||||
Number of options canceled | 0 | 0 | |||||||||||||||||||
Share options granted | 0 | 0 | |||||||||||||||||||
Share-based compensation | $ 10,000 | ¥ 50,000 | ¥ 40,000 | ¥ 300,000 | |||||||||||||||||
Unrecognized compensation cost | ¥ | ¥ 0 | ||||||||||||||||||||
Stock award term | 10 years | 10 years | |||||||||||||||||||
Option granted | 38,191,879 | 38,191,879 | |||||||||||||||||||
Maximum exercisable period for stock options granted to a person who is a greater than 10% shareholder on date of grant | 5 years | 5 years | |||||||||||||||||||
Stock options and ordinary shares granted by Red 5 | Maximum | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Stock options, exercise price | $ / shares | $ 0.2450 | ||||||||||||||||||||
Stock options and ordinary shares granted by Red 5 | Minimum | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Fair value of options granted | $ / shares | 0.0178 | ||||||||||||||||||||
Stock options, exercise price | $ / shares | $ 0.0001 | ||||||||||||||||||||
Performance conditions | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Total instrinsic value of options exercised | ¥ | ¥ 0 | ||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 1,000,000 | 2,000,000 | 1,000,000 | ||||||||||||||||||
Number of options exercised | 0 | 0 | |||||||||||||||||||
Number of options canceled | 1,000,000 | 1,000,000 | |||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.51 | ||||||||||||||||||||
Share options granted | 0 | 0 | |||||||||||||||||||
Unrecognized compensation cost | $ 5,000,000 | ¥ 35,000,000 | |||||||||||||||||||
Performance conditions | Directors, officers and consultants | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Number of options canceled | 1,500,000 | ||||||||||||||||||||
Share options granted | 2,500,000 | ||||||||||||||||||||
Performance conditions | CrossFire New Mobile Game | Inner Mongolia Culture Assets and Equity Exchange | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Share options granted | 6,000,000 | ||||||||||||||||||||
Performance conditions | Tranche I | Directors, officers and consultants | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Description of performance conditions for vesting of shares | 1,000,000 shares granted will vest upon the success of improvement on the Group's online game business | ||||||||||||||||||||
Performance conditions | Tranche II | Directors, officers and consultants | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||
Description of performance conditions for vesting of shares | 1,500,000 shares will vest upon the success of the Group's fund raising efforts |
RELATED PARTY TRANSACTIONS AN_2
RELATED PARTY TRANSACTIONS AND BALANCES (Details) | 1 Months Ended | 12 Months Ended | ||||||||
Jun. 30, 2019shares | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2014USD ($) | |
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Repayments of related party debt | $ 1,439,797 | ¥ 10,023,576 | ¥ 29,127,540 | ¥ 23,950,421 | ||||||
Zhenjiang Kexin Power System Design and Research Co., Ltd. ("Zhenjiang Kexin") | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Common Stock, Shares Subscribed but Unissued | shares | 3,444,882 | |||||||||
Percentage of equity interest | 9.90% | |||||||||
Chief Executive Officer | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Amount due to related party | 9,100,000 | ¥ 63,200,000 | ¥ 57,100,000 | |||||||
Loan from related party | 2,300,000 | 16,100,000 | 11,000,000 | |||||||
Minimum | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
License agreements, expected payment | $ 160,000,000 | |||||||||
Big Data | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Revenue from related party | 10,000 | 20,000 | 50,000 | |||||||
Amount due from related party | 20,000 | 100,000 | ||||||||
ZTE9 network technology Co., Ltd., Wuxi ("ZTE9") | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Net royalty paid | ¥ | 0 | 5,200,000 | ||||||||
Funds to related party | ¥ | 0 | 600,000 | ||||||||
Revenue from related party | ¥ | 0 | 200,000 | ||||||||
Amount due from related party | 100,000 | 1,000,000 | 1,000,000 | |||||||
Amount due to related party | 30,000 | ¥ 200,000 | ¥ 5,100,000 | |||||||
Repayments of related party debt | 0 | 1,700,000 | ||||||||
System Link Corporation Limited ('System Link") | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Investment in joint venture, ownership percentage | 50.00% | |||||||||
Due to related party, non-current | 0 | $ 0 | ||||||||
License Agreement | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Amount received for license agreement | $ 10,000,000 | |||||||||
License Agreement | System Link Corporation Limited ('System Link") | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Revenue from related party | 0 | ¥ 0 | ¥ 51,100,000 | |||||||
Amount received for license agreement | $ 10,000,000 | |||||||||
Outsourcing service fee | Big Data | ||||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||||
Revenue from related party | $ 0 | ¥ 400,000 |
LOSS PER SHARE (Details)
LOSS PER SHARE (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)¥ / sharesshares | Dec. 31, 2018CNY (¥)¥ / sharesshares | Dec. 31, 2017CNY (¥)¥ / sharesshares | |
Numerator: | ||||
Net loss attributable to ordinary shareholders before accretion on redeemable noncontrolling interest | $ (25,538,677) | ¥ (177,795,168) | ¥ (217,092,926) | ¥ (118,165,850) |
Accretion on redeemable noncontrolling interest | 1,842,569 | 12,827,598 | 40,918,773 | 57,126,233 |
Net loss attributable to ordinary shareholders | $ (27,381,246) | ¥ (190,622,766) | ¥ (258,011,699) | ¥ (175,292,083) |
Denominator: | ||||
Denominator for basic and diluted loss per share - weighted-average shares outstanding | 106,407,008 | 106,407,008 | 62,114,760 | 33,426,448 |
Loss per share - Basic and diluted | (per share) | $ (0.26) | ¥ (1.79) | ¥ (4.15) | ¥ (5.24) |
LOSS PER SHARE - Additional Inf
LOSS PER SHARE - Additional Information (Details) - shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
LOSS PER SHARE | |||
Anti-dilutive securities excluded from computation of diluted loss per share | 13,213,978 | 20,383,333 | 5,778,846 |
RESTRICTED NET ASSETS (Details)
RESTRICTED NET ASSETS (Details) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | |
Restricted Cash and Cash Equivalents Items | |||||
Appropriation of statutory reserves | ¥ 0 | ¥ 0 | ¥ 0 | ||
Accumulated reserves | $ 0.5 | ¥ 3,800,000 | |||
Restricted registered capital | 1.6 | 11,500,000 | |||
Amount of restricted net assets | $ 1.1 | ¥ 7,700,000 | |||
Minimum | |||||
Restricted Cash and Cash Equivalents Items | |||||
Percentage of appropriation of statutory reserve from retained earnings after tax profits | 10.00% | ||||
Maximum | |||||
Restricted Cash and Cash Equivalents Items | |||||
Percentage of appropriations of statutory reserve of registered capital | 50.00% |
NONCONTROLLING INTEREST (Detail
NONCONTROLLING INTEREST (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
Noncontrolling Interest | ||||
Net loss attributable to The9 Limited | $ (25,538,677) | ¥ (177,795,168) | ¥ (217,092,926) | ¥ (118,165,850) |
Transfers (to) from the noncontrolling interest | ||||
Change in The9 Limited's additional paid-in capital for adjustment on non-controlling interest as a result of issuance of common shares of Red 5 upon vesting of stock options and restricted shares | 0 | 0 | 0 | (7,060) |
Change from net loss attributable to The9 Limited and transfers (to) from noncontrolling interests | $ (25,538,677) | ¥ (177,795,168) | ¥ (217,092,926) | (118,172,910) |
Additional paid-in capital | ||||
Transfers (to) from the noncontrolling interest | ||||
Change in The9 Limited's additional paid-in capital for adjustment on non-controlling interest as a result of issuance of common shares of Red 5 upon vesting of stock options and restricted shares | ¥ (7,060) |
NONCONTROLLING INTEREST- Additi
NONCONTROLLING INTEREST- Additional Information (Details) - shares | 1 Months Ended | ||
Jun. 30, 2016 | Dec. 31, 2016 | May 31, 2016 | |
L&A International Holding Limited | |||
Noncontrolling Interest | |||
Equity interest owned by company | 58.10% | 37.00% | 10.40% |
Ordinary shares of L&A | 723,313,020 | ||
Stock split ratio | one-to-five stock split | ||
Percentage of shares received related to payment of service fee to third party consultant | 6.00% | ||
Ordinary shares of L&A, gross | 769,481,940 | ||
Red 5 Studios, Inc. ("Red 5") | MOU | |||
Noncontrolling Interest | |||
Equity interest owned by company | 30.60% |
REDEEMABLE NONCONTROLLING INT_3
REDEEMABLE NONCONTROLLING INTEREST - Holders of SPBS (Details) - Series B Redeemable Convertible Preferred Shares - shares | Dec. 31, 2019 | Dec. 31, 2018 |
Shanghai Oriental Pearl Culture Development Co Ltd | ||
Redeemable Noncontrolling Interest | ||
Number of shares | 17,258,399 | 17,258,399 |
L&A International Holding Limited | ||
Redeemable Noncontrolling Interest | ||
Number of shares | 10,180,553 | 10,180,553 |
REDEEMABLE NONCONTROLLING INT_4
REDEEMABLE NONCONTROLLING INTEREST - Reconciliation (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
NONCONTROLLING INTEREST | ||||
Redeemable noncontrolling interest opening balance | $ 48,992,293 | ¥ 341,074,539 | ¥ 306,014,668 | |
Net gain (loss) attributable to redeemable noncontrolling interest | (697,462) | (4,855,589) | (5,858,902) | ¥ 2,117,303 |
Accretion of redeemable noncontrolling interest | 1,842,569 | 12,827,598 | 40,918,773 | |
Redeemable noncontrolling interest ending balance | $ 50,137,400 | ¥ 349,046,548 | ¥ 341,074,539 | ¥ 306,014,668 |
REDEEMABLE NONCONTROLLING INT_5
REDEEMABLE NONCONTROLLING INTEREST - Additional Information (Details) | 1 Months Ended | 12 Months Ended | ||||
Jan. 31, 2014USD ($)shares | Jan. 31, 2014CNY (¥)shares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)shares | Dec. 31, 2018CNY (¥)shares | Dec. 31, 2017CNY (¥)shares | |
Redeemable Noncontrolling Interest | ||||||
Common shares purchased by Oriental Pearl, value | ¥ | ¥ 36,072,921 | ¥ 9,300,578 | ¥ 22,418,125 | |||
Ordinary shares | ||||||
Redeemable Noncontrolling Interest | ||||||
Common shares purchased by Oriental Pearl, shares | 15,444,882 | 15,444,882 | 46,771,429 | 14,300,000 | ||
Common shares purchased by Oriental Pearl, value | ¥ | ¥ 1,041,557 | ¥ 3,173,806 | ¥ 971,727 | |||
Conversion ratio basis | The initial conversion ratio is 1:1, subject to adjustment in the event of (i) share splits, share combinations, share dividends or distribution, other dividends, recapitalizations and similar events, or (ii) issuance of common shares at a price per share less than the conversion price in effect on the date of or immediately prior to such issuance. In that case, the conversion price shall be reduced concurrently to the subscription price of such issuance. | The initial conversion ratio is 1:1, subject to adjustment in the event of (i) share splits, share combinations, share dividends or distribution, other dividends, recapitalizations and similar events, or (ii) issuance of common shares at a price per share less than the conversion price in effect on the date of or immediately prior to such issuance. In that case, the conversion price shall be reduced concurrently to the subscription price of such issuance. | ||||
Series B Redeemable Convertible Preferred Shares | ||||||
Redeemable Noncontrolling Interest | ||||||
Dividends rate per share | $ / shares | $ 0.038237 | |||||
Preferred stock redemption term | At any time on or after April 1, 2017, if requested by at least 50% of the holders of SBPS then outstanding, Red 5 shall redeem all of the outstanding SBPS at a redemption price equal to 200% of the issuance price in three equal annual installments. The full amount of the redemption price due but not paid shall accrue interest daily at a rate of 10% per annum from the issuance date of SBPS | At any time on or after April 1, 2017, if requested by at least 50% of the holders of SBPS then outstanding, Red 5 shall redeem all of the outstanding SBPS at a redemption price equal to 200% of the issuance price in three equal annual installments. The full amount of the redemption price due but not paid shall accrue interest daily at a rate of 10% per annum from the issuance date of SBPS | ||||
Liquidation description of preferred stock | The holders of SBPS have preference over holders of common shares with respect to distribution of assets upon voluntary or involuntary liquidation of Red 5. The holders of SBPS shall be entitled to receive 100% of the original issue price ("preferred liquidation"). The holders of SBPS are also entitled to distribution of remaining assets from preferred liquidation, along with other shareholders, while the total distribution entitled to the holders of SBPS should not exceed 200% of the original issue price. | The holders of SBPS have preference over holders of common shares with respect to distribution of assets upon voluntary or involuntary liquidation of Red 5. The holders of SBPS shall be entitled to receive 100% of the original issue price ("preferred liquidation"). The holders of SBPS are also entitled to distribution of remaining assets from preferred liquidation, along with other shareholders, while the total distribution entitled to the holders of SBPS should not exceed 200% of the original issue price. | ||||
Series B Redeemable Convertible Preferred Shares | Minimum | ||||||
Redeemable Noncontrolling Interest | ||||||
Original issue price, percentage | 100.00% | 100.00% | ||||
Series B Redeemable Convertible Preferred Shares | Maximum | ||||||
Redeemable Noncontrolling Interest | ||||||
Original issue price, percentage | 200.00% | 200.00% | ||||
Red 5 Studios, Inc. ("Red 5") | ||||||
Redeemable Noncontrolling Interest | ||||||
Difference between fair value and purchase price | $ 18,900,000 | ¥ 131,300,000 | ||||
Recognized compensation paid | $ 1,900,000 | ¥ 13,000,000 | ||||
Red 5 Studios, Inc. ("Red 5") | Ordinary shares | ||||||
Redeemable Noncontrolling Interest | ||||||
Common shares purchased by Oriental Pearl, shares | 5,948,488 | 5,948,488 | ||||
Common shares purchased by Oriental Pearl, value | $ 3,700,000 | ¥ 25,600,000 | ||||
Red 5 Studios, Inc. ("Red 5") | Minimum | ||||||
Redeemable Noncontrolling Interest | ||||||
Gross proceeds from public offering | $ | $ 30,000,000 | |||||
Red 5 Studios, Inc. ("Red 5") | Series B Redeemable Convertible Preferred Shares | ||||||
Redeemable Noncontrolling Interest | ||||||
Redeemable convertible preferred shares issued, shares | 27,438,952 | 27,438,952 | ||||
Redeemable convertible preferred shares issued, value | $ 17,000,000 | ¥ 118,300,000 |
DISPOSAL OF A SUBSIDIARY (Detai
DISPOSAL OF A SUBSIDIARY (Details) ¥ in Millions, $ in Millions | Feb. 21, 2020 | Sep. 26, 2019USD ($)subsidiary | Sep. 30, 2019subsidiary | Sep. 26, 2019CNY (¥) |
DISPOSAL OF A SUBSIDIARY | ||||
Number of subsidiaries disposed of | 3 | |||
The9 Computer, C9I Shanghai and Shanghai Kaie | ||||
DISPOSAL OF A SUBSIDIARY | ||||
Number of subsidiaries disposed of | 3 | |||
Total consideration | $ 70.8 | ¥ 493 | ||
Remaining percentage of consideration expected to be received in May 2020 | 10.00% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ / shares in Units, $ in Millions | Jun. 06, 2017shares | Oct. 31, 2019USD ($)installment | Apr. 30, 2019USD ($) | Mar. 31, 2019USD ($)installment | Jan. 31, 2019USD ($)shares | Oct. 31, 2016USD ($)shares | Aug. 31, 2016shares | Jun. 30, 2016HKD ($)shares | Aug. 31, 2014shares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2019CNY (¥)shares | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($)$ / shares | Dec. 31, 2018CNY (¥) | Jun. 30, 2017USD ($) | Jun. 30, 2017CNY (¥) | Dec. 31, 2016 | Oct. 31, 2016CNY (¥) | Aug. 06, 2016USD ($) | Aug. 06, 2016CNY (¥) | Jun. 30, 2016USD ($) | May 31, 2016 | Dec. 31, 2014 |
Loss Contingencies | |||||||||||||||||||||||||
Funds raised for the development of CrossFire new mobile game | $ 8,259,345 | ¥ 57,499,910 | ¥ 57,499,910 | ||||||||||||||||||||||
Number of options canceled | shares | 10,806,665 | ||||||||||||||||||||||||
Investments in equity investees | $ 1,436,410 | ¥ 10,000,000 | 45,216,118 | ||||||||||||||||||||||
Common stock par value | $ / shares | $ 0.01 | $ 0.01 | |||||||||||||||||||||||
Initial deposit for joint venture arrangement | $ 5,000,000 | $ 5,010,342 | ¥ 34,881,000 | ¥ 0 | ¥ 0 | ||||||||||||||||||||
Redeemable convertible preferred shares redemption value | 1,842,569 | 12,827,598 | ¥ 40,918,773 | ||||||||||||||||||||||
Copyright infringements | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Total aggregated claim | 400,000 | 3,000,000 | |||||||||||||||||||||||
Third-party consultant | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Number of options canceled | shares | 1,000,000 | ||||||||||||||||||||||||
Joint venture to manufacture, market, distribute and sell electric cars | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Initial deposit for joint venture arrangement | $ 5,000,000 | ||||||||||||||||||||||||
Number of installments to pay capital contribution | installment | 3 | ||||||||||||||||||||||||
Development fee payable | $ 18,000,000 | ||||||||||||||||||||||||
Development fee payable, number of installments | installment | 4 | ||||||||||||||||||||||||
Development fee payable, first installment | $ 6,000,000 | ||||||||||||||||||||||||
Development fee payable, first installment, payment period | 2 days | ||||||||||||||||||||||||
Joint venture to manufacture, market, distribute and sell electric cars | Maximum | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Investment commitments | $ 600,000,000 | ||||||||||||||||||||||||
Equity Method Investment Funding Commitment | $ 600,000,000 | ||||||||||||||||||||||||
System Link Corporation Limited ('System Link") | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Ownership interest (as a percent) | 50.00% | ||||||||||||||||||||||||
Refund of court acceptance fee paid | 500,000 | 3,800,000 | |||||||||||||||||||||||
First Installment | Series B Redeemable Convertible Preferred Shares | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Redeemable convertible preferred shares redemption value | 16,500,000 | ||||||||||||||||||||||||
Second Installment | Series B Redeemable Convertible Preferred Shares | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Redeemable convertible preferred shares redemption value | 18,100,000 | ||||||||||||||||||||||||
Third Installment | Series B Redeemable Convertible Preferred Shares | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Redeemable convertible preferred shares redemption value | 19,900,000 | ||||||||||||||||||||||||
Shanghai The9 Information Technology Co., Ltd. ("Shanghai IT") | Beijing Ti Knight | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Investment commitments | $ 600,000 | 4,100,000 | $ 1,300,000 | ¥ 9,000,000 | |||||||||||||||||||||
Investments in equity investees | 700,000 | 4,900,000 | |||||||||||||||||||||||
Purchase commitment amount | 1,000,000 | 6,800,000 | |||||||||||||||||||||||
Maximum accumulated investment for waiving purchase commitment | $ 900,000 | ¥ 6,000,000 | |||||||||||||||||||||||
Purchase commitment, description | As of December 31, 2018, the Group has both a capital commitment and a purchase commitment amounting to RMB5.0 million (US$0.8 million) and RMB6.8 million (US$1.0 million), respectively, but the purchase commitment will be waived under the condition that accumulated investment in Beijing Ti Knight by Shanghai IT is more than RMB6.0 million (US$0.9 million). | As of December 31, 2018, the Group has both a capital commitment and a purchase commitment amounting to RMB5.0 million (US$0.8 million) and RMB6.8 million (US$1.0 million), respectively, but the purchase commitment will be waived under the condition that accumulated investment in Beijing Ti Knight by Shanghai IT is more than RMB6.0 million (US$0.9 million). | |||||||||||||||||||||||
Equity Method Investment Funding Commitment | $ 600,000 | ¥ 4,100,000 | $ 1,300,000 | ¥ 9,000,000 | |||||||||||||||||||||
L&A International Holding Limited | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Line of credit amount | $ 92.3 | $ 11,900,000 | |||||||||||||||||||||||
Interest rate (as a percent) | 2.00% | 2.00% | |||||||||||||||||||||||
Line of credit , duration | 24 months | ||||||||||||||||||||||||
Amount of shares pledged | shares | 417,440,000 | ||||||||||||||||||||||||
Percentage of shares owned | 58.10% | 37.00% | 58.10% | 10.40% | |||||||||||||||||||||
Red 5 Studios, Inc. ("Red 5") | Series B Redeemable Convertible Preferred Shares | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Redeemable convertible preferred shares issued, shares | shares | 27,438,952 | ||||||||||||||||||||||||
New Star International Development Ltd ("New Star") | Series A Preferred Stock | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Redeemable convertible preferred shares issued, shares | shares | 39,766,589 | 39,766,589 | |||||||||||||||||||||||
Jiu Gang | Smilegate | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Ownership interest (as a percent) | 20.00% | 20.00% | |||||||||||||||||||||||
Jiu Gang | Shenzhen EN-plus Technologies Co., Ltd. ("EN+") | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Ownership interest (as a percent) | 80.00% | 80.00% | |||||||||||||||||||||||
Jiu Gang | Joint venture related to new energy electric vehicles | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Investment commitments | $ 7,200,000 | ¥ 50,000,000 | |||||||||||||||||||||||
Equity Method Investment Funding Commitment | 7,200,000 | 50,000,000 | |||||||||||||||||||||||
CrossFire New Mobile Game | Smilegate | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Period for payment of minimum guarantee for royalty | 30 days | ||||||||||||||||||||||||
CrossFire New Mobile Game | Minimum | Smilegate | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Guarantee for royalty | $ 2,000,000 | ||||||||||||||||||||||||
CrossFire New Mobile Game | Inner Mongolia Culture Assets and Equity Exchange | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Funds raised for the development of CrossFire new mobile game | $ 8,300,000 | 8,300,000 | 57,500,000 | ¥ 57,500,000 | |||||||||||||||||||||
Additional funds aimed to be raised for the development of CrossFire new mobile game | $ 14,400,000 | 14,400,000 | 100,000,000 | ¥ 100,000,000 | |||||||||||||||||||||
Funds required for the development of CrossFire new mobile game | $ 22,600,000 | ¥ 157,500,000 | $ 22,600,000 | ¥ 157,500,000 | |||||||||||||||||||||
CrossFire New Mobile Game | Inner Mongolia Culture Assets and Equity Exchange | Elegant Wisdom Limited | |||||||||||||||||||||||||
Loss Contingencies | |||||||||||||||||||||||||
Option granted | shares | 365,079 | 1,000,000 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
Revenues from External Customers and Long-Lived Assets | ||||
Net revenues | $ 49,053 | ¥ 341,495 | ¥ 17,431,858 | ¥ 73,148,556 |
Greater China | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net revenues | 26,158 | 182,107 | 16,430,205 | 19,690,716 |
North America | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net revenues | 0 | 0 | 0 | 51,156,109 |
Other areas | ||||
Revenues from External Customers and Long-Lived Assets | ||||
Net revenues | $ 22,895 | ¥ 159,388 | ¥ 1,001,653 | ¥ 2,301,731 |
SEGMENT REPORTING - Additional
SEGMENT REPORTING - Additional Information (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
SEGMENT REPORTING | |
Number of operating segment | 1 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | Mar. 06, 2020shares | Feb. 21, 2020USD ($) | Jan. 01, 2020USD ($) | Sep. 26, 2019USD ($)subsidiary | Apr. 30, 2020USD ($) | Apr. 30, 2020CNY (¥) | Feb. 29, 2020USD ($)subsidiary$ / sharesshares | Sep. 30, 2019subsidiary | Feb. 29, 2020CNY (¥) | Dec. 31, 2019USD ($)$ / shares | Dec. 31, 2019CNY (¥) | Sep. 26, 2019CNY (¥) | Dec. 31, 2018$ / shares | Dec. 31, 2018CNY (¥) | Nov. 24, 2015USD ($) |
Number of subsidiaries disposed of | subsidiary | 3 | ||||||||||||||
Remaining outstanding balance of convertible notes | $ 59,485,752 | ¥ 414,127,908 | ¥ 375,257,140 | ||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.01 | $ 0.01 | |||||||||||||
Class A ordinary shares | |||||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.01 | $ 0.01 | |||||||||||||
12% Convertible Senior Notes Due 2018 | |||||||||||||||
Principal amount | $ 40,050,000 | ||||||||||||||
Interest rate (as a percent) | 12.00% | ||||||||||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | |||||||||||||||
Number of subsidiaries disposed of | subsidiary | 3 | ||||||||||||||
Total consideration | $ 70,800,000 | ¥ 493,000,000 | |||||||||||||
The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | |||||||||||||||
Total consideration | $ 70,800,000 | ¥ 493,000,000 | |||||||||||||
Subsequent Event | |||||||||||||||
Number of subsidiaries disposed of | subsidiary | 3 | ||||||||||||||
Aggregate consideration | $ 500,000 | ||||||||||||||
Subsequent Event | CrossFire New Mobile Game | Inner Mongolia Culture Assets and Equity Exchange | |||||||||||||||
Refund claimed through civil suit | $ 8,300,000 | ¥ 57,500,000 | |||||||||||||
Subsequent Event | Class A ordinary shares | |||||||||||||||
Ordinary shares | shares | 3,300,000 | ||||||||||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | ||||||||||||||
Number of ordinary shares represented by each ADS | shares | 3 | ||||||||||||||
Subsequent Event | ADS | |||||||||||||||
Ordinary shares | shares | 70,000 | ||||||||||||||
Subsequent Event | 12% Convertible Senior Notes Due 2018 | |||||||||||||||
Repayment of convertible notes | $ 4,800,000 | $ 4,800,000 | |||||||||||||
Remaining outstanding balance of convertible notes | $ 55,500,000 | $ 55,500,000 | |||||||||||||
Subsequent Event | Convertible notes issued to Iliad | |||||||||||||||
Remaining outstanding balance of convertible notes | $ 55,500,000 | ||||||||||||||
Term of the notes | 1 year | ||||||||||||||
Principal amount | $ 500,000 | ||||||||||||||
Initial conversion price (in dollars per ADS) | $ / shares | $ 1.05 | ||||||||||||||
Interest rate (as a percent) | 6.00% | 6.00% | |||||||||||||
Period for exercising the right to convert | 6 months | ||||||||||||||
Subsequent Event | Convertible notes issued to Iliad | Maximum | |||||||||||||||
Outstanding balance convertible | $ 150,000 | ||||||||||||||
Subsequent Event | Forecast | |||||||||||||||
Repayment of convertible notes | $ 4,800,000 | ||||||||||||||
Subsequent Event | The9 Computer, C9I Shanghai and Shanghai Kaie | Held for sale | |||||||||||||||
Percentage of consideration received | 90 | ||||||||||||||
Total consideration | ¥ | ¥ 443,700,000 |
FINANCIAL INFORMATION OF PARE_2
FINANCIAL INFORMATION OF PARENT COMPANY - CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
Condensed Statement of Income Captions [Line Items] | ||||
Revenue | $ 49,280 | ¥ 343,077 | ¥ 17,492,415 | ¥ 73,208,166 |
Cost of revenue | (192,804) | (1,342,266) | (16,435,590) | (23,782,054) |
Gross loss | (143,751) | (1,000,771) | 996,268 | 49,366,502 |
Operating expenses: | ||||
Product development | (1,880,337) | (13,090,530) | (24,555,308) | (45,112,396) |
Sales and marketing | (303,732) | (2,114,519) | (2,325,818) | (9,089,969) |
General and administrative | (16,355,971) | (113,867,000) | (89,583,331) | (108,824,680) |
Total operating expenses | 23,377,018 | 162,746,124 | 105,991,298 | 163,027,045 |
Loss from operations | (23,516,425) | (163,716,655) | (104,765,492) | (113,310,589) |
Fair value change on warrants liability | (185,619) | (1,292,244) | (2,251,427) | (12,615,466) |
Foreign exchange gain (loss) | (786,291) | (5,474,002) | (20,331,430) | 19,206,747 |
Other expenses, net | 1,346,297 | 9,372,652 | 1,598,663 | 4,669,587 |
Loss before income tax expense and share of loss in equity method investments | (27,768,893) | (193,321,480) | (234,991,909) | (169,704,427) |
Income tax benefit | 0 | 0 | 0 | 0 |
Recovery of equity investment in excess of cost | 0 | 60,548,651 | ||
Net loss | (28,177,876) | (196,168,740) | (239,284,796) | (112,092,907) |
Other comprehensive income (loss), net of tax: | ||||
Currency translation adjustments | (113,984) | (793,531) | (1,314,265) | (9,525,761) |
Total comprehensive loss | (24,759,195) | (172,368,564) | (209,851,734) | (137,193,621) |
Parent Company | ||||
Condensed Statement of Income Captions [Line Items] | ||||
Revenue | 0 | 0 | 0 | 0 |
Cost of revenue | 0 | 0 | 0 | 0 |
Gross loss | 0 | 0 | 0 | 0 |
Operating expenses: | ||||
Product development | 0 | 0 | 0 | (43,710) |
Sales and marketing | 0 | 0 | 0 | (231,884) |
General and administrative | (9,791,323) | (68,165,230) | (21,435,150) | (62,979,090) |
Total operating expenses | (9,791,323) | (68,165,230) | (21,435,150) | (63,254,684) |
Loss from operations | (9,791,323) | (68,165,230) | (21,435,150) | (63,254,684) |
Interest expenses | (4,762,301) | (33,154,189) | (98,308,205) | (76,989,899) |
Fair value change on warrants liability | (185,619) | (1,292,243) | (2,251,427) | (12,615,466) |
Foreign exchange gain (loss) | (236,814) | (1,648,652) | 1,963,364 | 35,473,519 |
Other expenses, net | (235,053) | (1,636,394) | (18,180,060) | (21,649,514) |
Loss before income tax expense and share of loss in equity method investments | (14,839,872) | (103,312,222) | (133,708,624) | (113,805,112) |
Income tax benefit | 0 | 0 | 0 | 0 |
Recovery of equity investment in excess of cost | 0 | 0 | 0 | 60,548,651 |
Equity in loss of subsidiaries and VIEs | (10,698,805) | (74,482,946) | (83,384,302) | (64,909,389) |
Net loss | (25,538,677) | (177,795,168) | (217,092,926) | (118,165,850) |
Other comprehensive income (loss), net of tax: | ||||
Currency translation adjustments | 779,483 | 5,426,604 | 7,241,192 | (19,027,771) |
Total comprehensive loss | $ (24,759,194) | ¥ (172,368,564) | ¥ (209,851,734) | ¥ (137,193,621) |
FINANCIAL INFORMATION OF PARE_3
FINANCIAL INFORMATION OF PARENT COMPANY - CONDENSED BALANCE SHEETS (Details) | Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018USD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | Dec. 31, 2016CNY (¥) |
Current assets: | ||||||
Cash and cash equivalents | $ 1,452,662 | ¥ 10,113,141 | $ 611,401 | ¥ 4,256,449 | ¥ 142,624,020 | ¥ 38,878,076 |
Prepayments and other current assets, net | 1,271,012 | 8,848,534 | 6,148,787 | |||
Total current assets | 22,187,915 | 154,467,831 | 33,014,021 | |||
Investments in subsidiaries and VIEs | 1,436,410 | 10,000,000 | 45,216,118 | |||
TOTAL ASSETS | 26,064,977 | 181,459,156 | 164,687,440 | |||
Current liabilities: | ||||||
Short-term borrowings | 16,881,566 | 117,526,089 | 112,461,383 | |||
Warrants | 28,527 | 200,000 | 1,490,844 | |||
Total current liabilities | 151,984,055 | 1,058,082,595 | 908,423,767 | |||
TOTAL LIABILITIES | 152,882,056 | 1,064,334,300 | 908,423,767 | |||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Ordinary shares | 6,502,658 | |||||
Additional paid-in capital | 364,783,889 | 2,539,552,478 | 2,496,069,065 | |||
Statutory reserves | 4,032,288 | 28,071,982 | 28,071,982 | |||
Accumulated other comprehensive loss | (542,669) | (3,777,952) | (9,204,556) | |||
Accumulated deficit | (489,938,842) | (3,410,856,231) | (3,233,061,063) | |||
Total shareholders' deficit | (120,520,543) | (839,039,915) | (711,621,914) | |||
Total liabilities and shareholders' equity | 26,064,977 | 181,459,156 | 164,687,440 | |||
Parent Company | ||||||
Current assets: | ||||||
Cash and cash equivalents | 20,669 | 143,896 | $ 3 | 18 | ¥ 18,733 | ¥ 58,919 |
Prepayments and other current assets, net | 9,175 | 63,873 | 61,979 | |||
Amounts due from intercompany | 187,173,592 | 1,303,065,115 | 1,305,838,856 | |||
Total current assets | 187,203,436 | 1,303,272,884 | 1,305,900,853 | |||
Investments in subsidiaries and VIEs | (241,536,174) | (1,681,526,537) | (1,635,525,945) | |||
TOTAL ASSETS | (54,332,738) | (378,253,653) | (329,625,092) | |||
Current liabilities: | ||||||
Short-term borrowings | 5,010,342 | 34,881,000 | ||||
Accrued expenses and other current liabilities | 1,663,184 | 11,578,754 | 5,248,838 | |||
Warrants | 28,527 | 198,600 | 1,490,844 | |||
Convertible notes | 59,485,752 | 414,127,908 | 375,257,140 | |||
Total current liabilities | 66,187,805 | 460,786,262 | 381,996,822 | |||
TOTAL LIABILITIES | 66,187,805 | 460,786,262 | 381,996,822 | |||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Ordinary shares | 6,502,658 | |||||
Additional paid-in capital | 364,783,889 | 2,539,552,478 | 2,496,069,065 | |||
Statutory reserves | 4,032,288 | 28,071,982 | 28,071,982 | |||
Accumulated other comprehensive loss | (542,669) | (3,777,952) | (9,204,556) | |||
Accumulated deficit | (489,938,842) | (3,410,856,231) | (3,233,061,063) | |||
Total shareholders' deficit | (120,520,543) | (839,039,915) | (711,621,914) | |||
Total liabilities and shareholders' equity | (54,332,738) | (378,253,653) | ¥ (329,625,092) | |||
Class A ordinary shares | ||||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Ordinary shares | 1,051,610 | 7,321,099 | ||||
Class A ordinary shares | Parent Company | ||||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Ordinary shares | 1,051,610 | 7,321,099 | ||||
Class B ordinary shares | ||||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Ordinary shares | 93,181 | 648,709 | ||||
Class B ordinary shares | Parent Company | ||||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Ordinary shares | $ 93,181 | ¥ 648,709 |
FINANCIAL INFORMATION OF PARE_4
FINANCIAL INFORMATION OF PARENT COMPANY - CONDENSED STATEMENTS OF CASH FLOWS (Details) | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Dec. 31, 2019CNY (¥) | Dec. 31, 2018CNY (¥) | Dec. 31, 2017CNY (¥) | |
Cash flows from operating activities: | ||||
Net loss | $ (28,177,876) | ¥ (196,168,740) | ¥ (239,284,796) | ¥ (112,092,907) |
Adjustments for: | ||||
Share-based compensation expenses | 3,124,269 | 21,750,533 | 3,898,328 | 38,029,713 |
Fair value change on warrants liability | (185,619) | (1,292,244) | (2,251,427) | (12,615,466) |
Amortization of discount and interest on convertible notes | 4,762,302 | 33,154,191 | 98,308,205 | 76,990,826 |
Foreign exchange (gain) loss | 786,291 | 5,474,002 | 20,331,430 | (19,206,747) |
Recovery of equity investment in excess of cost | 0 | (60,548,651) | ||
Consulting fee paid by issuance of shares | 5,040,605 | 35,091,686 | 4,172,800 | 13,454,692 |
Change in prepayments and other current assets | (952,181) | (6,628,897) | (20,575,190) | 3,169,076 |
Change in accounts payable | 35,445 | 246,764 | 905,990 | 2,073,797 |
Change in accrued expenses and other current liabilities | 1,708,802 | 11,896,337 | (2,408,745) | (7,943,127) |
Net cash used in operating activities | (7,781,799) | (54,175,322) | (101,200,526) | (86,651,662) |
Cash flows from investing activity: | ||||
Settlement payment from investee | 0 | 165,812,500 | ||
Cash flows from financing activities: | ||||
Proceeds from other loans | 5,010,342 | 34,881,000 | 0 | 19,881,900 |
Net cash provided by (used in) financing activities | 5,878,192 | 40,922,800 | (18,357,011) | 44,073,433 |
Net change in cash and cash equivalents | 841,261 | 5,856,692 | (138,367,571) | 103,745,944 |
Cash and cash equivalents, beginning of year | 611,401 | 4,256,449 | 142,624,020 | 38,878,076 |
Cash and cash equivalents, end of year | 1,452,662 | 10,113,141 | 4,256,449 | 142,624,020 |
Supplement disclosure of cash flow information: | ||||
Interest paid | 260,073 | 892,159 | ||
Income taxes paid | 0 | 0 | ||
Parent Company | ||||
Cash flows from operating activities: | ||||
Net loss | (25,538,677) | (177,795,168) | (217,092,926) | (118,165,850) |
Adjustments for: | ||||
Share-based compensation expenses | 3,117,763 | 21,705,240 | 3,645,751 | 37,727,861 |
Fair value change on warrants liability | (185,619) | (1,292,243) | (2,251,427) | (12,615,466) |
Amortization of discount and interest on convertible notes | 4,762,302 | 33,154,191 | 98,308,205 | 76,990,826 |
Foreign exchange (gain) loss | 236,813 | 1,648,652 | (1,963,364) | (35,473,519) |
Recovery of equity investment in excess of cost | 0 | 0 | 0 | (60,548,651) |
Equity in loss of subsidiaries and VIEs | 10,698,805 | 74,482,946 | 83,384,302 | 64,909,389 |
Consulting fee paid by issuance of shares | 5,040,605 | 35,091,686 | 4,172,800 | 13,454,692 |
Change in prepayments and other current assets | (272) | (1,894) | (2,971) | 915,269 |
Change in amounts due from intercompany | (4,030,631) | (28,060,447) | 30,882,203 | (130,954,737) |
Change in accrued expenses and other current liabilities | 909,236 | 6,329,916 | 898,712 | (2,092,500) |
Net cash used in operating activities | (4,989,675) | (34,737,122) | (18,715) | (165,852,686) |
Cash flows from investing activity: | ||||
Settlement payment from investee | 0 | 0 | 0 | 165,812,500 |
Cash flows from financing activities: | ||||
Proceeds from other loans | 5,010,341 | 34,881,000 | 0 | 0 |
Net cash provided by (used in) financing activities | 5,010,341 | 34,881,000 | 0 | 0 |
Net change in cash and cash equivalents | 20,666 | 143,878 | (18,715) | (40,186) |
Cash and cash equivalents, beginning of year | 3 | 18 | 18,733 | 58,919 |
Cash and cash equivalents, end of year | 20,669 | 143,896 | 18 | 18,733 |
Supplement disclosure of cash flow information: | ||||
Interest paid | 0 | 0 | 0 | 0 |
Income taxes paid | $ 0 | ¥ 0 | ¥ 0 | ¥ 0 |