Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2015shares | |
Document Information [Line Items] | |
Document Type | 20-F |
Amendment Flag | false |
Document Period End Date | Dec. 31, 2015 |
Document Fiscal Year Focus | 2,015 |
Document Fiscal Period Focus | FY |
Trading Symbol | NCTY |
Entity Registrant Name | The9 LTD |
Entity Central Index Key | 1,296,774 |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Common Stock, Shares Outstanding | 37,283,929 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | 12 Months Ended | |||
Dec. 31, 2015CNY (¥)¥ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014CNY (¥)¥ / sharesshares | Dec. 31, 2013CNY (¥)¥ / sharesshares | |
Revenues: | ||||
Online game services | ¥ 40,504,363 | $ 6,252,797 | ¥ 55,417,700 | ¥ 95,131,347 |
Other revenues | 6,105,523 | 942,530 | 9,421,865 | 11,495,630 |
Revenue, net, total | 46,609,886 | 7,195,327 | 64,839,565 | 106,626,977 |
Sales taxes | (198,555) | (30,652) | (562,674) | (1,850,908) |
Total net revenues | 46,411,331 | 7,164,675 | 64,276,891 | 104,776,069 |
Cost of revenues | (67,743,995) | (10,457,871) | (85,782,569) | (107,803,360) |
Gross loss | (21,332,664) | (3,293,196) | (21,505,678) | (3,027,291) |
Operating (expenses) income: | ||||
Product development | (135,042,829) | (20,847,020) | (156,253,036) | (213,243,567) |
Sales and marketing | (31,692,522) | (4,892,482) | (51,758,100) | (116,672,411) |
General and administrative | (131,768,503) | (20,341,552) | (111,157,250) | (161,958,423) |
(Provision)/reversal of provision for allowance for long-term receivables and prepayments | (8,439,580) | (1,302,847) | 14,371,918 | (29,741,076) |
Impairment of long-lived assets | (5,725,046) | |||
Gain on disposal of subsidiaries | 3,339,394 | 515,514 | 165,392,382 | |
Total operating expenses | (303,604,040) | (46,868,387) | (139,404,086) | (527,340,523) |
Other operating income (expenses) | (1,563,518) | (241,366) | 75,000 | 120,000 |
Loss from operations | (326,500,222) | (50,402,949) | (160,834,764) | (530,247,814) |
Impairment on investments | (47,970,885) | |||
Interest income | 775,152 | 119,663 | 3,414,559 | 8,376,355 |
Interest expense | (6,397,192) | (987,556) | ||
Fair value change on warrants liability | (7,129,161) | (1,100,553) | ||
Gain on disposal of equity investee and available-for-sale investment | 33,153,452 | |||
Other income (expenses), net | (1,916,755) | (295,896) | (963,125) | 9,301,565 |
Loss before income tax expense and share of loss in equity method investments | (341,168,178) | (52,667,291) | (125,229,878) | (560,540,779) |
Income tax expense | 0 | 0 | 0 | 0 |
Share of loss in equity method investments | (13,013,791) | (2,008,983) | (3,712,530) | (2,375,826) |
Net loss | (354,181,969) | (54,676,274) | (128,942,408) | (562,916,605) |
Net loss attributable to noncontrolling interest | (16,655,902) | (2,571,228) | (21,443,321) | (36,655,033) |
Net loss attributable to redeemable noncontrolling interest | (32,697,713) | (5,047,657) | (20,876,617) | |
Attributable net loss to The9 Limited | (304,828,354) | (47,057,389) | (86,622,470) | (526,261,572) |
Change in redemption value of redeemable noncontrolling interest | 79,805,706 | 12,319,878 | 21,076,744 | |
Net loss attributable to holders of ordinary shares | (384,634,060) | (59,377,267) | (107,699,214) | (526,261,572) |
Other comprehensive income (loss) | ||||
Unrealized loss on available-for-sale investment | (16,600) | |||
Currency translation adjustments | 5,009,430 | 773,323 | (1,203,960) | (688,963) |
Total comprehensive loss | (349,172,539) | (53,902,951) | (130,146,368) | (563,622,168) |
Comprehensive loss attributable to: | ||||
noncontrolling interest | (16,912,488) | (2,610,838) | (22,995,718) | (35,084,526) |
redeemable noncontrolling interest | (32,697,713) | (5,047,657) | (20,876,617) | |
The9 Limited | ¥ (299,562,338) | $ (46,244,456) | ¥ (86,274,033) | ¥ (528,537,642) |
Net loss attributable to holders of ordinary shares per share: | ||||
- Basic and diluted | (per share) | ¥ (16.55) | $ (2.56) | ¥ (4.65) | ¥ (22.71) |
Weighted average number of shares outstanding: | ||||
- Basic and diluted | shares | 23,235,848 | 23,235,848 | 23,164,695 | 23,174,823 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Current assets: | |||
Cash and cash equivalents | ¥ 49,010,541 | $ 7,565,924 | ¥ 181,482,300 |
Accounts receivable, net of allowance for doubtful accounts of RMB480,926 and RMB991,743 as of December 31, 2014 and 2015, respectively | 7,153,663 | 1,104,335 | 11,804,750 |
Advances to suppliers | 898,126 | 138,647 | 733,339 |
Prepayments and other current assets | 9,463,149 | 1,460,858 | 56,573,321 |
Deferred costs | 9,745 | ||
Amounts due from a related party | 10,732,643 | 1,656,835 | 5,250,000 |
Total current assets | 77,258,122 | 11,926,599 | 255,853,455 |
Investments in equity investees | 267,539,694 | 41,301,012 | 39,223,925 |
Property, equipment and software, net | 33,846,518 | 5,225,002 | 36,346,230 |
Goodwill | 10,342,694 | 1,596,637 | 9,746,054 |
Intangible assets, net | 78,876,486 | 12,176,431 | 97,539,341 |
Land use right, net | 68,352,386 | 10,551,790 | 70,273,296 |
Other long-lived assets, net | 1,879,021 | 290,071 | 8,348,409 |
TOTAL ASSETS | 538,094,921 | 83,067,542 | 517,330,710 |
Current liabilities: | |||
Accounts payable (including accounts payable of the consolidated VIEs without recourse to the Group of 15,458,464 and 7,292,389 as of December 31, 2014 and December 31, 2015 respectively) | 41,248,455 | 6,367,665 | 40,213,660 |
Other taxes payable (including other taxes payable of the consolidated VIEs without recourse to the Group of 443,467 and 266,323 as of December 31, 2014 and December 31, 2015 respectively) | 551,445 | 85,128 | 932,431 |
Advances from customers (including advances from customers of the consolidated VIEs without recourse to the Group of 7,192,127 and 8,913,065 as of December 31, 2014 and December 31, 2015 respectively) | 19,605,593 | 3,026,582 | 16,833,165 |
Amounts due to related parties (including amounts due to related parties of the consolidated VIEs without recourse to the Group of 7,203,895 and 11,865,648 as of December 31, 2014 and December 31, 2015 respectively) | 77,730,267 | 11,999,485 | 6,304,956 |
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to the Group of 4,990,959 and 4,732,678 as of December 31, 2014 and December 31, 2015 respectively) | 18,552,217 | 2,863,969 | 20,434,962 |
Refund of game points (including refund of game points of the consolidated VIEs without recourse to the Group of 169,998,682 as of both December 31, 2014 and December 31, 2015) | 169,998,682 | 26,243,274 | 169,998,682 |
Warrants (including warrants of consolidated VIEs without recourse to the Group of nil as of both December 31, 2014 and December 31, 2015) | 64,414,941 | 9,943,953 | |
Accrued expense and other current liabilities (including accrued expense and other current liabilities of the consolidated VIEs without recourse to the Group of 26,346,672 and 19,082,615 as of December 31, 2014 and December 31, 2015 respectively) | 35,864,424 | 5,536,514 | 41,872,851 |
Total current liabilities | 427,966,024 | 66,066,570 | 296,590,707 |
Long-term accounts payable (including long-term accounts payable of the consolidated VIEs without recourse to the Group of nil as of both December 31, 2014 and December 31, 2015) | 18,992,201 | ||
Long-term debt (including long-term debt of consolidated VIEs without recourse to the Group of nil as of both December 31, 2014 and December 31, 2015) | 31,726,575 | 4,897,739 | |
Convertible notes (including convertible notes of consolidated VIEs without recourse to the Group of nil as of both December 31, 2014 and December 31, 2015) | 135,182,536 | 20,868,587 | |
Deferred tax liabilities, non-current (including deferred tax liabilities, non-current of the consolidated VIEs without recourse to the Group of nil as of both December 31, 2014 and December 31, 2015) | 5,690,705 | 878,494 | 5,362,427 |
TOTAL LIABILITIES | ¥ 600,565,840 | $ 92,711,390 | ¥ 320,945,335 |
Commitments and contingencies (Note 33) | |||
Redeemable noncontrolling interest (Note 31) | ¥ 178,605,097 | $ 27,571,876 | ¥ 131,497,104 |
SHAREHOLDERS' EQUITY (DEFICITS): | |||
Ordinary shares (US$0.01 par value; 23,201,601 and 23,701,601 shares issued and outstanding as of December 31, 2014 and December 31, 2015, respectively) | 1,917,620 | 296,030 | 1,885,153 |
Additional paid-in capital | 2,080,041,288 | 321,103,042 | 2,075,900,461 |
Statutory reserves | 28,071,982 | 4,333,567 | 28,071,982 |
Accumulated other comprehensive loss | (3,372,588) | (520,638) | (8,638,604) |
Accumulated deficit | (2,304,020,698) | (355,679,505) | (1,999,192,344) |
The9 Limited shareholders' equity (deficit) | (197,362,396) | (30,467,504) | 98,026,648 |
Noncontrolling interest | (43,713,620) | (6,748,220) | (33,138,377) |
Total shareholders' equity (deficit) | (241,076,016) | (37,215,724) | 64,888,271 |
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY (DEFICIT) | ¥ 538,094,921 | $ 83,067,542 | ¥ 517,330,710 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) | Dec. 31, 2015CNY (¥)shares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014CNY (¥)shares |
Accounts receivable, allowance for doubtful accounts | ¥ 991,743 | ¥ 480,926 | |
Accounts payable, consolidated VIEs | 41,248,455 | $ 6,367,665 | 40,213,660 |
Other taxes payable, consolidated VIEs | 551,445 | 85,128 | 932,431 |
Advances from customers, consolidated VIEs | 19,605,593 | 3,026,582 | 16,833,165 |
Amounts due to related parties, consolidated VIEs | 77,730,267 | 11,999,485 | 6,304,956 |
Deferred revenue, consolidated VIEs | 18,552,217 | 2,863,969 | 20,434,962 |
Refund of game points, consolidated VIEs | 169,998,682 | 26,243,274 | 169,998,682 |
Warrants, consolidated VIEs | 64,414,941 | 9,943,953 | |
Accrued expense and other current liabilities, consolidated VIEs | 35,864,424 | 5,536,514 | 41,872,851 |
Long-term accounts payable, consolidated VIEs | 18,992,201 | ||
Long-term debt, consolidated VIEs | 31,726,575 | 4,897,739 | |
Convertible notes, consolidated VIEs | 135,182,536 | 20,868,587 | |
Deferred tax liabilities, non-current , consolidated VIEs | ¥ 5,690,705 | $ 878,494 | ¥ 5,362,427 |
Ordinary shares, par value | $ / shares | $ 0.01 | ||
Ordinary shares, shares issued | shares | 23,701,601 | 23,701,601 | 23,201,601 |
Ordinary shares, shares outstanding | shares | 23,701,601 | 23,701,601 | 23,201,601 |
Variable Interest Entity, Primary Beneficiary | |||
Accounts payable, consolidated VIEs | ¥ 7,292,389 | ¥ 15,458,464 | |
Other taxes payable, consolidated VIEs | 266,323 | 443,467 | |
Advances from customers, consolidated VIEs | 8,913,065 | 7,192,127 | |
Amounts due to related parties, consolidated VIEs | 11,865,648 | 7,203,895 | |
Deferred revenue, consolidated VIEs | 4,732,678 | 4,990,959 | |
Refund of game points, consolidated VIEs | 169,998,682 | 169,998,682 | |
Warrants, consolidated VIEs | 0 | 0 | |
Accrued expense and other current liabilities, consolidated VIEs | 19,082,615 | 26,346,672 | |
Long-term accounts payable, consolidated VIEs | 0 | 0 | |
Long-term debt, consolidated VIEs | 0 | 0 | |
Convertible notes, consolidated VIEs | 0 | 0 | |
Deferred tax liabilities, non-current , consolidated VIEs | ¥ 0 | ¥ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CNY (¥) | USD ($) | Ordinary sharesCNY (¥)shares | Ordinary sharesUSD ($)shares | Additional paid-in capitalCNY (¥) | Additional paid-in capitalUSD ($) | Statutory reservesCNY (¥) | Statutory reservesUSD ($) | Accumulated other comprehensive lossCNY (¥) | Accumulated other comprehensive lossUSD ($) | Accumulated deficitCNY (¥) | Accumulated deficitUSD ($) | Equity ( deficit ) attributable to The9 limitedCNY (¥) | Equity ( deficit ) attributable to The9 limitedUSD ($) | Noncontrolling interestCNY (¥) | Noncontrolling interestUSD ($) | |
Balance (in shares) at Dec. 31, 2012 | shares | 24,484,634 | 24,484,634 | |||||||||||||||
Balance at Dec. 31, 2012 | ¥ 749,211,544 | ¥ 1,997,390 | ¥ 2,148,416,134 | ¥ 28,071,982 | ¥ (6,710,971) | ¥ (1,386,308,302) | ¥ 785,466,233 | ¥ (36,254,689) | |||||||||
Net loss | (562,916,605) | (526,261,572) | (526,261,572) | (36,655,033) | |||||||||||||
Unrealized loss on available-for-sale investment | (16,600) | (16,600) | (16,600) | ||||||||||||||
Currency translation adjustments | (688,963) | (2,259,470) | (2,259,470) | 1,570,507 | |||||||||||||
Exercise of options (in shares) | shares | 330,533 | 330,533 | |||||||||||||||
Exercise of options | 4,304,447 | ¥ 20,309 | 4,284,138 | 4,304,447 | |||||||||||||
Repurchase and retirement of ordinary shares | (29,030,699) | ¥ (135,915) | (28,894,784) | (29,030,699) | |||||||||||||
Repurchase and retirement of ordinary shares (in shares) | shares | (1,668,308) | (1,668,308) | |||||||||||||||
Share-based compensation | 29,237,416 | 25,417,173 | 25,417,173 | 3,820,243 | |||||||||||||
Change in equity interest attributable to noncontrolling interest | 3,072,133 | 3,072,133 | (3,072,133) | ||||||||||||||
Issuance of shares of Red 5 upon exercise of stock options | 32,603 | 25,992 | 25,992 | 6,611 | |||||||||||||
Balance (in shares) at Dec. 31, 2013 | shares | 23,146,859 | 23,146,859 | |||||||||||||||
Balance at Dec. 31, 2013 | 190,133,143 | ¥ 1,881,784 | 2,152,320,786 | 28,071,982 | (8,987,041) | (1,912,569,874) | 260,717,637 | (70,584,494) | |||||||||
Net loss | (108,065,791) | (86,622,470) | (86,622,470) | (21,443,321) | |||||||||||||
Currency translation adjustments | (1,203,960) | 348,437 | 348,437 | (1,552,397) | |||||||||||||
Exercise of options (in shares) | shares | 54,742 | 54,742 | |||||||||||||||
Exercise of options | 812,635 | ¥ 3,369 | 809,266 | 812,635 | |||||||||||||
Change in redemption value of redeemable noncontrolling interest | (21,076,744) | (21,076,744) | (21,076,744) | ||||||||||||||
Share-based compensation | 3,672,300 | 2,703,685 | 2,703,685 | 968,615 | |||||||||||||
Change in equity interest attributable to noncontrolling interest | (42,692,211) | (42,692,211) | 42,692,211 | ||||||||||||||
Change in equity interest attributable to non-controlling interest due to restructuring of Red 5 Singapore | 15,068,103 | [1] | 15,068,103 | (15,068,103) | |||||||||||||
Conversion of loans due from Red 5 to equity | (31,784,850) | [2] | (31,784,850) | 31,784,850 | |||||||||||||
Issuance of shares of Red 5 upon exercise of stock options | 616,688 | 552,426 | 552,426 | 64,262 | |||||||||||||
Balance (in shares) at Dec. 31, 2014 | shares | 23,201,601 | 23,201,601 | |||||||||||||||
Balance at Dec. 31, 2014 | 64,888,271 | ¥ 1,885,153 | 2,075,900,461 | 28,071,982 | (8,638,604) | (1,999,192,344) | 98,026,648 | (33,138,377) | |||||||||
Net loss | (321,484,256) | (304,828,354) | (304,828,354) | (16,655,902) | |||||||||||||
Currency translation adjustments | 5,009,430 | $ 773,323 | 5,266,016 | 5,266,016 | (256,586) | ||||||||||||
Change in redemption value of redeemable noncontrolling interest | (79,805,706) | (79,805,706) | (79,805,706) | ||||||||||||||
Noncontrolling interest on The9 Education | 4,500,000 | 366,631 | 366,631 | 4,133,369 | |||||||||||||
Issuance of ordinary shares upon vesting of restricted shares (in shares) | shares | 500,000 | 500,000 | |||||||||||||||
Issuance of ordinary shares upon vesting of restricted shares | ¥ 32,467 | (32,467) | |||||||||||||||
Change in noncontrolling interest due to disposal of Jiucheng Advertisement Co., Ltd. | (298,336) | (298,336) | |||||||||||||||
Purchase additional equity interest in a subsidiary | (656,799) | (2,408,096) | (2,408,096) | 1,751,297 | |||||||||||||
Beneficial conversion feature on convertible notes | 52,679,692 | 52,679,692 | 52,679,692 | ||||||||||||||
Share-based compensation | 34,007,629 | 33,184,307 | 33,184,307 | 823,322 | |||||||||||||
Change in equity interest attributable to noncontrolling interest | 80,903 | 80,903 | (80,903) | ||||||||||||||
Issuance of shares of Red 5 upon exercise of stock options | 84,059 | 75,563 | 75,563 | 8,496 | |||||||||||||
Balance (in shares) at Dec. 31, 2015 | shares | 23,701,601 | 23,701,601 | |||||||||||||||
Balance at Dec. 31, 2015 | ¥ (241,076,016) | $ (37,215,724) | ¥ 1,917,620 | $ 296,030 | ¥ 2,080,041,288 | $ 321,103,042 | ¥ 28,071,982 | $ 4,333,567 | ¥ (3,372,588) | $ (520,638) | ¥ (2,304,020,698) | $ (355,679,505) | ¥ (197,362,396) | $ (30,467,504) | ¥ (43,713,620) | $ (6,748,220) | |
[1] | In August 2014, Red 5 issued 27,438,952 Series B redeemable convertible preferred shares of Red 5 to a new investor (see Note 31). As the license to publish Firefall belongs to Red 5 Singapore (Note 11), as a condition for the investment by the new investor, the Group is required to transfer the license to Red 5. As such, in June 2014, the Group transferred its equity interests in Red 5 Singapore, a wholly owned subsidiary of the Group to Red 5, a 79.2% owned subsidiary at a nominal price. At the time of transfer, 20.8% of the accumulated deficit of Red 5 Singapore, amounted to RMB 15,068,103, was attributable to the noncontrolling interest of Red 5 with no consideration, which was recorded as an equity transaction in the Consolidated Statements of Changes in Equity. | ||||||||||||||||
[2] | In August 2014, the Group converted its convertible loan and certain other loans due from Red 5 with a book value of US$50.0 million (RMB307.6 million), into 63,301,276 common shares of Red 5. The equity of Red 5 increased by RMB307.6 million while the impact attributable to noncontrolling interest of Red 5 was RMB31,784,850 as a result of the loan conversion. |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Cash flows from operating activities: | ||||
Net loss | ¥ (354,181,969) | $ (54,676,274) | ¥ (128,942,408) | ¥ (562,916,605) |
Adjustments for: | ||||
Loss on disposal of property, equipment and software | 1,563,518 | 241,366 | 1,346,972 | 13,137 |
Gain on disposal of subsidiaries | (3,339,394) | (515,514) | (165,392,382) | |
Employee compensation relating to the issuance of redeemable noncontrolling interest | 13,034,797 | |||
Share-based compensation expense | 34,007,629 | 5,249,873 | 3,672,300 | 29,237,416 |
Impairment on investments | 47,970,885 | |||
Provision/(reversal of provision) for allowance for long-term receivables and prepayments | 8,439,580 | 1,302,847 | (14,371,918) | 29,741,076 |
Impairment of long-lived assets | 5,725,046 | |||
Allowance for doubtful accounts receivable | 711,908 | 109,900 | 76,246 | 1,224,425 |
Impairment on upfront prepaid royalties and deferred costs | 13,096,101 | |||
Depreciation and amortization of property, equipment and software | 11,563,567 | 1,785,107 | 15,665,588 | 19,035,455 |
Amortization of prepaid land use right | 1,920,910 | 296,537 | 1,920,911 | 1,920,909 |
Amortization of intangible assets | 19,136,842 | 2,954,219 | 28,854,483 | 23,015,765 |
Share of loss in equity method investments | 13,013,791 | 2,008,983 | 3,712,530 | 2,375,826 |
Gain on disposal of investment in equity investee and available-for-sales investment | (33,153,452) | |||
Exchange loss (gain) | 7,313,303 | 1,128,979 | 3,086,602 | (1,507,157) |
Fair value change on warrant liability | 7,129,161 | 1,100,553 | ||
Amortization of discount on convertible note | 2,609,771 | 402,879 | ||
Changes in operating assets and liabilities: | ||||
Change in accounts receivable | 3,630,201 | 560,406 | 7,257,096 | (3,894,295) |
Change in advance to suppliers | (164,787) | (25,439) | (3,277,573) | |
Change in prepayments and other current assets | 11,928,473 | 1,841,439 | (1,767,972) | 23,085,521 |
Change in prepaid royalties | 4,878,579 | (453,785) | ||
Change in deferred costs | 9,745 | 1,504 | 58,472 | (1,867,820) |
Change in other long-lived assets | (1,970,192) | (304,145) | 7,732,074 | 13,115,217 |
Change in accounts payable | 565,870 | 87,355 | (9,104,630) | 8,665,354 |
Change in amounts due to related party | 61,454,444 | 9,486,931 | 1,505,203 | 4,799,753 |
Change in other taxes payable | (405,070) | (62,532) | (306,421) | (2,735,038) |
Change in advances from customers | 2,823,656 | 435,897 | (2,062,884) | 1,017,996 |
Change in deferred revenue | (1,882,745) | (290,646) | 321,706 | (142,057) |
Change in other payables and accruals | (1,465,002) | (226,155) | (7,118,898) | (4,815,188) |
Net cash used in operating activities | (175,586,790) | (27,105,930) | (269,097,406) | (357,569,636) |
Cash flows from investing activities | ||||
Decrease (Increase) in restricted cash | 700,000 | 37,959 | ||
Proceeds from disposal of short term investment | 877,350 | |||
Proceeds from disposal of subsidiaries | 12,178,328 | 1,880,010 | 163,715,759 | |
Proceeds from disposal of cost method investee | 5,469,593 | |||
Proceeds from disposal of equity method investees | 25,040,812 | |||
Proceeds from disposal of available-for-sale investment | 6,274,326 | |||
Purchase of equity method and available-for-sale investments | (223,428,600) | (34,491,432) | (9,158,160) | |
Disbursement for loans receivable from a related party (including the former equity method investee before the disposal of its equity interest held by the Group in 2014) | (9,870,000) | (1,523,665) | (5,250,000) | (4,500,000) |
Collection of loans receivable from related party (including the former equity method investee before the disposal of its equity interest held by the Group in 2014) | 4,500,000 | 694,680 | 5,250,000 | 4,500,000 |
Proceeds from disposal of property, equipment and software | 340,962 | 52,635 | 1,148,851 | 146,500 |
Proceeds from refund of investment | 7,252,493 | |||
Refund of upfront license fees | 2,000,000 | |||
Refund of long-term receivables | 17,927,763 | 2,767,570 | 2,000,000 | |
Purchase of property, equipment and software | (10,644,290) | (1,643,195) | (3,127,931) | (7,057,543) |
Purchase of intangible assets | (500,000) | |||
Net cash provided by (used in) investing activities | (208,995,837) | (32,263,397) | 197,751,817 | (2,931,808) |
Cash flows from financing activities: | ||||
Proceeds from stock option exercises | 812,635 | 4,304,447 | ||
Proceeds from exercises of stock options of a subsidiary | 84,059 | 12,976 | 616,688 | 32,603 |
Issuance of redeemable noncontrolling interest | 118,262,180 | |||
Purchase of noncontrolling interest | (656,799) | (101,392) | ||
Repurchase of ordinary shares | (29,030,699) | |||
Proceeds from bank borrowings | 31,624,560 | 4,881,991 | ||
Proceeds from the issuance of convertible notes | 260,068,680 | 40,147,686 | ||
Payment for the issuance cost related to convertible notes | (20,779,520) | (3,207,805) | ||
Amount due to related parties | 2,597,440 | 400,976 | ||
Loan from a related party | 30,000,000 | 4,631,202 | ||
Repayment a loan from a related party | (30,000,000) | (4,631,202) | ||
Contribution from noncontrolling interest | 4,500,000 | 694,680 | ||
Payment for long-term payable | (19,501,485) | (3,010,511) | (19,469,853) | (13,995,293) |
Net cash provided by (used in) financing activities | 257,936,935 | 39,818,601 | 100,221,650 | (38,688,942) |
Effect of foreign exchange rate changes on cash and cash equivalents | (5,826,067) | (899,389) | (4,380,962) | 1,898,778 |
Net change in cash and cash equivalents | (132,471,759) | (20,450,115) | 24,495,099 | (397,291,608) |
Cash and cash equivalents, beginning of year | 181,482,300 | 28,016,039 | 156,987,201 | 554,278,809 |
Cash and cash equivalents, end of year | 49,010,541 | 7,565,924 | 181,482,300 | 156,987,201 |
Supplemental disclosure of cash flow information: | ||||
Accrued purchases of property, equipment and software | 1,841,541 | 284,285 | 1,747,081 | 2,085,286 |
Accrued purchases of intangible assets | ¥ 20,010,351 | $ 3,089,066 | 36,775,866 | ¥ 56,109,371 |
Receivable related to the disposition of a subsidiary | ¥ 12,750,000 |
ORGANIZATION AND NATURE OF OPER
ORGANIZATION AND NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2015 | |
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”). The Company, its subsidiaries and VIE subsidiaries are collectively referred to as the “Group”. The Group is principally engaged in the development and operation of online games and internet related businesses, including massively multiplayer online games (“MMOGs”), mobile games and TV games. The Group commercial launched Firefall, a proprietary game developed by Red 5 in North America and Europe in 2014. It conducted a limited commercial release in China in November 2015 and expect to have a large-scale commercial launch in China in the second half of 2016. The Group also expect to launch a proprietary mobile game, Song of Knights in 2016. The Company’s principal subsidiaries and VIE subsidiaries are as follows as of December 31, 2015: Name of entity Date of Place of incorporation Legal Ownership Subsidiaries: GameNow.net (Hong Kong) Limited (“ GameNow Hong Kong January-00 Hong Kong 100% The9 Computer Technology Consulting (Shanghai) Co., Ltd. (“ The9 Computer June-00 PRC 100% China The9 Interactive Limited (“ C9I October-03 Hong Kong 100% China The9 Interactive (Shanghai) Limited (“ C9I Shanghai February-05 PRC 100% 9Dream Limited ( “9Dream” July-05 Hong Kong 100% China The9 Interactive (Beijing) Limited (“ C9I Beijing March-07 PRC 100% Jiu Jing Era Information Technology (Beijing) Limited (“ Jiu Jing”) April-07 PRC 100% Jiu Tuo (Shanghai) Information Technology Limited (“Jiu Tuo”) July-07 PRC 100% China Crown Technology Limited (“China Crown Technology”) November-07 Hong Kong 100% Asian Way Development Limited (“Asian Way”) November-07 Hong Kong 100% New Star International Development Limited (“New Star”) January-08 Hong Kong 100% The9 Development Center Limited (“TDC”) June-08 Hong Kong 100% TDC (Asia) Limited (“TDC Asia”) April-09 British Virgin Islands 100% Red 5 Studios, Inc. ( “Red 5” June-05 USA 73% Red 5 Singapore Pte. Ltd. (“ Red 5 Singapore April-10 Singapore 73% The9 Interactive, Inc. (“ The9 Interactive June-10 USA 100% The9 Korea Co., Ltd. (“ The9 Korea February-11 Korea 100% Red 5 Korea LLC. (“ Red 5 Korea November-10 Korea 100% City Channel Ltd. (“City Channel”) June-06 Hong Kong 100% Variable interest entity: Shanghai The9 Information Technology Co., Ltd. (“ Shanghai IT September-00 PRC N/A (Note 4) Shanghai Mengxiang Hulian Digital Technology Co., Ltd. (“ Mengxiang Hulian December-11 PRC 20% (Note 4) Shanghai Fire Wing Information Technology Co., Ltd. (“ Shanghai Fire Wing January-12 PRC N/A Subsidiaries of Shanghai IT: Name of entity Date of Place of incorporation Legal Ownership Held Shanghai Jiushi Interactive Network Technology Co., Ltd. ( “Jiushi” July-11 PRC 80% Shanghai The9 Education Technology Co., Ltd. (“ The9 Education May-12 PRC 70% Beijing Chuan Yun Interactive Network Technology Co., Ltd. (“Chuan Yun”) February-14 PRC 100% Shanghai Jiu Chang Investment Co., Ltd. (“Jiu Chang”) December-14 PRC 100% Hangzhou Firerain network Technology Co., Ltd.(“HZ Firerain”) October- PRC 100% Shanghai Shencai Chengjiu information technology co., Ltd. (“SH Shencai”) May-15 PRC 100% Wuxi Chuang You Technology Co., Ltd. (“Chuang You”) July-15 PRC 100% |
PRINCIPAL ACCOUNTING POLICIES
PRINCIPAL ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
PRINCIPAL ACCOUNTING POLICIES | 2. PRINCIPAL ACCOUNTING POLICIES <1> Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 RMB2,304 million (US$355.7 million) as of December 31, 2015, a net loss of approximately RMB354.2 million (US$54.7 million) for the year ended December 31, 2015. 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. 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 recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty. To meet its capital needs, the Group is considering multiple alternatives, including, but not limited to, additional equity financings, debt financings and other funding transactions 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 and/or cease operations. Sales of Equity Interest of Red 5 In March 2016, the Group entered into a non-binding memorandum of understanding (“MOU”) with L&A International Holding Limited (“L&A”), a Cayman Island Company with shares publicly listed in Hong Kong, and a certain other shareholder of Red 5 Studios, Inc. (“Red 5”). Under the terms of this MOU, the Group will exchange approximately 30.6% of its equity interest in Red 5 for such number of newly issued shares of L&A of equivalent value based on a valuation agreed by all parties. The other participating shareholders of Red 5 will exchange an aggregate of approximately 14.4% equity interest in Red 5 based on the same terms. The total valuation for the 45% of equity interest in Red 5 subject to this exchange is expected to be approximately US$76.5 million, subject to adjustments by no more than 15% based on the results of due diligences conducted by both parties. The completion of the transaction is subject to the parties’ execution of definitive agreements and customary closing conditions to be stipulated therein. Should the transaction is to be completed in accordance with valuation of the MOU, the Group is expected to receive ordinary shares of L&A with a valuation ranging between US$44 million to US$60 million. The Group expect these shares to be publicly traded and without restriction for sale in the public market in Hong Kong. As such, the Group believes the completion of this transaction can provide a source of funding for its operations. Addition external debt financing In March 2016, Bank of Shanghai (BOS) issued a commitment letter whereby BOS agrees to grant the Group a credit facility of RMB50 million (US$7.7 million). The Group can apply to withdraw the funding from BOS should they require liquidity for its operations. As of the report date, the Group had withdrawn RMB4.9 million (US$0.8 million) under this credit facility. Launch of new games The Group plans to have a large-scaled commercial launch of Firefall in China in the second half of 2016. In addition, The Group plans to launch the proprietary mobile game Song of Knights in 2016. We had already licensed Song of Knights to different game operators for distribution in Korea, Vietnam, Taiwan, Malaysia, Hong Kong, Singapore and Macau. Cost Control The Group does not have significant short term loans or liabilities to third parties. Currently the biggest use of cash for the Group is payroll related costs. When Management deems it is necessary, the Group has the ability to control the level of discretionary spending on payroll by reducing the headcount of the Group within a short period of time. <2> Consolidation The consolidated financial statements include the financial statements of the Company, its subsidiary and VIEs in which it has a controlling financial interest. The results of the subsidiary are consolidated from the date on which the Company obtained control and continue 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. However, if the company demonstrates its ability to control the VIEs through its rights to all the residual benefits of the VIEs and its obligation to fund losses of the VIEs then the entity is consolidated. All intercompany balances and transactions between the Company, its subsidiary and VIEs have been eliminated in consolidation. PRC laws and regulations currently prohibit or restrict foreign ownership of internet-related business. In September 2009, the General Administration of Press and Publication (“GAPP”) 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 and the Further Strengthening of the Administration of Pre-approval on Online Games and Approval on Import Online Games, or the GAPP Circular. It is not clear that the regulatory authority of the GAPP applies to the regulation of ownership structures of online game companies based in the PRC. While the GAPP Circular is applicable to the Group and its business in terms of publication and pre-approval of online games, to date, GAPP has not issued any interpretation of Section 4 of the GAPP Circular to specifically invalidate VIE agreements and, to the Group’s knowledge, has not taken any enforcement action under Section 4 of the GAPP Circular against any of the companies that rely on contractual arrangements with VIEs to operate online games in the PRC. Therefore, the Group believes that its ability to direct the activities of VIEs that most significantly impact their economic performance is not affected by the GAPP Circular. <3> Use of estimates The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affected the reported amount of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the 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 and prepayment, revenue recognition, assessment of recoverability of long-lived assets and goodwill impairment, assessment of impairment of other long-lived assets, fair value of redeemable noncontrolling interest, the fair value of the warrants, share-based compensation expense, consolidation of VIEs, valuation allowances for deferred tax assets and contingencies. Such accounting policies are impacted 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 Renminbi (“RMB”). The Group’s functional currency with the exception of its subsidiaries, Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea, is the RMB. The functional currency of Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea is United States Dollar (“US$”, or “US dollars”), United States Dollar, Singapore Dollar, Korean Won and Korean Won, respectively. Assets and liabilities of Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea 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 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 other income (expense) 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 an original maturity date of three months or less. At December 31, 2014 and 2015, cash equivalents were comprised primarily of bank deposits. Included in cash and cash equivalents as of December 31, 2014 and 2015 are amounts denominated in US Dollars totaling US$4.9 million and US$0.1 million, respectively. The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, 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 Company’s aggregate amount of cash and cash equivalents denominated in RMB amounted to RMB150.5 million and RMB48.1 million (US$7.4 million) as of December 31, 2014 and 2015, respectively. <6> Allowance for doubtful accounts Accounts receivable mainly consist of receivables from prepaid card distributors and third party game platforms, and 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 allowance for doubtful accounts of RMB1.2 million, RMB0.08 million and RMB0.7 million (US$0.1 million) in 2013, 2014 and 2015, respectively. <7> Prepaid royalties and deferred costs Royalties paid to the licensors of games are initially recognized as prepaid royalties when paid and subsequently recognized as deferred costs upon the customers’ online registration and activation of their cards or online points. Royalties payable to the licensors or receivable from collection agents upon customers’ charging their accounts are initially recorded as deferred costs upon the customers’ online registration and activation of their cards or online points. Deferred costs are then ultimately recognized as cost of services in the consolidated statements of operations and comprehensive loss based upon the actual consumption of game premium features or usage of the game playing time by the customers or when the likelihood that the Group would provide further services to those customers becomes remote. <8> 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 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 loans to certain equity investees in order to provide to them financial support. If the Group’s share of losses 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 to 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, and 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. <9> 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 them 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. As of December 31, 2014 and 2015, the Group did not hold trading securities or held-to-maturity securities. 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. <10> Property, equipment and software 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 the shorter of respective term of the leases or the estimated useful lives of the leasehold improvements 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 <11> 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 acquisition. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. In September 2011, the Financial Accounting Standards Board (“FASB”) issued an authoritative pronouncement related to testing goodwill for impairment. The guidance permits us to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The Company adopted this pronouncement since 2012. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Group completes a two-step goodwill impairment test in December of each year. The first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. <12> Intangible assets 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 the monetization of the related online game. 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. Subsequently, they are recorded as acquired game development cost upon completion of the research and development efforts and are amortized on a straight-line basis over the useful economic life of the relevant online game. Amortization of acquired game development cost commences upon the monetization of the related online game <13> Land use right Land use right represents operating lease prepayments to the PRC’s land bureau for usage of the parcel of land where the Group’s office building is located. Amortization is calculated using the straight-line method over the estimated land use right period of 44 years. <14> Impairment of long-lived assets and allowance on long-term receivables 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. The Group determines an allowance on doubtful long-term receivables when facts and circumstances indicate that the long-term receivable is unlikely to be collected. When the collectability of the long-term receivable became likely subsequently, the Group reverses the allowance <15>Revenue recognition 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 platform and overseas licensing of the online game to other operators. The Group recognizes revenues when persuasive evidence of an arrangement exists, services are delivered or performed, our price is fixed or determinable and collectability is reasonably assured. Online game services to players on the Group’s game server The Group sells its prepaid online points for its online game products directly to players via certain online payment platforms. The Group adopts virtual item / service consumption model for the online game services. Players can access certain games free of charge, but may purchase game points to acquire in-game premium features. The distribution of points to players is typically made by sales of prepaid game cards and prepaid online points. Fees for prepaid game cards and prepaid online points are deferred when received. Revenue is recognized over the estimated life of the premium features or as the premium features are consumed. For in-game premium features that are immediately consumed, revenue is recognized upon consumption. For premium features with a stated expiration time, which range from one to 180 days, revenue is recognized ratably over the period starting from when the feature is first used to the expiration time. For perpetual features with no predetermined expiration, revenue is recognized ratably over the estimated average lives of the perpetual features, which are typically less than one year. When estimating the average lives of the in-game perpetual features, the Group considers the average period that players typically play the game, other player behavior patterns, and factors including the acceptance and popularity of expansion packs, promotional events launched, and market conditions. Future usage patterns of players may differ from the historical usage patterns on which the virtual item / service consumption revenue recognition model is based. The Group continually monitors the operational statistics and usage patterns. Online game operation services over third party platform Certain social games, TV games, certain web games and certain MMOGS, have adopted the virtual item / service consumption model, and are launched on the third party game platforms and telecom carriers. Revenue from social and web games operated through third party game platforms are recognized upon consumption of the in-game premium features with the amount net of remittance to the third party game platforms as the Group does not set the pricing of the in-game currency of the third party game platforms. Revenue from TV games operated through telecom carriers and certain MMOGS operated on the third party game platforms are recognized upon consumption of the in-game premium features based on the gross amount paid, as the Group is the primary obligor of the games operation. The remittance to the telecom carrier and third party game platforms is recognized as costs of revenue when incurred. Licensing revenue The Group licenses certain proprietary online games to other game operators and receives license fees and royalty income in connection with their operation of the games. License fee revenue is recognized over the license period upon the commercialization of the game in the licensees’ market. Royalty income is recognized when earned, provided that collectability is reasonably assured. Other revenues Other revenues mainly include those generated from training. Training revenue include revenues generated from providing technical training to college students on mobile application programming. These revenues are recognized when delivery of the service has occurred or when services have been rendered and the collection of the related fees is reasonably assured. <16>Advances from customers and deferred revenue Online points that have been sold but not activated are recognized as advances from customers. Online points that have been activated but for which online game services will be rendered in the future are recognized as deferred revenue. Deferred revenue is recognized as income based upon the actual consumption of in-game premium features by players or when the likelihood that the Group would provide further online game service to those customers is remote. The Group licenses proprietary games to operators in other countries and receives license fees and royalty income. License fee received in advance of the monetization of the game is recorded in advances from operators. <17>Convertible note 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 The Group has early adopted ASU 2015-3, simplifying the presentation of debt issuance costs to present the occurred debt issuance costs as a direct deduction from the convertible note rather than as an assets. 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 pricing 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 historic 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. <18>Cost of revenue Cost of revenue consists primarily of online game royalties, payroll, sharing to third party game platform, telecom carries and other suppliers, depreciation, maintenance and rental of Internet data center sites, depreciation and amortization of computer equipment and software, production costs for prepaid game cards, intangible assets amortization and other overhead expenses directly attributable to the services provided. <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. To date, the Group has essentially completed its software development concurrently with the establishment of technological feasibility, and, accordingly, no costs have been 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 expenses, payroll, depreciation charge and other overhead expenses 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. <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 RMB52.8 million, RMB22.5 million and RMB3.2 million (US$0.5 million) for the years ended December 31, 2013, 2014 and 2015, respectively, were expensed as incurred. <21>Government grants Unrestricted government subsidies from local government agencies allowing the Group full discretion to utilize the funds were RMB 1.0 million, RMB1.2 million and RMB0.3 million (US$0.04 million) for the years ended December 31, 2013, 2014 and 2015, respectively, which were recorded in other income (expense) in the consolidated statements of operations and comprehensive loss. <22>Share-based compensation The Group has granted share-based compensation awards to certain employees under several equity plans. The Group measures the cost of employee services received in exchange for an equity award, based on the fair value of the award at the date of grant. Share-based compensation expense is recognized net of estimated forfeitures, determined based on historical experience. The Group recognizes share-based compensation expense over the requisite service period. For performance and market-based awards which also require a service period, the Group uses graded vesting over the longer of the derived service period or when the performance condition is considered probable. The Company determines the grant date fair value of stock options using a Black-Scholes-Merton option pricing model (the “Black-Scholes Model”) with assumptions made regarding expected term, volatility, risk-free interest rate, and dividend yield. The fair value of the stock options containing a market condition are estimated using a Monte Carlo simulation model. For options awarded by private subsidiaries of the Group, the fair value of shares is estimated based on the equity value of the subsidiary. The Group evaluates the fair value of the subsidiary by making judgments and assumptions about the projected financial and operating results of the subsidiary. Once the equity v |
CONVENIENCE TRANSLATION
CONVENIENCE TRANSLATION | 12 Months Ended |
Dec. 31, 2015 | |
CONVENIENCE TRANSLATION | 3. CONVENIENCE TRANSLATION The Group, with the exception of its subsidiary, Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea, maintains its accounting records and prepares its financial statements in RMB. The United States dollar (“US dollar” or “US$”) amounts disclosed in the accompanying financial statements are presented solely for the convenience of the readers at the rate of US$1.00 = RMB6.4778, representing the noon buying rate in the City of New York for cable transfers of RMB, as certified for customs purposes by the Federal Reserve Bank of New York, on December 31, 2015. 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, 2015 | |
VARIABLE INTEREST ENTITIES | 4. VARIABLE INTEREST ENTITIES The Group is the primary beneficiary of certain VIEs, including i) Shanghai IT which was designed by the Group to comply with PRC regulations that prohibit direct foreign ownership of businesses that operate online games in the PRC and ii) Mengxiang Hulian, which is a start-up research and development company (“R&D VIE”) developing games and software funded by the Group. Due to the weaker than expected performance of the game developed by Mengxiang Hulian, the Group has stopped funding Mengxiang Hulian and it had become an inactive company as of December 31, 2014. Shanghai Huopu Cloud Computing Terminal Technology Co., Ltd. (“Huopu Cloud”) was considered as an VIE of the Group since its establishment in 2010. In 2014, the Group sold Houpu Cloud to a third party (Note 32). Shanghai IT Shanghai IT 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. There are a few key contractual arrangements between the Group’s subsidiary, The9 Computer (the “WOFE”) and respective VIEs that provide the Group with a controlling financial interest over the VIEs and upon which the Group concluded that it is required to consolidate these entities pursuant to the guidance in ASC 810. A summary of the contractual agreements referenced above 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. The loans have an unspecified term and will remain outstanding for the duration of WOFE 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 shareholder has 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. However, the determination of service fees 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 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 The9 Computer, 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, it has been deemed to be the primary beneficiary of the VIEs and has consolidated the respective 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 Company. As a result, the Company may have to initiate legal proceedings, which involve significant uncertainty. Such disputes and proceedings may significantly disrupt the Company’s business operations and adversely affect the Company’s ability to control the VIEs. In light of the fact that most of the shareholders of the VIEs are directors, officers, shareholders or employees of the Company or the PRC subsidiaries, 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 for operating online games in the PRC. The Company is incorporated in the Cayman Islands and is considered a foreign entity under the PRC laws. Due to restrictions on foreign ownership of the provision of online games, the Company is dependent on the licenses held by Shanghai IT to conduct its online games business through its subsidiary in the PRC. Shanghai IT holds the necessary licenses and approvals that are essential for the online game business. The9 Computer has entered into contractual arrangements with Shanghai IT for use of its relevant licenses and websites. Shanghai IT is principally owned by certain shareholder and employee of the Company. Pursuant to certain other agreements and undertakings, the Company in substance controls Shanghai IT. In the opinion of the Company’s directors, the Company’s current ownership structures and its contractual arrangements with Shanghai IT, and its equity owners as well as its operations, are in compliance with all existing PRC laws and regulations. However, there may be changes and other developments in the PRC laws and regulations or their interpretation. Specifically following the recent promulgation of the GAPP Circular, it is unclear whether the authorities will deem our VIE structure and contractual arrangements with Shanghai IT as an “indirect or disguised” way by foreign investors to gain control over or participate in domestic online game operators, and challenge our VIE structure accordingly. If the Company, its PRC subsidiaries and VIEs are found to be in violation of any existing or future PRC laws or regulations, or fail 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 Company to undergo a costly and disruptive restructuring such as forcing the Company to transfer its equity interest in the PRC subsidiaries to a domestic entity or invalidating the VIE agreements. If the PRC government authorities impose penalties which cause the Company to lose its rights to direct the activities of and receive economic benefits from the VIEs, the Company may lose the ability to consolidate and reflect in its financial statements the financial condition, and results of operation of the VIEs. The Group has concluded that the aforementioned contractual arrangements are legally enforceable and provide the Group with full control of the VIEs. However, 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 our offshore parent company to the VIEs must be approved by the relevant PRC government body and such approval may be difficult or impossible to obtain. Because the VIEs are domestic PRC enterprises owned by nominee shareholders, the Group is not likely to finance their activities by means of direct capital contributions either. If the Company, its PRC subsidiaries and VIEs are found to be in violation of any existing or future PRC laws or regulations, or fail 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 Company to undergo a costly and disruptive restructuring such as forcing the Company to transfer its equity interest in the PRC subsidiaries to a domestic entity or invalidating the VIE agreements. If the PRC government authorities impose penalties which cause the Company to lose its rights to direct the activities of and receive economic benefits from the VIEs, the Company may lose the ability to consolidate and reflect in its financial statements the results of operation of the VIEs. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, the WOFEs or VIEs. R&D VIE Mengxiang Hulian is a primarily start-up research and development company developing games and software funded by the Group starting from 2011. The Group had arrangements with Mengxiang Hulian (the “R&D” company) pursuant to which the Group provided substantial financial support and obtained equity interests in these entities. The Group has acquired or has an option to acquire the exclusive licenses in Mainland China or worldwide for the games and software under development by these entities. As of December 31, 2014 and 2015, the Group held equity interest of 20% of Mengxiang Hulian. Under the above arrangements with the R&D company, the Group has the power to make decisions that most significantly affect the entities’ operations and effectively assumed a majority of economic risks associated with these entities, and has the obligation to absorb losses and the right to receive returns that are significant to these entities. As such, prior to the reconsideration events discussed below, it was determined that the Group is the primary beneficiary of these entities and has included them in its consolidated financial statements since their respective dates of incorporation. 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, December 31, December 31, RMB RMB US$ (Note 3) Total assets 130,055,790 141,614,244 21,861,472 Total liabilities 231,634,266 222,151,400 34,294,267 December 31, December 31, December 31, December 31, RMB RMB RMB US$ (Note 3) Net Revenue 86,574,297 42,697,861 34,390,944 5,309,047 Net profit (loss) (201,412,786 ) 101,628,848 (95,285,846 ) (14,709,600 ) The VIEs contributed an aggregate of 82.6%, 66.4% and 74.1% of the consolidated net revenues for the years ended December 31, 2013, 2014 and 2015, respectively. The Company’s operations not conducted through contractual arrangements with the VIE primarily consist of its product development on Firefall in the United States. As of the fiscal years ended December 31, 2014 and 2015, the VIEs accounted for an aggregate of 25.1% and 26.3%, respectively, of the consolidated total assets, and 72.2% and 37.0%, respectively, of the consolidated total liabilities. There are no consolidated VIE’s assets that are 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 from transferring a portion of its net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends. Please refer to Note 29 for disclosure of restricted net assets. |
PREPAYMENTS AND OTHER CURRENT A
PREPAYMENTS AND OTHER CURRENT ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
PREPAYMENTS AND OTHER CURRENT ASSETS | 5 . PREPAYMENTS AND OTHER CURRENT ASSETS Prepayments and other current assets are as follows: December 31, December 31, December 31, RMB RMB US$ (Note 3) Receivable from a former equity method investee 4,500,000 — — Consideration receivable for a disposal of a subsidiary 12,750,575 — — Receivable from a supplier (Note 14) 17,927,763 — — Prepayments and deposits 10,929,101 3,220,205 497,114 Employee advances 1,963,858 2,717,027 419,437 Others 8,502,024 3,525,917 544,307 56,573,321 9,463,149 1,460,858 |
PREPAID ROYALTIES AND DEFERRED
PREPAID ROYALTIES AND DEFERRED COSTS | 12 Months Ended |
Dec. 31, 2015 | |
PREPAID ROYALTIES AND DEFERRED COSTS | 6. PREPAID ROYALTIES AND DEFERRED COSTS Due to a weaker than expected operating performance of certain games, and the expectation that the net cash flow of these games will not be sufficient to recover the carrying amount of the prepaid royalties, the Group recognized an impairment loss for prepaid royalties associated with such games of RMB10.4 million, nil and nil for the years ended December 31, 2013, 2014, and 2015, respectively, and an impairment loss for deferred cost of RMB2.7 million, nil and nil for the years ended December 31, 2013, 2014, and 2015, respectively. The impairment charges of prepaid royalties and deferred cost were included in cost of services in the consolidated statements of operations and comprehensive loss. |
INVESTMENTS IN EQUITY INVESTEES
INVESTMENTS IN EQUITY INVESTEES | 12 Months Ended |
Dec. 31, 2015 | |
INVESTMENTS IN EQUITY INVESTEES | 7. INVESTMENTS IN EQUITY INVESTEES The Group’s investments in equity investees comprise the following: December 31, December 31, December 31, RMB RMB US$ (Note 3) Investments accounted for under equity method: ZTE9 network technology Co., Ltd., Wuxi (“ZTE9”) 67,020 — — System Link Corporation Limited (“System Link”)<1> — 215,631,351 33,287,744 Shanghai Jiucheng Advertisement Co., Ltd. (“Jiucheng Advertisement”) <2> — 12,751,438 1,968,483 Investments accounted for under cost method: Shanghai Institute of Visual Art of Fudan University (“SIVA”) 10,000,000 10,000,000 1,543,734 G10 Entertainment Corporation (“G10”) Ltd. 24,892,921 24,892,921 3,842,805 CrowdStar Inc. (“Crowdstar”) 1,627,099 1,627,099 251,181 Tandem Fund II, L.P. (“Tandem Fund”) 2,636,885 2,636,885 407,065 Total 39,223,925 267,539,694 41,301,012 <1> System Link In August 2014, the Group formed a joint venture, System Link, with Qihoo 360 Technology Co., Ltd., or Qihoo 360. Pursuant to the joint venture agreement, Qihoo 360 and the Group will each own 50% equity interest in the joint venture and share profits based on the equity interest each party holds in the joint venture. In August 2014, Red 5 Singapore entered into a license agreement with System Link for publishing and operating Firefall under a five-year term in mainland China. Under this license agreement, System Link is expected to pay Red 5 Singapore no less than US$160 million (inclusive of license fee and royalties) during the term of the agreement. The Group accounts for its investment in System Link as an equity method investment. The total capital contribution from the Group is RMB 223.4 million (US$35 million) as of December 31, 2015. The Group records a loss of RMB 11.1 million (US$1.7 million) in share of loss in equity method and a gain of RMB3.3 million (US$0.5 million) in other comprehensive income for the year ended December 31, 2015. The Group has filed System Link Corporation Limited’s consolidated financial statement as indicated in our annual report on Form 20-F for the year ended December 31, 2015, as the 20% significant subsidiary test was met for the current year in accordance with Rule 3-09 of SEC Regulation S-X. <2> Jiucheng Advertisement In June 2015, the Group granted 33.3% equity interest of Jiucheng Advertisement to two of its employees for nil consideration. The Group recorded share-based compensation of RMB 2.7 million as a result of this transaction as the equity interest was considered a share-based award for this service. In October, 2015, the Group entered into an agreement 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 the completion of the exchange, the Group’s equity interest in Jincheng Advertisement was diluted to 46.7%. The Group accounted for the exchange as a disposal of subsidiary with a gain of RMB 3.3 million (US$0.5 million) recognized upon disposal and an acquisition of an equity method investment in Jiucheng Advertisement at fair value. In November 2015, The Group’s equity interest in Jiucheng Advertisement was further diluted to 42% as a result of capital injection by other shareholders. In October 2014, the Group disposed to a third party, 100% of its equity interest in an equity method investee for a cash consideration of RMB14 million and further recovered loan receivables of RMB9.8 million to the same equity method investee. The Company had previously fully impaired the investment in 2013 as well as provided a full allowance for the loan receivables due to the tight liquidity position combined with less than satisfactory performance of the investee. The Group recorded a gain of RMB23.8 as a result of this disposal. In 2014, the Group disposed 75% of its interest in Tandem Fund for cash consideration of RMB11.0 million, a gain of RMB3.1 million was recognized upon disposal. The Group recorded impairment charges relating to its investment in equity investees of RMB41.7 million, nil and nil for the years ended December 31, 2013, 2014 and 2015, respectively. |
AVAILABLE-FOR-SALE INVESTMENTS
AVAILABLE-FOR-SALE INVESTMENTS | 12 Months Ended |
Dec. 31, 2015 | |
AVAILABLE-FOR-SALE INVESTMENTS | 8. AVAILABLE-FOR-SALE INVESTMENTS Investment in Youjia Group Limited (“Youjia”) In November 2011, the Group acquired 925,926 redeemable and convertible preferred shares of Youjia, a mobile social application developer based in the PRC, for a consideration of US$1.0 million. The Group’s investment represented 6.67% of Youjia’s equity interest on an as converted basis as of December 31, 2011. The Group recorded the investment in Youjia as an available-for-sale investment as the redeemable convertible preference share is in substance a debt security. During 2013, based on an evaluation of the financial results and condition of Youjia, the Group provided full impairment provision of Youjia. In April 2014, the Group disposed all of its shares in Youjia to a third party for a cash consideration of US$1.0 million (RMB6.3 million), a gain of RMB6.3 million (US$1.0 million) for the year ended December 31, 2014 is recognized upon disposal. |
PROPERTY, EQUIPMENT AND SOFTWAR
PROPERTY, EQUIPMENT AND SOFTWARE, NET | 12 Months Ended |
Dec. 31, 2015 | |
PROPERTY, EQUIPMENT AND SOFTWARE, NET | 9. PROPERTY, EQUIPMENT AND SOFTWARE, NET Property, equipment and software and related accumulated depreciation and amortization are as follows: December 31, December 31, December 31, RMB RMB US$ (Note 3) Office buildings 67,881,751 69,276,652 10,694,472 Computer and equipment 123,158,909 118,052,297 18,224,134 Leasehold improvements 12,571,448 11,008,880 1,699,478 Office furniture and fixtures 10,395,482 11,355,064 1,752,920 Motor vehicles 11,092,117 10,889,632 1,681,070 Software 18,175,695 18,424,967 2,844,325 Less: accumulated depreciation and amortization (206,929,172 ) (205,160,974 ) (31,671,397 ) Net book value 36,346,230 33,846,518 5,225,002 Depreciation and amortization charges for the years ended December 31, 2013, 2014 and 2015 amounted to RMB19.0 million, RMB15.7 million and RMB11.6 million (US$1.8 million) respectively. The office building was mortgaged for the convertible notes and bank borrowing in year 2015 (Note 20 and 21). Due to weaker than expected operating performance of certain games, the Group recognized impairment provisions on computer equipment of RMB1.9 million, nil and nil in 2013, 2014, and 2015 respectively. |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2015 | |
GOODWILL | 10. GOODWILL The changes in the carrying amount of goodwill for the years ended December 31, 2013, 2014 and 2015 are as follows: Gross Accumulated Net Amount RMB RMB RMB Balance at January 1, 2013 10,011,247 — 10,011,247 Translation difference (300,393 ) — (300,393 ) Balance at December 31, 2013 9,710,854 — 9,710,854 Translation difference 35,200 — 35,200 Balance at December 31, 2014 9,746,054 — 9,746,054 Translation difference 596,640 — 596,640 Balance at December 31, 2015 10,342,694 — 10,342,694 Balance at December 31, 2015 US$ (Note 3) 1,596,637 — 1,596,637 In 2010, the Group recognized goodwill of RMB10.9 million in connection with the acquisition of Red 5. The Group measures the consideration it transfers at fair value, which may be calculated as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred to former owners of the acquiree, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. Contingent consideration is measured at fair value and recorded as a liability. The excess of (i) the total cost of acquisition, fair value of the noncontrolling interests and acquisition-date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference would be recognized directly in the consolidated statement of operations and comprehensive loss. The Group performed annual impairment test on goodwill as of December 31, 2013, 2014 and 2015, respectively, as the fair value was greater than carrying value of the reporting unit, no impairment was recorded. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
INTANGIBLE ASSETS | 11. INTANGIBLE ASSETS Gross carrying amount, accumulated amortization and net book value of the intangible assets as of December 31, 2014 and 2015 are as follows: December 31, December 31, December 31, RMB RMB US$ (Note 3) Acquired game licenses 146,925,649 146,925,649 22,681,412 Acquired game development cost 12,285,000 12,285,000 1,896,477 Less: Accumulated amortization (55,738,585 ) (74,875,427 ) (11,558,774 ) Impairment provision (4,394,381 ) (4,394,381 ) (678,376 ) Translation difference (1,538,342 ) (1,064,355 ) (164,308 ) Net book value of intangible assets subject to amortization 97,539,341 78,876,486 12,176,431 In 2014 and 2015, RMB1.8 million and nil acquired game licenses were expired, respectively, and were written off from the cost basis and accumulated amortization. Since its acquisition by the Group on April 6, 2010, Red 5 has been substantially devoting its operating activities to fulfill its obligations under a game development and license agreement executed in 2006 and amended in 2009 between Red 5 and a third party game publisher to develop Firefall in exchange for cash consideration from the third party publisher. Prior to the acquisition, Red 5 received a total of US$24.7 million cash consideration as an advance recoupable against future royalties payable to Red 5. Red 5 retained the ownership of the game and granted the third party publisher an exclusive, non-transferable term license to market and distributes the game and host the game to customers in specified regions after Red 5 completes the game development. Red 5 continues to perform its obligations under the agreement post-acquisition, including the provision of post-contract customer support for the hosted version of the game to the third party publisher during the term of the license. The initial term of the agreement is from February 2006 through the fifth anniversary of the first commercial release of the initial game. Thereafter, the agreement can be renewed in two-year terms. In September 2011, Red5 Korea, Red 5 Singapore and Red5 entered into a series of agreements with the third party game publisher. Pursuant to the agreement, Red 5 Singapore were substituted in full for the third party publisher as a party under the game development and license agreement between Red 5 and the third party game publisher, including the exclusive , non-transferable term license to market and distribute the game and host the game to customers in specified regions. Under the agreements, the Group paid US$10.0 million and guaranteed an additional payment of US$12.7 million to the third party game publisher due within four years. 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 million and the guaranteed amount of US$12.7 million, was recorded as acquired game license and the contingent payments will be recorded as cost of services when incurred. The amount payable which is expected to due on or before December 31, 2016 amounted to US$ 3.1 million (RMB20.0 million) was recorded in accounts payable under current liabilities. The Group pledged the intellectual property in relation to the game to secure the guaranteed amount. Following this license acquisition, the previously recognized backlog of US$ 0.4 million in relation to the game development and license agreement acquired in Red 5 acquisition was reclassified to acquire game licenses as it was considered to be additional cost to acquire the game license paid in prior year. Amortization expense related to intangible assets was RMB23.0 million, RMB28.9 million and RMB19.1 million (US$3.0 million) for the years ended December 31, 2013, 2014 and 2015, respectively. As of December 31, 2015, the estimated aggregate amortization expense from existing intangible assets for each of the five succeeding fiscal years is as follows: RMB US$ (Note 3) 2016 21,964,146 3,390,680 2017 21,964,146 3,390,680 2018 21,964,146 3,390,680 2019 12,984,048 2,004,391 2020 — — Total 78,876,486 12,176,431 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 taking 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, impairment provisions on upfront licensing fees of RMB3.8 million, nil and nil were recognized in 2013, 2014 and 2015, respectively. |
LAND USE RIGHT, NET
LAND USE RIGHT, NET | 12 Months Ended |
Dec. 31, 2015 | |
LAND USE RIGHT, NET | 12. LAND USE RIGHT, NET Gross carrying amount, accumulated amortization and net book value of land use right are as follows: December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB US$ (Note 3) Land use right 85,160,348 85,160,348 13,146,492 Less: accumulated amortization (14,887,052 ) (16,807,962 ) (2,594,702 ) Net book value 70,273,296 68,352,386 10,551,790 Amortization charge for the years ended December 31, 2013, 2014 and 2015 amounted to RMB1.9 million, RMB1.9 million and RMB1.9 million (US$0.3 million), respectively. |
OTHER LONG-LIVED ASSETS
OTHER LONG-LIVED ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
OTHER LONG-LIVED ASSETS | 13. OTHER LONG-LIVED ASSETS Other long-lived assets are as follows: December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB US$ (Note 3) Receivable from WoW game points refund agent (Note 19) 7,894,836 — — Others 453,573 1,879,021 290,071 Total 8,348,409 1,879,021 290,071 |
ALLOWANCE (REVERSAL OF ALLOWANC
ALLOWANCE (REVERSAL OF ALLOWANCE) OF LONG-TERM RECEIVABLE | 12 Months Ended |
Dec. 31, 2015 | |
ALLOWANCE (REVERSAL OF ALLOWANCE) OF LONG-TERM RECEIVABLE | 14. ALLOWANCE (REVERSAL OF ALLOWANCE) OF LONG-TERM RECEIVABLE December 31, 2013 December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB RMB US$ (Note 3) Allowance (reversal of allowance) of receivables 17,927,763 (17,927,763 ) — — Total 17,927,763 (17,927,763 ) — — The Group prepaid RMB20.0 million to a supplier for purchasing computers and equipment in 2011. Due to game’s performance being much lower than expectations, the Group cancelled the purchase plan and requested for a refund on the prepayment from the supplier in 2013. However, the supplier did not have enough funds to return all prepayment which was deemed a strong indicator that recovery of the refund is doubtful. In February 2014, the Group agreed a repayment schedule with the supplier, under which the prepayment is required to be refunded in four installments during the next three years, and the first installment, which was RMB2.0 million, had been received on March, 2014. Due to the significant doubts as to the collectability of the remaining amount, management provided an allowance for the remaining prepayment receivable of RMB17.9 million as of December 31, 2013. The Company continued to negotiate with the supplier for the settlement of remaining receivables. In December 2014, the supplier promised to repay all the remaining RMB17.9 million before March 31, 2015. The Group revaluated the collectability of the receivables and determined the payments can be collected and therefore reversed the allowance of RMB17.9 million as of December 31, 2014. In March, 2015, the Group received payment of RMB17.9 million from the supplier. |
IMPAIRMENT ON PREPAYMENT FOR EQ
IMPAIRMENT ON PREPAYMENT FOR EQUIPMENT AND OTHER ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
IMPAIRMENT ON PREPAYMENT FOR EQUIPMENT AND OTHER ASSETS | 15. IMPAIRMENT ON PREPAYMENT FOR EQUIPMENT AND OTHER ASSETS December 31, December 31, December 31, December 31, RMB RMB RMB US$ (Note 3) Impairment on prepayment for equipment and other assets 11,813,313 3,555,845 — — Total 11,813,313 3,555,845 — — The Group prepaid RMB 11.8 million to a supplier for certain asset which was planned to be used in game promotion activity. In 2013, the management decided to change the game promotion plans and as a result the asset was no longer required under the new promotion plan and as such Group decided not to take title to the asset from the supplier and wrote off the non-refundable prepayment. For the year ended December 31, 2014, the Group recorded RMB 3.6 million impairment on the prepayment to certain suppliers with which the Group terminated the transaction and wrote off the repayment balance considering its low collectability. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2015 | |
FAIR VALUE MEASUREMENTS | 16. FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The fair values of the common stock warrants were measured using the Black-Scholes option-pricing model (Note 22). 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). The Group measured the fair value of its investment in Youjia using the income approach based on a weighted average of multiple discounted cash flow scenarios, which required the use of unobservable inputs (Level 3) including assumptions of projected revenue, expenses, capital spending, and other costs, as well as a discount rate calculated based on the risk profile of the online game industry and company-specific risk adjustments. The available-for-sale investment in Youjia was fully impaired in 2013 and then sold in 2014. The following table presents the changes in the available-for-sale investment that were measured at fair value on a recurring basis using significant Level 3 inputs for the year ended December 31, 2013, 2014 and 2015. The Group did not have other assets or liabilities measured at fair value on a recurring basis using significant Level 3 inputs during the years ended December 31, 2013, 2014 and 2015. Fair Value Measurements Using Significant Unobservable Inputs (Level 3) 2013 2014 2015 RMB RMB RMB Balance at the beginning of the year 6,285,500 — — Unrealized loss recognized in other comprehensive income (16,600 ) — — Impairment losses included in earnings (6,268,900 ) — — Balance at the end of the year — — — 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 the year 2015 (Note 22). 2015 2015 RMB US$ (Note 3) Balance at issuance date 57,285,780 8,843,400 Unrealized loss recognized in other comprehensive income 7,129,161 1,100,553 Balance at the end of the year 64,414,941 9,943,953 Assets and Liabilities Measured at Fair Value on a Non-recurring Basis The following table displays assets and liabilities measured at fair value on a non-recurring basis for the years ended December 31, 2013, 2014 and 2015, respectively. Fair Value Measurements at Reporting Date Using Year Ended Quoted Prices Significant (Level 2) Significant (Level 3) Total Losses (gains) RMB RMB RMB RMB Receivable from WoW game points refund agent (Note 19) — — — — 8,439,580 Total — — — — 8,439,580 Fair Value Measurements at Reporting Date Using Year Ended Quoted Prices Significant (Level 2) Significant (Level 3) Total Losses (gains) RMB RMB RMB RMB Prepayment for other assets (Note 15) — — — — 3,555,845 Total — — — — 3,555,845 Fair Value Measurements at Reporting Date Using Year Ended Quoted Prices Significant (Level 2) Significant (Level 3) Total RMB RMB RMB RMB Prepayment for equipment (Note 15) 11,813,313 Long-term receivables (Note 14) — — — — 17,927,763 Total — — — — 29,741,076 |
TAXATION
TAXATION | 12 Months Ended |
Dec. 31, 2015 | |
TAXATION | 17. TAXATION Cayman Islands and British Virgin Islands Under the current tax laws of the Cayman Islands and British Virgin Islands, the Company and its subsidiaries are not subject to tax on their income or capital gains. In addition, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed. Hong Kong The Group’s subsidiaries in Hong Kong did not have assessable profits that were derived in Hong Kong during the years ended December 31, 2013, 2014 and 2015. Therefore, no Hong Kong profit tax has been provided for in the years presented. Singapore The Group’s subsidiaries in Singapore did not have assessable profits that were derived in Singapore during the years ended December 31, 2013, 2014 and 2015. Therefore, no Singapore income tax has been provided for in the years presented. The PRC The Group’s subsidiaries and VIE subsidiaries 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%. However, the subsidiaries that are located in the Pudong New District of Shanghai enjoy five-year transitional EIT rates, which refer to the phase-in rates of 18%, 20%, 22%, 24% and 25% for the 5 years period from 2008 to 2012 and the subsidiaries that hold a “High and New Technology Enterprise” (“HNTE”) qualification are subject to a 15% preferential EIT rate. In November 2008, Shanghai IT received approval from certain government authorities to be qualified as a HNTE. This approval entitles Shanghai IT to enjoy a 15% preferential EIT rate during the period from 2008 to 2010. 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 2014, Shanghai IT renewed its HNTE qualification and obtained approval in 2015, which entitles Shanghai IT to enjoy a preferential EIT rate of 15% during the period from 2014 to 2016. Total tax savings of Shanghai IT were nil for the years ended December 31, 2013, 2014 and 2015, respectively. United States The Group’s subsidiaries in the U.S. are registered in the state of California and are subject to U.S. federal corporate marginal income tax rate of 34% and state income tax rate of 0.48%, respectively. 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, 2013 2014 2015 2015 RMB RMB RMB US$ (Note 3) Current income tax expense — — — — China — — — — Other jurisdictions — — — — Deferred taxation 134,391,290 (21,011,979 ) 6,324,015 976,260 China 70,063,810 (62,051,840 ) (31,447,143 ) (4,854,602 ) Other jurisdictions 64,327,480 41,039,861 37,771,158 5,830,862 Change in valuation allowance (134,391,290 ) 21,011,979 (6,324,015 ) (976,260 ) China (70,063,810 ) 62,051,840 31,447,143 4,854,602 Other jurisdictions (64,327,480 ) (41,039,861 ) (37,771,158 ) (5,830,862 ) Income tax (expense) benefit — — — — 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 PRC Statutory EIT rate 25 % 25 % 25 % Effect of different tax rates in other jurisdictions (2 %) 10 % (1 %) Effect of future tax rate change 1 % (1 %) (1 %) Change of prior year deferred tax assets 1 % (0 %) (1 %) Change of valuation allowance (24 %) (16 %) (2 %) (Income) not subject to tax and non-deductible expenses, net 0 % 2 % (1 %) Effect of expired net operating loss (1 %) (20 %) (19 %) Effective EIT rate 0 % (0 %) 0 % Significant components of deferred tax assets December 31, December 31, December 31, RMB RMB US$ (Note 3) Temporary differences related to expenses and accruals 1,926,262 3,285,994 507,271 Temporary differences related to provision for advances to suppliers 1,621,968 888,961 137,232 Temporary differences related to provision for doubtful accounts 191,012 1,510,153 233,126 Other 5,609,163 5,900,763 910,921 Temporary differences related to depreciation, amortization, and impairment of equipment and intangible assets 11,710,677 12,728,642 1,964,964 Startup expenses and advertising fee 25,761,300 26,010,125 4,015,271 Temporary differences related to research and development credits 988,010 1,045,470 161,393 Temporary differences related to equity investment 1,795,745 1,531,567 236,433 Foreign tax credits 15,113,930 16,039,192 2,476,025 Temporary differences related to provision for prepayment for equipment 5,000,000 5,000,000 771,867 Tax loss carry forwards 492,204,751 505,784,660 78,079,697 Total deferred tax assets 561,922,818 579,725,527 89,494,200 Less: Valuation allowance (561,922,818 ) (579,725,527 ) (89,494,200 ) Total deferred tax assets — — — Significant components of deferred tax liabilities December December December RMB RMB US$ (Note 3) Temporary differences related to amortization of intangible assets 5,362,427 5,690,705 878,494 Movement of valuation allowance on deferred tax assets For the year ended For the year ended For the year ended RMB RMB US$ (Note 3) Balance at January 1 582,934,797 561,922,818 86,745,935 Increase (decrease) in valuation allowance (21,011,979 ) 17,802,709 2,748,265 Balance at December 31 561,922,818 579,725,527 89,494,200 For the years ended December 31, 2014 and 2015, a reversal of valuation allowance and an increase of valuation allowance of approximately RMB21.0 million and RMB17.8 million (US$2.7 million) was provided 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 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, 2015, the Group’s PRC subsidiaries had net operating loss carry forwards of RMB817.1 million, of which RMB162.9 million, RMB327.9 million, RMB190.2 million, RMB46.3 million and RMB89.8 million will expire in 2016, 2017, 2018, 2019 and 2020, respectively. 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. As of December 31, 2015, Red 5 had net operating loss carry forwards for federal and state income tax purposes of approximately US$124.2 million and US$68.7 million, respectively, which will begin to expire in 2026 and 2016, 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 begin to expire in 2016. Pursuant to US tax laws and regulations, the utilization of an acquired entity’s net operation 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 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 Enterprise Income Tax Law (“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 Company 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 China subsidiaries in its operations in the PRC. Therefore, no withholding income taxes for undistributed profits of the Company’s subsidiaries have been provided as of December 31, 2013, 2014 and 2015. 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 entities do not have any accumulated earnings as of December 31, 2013, 2014 and 2015. 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, 2013, 2014 and 2015. 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, 2013, 2014 and 2015, 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 2015, the Group is subject to examination of the PRC tax authorities. Red 5’s federal income tax returns and state income tax returns for 2006 through 2015 are open tax years, subject to examination by the relevant tax authorities. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2015 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 18. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Other payables and accruals are as follows: December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB US$ (Note 3) Staff cost related payables 18,758,212 15,705,966 2,424,583 Professional services 12,312,998 12,070,384 1,863,346 Product development services 5,820,394 1,648,410 254,471 Marketing and promotion 452,920 3,988 616 Others 4,528,327 6,435,676 993,498 41,872,851 35,864,424 5,536,514 |
REFUND OF WOW GAME POINTS
REFUND OF WOW GAME POINTS | 12 Months Ended |
Dec. 31, 2015 | |
REFUND OF WOW GAME POINTS | 19. Refund of WoW game points As a result of the loss of the 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 advance from customers. 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, of which RMB4.0 million was refunded in 2009. 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 ability 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$4.2 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$26.2 million) as of December 31, 2015. In 2009, the Group engaged an agent to facilitate the refund to game players and provided an advance payment to the agent for RMB43.3 million for this purpose. In 2013, 2014 and 2015, nil were refunded to game point card holders through the agent, respectively. In February 2012, the Group entered into an agreement with the agent pursuant to which the agent will refund the advance to the Group in installments over a five year period after deducting any further refunds paid to game point card holders. As of December 31, 2015, the balance of the advance payment to the agent was RMB8.4 million (US$1.3 million). As of December 31, 2015, the Group wrote off the remaining RMB8.4 million receivable because it is unlikely that the agent will refund to us since the business relationship between the Group and the agent have been terminated. |
LONG-TERM DEBT
LONG-TERM DEBT | 12 Months Ended |
Dec. 31, 2015 | |
LONG-TERM DEBT | 20. LONG-TERM DEBT The Group entered an entrusted bank borrowing agreement, amounted to RMB 31.6 million (US$4.9 million), with a third party investor and China Merchants Bank as entrustment bank. The borrowing is due in November 2018, with two years extension and bears an annual interest rate of 12% due up maturity of the loan. The loan is secured by the real property of the office building of the Group. The balance as of December 31, 2015 is RMB 31.7 million (US$ 4.9 million) also includes RMB 0.1 million (US$ 0.02 million) interest payable. |
CONVERTIBLE NOTES
CONVERTIBLE NOTES | 12 Months Ended |
Dec. 31, 2015 | |
CONVERTIBLE NOTES | 21. CONVERTIBLE NOTES On November 24, 2015, the Group entered into agreement with a third party investor for a private placement of secured convertible notes and warrants for a gross proceeds of US$40,050,000, which the transaction closed on December 11, 2015. Pursuant to the terms of the agreement, the convertible notes mature in 2018, subject to an extension for two years at the discretion of the investor. The convertible notes accrue interest at a rate of twelve percent (12%) per annum and payable upon maturity of the notes. The notes are secured by the equity interest of the Group’s subsidiaries (The9 Computer and C9I Shanghai) and office buildings with a total net book value of RMB24.3 million. The investor of the notes is entitled to put the notes to the Group upon a change in control and upon an event of default. 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 Note Principle Amount Conversion Price Tranche A US$22,250,000 US$2.6 Tranche B US$13,350,000 US$5.2 Tranche C US$4,450,000 US$7.8 The conversion prices are subject to anti-dilution adjustments and in the event the Company issue ordinary shares at a price per share lower than the applicable conversion price in effect immediately prior to the issuance. As of December 31, 2015, no adjustments to the conversion prices had occurred. The Group has determined that there was BCF attributable to Tranche A convertible loan as the conversion price is lower than market value at the date of issuance of the convertible note. The value of the BCF is determined to be US$8.1 million (RMB 52.7 million), which is equal to the intrinsic value of the conversion feature. The convertible notes are recorded at net carrying value at the date of issuance as follows: US$ RMB Principle Amount 40,050,000 260,068,680 Less: Fair value allocated to warrants (Note 22) 8,821,883 57,285,780 Beneficial conversion feature 8,112,556 52,679,692 Issuance Cost 3,200,000 20,779,520 Net carrying value 19,915,561 129,323,688 The fair value of warrants, BCF and issuance costs are recorded as debt discount and accreted to interest expense over 3 years using the effective interest method. As of December 31, 2015, the carrying amount of the convertible notes is RMB 131.9 million (US$ 20.3 million) and interest payable is RMB 3.3 million(US$0.5 million). Interest expense recognized related to the convertible note is RMB 5.9 million (US$ 0.9 million) for the year ended December 31, 2015. |
WARRANTS
WARRANTS | 12 Months Ended |
Dec. 31, 2015 | |
WARRANTS | 22. WARRANTS The warrants issued in conjunction with the convertible notes expire November 24, 2020 and are exercisable at any time after the commitment date to purchase up to 4,778,846 shares of the Company’s ADS as follows: Warrants Principle Amount Exercise Price Tranche I US$5,000,000 US$1.5 Tranche A US$2,750,000 US$2.6 Tranche B US$1,650,000 US$5.2 Tranche C US$550,000 US$7.8 The exercise prices of the warrants are subject to anti-dilution adjustments and 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, 2015, no adjustments to the exercise prices had occurred. The Group performs valuations of the warrants using a probability weighted Black-Scholes option pricing 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 impact net income. The assumptions used in the Black-Scholes option pricing model for the warrants were as follows: Risk-free interest rate 1.71 % Expected volatility of common stock 63.25 % Dividend yield 0.00 % Expected life of warrants 5 years The fair value of the warrants as of issuance date and December 31, 2015 is RMB 57.3 million (US$8.8 million) and RMB 64.4 million (US$9.9 million), respectively. The change in fair value of the warrant liability resulted in a loss of RMB 7.1 million (US$1.1 million) for the year ended December 31, 2015. |
SHARE REPURCHASE PROGRAM
SHARE REPURCHASE PROGRAM | 12 Months Ended |
Dec. 31, 2015 | |
SHARE REPURCHASE PROGRAM | 23. SHARE REPURCHASE PROGRAM In December 2012, the Company’s Board approved share buyback of up to US$10 million of its ADSs over the next 12 months. Under this share repurchase program, the Company spent an aggregate purchase consideration of approximately US$0.1 million and repurchased approximately 0.04 million shares of its ADSs during the year ended December 31, 2012. During the year ended December 31, 2013, the Company spent approximately US$4.6 million and repurchased approximately 1.7 million shares of ADSs. |
SHAREHOLDER RIGHTS PLAN
SHAREHOLDER RIGHTS PLAN | 12 Months Ended |
Dec. 31, 2015 | |
SHAREHOLDER RIGHTS PLAN | 24. 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. 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 will continue in effect until January 8, 2019, unless the plan is terminated by the Company or the rights are redeemed by the Company before the plan expires. The plan has not been exercisable yet. |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended |
Dec. 31, 2015 | |
EMPLOYEE BENEFITS | 25. EMPLOYEE BENEFITS The full-time employees of the Company’s subsidiaries and VIE subsidiaries that are incorporated in the PRC are entitled to staff welfare benefits, including medical care, welfare subsidies, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. These companies 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 RMB15.3 million, RMB19.5 million and RMB13.1 million (US$2 million) for the years ended December 31, 2013, 2014 and 2015, respectively. The PRC government is responsible for the medical benefits and ultimate pension liability to these employees. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2015 | |
SHARE-BASED COMPENSATION | 26. SHARE-BASED COMPENSATION 26.1 Share Option Plan On December 15, 2004, in connection with its initial public offering, the Company adopted a share option plan (“2004 Option Plan”). As of December 31, 2013, the total number of ordinary shares reserved in the 2004 Option Plan was 6,449,614 shares. The maximum contractual term of the awards under this plan shall be no more than five years from the date of grant. The options granted under this plan shall be at the money on the date of grant and typically vest over a three-year period, with one third of the options to vest on the each of the anniversary after the grant date. The 2004 Option Plan was amended in November 2015 to increase the maximum aggregate number of ordinary shares to 14,449,614 Shares. As of December 31, 2015, options to purchase 12,877,718 ordinary shares were outstanding and options to purchase 120,925 ordinary shares were available for future grant under the 2004 Option Plan. Stock Options The following table summarizes the Company’s share option activities with its employees and directors: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 3,070,491 US$ 2.41 1.03 — Granted 1,910,000 Exercised — Forfeited (302,773 ) US$ 4.52 Outstanding at December 31, 2015 4,677,718 US$ 1.53 4.41 US$ 7,577,903 Vested and expected to vest at December 31, 2015 4,677,718 US$ 1.53 4.41 US$ 7,577,903 Exercisable at December 31, 2015 3,085,410 US$ 1.53 4.42 US$ 4,998,364 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 US$119,624, US$21,701 and nil for year ended December 31, 2013, 2014 and 2015, respectively. The weighted-average grant-date fair value of options granted during the years 2013 and 2015 was US$0.99 and US$0.65, respectively. No options were granted during 2014. The fair value of the share options were measured on the respective grant dates based on the Black-Scholes option pricing model, with below assumptions made regarding expected term and volatility, risk-free interest rate and dividend yield: For the year ended For the year ended Risk-free interest rate 0.35 % 1.22 % Expected life (years) 3.25 3.35 Expected dividend yield 0 0 Volatility 59.39 % 59.74 % Fair value of options at grant date US$ 0.99 US$ 0.65 On November 17, 2015, The Group granted three tranches of share options to certain directors, officers and key employees totaling 8,200,000 shares with predetermined market conditions as summarized below: Options Target Price Number of Tranche I 2.6 4,555,556 Tranche II 5.2 2,733,334 Tranche III 7.8 911,110 Total 8,200,000 Of these share options granted, 7,000,000 options is subject only to the predetermined market condition and will vest immediately when the Company’s ADS stock price reaches the respective target stock prices as noted above (“Predetermined Market Condition”). The Vesting of the remaining 1,200,000 options are subject to a 3 year service period in addition to Predetermined Market Condition. Activities relating to share options subject to with only Predetermined Market Condition are summarized as follows: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 — — Granted 7,000,000 US$ 1.53 Exercised — Forfeited — Outstanding at December 31, 2015 7,000,000 US$ 1.53 4.88 US$ 11,340,000 Vested and expected to vest at December 31, 2015 7,000,000 US$ 1.53 4.88 US$ 11,340,000 Exercisable at December 31, 2015 3,888,889 US$ 1.53 4.88 US$ 6,300,000 The weighted-average grant-date fair value of options granted with only Predetermined Market Condition during the year 2015 was US$0.69, US$0.68, US$0.60 for Tranche I,II and III, respectively. The fair values for these shares options is calculated using the Monte Carlo Simulation mode with the key following assumption: Risk-free interest rate 1.66 % Expected life (years) 4.49-5.0 Expected dividend yield 0 Volatility 62 % Fair value of options at grant date US$ 0.60-US$0.69 The share options subject to both Predetermined Market Condition and service conditions are as followed: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 — — Granted: 1,200,000 US$ 1.53 — Exercised Forfeited — Outstanding at December 31, 2015 1,200,000 US$ 1.53 4.88 US$ 1,944,000 Vested and expected to vest at December 31, 2015 1,200,000 US$ 1.53 4.88 US$ 1,944,000 Exercisable at December 31, 2015 18,530 US$ 1.53 4.88 US$ 30,019 The weighted-average grant-date fair value of options granted with multiple conditions during the year 2015 was US$0.71, US$0.68, US$0.60 for Tranche I,II and III, respectively. The fair values of the awards that are based on the market condition were calculated using the Monte Carlo Simulation mode with the key following assumption: Risk-free interest rate 1.66 % Expected life (years) 4.49-5.0 Expected dividend yield 0 Volatility 62 % Fair value of options at grant date US$ 0.60-US$0.71 Modification of Share-Based Awards On April 22, 2013, the Company modified the exercise prices of share options granted to 234 directors, officers and employees granted to US$2.41 per share, which was the market price on the date of modification. The original exercise price of the modified options ranged from US$7.36 to US$4.78. On June 13, 2015, the company extended the expiration dates of the stock options granted to 25 directors, officers and employees, with expirations dates of August 26, 2015 and December 10, 2015 to August 26, 2020, and the exercise price of these share options was also reduced to US$1.78 which was the closing sale price on June 12, 2015. On November 17, 2015, the Company modified the exercise prices of share options granted to 15 directors, officers and employees to US$1.53 per share, the closing price of the last trading day. The original exercise price of the modified options ranged from US$1.78 to US$2.41. During 2013, 2014 and 2015, as a result of these modifications, the Group recognized incremental compensation cost of RMB3.8 million (US$0.6 million), RMB0.9 million (US$0.2 million) and RMB11.8 million (US$1.8 million) respectively upon modification for the vested portion. The fair value of options, of which exercise prices were modified in April 2013, June 2015 and November 2015, were measured on the modification date based on the Black-Scholes option pricing model with the following assumptions: For the year ended December 31, 2013 For the year ended December 31, 2015 Risk-free interest rate 0.09%-0.24 % 0.50%-1.12 % Expected remaining life (years) 0.57-2.20 1.32-2.61 Expected dividend yield 0 0 Volatility 36%-65 % 64%-71 % Fair value of incremental cost US$ 0.16-US$0.43 US$ 0.21-US$0.73 Share-Based Compensation For the years ended December 31, 2013, 2014 and 2015, the Company recorded share-based compensation of RMB16.7 million, RMB0.1 million and RMB32.0 million (US$4.9 million), respectively, for options granted to the Company’s employees and directors, including incremental compensation cost due to the modification of the option exercise prices in April 2013, June 2015 and November 2015. As of December 31, 2015, there was approximately RMB25.4 million (US$3.9 million) unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested options. This cost is expected to be recognized over a weighted-average period of 3.81 years. Total unrecognized compensation cost may be adjusted for future changes in estimated forfeitures. 26.2 Ordinary shares granted to Incsight Limited (“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 shares granted will vest when the Group achieves breakeven and 1,000,000 shares will vest when the Group’s cumulative profit reaches US$5 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 considered the grant of ordinary shares as an incentive to retain Mr. 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 is considered probable the performance targets will 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 shares granted to Incsight Limited were vested. The awarded non-vested shares would be valid for additional three years and expired on December 7, 2018. The Group recorded share-based compensation of RMB7.6 million, RMB2.2 million and RMB1.2million (US$0.2 million) for the years ended December 31, 2013, 2014 and 2015, respectively. The following table reflected the activity of non-vested shares for the year ended December 31, 2015: Number of Options Weighted- Non-vested at January 1, 2015 1,500,000 US$ 6.48 Granted — — Forfeited — — Vested (500,000 ) US$ 6.48 Non-vested at December 31, 2015 1,000,000 US$ 6.48 26.3 Ordinary shares granted to non-executive directors In May 2011, the Board of Directors granted 30,000 ordinary shares to each of the Group’s four non-executive directors, of which 10,000 ordinary shares vest for each director on July 1 of each year from 2011 to 2013 so long as such directors continue their services during the period. An aggregate of 40,000 ordinary shares vested in July 2011, 2012 and 2013, respectively. The fair value of the shares granted was US$6.03 per share, being the market price on the date of the grant. The Group recorded share-based compensation of RMB0.4 million, nil and nil for the year ended December 31, 2013, 2014 and 2015, respectively. 26.4 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 option to purchase common stock or restricted stock. 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 stocks reserved to 22,855,591 shares. 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, 2015, 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$0.2450 per share, which vest over four years commencing from grant date. Options expire within a period of not more than ten years from the grant date. An option granted to a person who is a greater than 10% shareholder on the date of grant may not be exercisable more than five years after the grant date. As of December 31, 2015, option to purchase 10,649,893 shares of common stock were outstanding and options to purchase 10,301,444 shares of common stock were available for future grant. The following table summarizes the Red 5’s share option activities with its employees and directors: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 5,550,357 US$ 0.122 2.61 US$ 1,133,349 Granted 9,228,621 Exercised (300,000 ) US$ 0.045 US$ 1,200 Forfeited (3,829,085 ) US$ 0.120 Outstanding at December 31, 2015 10,649,893 US$ 0.061 4.73 Nil Vested and expected to vest at December 31, 2015 10,649,893 US$ 0.061 4.73 Nil Exercisable at December 31, 2015 3,422,692 US$ 0.087 3.67 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 company 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, 2013, 2014 and 2015 were US$14,762, US$162,279 and US$1,200, respectively. The fair value of options granted ranged from US$0.012 to US$0.149, measured on the grant date based on the Black-Scholes option pricing model with assumptions made regarding expected term and volatility, risk-free interest rate and dividend yield: Risk-free interest rate 0.78%-5.00 % Expected life (years) 4.00-6.00 Expected dividend yield 0 Volatility 38.89%-69.36 % In September 2012, Red 5 granted 6,122,435 shares of restricted common stock to two directors of Red 5 including Mr. Zhu for their services to Red 5. Of these shares, 60% were vested on the grant date. The remaining shares shall become vested in a series of 36 successive equal monthly installments upon grantees’ completion of each month of service to Red 5 over the 36-month period measured from the grant date.The following table reflected the activity of non-vested shares for the year ended December 31, 2015: Number of Options Weighted- Non-vested at January 1, 2015 612,244 US$ 0.01193 Granted — Forfeited — Vested (612,244 ) US$ 0.01193 Non-vested at December 31, 2015 — US$ 0.01193 Red 5 recorded share-based compensation of RMB3.8 million, RMB1.0 million and RMB0.8 million (US$0.1million) for options and shares of restricted common stock granted for the year ended December 31, 2013, 2014 and 2015, respectively. The share-based payment awards were recorded as a component of noncontrolling interest in the consolidated financial statements. As of December 31, 2015, there was approximately RMB0.8 million (US$0.1million) of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested share-based awards granted to Red 5 grantees. This cost is expected to be recognized over 3.2 years. Total unrecognized compensation cost may be adjusted for future changes in estimated forfeitures. 26.5 Non-vested equity interest of Jiushi granted to employees In July 2011, the Group granted 20% equity interest of the newly established Jiushi to two employees as an incentive to retain these two employees’ services, which they will earn over three-year period. The fair value of the granted equity interest was estimated to be RMB2.2 million. The Group recorded share-based compensation of RMB0.7 million, RMB0.4 million and nil for the years ended December 31, 2013, 2014 and 2015, respectively. |
RELATED PARTY TRANSACTIONS AND
RELATED PARTY TRANSACTIONS AND BALANCES | 12 Months Ended |
Dec. 31, 2015 | |
RELATED PARTY TRANSACTIONS AND BALANCES | 27. 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 China jointly. According to the agreement, the group pays ZTE9 a royalty fee for providing game contents on IPTV. Net royalty charged by ZTE9 to the Group amounted to RMB6.8 million and RMB10.1 million (US$1.6 million) for year ended December 31, 2014 and 2015, respectively. The amount due to ZTE9 amounted to RMB6.3 million and RMB7.7 million (US$1.2 million) as of December 31, 2014 and 2015 respectively. In 2014, the Group lent RMB5.3 million (US$0.9 million) to ZTE9 to fund it operation. The loan was interest-free and was due and repaid in June, 2015. In 2015, the Group lent RMB9.9 million (US$1.5 million) to ZTE9 to fund its operation. The loan was interest-free and due in March-August, 2016. Total amount due from ZTE9 was RMB5.3 million and RMB9.9 million (US$1.5 million) as of December 31, 2014 and 2015, respectively. As of December 31, 2015, the amount due to Jiucheng Advertisement was RMB 4.0 million (US$0.6 million). In 2014, the Group entered a license agreement with System Link Corporation Ltd., a 50% joint venture of the Group, for publishing and operating Firefall for a five-year term in mainland China. Under this license agreement, System Link is expected to pay to Red 5 Singapore no less than US$160 million (including license fee and royalties) during the term of the agreement. In 2015, System Link paid US$10 million to the Group as license. The Group records the amount as amount due to the related party and amortizes the amount over the five-year period. As of December 31, 2015, the balance of amount due to System Link (non-current) is RMB 63.4 million (US$9.8million) and revenue recognized is RMB1.7 million (US$ 0.3 million). |
LOSS PER SHARE
LOSS PER SHARE | 12 Months Ended |
Dec. 31, 2015 | |
LOSS PER SHARE | 28. LOSS PER SHARE Loss per share is calculated as follows: For the year For the year For the year For the year RMB RMB RMB US$ (Note 3) Numerator: Net loss attributable to ordinary shareholders before accretion on redeemable noncontrolling interest (526,261,572 ) (86,622,470 ) (304,828,354 ) (47,057,389 ) Accretion on redeemable noncontrolling interest — (21,076,744 ) (79,805,706 ) (12,319,878 ) Net loss attributable to ordinary shareholders (526,261,572 ) (107,699,214 ) (384,634,060 ) (59,377,267 ) Denominator: Denominator for basic and diluted loss per share – weighted-average shares outstanding 23,174,823 23,164,695 23,235,848 23,235,848 Loss per share - Basic and diluted (22.71 ) (4.65 ) (16.55 ) (2.56 ) The Company had 4,797,391, 4,570,491 and 18,656,564 stock options, warrants and nonvested shares outstanding as of December 31, 2013, 2014 and 2015, 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, 2015 | |
RESTRICTED NET ASSETS | 29. RESTRICTED NET ASSETS Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries and the VIEs of the Group in the PRC must make appropriations from after-tax profit to non-distributable reserve 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 reserve 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 staff bonus and welfare are not distributable as cash dividends. The appropriation to these reserves by the Group’s PRC entities were nil, nil and nil for the years ended December 31, 2013, 2014 and 2015. The accumulated reserves as of December 31, 2015 is RMB 3.8 million. In addition, due to restrictions on the distribution of registered capital from the Company’s PRC subsidiaries, the PRC subsidiaries’ registered capital of 19.5 million as of December 31, 2015, were considered restricted. As a result of these PRC laws and regulations, as of December 31, 2015, approximately RMB23.3 million (US$3.6 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, 2015 | |
NONCONTROLLING INTEREST | 30. NONCONTROLLING INTEREST As of December 31, 2015, the Group’s non-controlling interest mainly included equity interests in Red 5,Mengxiang Hulian, The9 Education, 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, 2013, 2014 and 2015. December 31, 2013 December 31, 2014 December 31, 2015 RMB RMB RMB Net loss attributable to The9 Limited (526,261,572 ) (86,622,470 ) (304,828,354 ) Transfers (to) from the noncontrolling interest Increase in The9 Limited’s additional paid-in capital for issuance of shares by Red 5 upon stock option exercise 25,992 552,426 75,563 Change in equity interest attributable to non-controlling interest due to restructuring of Red 5 Singapore (1) — 15,068,103 Change in The9 Limited’s additional paid-in capital for adjustment on noncontrolling interest due to change in ownership interest as a result of loan conversion (2) — (31,784,850 ) — 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 3,072,133 (42,692,211 ) 80,903 Change from net loss attributable to The9 Limited and transfers (to) from noncontrolling interests (523,163,447 ) (145,479,002 ) (304,671,888 ) (1) In August 2014, Red 5 issued 27,438,952 Series B redeemable convertible preferred shares of Red 5 to a new investor (see Note 31). As the license to publish Firefall belongs to Red 5 Singapore (Note 11), as a condition for the investment by the new investor, the Group is required to transfer the license to Red 5. As such, in June 2014, the Group transferred its equity interests in Red 5 Singapore, a wholly owned subsidiary of the Group to Red 5, a 79.2% owned subsidiary at a nominal price. At the time of transfer, 20.8% of the accumulated deficit of Red 5 Singapore, amounted to RMB 15,068,103, was attributable to the noncontrolling interest of Red 5 with no consideration, which was recorded as an equity transaction in the Consolidated Statements of Changes in Equity. (2) In August 2014, the Group converted its convertible loan and certain other loans due from Red 5 with a book value of US$50.0 million (RMB307.6 million), into 63,301,276 common shares of Red 5. The equity of Red 5 increased by RMB307.6 million while the impact attributable to noncontrolling interest of Red 5 was RMB31,784,850 as a result of the loan conversion. |
REDEEMABLE NON-CONTROLLING INTE
REDEEMABLE NON-CONTROLLING INTEREST | 12 Months Ended |
Dec. 31, 2015 | |
REDEEMABLE NON-CONTROLLING INTEREST | 31. REDEEMABLE NON-CONTROLLING INTEREST In January 2014, Red5 issued 27,438,952 Series B redeemable convertible preferred shares (“SBPS”) to a third party investor, Shanghai Oriental Pearl Culture Development Co., Ltd., (“Oriental Pearl”), for an aggregate consideration of RMB118.3 million (US$19.2 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$4.2 million). The purchase price for these common shares was determined to be less than fair value as the transaction as 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 independent valuation firm, which amounted to RMB131.3 million (US$21.2 million), was recognized as a compensation paid to the two executives in the amount of RMB13.0 million (US$2.1 million). As of December 31, 2014, the Group considered the redemption of the SBPS to be possible. 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. 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. 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 Preferred Shares have preference over holders of common shares with respect to distribution of assets upon voluntary or involuntary liquidation of the Company. The holders of Preferred Shares shall be entitled to receive 100% of the original issue price(“preferred liquidation”). The holders of Preferred Shares are also entitled to distribution of remaining assets from preferred liquidation, along with other shareholders, while the total distribution entitled to the holders of Preferred Shares should not exceed 200% of the original issue price. A reconciliation of Redeemable noncontrolling interest is as follows: Year ended December 31, 2014 2015 Redeemable noncontrolling interest opening balance — 131,497,104 Issuance of Redeemable noncontrolling interest 131,296,977 — Net loss attributable to redeemable noncontrolling interest (20,876,617 ) (32,697,713 ) Accretion of Redeemable noncontrolling interest 21,076,744 79,805,706 Redeemable noncontrolling interest ending balance 131,497,104 178,605,097 |
DISPOSAL OF SUBSIDIARIES
DISPOSAL OF SUBSIDIARIES | 12 Months Ended |
Dec. 31, 2015 | |
DISPOSAL OF SUBSIDIARIES | 32. DISPOSAL OF SUBSIDIARIES In July 2014, the Group entered into an agreement to sell its VIE, Huopu Cloud, for a total consideration of RMB200 million (US$32.2 million) to a third-party purchaser. Pursuant to the agreement, the Group paid RMB30 million (US$4.8 million) to Huopu Cloud’s development team to retain them in Huopu Cloud and undertook Huopu Cloud’s operating costs and expenses from the date of disposal to December 31, 2014 in the amount of RMB19 million (US$3.1 million). Huopu Cloud developed and held a web game Qijiguilai. As of the transfer date, the net assets held by Huopu Cloud amounted to RMB11 million (US$1.8 million).The Group recognized a net gain of RMB 140 million (US$22.5 million) upon the disposal of Huopu Cloud in 2014. In 2014, the Group established a subsidiary with two individual shareholders, Shanghai Kaiyue Information and technology Co., Ltd. (“Kaiyue”), while the Group owned 85% equity interest of Kaiyue. Kaiyue developed and held a mobile application named KingReader for online reading. In December 2014, the Company sold their 85% equity interest of Kaiyue to a third-party investor for an aggregate consideration of RMB 25.5 million (US$4.1 million), and recognized a net gain of RMB 25.5 million (US$4.1 million) upon the disposal of the subsidiary in 2014. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
COMMITMENTS AND CONTINGENCIES | 33. COMMITMENTS AND CONTINGENCIES 33.1 Operating lease commitments The Group has entered into operating lease arrangements relating to the use of certain premises and internet data centers. Future minimum lease payments for non-cancellable operating leases as of December 31, 2015 are as follows: RMB US$ (Note 3) 2016 8,389,540 1,295,122 2017 7,159,779 1,105,279 2018 6,819,782 1,052,793 2019 6,497,790 1,003,086 2020 5,414,825 835,905 34,281,716 5,292,185 Total rental expenses amounted to RMB38.2 million, RMB22.2 million and RMB19.4 million (US$3.0 million) for the years ended December 31, 2013, 2014 and 2015, respectively. 33.2 Contingencies The Group may be subject to other legal or administrative proceedings in the ordinary course of business. The Group does not believe that any currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on the business or financial condition. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2015 | |
SEGMENT REPORTING | 34. SEGMENT REPORTING The Group operates in one segment whose business is developing and operating online games and related services. The Group’s chief operating decision maker is the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. The Group generates its revenues from customers in the PRC, North America and other areas. The following geographic area information includes revenue based on location of players for the years ended December 31, 2013, 2014 and 2015: 2013 2014 2015 2015 RMB RMB RMB US$ (Note 3) PRC 85,483,458 41,969,350 33,201,421 5,125,416 North America 13,135,914 14,906,530 8,382,753 1,294,074 Other areas 6,156,697 7,401,011 4,827,157 745,185 Total 104,776,069 64,276,891 46,411,331 7,164,675 A majority of the Group’s assets are located in PRC. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
SUBSEQUENT EVENTS | 35. SUBSEQUENT EVENTS In March 2016, the Group entered into a non-binding memorandum of understanding (“MOU”) with L&A International Holding Limited (“L&A”), a Cayman Island Company with shares publicly listed in Hong Kong, and a certain other shareholder of Red 5 Studios, Inc. (“Red 5”). Under the terms of this MOU, the Group will exchange approximately 30.6% of its equity interest in Red 5 for such number of newly issued shares of L&A of equivalent value based on a valuation agreed by all parties. The other participating shareholders of Red 5 will exchange an aggregate of approximately 14.4% equity interest in Red 5 based on the same terms. In March 2016, Bank of Shanghai (BOS) issued a commitment letter whereby BOS agrees to grant the Group a credit facility of RMB50 million (US$7.7 million). The Group can apply to withdraw the funding from BOS should they require liquidity for its operations. As of the report date, the Group had withdrawn RMB4.9 million (US$0.8 million) under this credit facility. |
FINANCIAL INFORMATION OF PARENT
FINANCIAL INFORMATION OF PARENT COMPANY | 12 Months Ended |
Dec. 31, 2015 | |
FINANCIAL INFORMATION OF PARENT COMPANY | ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANY - THE9 LIMITED FINANCIAL INFORMATION OF PARENT COMPANY CONDENSED STATEMENTS OF COMPREHENSIVE LOSS 2013 2014 2015 2015 RMB RMB RMB US$ Cost of revenue (127,706 ) — — — Gross loss (127,706 ) — — — Operating expenses: Product development (1,284,261 ) 632,437 (70,941 ) (10,951 ) Sales and marketing (14,536,253 ) 0 (120,735 ) (18,638 ) General and administrative (32,056,416 ) (9,392,137 ) (38,475,787 ) (5,939,640 ) Total operating expenses (47,876,930 ) (8,759,700 ) (38,667,463 ) (5,969,229 ) Loss from operations (48,004,636 ) (8,759,700 ) (38,667,463 ) (5,969,229 ) Interest income (expenses), net 869 32 (5,858,848 ) (904,450 ) Fair value change on convertible bonds and warrants — — (7,129,161 ) (1,100,553 ) Other income (expenses), net (69,198 ) 9,756 (2,267,335 ) (350,016 ) Loss before income tax expense and share of loss in equity method investments (48,072,965 ) (8,749,912 ) (53,922,807 ) (8,324,248 ) Income tax expense — — — — Equity in income (loss) of subsidiaries and VIEs (478,188,607 ) (77,872,558 ) (250,905,547 ) (38,733,141 ) Net loss (526,261,572 ) (86,622,470 ) (304,828,354 ) (47,057,389 ) Other comprehensive income (loss) Unrealized loss on available-for-sale investment (16,600 ) — — — Currency translation adjustments (2,259,470 ) 348,437 5,266,016 812,933 Total comprehensive loss (528,537,642 ) (86,274,033 ) (299,562,338 ) (46,244,456 ) ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANY - FINANCIAL STATEMENTS SCHEDULE I THE9 LIMITED FINANCIAL INFORMATION OF PARENT COMPANY CONDENSED BALANCE SHEETS December 31, 2014 December 31, 2015 December 31, RMB RMB US$ ASSETS Cash and cash equivalents 2,754,295 28,984 4,474 Prepayments and other current assets, net 55,258 912,003 140,791 Amounts due from intercompany 1,188,956,211 1,425,500,136 220,059,300 Total current assets 1,191,765,764 1,426,441,123 220,204,565 Investments in subsidiaries (1,092,897,996 ) (1,420,228,235 ) (219,245,461 ) Total assets 98,867,768 6,212,888 959,104 LIABILITIES Current liabilities: Accounts payable 164,162 148,204 22,879 Other payables and accruals 676,958 3,829,603 591,189 Warrants 64,414,941 9,943,953 Total current liabilities 841,120 68,392,748 10,558,021 Convertible notes — 135,182,536 20,868,587 Total liabilities 841,120 203,575,284 31,426,608 SHAREHOLDERS’ EQUITY Ordinary shares 1,885,153 1,917,620 296,030 Additional paid-in capital 2,075,900,461 2,080,041,288 321,103,042 Statutory reserves 28,071,982 28,071,982 4,333,567 Accumulated other comprehensive loss (8,638,604 ) (3,372,588 ) (520,638 ) Accumulated deficit (1,999,192,344 ) (2,304,020,698 ) (355,679,505 ) Total shareholders’ equity 98,026,648 (197,362,396 ) (30,467,504 ) Total liabilities, and shareholders’ equity 98,867,768 6,212,888 959,104 ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANY – FINANCIAL STATEMENTS SCHEDULE I THE9 LIMITED FINANCIAL INFORMATION OF PARENT COMPANY CONDENSED STATEMENTS OF CASH FLOWS 2013 2014 2015 2015 RMB RMB RMB US$ Cash flows from operating activities: Net loss (526,261,572 ) (86,622,470 ) (304,828,354 ) (47,057,389 ) Adjustments for: Employee share-based compensation expense 24,683,804 2,337,019 33,184,307 5,122,772 Fair value change on warrants liability — — 7,129,161 1,100,553 Amortization of discount on convertible note — — 2,609,771 402,879 Equity in income (loss) of subsidiaries and VIEs 478,188,607 77,872,558 250,905,547 38,733,141 Change in prepayments and other current assets 14,253,727 (199 ) (856,745 ) (132,259 ) Change in accounts payable (31,607 ) (27,382 ) (15,958 ) (2,463 ) Change in amounts due from intercompany 32,990,799 4,294,984 (236,543,924 ) (36,516,087 ) Change in other payables and accruals 1,858,984 (1,702,034 ) 6,401,724 988,255 Net cash used in operating activities 25,682,742 (3,847,524 ) (242,014,471 ) (37,360,598 ) Cash flows from financing activities: Proceeds from stock option exercises 4,304,447 812,635 — — Proceeds from the issuance of convertible bonds — — 260,068,680 40,147,686 Payment for the issuance cost related to convertible bonds (20,779,520 ) (3,207,805 ) Repurchase of ordinary shares (29,030,699 ) Net cash provided by (used in) financing activities (24,726,252 ) 812,635 239,289,160 36,939,881 Net change in cash and cash equivalents 956,490 (3,034,889 ) (2,725,311 ) (420,717 ) Cash and cash equivalents, beginning of year 4,832,694 5,789,184 2,754,295 425,191 Cash and cash equivalents, end of year 5,789,184 2,754,295 28,984 4,474 ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANY - FINANCIAL STATEMENTS SCHEDULE I THE9 LIMITED FINANCIAL INFORMATION OF PARENT COMPANY NOTES TO SCHEDULE I 1) Rule 12-04(a) 5-04(c) Regulation S-X 2) 3) ASC 323, Investments-Equity Method and Joint Ventures 4) 5) |
PRINCIPAL ACCOUNTING POLICIES (
PRINCIPAL ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Basis of presentation | <1> Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 RMB2,304 million (US$355.7 million) as of December 31, 2015, a net loss of approximately RMB354.2 million (US$54.7 million) for the year ended December 31, 2015. 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. 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 recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty. To meet its capital needs, the Group is considering multiple alternatives, including, but not limited to, additional equity financings, debt financings and other funding transactions 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 and/or cease operations. Sales of Equity Interest of Red 5 In March 2016, the Group entered into a non-binding memorandum of understanding (“MOU”) with L&A International Holding Limited (“L&A”), a Cayman Island Company with shares publicly listed in Hong Kong, and a certain other shareholder of Red 5 Studios, Inc. (“Red 5”). Under the terms of this MOU, the Group will exchange approximately 30.6% of its equity interest in Red 5 for such number of newly issued shares of L&A of equivalent value based on a valuation agreed by all parties. The other participating shareholders of Red 5 will exchange an aggregate of approximately 14.4% equity interest in Red 5 based on the same terms. The total valuation for the 45% of equity interest in Red 5 subject to this exchange is expected to be approximately US$76.5 million, subject to adjustments by no more than 15% based on the results of due diligences conducted by both parties. The completion of the transaction is subject to the parties’ execution of definitive agreements and customary closing conditions to be stipulated therein. Should the transaction is to be completed in accordance with valuation of the MOU, the Group is expected to receive ordinary shares of L&A with a valuation ranging between US$44 million to US$60 million. The Group expect these shares to be publicly traded and without restriction for sale in the public market in Hong Kong. As such, the Group believes the completion of this transaction can provide a source of funding for its operations. Addition external debt financing In March 2016, Bank of Shanghai (BOS) issued a commitment letter whereby BOS agrees to grant the Group a credit facility of RMB50 million (US$7.7 million). The Group can apply to withdraw the funding from BOS should they require liquidity for its operations. As of the report date, the Group had withdrawn RMB4.9 million (US$0.8 million) under this credit facility. Launch of new games The Group plans to have a large-scaled commercial launch of Firefall in China in the second half of 2016. In addition, The Group plans to launch the proprietary mobile game Song of Knights in 2016. We had already licensed Song of Knights to different game operators for distribution in Korea, Vietnam, Taiwan, Malaysia, Hong Kong, Singapore and Macau. Cost Control The Group does not have significant short term loans or liabilities to third parties. Currently the biggest use of cash for the Group is payroll related costs. When Management deems it is necessary, the Group has the ability to control the level of discretionary spending on payroll by reducing the headcount of the Group within a short period of time. |
Consolidation | <2> Consolidation The consolidated financial statements include the financial statements of the Company, its subsidiary and VIEs in which it has a controlling financial interest. The results of the subsidiary are consolidated from the date on which the Company obtained control and continue 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. However, if the company demonstrates its ability to control the VIEs through its rights to all the residual benefits of the VIEs and its obligation to fund losses of the VIEs then the entity is consolidated. All intercompany balances and transactions between the Company, its subsidiary and VIEs have been eliminated in consolidation. PRC laws and regulations currently prohibit or restrict foreign ownership of internet-related business. In September 2009, the General Administration of Press and Publication (“GAPP”) 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 and the Further Strengthening of the Administration of Pre-approval on Online Games and Approval on Import Online Games, or the GAPP Circular. It is not clear that the regulatory authority of the GAPP applies to the regulation of ownership structures of online game companies based in the PRC. While the GAPP Circular is applicable to the Group and its business in terms of publication and pre-approval of online games, to date, GAPP has not issued any interpretation of Section 4 of the GAPP Circular to specifically invalidate VIE agreements and, to the Group’s knowledge, has not taken any enforcement action under Section 4 of the GAPP Circular against any of the companies that rely on contractual arrangements with VIEs to operate online games in the PRC. Therefore, the Group believes that its ability to direct the activities of 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 the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affected the reported amount of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the 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 and prepayment, revenue recognition, assessment of recoverability of long-lived assets and goodwill impairment, assessment of impairment of other long-lived assets, fair value of redeemable noncontrolling interest, the fair value of the warrants, share-based compensation expense, consolidation of VIEs, valuation allowances for deferred tax assets and contingencies. Such accounting policies are impacted 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 Renminbi (“RMB”). The Group’s functional currency with the exception of its subsidiaries, Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea, is the RMB. The functional currency of Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea is United States Dollar (“US$”, or “US dollars”), United States Dollar, Singapore Dollar, Korean Won and Korean Won, respectively. Assets and liabilities of Red 5, The9 Interactive, Red 5 Singapore, Red5 Korea and The9 Korea 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 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 other income (expense) 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 an original maturity date of three months or less. At December 31, 2014 and 2015, cash equivalents were comprised primarily of bank deposits. Included in cash and cash equivalents as of December 31, 2014 and 2015 are amounts denominated in US Dollars totaling US$4.9 million and US$0.1 million, respectively. The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, 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 Company’s aggregate amount of cash and cash equivalents denominated in RMB amounted to RMB150.5 million and RMB48.1 million (US$7.4 million) as of December 31, 2014 and 2015, respectively |
Allowance for doubtful accounts | <6> Allowance for doubtful accounts Accounts receivable mainly consist of receivables from prepaid card distributors and third party game platforms, and 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 allowance for doubtful accounts of RMB1.2 million, RMB0.08 million and RMB0.7 million (US$0.1 million) in 2013, 2014 and 2015, respectively. |
Prepaid royalties and deferred costs | <7> Prepaid royalties and deferred costs Royalties paid to the licensors of games are initially recognized as prepaid royalties when paid and subsequently recognized as deferred costs upon the customers’ online registration and activation of their cards or online points. Royalties payable to the licensors or receivable from collection agents upon customers’ charging their accounts are initially recorded as deferred costs upon the customers’ online registration and activation of their cards or online points. Deferred costs are then ultimately recognized as cost of services in the consolidated statements of operations and comprehensive loss based upon the actual consumption of game premium features or usage of the game playing time by the customers or when the likelihood that the Group would provide further services to those customers becomes remote. |
Investments in equity method investee and loan to equity method investee | <8> 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 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 loans to certain equity investees in order to provide to them financial support. If the Group’s share of losses 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 to 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, and 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 | <9> 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 them 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. As of December 31, 2014 and 2015, the Group did not hold trading securities or held-to-maturity securities. 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 | <10> Property, equipment and software 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 the shorter of respective term of the leases or the estimated useful lives of the leasehold improvements 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 |
Goodwill | <11> 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 acquisition. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. In September 2011, the Financial Accounting Standards Board (“FASB”) issued an authoritative pronouncement related to testing goodwill for impairment. The guidance permits us to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The Company adopted this pronouncement since 2012. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Group completes a two-step goodwill impairment test in December of each year. The first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. |
Intangible assets | <12> Intangible assets 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 the monetization of the related online game. 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. Subsequently, they are recorded as acquired game development cost upon completion of the research and development efforts and are amortized on a straight-line basis over the useful economic life of the relevant online game. Amortization of acquired game development cost commences upon the monetization of the related online game |
Land use right | <13> Land use right Land use right represents operating lease prepayments to the PRC’s land bureau for usage of the parcel of land where the Group’s office building is located. Amortization is calculated using the straight-line method over the estimated land use right period of 44 years. |
Impairment of long-lived assets and allowance on long-term receivables | <14> Impairment of long-lived assets and allowance on long-term receivables 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. The Group determines an allowance on doubtful long-term receivables when facts and circumstances indicate that the long-term receivable is unlikely to be collected. When the collectability of the long-term receivable became likely subsequently, the Group reverses the allowance |
Revenue recognition | <15>Revenue recognition 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 platform and overseas licensing of the online game to other operators. The Group recognizes revenues when persuasive evidence of an arrangement exists, services are delivered or performed, our price is fixed or determinable and collectability is reasonably assured. Online game services to players on the Group’s game server The Group sells its prepaid online points for its online game products directly to players via certain online payment platforms. The Group adopts virtual item / service consumption model for the online game services. Players can access certain games free of charge, but may purchase game points to acquire in-game premium features. The distribution of points to players is typically made by sales of prepaid game cards and prepaid online points. Fees for prepaid game cards and prepaid online points are deferred when received. Revenue is recognized over the estimated life of the premium features or as the premium features are consumed. For in-game premium features that are immediately consumed, revenue is recognized upon consumption. For premium features with a stated expiration time, which range from one to 180 days, revenue is recognized ratably over the period starting from when the feature is first used to the expiration time. For perpetual features with no predetermined expiration, revenue is recognized ratably over the estimated average lives of the perpetual features, which are typically less than one year. When estimating the average lives of the in-game perpetual features, the Group considers the average period that players typically play the game, other player behavior patterns, and factors including the acceptance and popularity of expansion packs, promotional events launched, and market conditions. Future usage patterns of players may differ from the historical usage patterns on which the virtual item / service consumption revenue recognition model is based. The Group continually monitors the operational statistics and usage patterns. Online game operation services over third party platform Certain social games, TV games, certain web games and certain MMOGS, have adopted the virtual item / service consumption model, and are launched on the third party game platforms and telecom carriers. Revenue from social and web games operated through third party game platforms are recognized upon consumption of the in-game premium features with the amount net of remittance to the third party game platforms as the Group does not set the pricing of the in-game currency of the third party game platforms. Revenue from TV games operated through telecom carriers and certain MMOGS operated on the third party game platforms are recognized upon consumption of the in-game premium features based on the gross amount paid, as the Group is the primary obligor of the games operation. The remittance to the telecom carrier and third party game platforms is recognized as costs of revenue when incurred. Licensing revenue The Group licenses certain proprietary online games to other game operators and receives license fees and royalty income in connection with their operation of the games. License fee revenue is recognized over the license period upon the commercialization of the game in the licensees’ market. Royalty income is recognized when earned, provided that collectability is reasonably assured. Other revenues Other revenues mainly include those generated from training. Training revenue include revenues generated from providing technical training to college students on mobile application programming. These revenues are recognized when delivery of the service has occurred or when services have been rendered and the collection of the related fees is reasonably assured. |
Advances from customers and deferred revenue | <16>Advances from customers and deferred revenue Online points that have been sold but not activated are recognized as advances from customers. Online points that have been activated but for which online game services will be rendered in the future are recognized as deferred revenue. Deferred revenue is recognized as income based upon the actual consumption of in-game premium features by players or when the likelihood that the Group would provide further online game service to those customers is remote. The Group licenses proprietary games to operators in other countries and receives license fees and royalty income. License fee received in advance of the monetization of the game is recorded in advances from operators. |
Convertible note and warrants | <17>Convertible note 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 The Group has early adopted ASU 2015-3, simplifying the presentation of debt issuance costs to present the occurred debt issuance costs as a direct deduction from the convertible note rather than as an assets. 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 pricing 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 historic 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 revenue | <18>Cost of revenue Cost of revenue consists primarily of online game royalties, payroll, sharing to third party game platform, telecom carries and other suppliers, depreciation, maintenance and rental of Internet data center sites, depreciation and amortization of computer equipment and software, production costs for prepaid game cards, intangible assets amortization 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. To date, the Group has essentially completed its software development concurrently with the establishment of technological feasibility, and, accordingly, no costs have been 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 expenses, payroll, depreciation charge and other overhead expenses 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 RMB52.8 million, RMB22.5 million and RMB3.2 million (US$0.5 million) for the years ended December 31, 2013, 2014 and 2015, 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 RMB 1.0 million, RMB1.2 million and RMB0.3 million (US$0.04 million) for the years ended December 31, 2013, 2014 and 2015, respectively, which were recorded in other income (expense) 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-Merton option pricing model (the “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 are 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. 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 (“US”) 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. |
Leases | <23>Leases Leases for which substantially all of the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received by the Group from the leasing company are charged to the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease periods. |
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 non-controlling interests | <25> Redeemable non-controlling interests Redeemable non-controlling interests are equity interests of our consolidated subsidiary not attribute to the Group that have 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 non-controlling 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 is 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. However, ordinary share equivalents 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 the PRC, 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, 2014 and 2015, 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 Company considers the principal or most advantageous market in which it would transact and it 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. The 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, restricted cash, short-term investment, accounts receivable, accounts payable, warrants, convertible notes, long-term accounts payable and long-term debt. The carrying value of the Group’s cash and cash equivalents, restricted cash, short-term investment, accounts receivable and accounts payable 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. The carrying value of long-term accounts payable approximates its fair value as the impact to discount the long-term payable with interest rate is insignificant. The carrying value of long-term debt approximates its fair value as its interest rates is at the same level of the current market yield for comparable loans. The carrying value of convertible notes as of December 31, 2015 was RMB129.3 million (US$20.0 millions) and the fair value of the convertible notes was approximately RMB193.5 million (US$29.8 million) as of December 31, 2015. |
Recent accounting pronouncements | <32> Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard update on revenue recognition that will be applied to all contracts with customers. The update requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, deferring the effective date for ASU 2014-09 by one year, and thus, the new standard will be effective for fiscal years beginning after December 15, 2017, with early application permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The guidance allows for either a full retrospective or a modified retrospective transition method. The Company is currently assessing the impact that the guidance will have on the Company’s financial condition and results of operations. In February 2015, the FASB issued ASU 2015-02 to respond to stakeholders ‘concerns about the current accounting for consolidation of certain legal entities. Stakeholders expressed concerns that current generally accepted accounting principles (GAAP) might require a reporting entity to consolidate another legal entity in situations in which the reporting entity’s contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity’s voting rights, or the reporting entity is not exposed to a majority of the legal entity’s economic benefits or obligations. Financial statement users asserted that in certain of those situations in which consolidation is ultimately required, deconsolidated financial statements are necessary to better analyze the reporting entity’s economic and operational results. Previously, the FASB issued an indefinite deferral for certain entities to partially address those concerns. However, the amendments in this Update rescind that deferral and address those concerns by making changes to the consolidation guidance. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Group is in the process of evaluating the impact of the standard on its consolidated financial statements. In April 2015, the FASB issued ASU 2015-03 to simplify presentation of debt issuance costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Group early adopted this guidance as of December 31, 2015. The adoption of this guidance did not have a material effect on the Company’s financial condition, results of operations and cash flows. In May 2015, the FASB issued ASU 2015-07, Topic 820, and Fair Value Measurement, which permits a reporting entity, as a practical expedient, to measure the fair value of certain investments using the net asset value per share of the investment. Currently, investments valued using the practical expedient are categorized within the fair value hierarchy on the basis of whether the investment is redeemable with the investee at net asset value on the measurement date, never redeemable with the investee at net asset value, or redeemable with the investee at net asset value at a future date. For investments that are redeemable with the investee at a future date, a reporting entity must take into account the length of time until those investments become redeemable to determine the classification within the fair value hierarchy. In November 2015, the FASB issued ASU 2015-17, to simplify the presentation of deferred income taxes, which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. The Group has adopted this guidance during the year ended December 31, 2015 with a retroactive application. The adoption of this guidance did not have a material effect on the Company’s financial condition, results of operations and cash flows. In January 2016, the FASB issued ASU 2016-01, to improve and to achieve convergence of their respective standards on the accounting for financial instruments and enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Board also is addressing measurement of credit losses on financial assets in a separate project. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance did not have a material effect on the Company’s financial condition, results of operations and cash flows. In February 2016, the FASB issued ASU 2016-02, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Group is in the process of evaluating the impact of the standard on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-06, which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this Update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. An entity should apply the amendments in this Update on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Group is in the process of evaluating the impact of adoption of this guidance on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-07, which eliminates eliminate the requirement to retroactively adopt the equity method of accounting. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. The Group is in the process of evaluating the impact of adoption of this guidance on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public entities, the ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption will be permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance. The Group is in the process of evaluating the impact of adoption of this guidance on the consolidated financial statements. |
ORGANIZATION AND NATURE OF OP44
ORGANIZATION AND NATURE OF OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Company's Principal Subsidiaries and VIE Subsidiaries | The Company’s principal subsidiaries and VIE subsidiaries are as follows as of December 31, 2015: Name of entity Date of Place of incorporation Legal Ownership Subsidiaries: GameNow.net (Hong Kong) Limited (“ GameNow Hong Kong January-00 Hong Kong 100% The9 Computer Technology Consulting (Shanghai) Co., Ltd. (“ The9 Computer June-00 PRC 100% China The9 Interactive Limited (“ C9I October-03 Hong Kong 100% China The9 Interactive (Shanghai) Limited (“ C9I Shanghai February-05 PRC 100% 9Dream Limited ( “9Dream” July-05 Hong Kong 100% China The9 Interactive (Beijing) Limited (“ C9I Beijing March-07 PRC 100% Jiu Jing Era Information Technology (Beijing) Limited (“ Jiu Jing”) April-07 PRC 100% Jiu Tuo (Shanghai) Information Technology Limited (“Jiu Tuo”) July-07 PRC 100% China Crown Technology Limited (“China Crown Technology”) November-07 Hong Kong 100% Asian Way Development Limited (“Asian Way”) November-07 Hong Kong 100% New Star International Development Limited (“New Star”) January-08 Hong Kong 100% The9 Development Center Limited (“TDC”) June-08 Hong Kong 100% TDC (Asia) Limited (“TDC Asia”) April-09 British Virgin Islands 100% Red 5 Studios, Inc. ( “Red 5” June-05 USA 73% Red 5 Singapore Pte. Ltd. (“ Red 5 Singapore April-10 Singapore 73% The9 Interactive, Inc. (“ The9 Interactive June-10 USA 100% The9 Korea Co., Ltd. (“ The9 Korea February-11 Korea 100% Red 5 Korea LLC. (“ Red 5 Korea November-10 Korea 100% City Channel Ltd. (“City Channel”) June-06 Hong Kong 100% Variable interest entity: Shanghai The9 Information Technology Co., Ltd. (“ Shanghai IT September-00 PRC N/A (Note 4) Shanghai Mengxiang Hulian Digital Technology Co., Ltd. (“ Mengxiang Hulian December-11 PRC 20% (Note 4) Shanghai Fire Wing Information Technology Co., Ltd. (“ Shanghai Fire Wing January-12 PRC N/A Subsidiaries of Shanghai IT: Name of entity Date of Place of incorporation Legal Ownership Held Shanghai Jiushi Interactive Network Technology Co., Ltd. ( “Jiushi” July-11 PRC 80% Shanghai The9 Education Technology Co., Ltd. (“ The9 Education May-12 PRC 70% Beijing Chuan Yun Interactive Network Technology Co., Ltd. (“Chuan Yun”) February-14 PRC 100% Shanghai Jiu Chang Investment Co., Ltd. (“Jiu Chang”) December-14 PRC 100% Hangzhou Firerain network Technology Co., Ltd.(“HZ Firerain”) October- PRC 100% Shanghai Shencai Chengjiu information technology co., Ltd. (“SH Shencai”) May-15 PRC 100% Wuxi Chuang You Technology Co., Ltd. (“Chuang You”) July-15 PRC 100% |
PRINCIPAL ACCOUNTING POLICIES45
PRINCIPAL ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Estimated Useful Lives | Depreciation and amortization are computed using the straight-line method over the following estimated useful lives: Leasehold improvements the shorter of respective term of the leases or the estimated useful lives of the leasehold improvements 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, 2015 | |
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, December 31, December 31, RMB RMB US$ (Note 3) Total assets 130,055,790 141,614,244 21,861,472 Total liabilities 231,634,266 222,151,400 34,294,267 December 31, December 31, December 31, December 31, RMB RMB RMB US$ (Note 3) Net Revenue 86,574,297 42,697,861 34,390,944 5,309,047 Net profit (loss) (201,412,786 ) 101,628,848 (95,285,846 ) (14,709,600 ) |
PREPAYMENTS AND OTHER CURRENT47
PREPAYMENTS AND OTHER CURRENT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Prepayments and Other Current Assets | Prepayments and other current assets are as follows: December 31, December 31, December 31, RMB RMB US$ (Note 3) Receivable from a former equity method investee 4,500,000 — — Consideration receivable for a disposal of a subsidiary 12,750,575 — — Receivable from a supplier (Note 14) 17,927,763 — — Prepayments and deposits 10,929,101 3,220,205 497,114 Employee advances 1,963,858 2,717,027 419,437 Others 8,502,024 3,525,917 544,307 56,573,321 9,463,149 1,460,858 |
INVESTMENTS IN EQUITY INVESTE48
INVESTMENTS IN EQUITY INVESTEES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Investments in Equity Investees | The Group’s investments in equity investees comprise the following: December 31, December 31, December 31, RMB RMB US$ (Note 3) Investments accounted for under equity method: ZTE9 network technology Co., Ltd., Wuxi (“ZTE9”) 67,020 — — System Link Corporation Limited (“System Link”)<1> — 215,631,351 33,287,744 Shanghai Jiucheng Advertisement Co., Ltd. (“Jiucheng Advertisement”) <2> — 12,751,438 1,968,483 Investments accounted for under cost method: Shanghai Institute of Visual Art of Fudan University (“SIVA”) 10,000,000 10,000,000 1,543,734 G10 Entertainment Corporation (“G10”) Ltd. 24,892,921 24,892,921 3,842,805 CrowdStar Inc. (“Crowdstar”) 1,627,099 1,627,099 251,181 Tandem Fund II, L.P. (“Tandem Fund”) 2,636,885 2,636,885 407,065 Total 39,223,925 267,539,694 41,301,012 |
PROPERTY, EQUIPMENT AND SOFTW49
PROPERTY, EQUIPMENT AND SOFTWARE, NET (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
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, RMB RMB US$ (Note 3) Office buildings 67,881,751 69,276,652 10,694,472 Computer and equipment 123,158,909 118,052,297 18,224,134 Leasehold improvements 12,571,448 11,008,880 1,699,478 Office furniture and fixtures 10,395,482 11,355,064 1,752,920 Motor vehicles 11,092,117 10,889,632 1,681,070 Software 18,175,695 18,424,967 2,844,325 Less: accumulated depreciation and amortization (206,929,172 ) (205,160,974 ) (31,671,397 ) Net book value 36,346,230 33,846,518 5,225,002 |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the years ended December 31, 2013, 2014 and 2015 are as follows: Gross Accumulated Net Amount RMB RMB RMB Balance at January 1, 2013 10,011,247 — 10,011,247 Translation difference (300,393 ) — (300,393 ) Balance at December 31, 2013 9,710,854 — 9,710,854 Translation difference 35,200 — 35,200 Balance at December 31, 2014 9,746,054 — 9,746,054 Translation difference 596,640 — 596,640 Balance at December 31, 2015 10,342,694 — 10,342,694 Balance at December 31, 2015 US$ (Note 3) 1,596,637 — 1,596,637 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Gross Carrying Amount, Accumulated Amortization and Net Book Value of Intangible Assets | Gross carrying amount, accumulated amortization and net book value of the intangible assets as of December 31, 2014 and 2015 are as follows: December 31, December 31, December 31, RMB RMB US$ (Note 3) Acquired game licenses 146,925,649 146,925,649 22,681,412 Acquired game development cost 12,285,000 12,285,000 1,896,477 Less: Accumulated amortization (55,738,585 ) (74,875,427 ) (11,558,774 ) Impairment provision (4,394,381 ) (4,394,381 ) (678,376 ) Translation difference (1,538,342 ) (1,064,355 ) (164,308 ) Net book value of intangible assets subject to amortization 97,539,341 78,876,486 12,176,431 |
Estimated Aggregate Amortization Expense from Existing Intangible Assets | As of December 31, 2015, the estimated aggregate amortization expense from existing intangible assets for each of the five succeeding fiscal years is as follows: RMB US$ (Note 3) 2016 21,964,146 3,390,680 2017 21,964,146 3,390,680 2018 21,964,146 3,390,680 2019 12,984,048 2,004,391 2020 — — Total 78,876,486 12,176,431 |
Land use right | |
Gross Carrying Amount, Accumulated Amortization and Net Book Value of Intangible Assets | Gross carrying amount, accumulated amortization and net book value of land use right are as follows: December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB US$ (Note 3) Land use right 85,160,348 85,160,348 13,146,492 Less: accumulated amortization (14,887,052 ) (16,807,962 ) (2,594,702 ) Net book value 70,273,296 68,352,386 10,551,790 |
OTHER LONG-LIVED ASSETS (Tables
OTHER LONG-LIVED ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Other Long-Lived Assets | Other long-lived assets are as follows: December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB US$ (Note 3) Receivable from WoW game points refund agent (Note 19) 7,894,836 — — Others 453,573 1,879,021 290,071 Total 8,348,409 1,879,021 290,071 |
ALLOWANCE (REVERSAL OF ALLOWA53
ALLOWANCE (REVERSAL OF ALLOWANCE) OF LONG-TERM RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Schedule of Allowance (Reversal of Allowance) of Long-Term Receivable | December 31, 2013 December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB RMB US$ (Note 3) Allowance (reversal of allowance) of receivables 17,927,763 (17,927,763 ) — — Total 17,927,763 (17,927,763 ) — — |
IMPAIRMENT ON PREPAYMENT FOR 54
IMPAIRMENT ON PREPAYMENT FOR EQUIPMENT AND OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Schedule of Impairment on Prepayment for Equipment and Other Assets | December 31, December 31, December 31, December 31, RMB RMB RMB US$ (Note 3) Impairment on prepayment for equipment and other assets 11,813,313 3,555,845 — — Total 11,813,313 3,555,845 — — |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Available-for-Sale Investment Measured at Fair Value on a Recurring Basis Using Significant Level 3 Inputs | The following table presents the changes in the available-for-sale investment that were measured at fair value on a recurring basis using significant Level 3 inputs for the year ended December 31, 2013, 2014 and 2015. The Group did not have other assets or liabilities measured at fair value on a recurring basis using significant Level 3 inputs during the years ended December 31, 2013, 2014 and 2015. Fair Value Measurements Using Significant Unobservable Inputs (Level 3) 2013 2014 2015 RMB RMB RMB Balance at the beginning of the year 6,285,500 — — Unrealized loss recognized in other comprehensive income (16,600 ) — — Impairment losses included in earnings (6,268,900 ) — — Balance at the end of the year — — — |
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 the year 2015 (Note 22). 2015 2015 RMB US$ (Note 3) Balance at issuance date 57,285,780 8,843,400 Unrealized loss recognized in other comprehensive income 7,129,161 1,100,553 Balance at the end of the year 64,414,941 9,943,953 |
Assets and Liabilities Measured at Fair Value on Non-Recurring Basis | The following table displays assets and liabilities measured at fair value on a non-recurring basis for the years ended December 31, 2013, 2014 and 2015, respectively. Fair Value Measurements at Reporting Date Using Year Ended Quoted Prices Significant (Level 2) Significant (Level 3) Total Losses (gains) RMB RMB RMB RMB Receivable from WoW game points refund agent (Note 19) — — — — 8,439,580 Total — — — — 8,439,580 Fair Value Measurements at Reporting Date Using Year Ended Quoted Prices Significant (Level 2) Significant (Level 3) Total Losses (gains) RMB RMB RMB RMB Prepayment for other assets (Note 15) — — — — 3,555,845 Total — — — — 3,555,845 Fair Value Measurements at Reporting Date Using Year Ended Quoted Prices Significant (Level 2) Significant (Level 3) Total RMB RMB RMB RMB Prepayment for equipment (Note 15) 11,813,313 Long-term receivables (Note 14) — — — — 17,927,763 Total — — — — 29,741,076 |
TAXATION (Tables)
TAXATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
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, 2013 2014 2015 2015 RMB RMB RMB US$ (Note 3) Current income tax expense — — — — China — — — — Other jurisdictions — — — — Deferred taxation 134,391,290 (21,011,979 ) 6,324,015 976,260 China 70,063,810 (62,051,840 ) (31,447,143 ) (4,854,602 ) Other jurisdictions 64,327,480 41,039,861 37,771,158 5,830,862 Change in valuation allowance (134,391,290 ) 21,011,979 (6,324,015 ) (976,260 ) China (70,063,810 ) 62,051,840 31,447,143 4,854,602 Other jurisdictions (64,327,480 ) (41,039,861 ) (37,771,158 ) (5,830,862 ) Income tax (expense) benefit — — — — |
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 PRC Statutory EIT rate 25 % 25 % 25 % Effect of different tax rates in other jurisdictions (2 %) 10 % (1 %) Effect of future tax rate change 1 % (1 %) (1 %) Change of prior year deferred tax assets 1 % (0 %) (1 %) Change of valuation allowance (24 %) (16 %) (2 %) (Income) not subject to tax and non-deductible expenses, net 0 % 2 % (1 %) Effect of expired net operating loss (1 %) (20 %) (19 %) Effective EIT rate 0 % (0 %) 0 % |
Significant Components of Deferred Tax Assets and Liabilities | Significant components of deferred tax assets December 31, December 31, December 31, RMB RMB US$ (Note 3) Temporary differences related to expenses and accruals 1,926,262 3,285,994 507,271 Temporary differences related to provision for advances to suppliers 1,621,968 888,961 137,232 Temporary differences related to provision for doubtful accounts 191,012 1,510,153 233,126 Other 5,609,163 5,900,763 910,921 Temporary differences related to depreciation, amortization, and impairment of equipment and intangible assets 11,710,677 12,728,642 1,964,964 Startup expenses and advertising fee 25,761,300 26,010,125 4,015,271 Temporary differences related to research and development credits 988,010 1,045,470 161,393 Temporary differences related to equity investment 1,795,745 1,531,567 236,433 Foreign tax credits 15,113,930 16,039,192 2,476,025 Temporary differences related to provision for prepayment for equipment 5,000,000 5,000,000 771,867 Tax loss carry forwards 492,204,751 505,784,660 78,079,697 Total deferred tax assets 561,922,818 579,725,527 89,494,200 Less: Valuation allowance (561,922,818 ) (579,725,527 ) (89,494,200 ) Total deferred tax assets — — — Significant components of deferred tax liabilities December December December RMB RMB US$ (Note 3) Temporary differences related to amortization of intangible assets 5,362,427 5,690,705 878,494 |
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 RMB RMB US$ (Note 3) Balance at January 1 582,934,797 561,922,818 86,745,935 Increase (decrease) in valuation allowance (21,011,979 ) 17,802,709 2,748,265 Balance at December 31 561,922,818 579,725,527 89,494,200 |
ACCRUED EXPENSES AND OTHER CU57
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Other Payables and Accruals | Other payables and accruals are as follows: December 31, 2014 December 31, 2015 December 31, 2015 RMB RMB US$ (Note 3) Staff cost related payables 18,758,212 15,705,966 2,424,583 Professional services 12,312,998 12,070,384 1,863,346 Product development services 5,820,394 1,648,410 254,471 Marketing and promotion 452,920 3,988 616 Others 4,528,327 6,435,676 993,498 41,872,851 35,864,424 5,536,514 |
CONVERTIBLE NOTES (Tables)
CONVERTIBLE NOTES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
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 Note Principle Amount Conversion Price Tranche A US$22,250,000 US$2.6 Tranche B US$13,350,000 US$5.2 Tranche C US$4,450,000 US$7.8 |
Convertible Notes at Net Carrying Value at Date of Issuance | The convertible notes are recorded at net carrying value at the date of issuance as follows: US$ RMB Principle Amount 40,050,000 260,068,680 Less: Fair value allocated to warrants (Note 22) 8,821,883 57,285,780 Beneficial conversion feature 8,112,556 52,679,692 Issuance Cost 3,200,000 20,779,520 Net carrying value 19,915,561 129,323,688 |
WARRANTS (Tables)
WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Warrants Issued in Conjunction with Convertible Notes | The warrants issued in conjunction with the convertible notes expire November 24, 2020 and are exercisable at any time after the commitment date to purchase up to 4,778,846 shares of the Company’s ADS as follows: Warrants Principle Amount Exercise Price Tranche I US$5,000,000 US$1.5 Tranche A US$2,750,000 US$2.6 Tranche B US$1,650,000 US$5.2 Tranche C US$550,000 US$7.8 |
Assumptions Used in Black-Scholes Option Pricing Model for Warrants | The assumptions used in the Black-Scholes option pricing model for the warrants were as follows: Risk-free interest rate 1.71 % Expected volatility of common stock 63.25 % Dividend yield 0.00 % Expected life of warrants 5 years |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Three Tranches of Shares Option to Certain Directors, Officers and Key Employees with Predetermined Market Conditions | On November 17, 2015, The Group granted three tranches of share options to certain directors, officers and key employees totaling 8,200,000 shares with predetermined market conditions as summarized below: Options Target Price Number of Tranche I 2.6 4,555,556 Tranche II 5.2 2,733,334 Tranche III 7.8 911,110 Total 8,200,000 |
Stock Options | |
Share Option Activities | The following table summarizes the Company’s share option activities with its employees and directors: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 3,070,491 US$ 2.41 1.03 — Granted 1,910,000 Exercised — Forfeited (302,773 ) US$ 4.52 Outstanding at December 31, 2015 4,677,718 US$ 1.53 4.41 US$ 7,577,903 Vested and expected to vest at December 31, 2015 4,677,718 US$ 1.53 4.41 US$ 7,577,903 Exercisable at December 31, 2015 3,085,410 US$ 1.53 4.42 US$ 4,998,364 |
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: For the year ended For the year ended Risk-free interest rate 0.35 % 1.22 % Expected life (years) 3.25 3.35 Expected dividend yield 0 0 Volatility 59.39 % 59.74 % Fair value of options at grant date US$ 0.99 US$ 0.65 |
Market Condition | |
Share Option Activities | Activities relating to share options subject to with only Predetermined Market Condition are summarized as follows: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 — — Granted 7,000,000 US$ 1.53 Exercised — Forfeited — Outstanding at December 31, 2015 7,000,000 US$ 1.53 4.88 US$ 11,340,000 Vested and expected to vest at December 31, 2015 7,000,000 US$ 1.53 4.88 US$ 11,340,000 Exercisable at December 31, 2015 3,888,889 US$ 1.53 4.88 US$ 6,300,000 |
Fair Value of Options Valuation Assumptions | The fair values for these shares options is calculated using the Monte Carlo Simulation mode with the key following assumption: Risk-free interest rate 1.66 % Expected life (years) 4.49-5.0 Expected dividend yield 0 Volatility 62 % Fair value of options at grant date US$ 0.60-US$0.69 |
Predetermined Market Condition and Service Conditions | |
Share Option Activities | The share options subject to both Predetermined Market Condition and service conditions are as followed: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 — — Granted: 1,200,000 US$ 1.53 — Exercised Forfeited — Outstanding at December 31, 2015 1,200,000 US$ 1.53 4.88 US$ 1,944,000 Vested and expected to vest at December 31, 2015 1,200,000 US$ 1.53 4.88 US$ 1,944,000 Exercisable at December 31, 2015 18,530 US$ 1.53 4.88 US$ 30,019 |
Fair Value of Options Valuation Assumptions | The fair values of the awards that are based on the market condition were calculated using the Monte Carlo Simulation mode with the key following assumption: Risk-free interest rate 1.66 % Expected life (years) 4.49-5.0 Expected dividend yield 0 Volatility 62 % Fair value of options at grant date US$ 0.60-US$0.71 |
Modification of Share-Based Awards | |
Fair Value of Options Valuation Assumptions | The fair value of options, of which exercise prices were modified in April 2013, June 2015 and November 2015, were measured on the modification date based on the Black-Scholes option pricing model with the following assumptions: For the year ended December 31, 2013 For the year ended December 31, 2015 Risk-free interest rate 0.09%-0.24 % 0.50%-1.12 % Expected remaining life (years) 0.57-2.20 1.32-2.61 Expected dividend yield 0 0 Volatility 36%-65 % 64%-71 % Fair value of incremental cost US$ 0.16-US$0.43 US$ 0.21-US$0.73 |
Ordinary granted to Incsight Limited (''Incsight'') | |
Activity of Non-vested Shares | The following table reflected the activity of non-vested shares for the year ended December 31, 2015: Number of Options Weighted- Non-vested at January 1, 2015 1,500,000 US$ 6.48 Granted — — Forfeited — — Vested (500,000 ) US$ 6.48 Non-vested at December 31, 2015 1,000,000 US$ 6.48 |
Stock options and ordinary shares granted by Red 5 | |
Activity of Non-vested Shares | The following table reflected the activity of non-vested shares for the year ended December 31, 2015: Number of Options Weighted- Non-vested at January 1, 2015 612,244 US$ 0.01193 Granted — Forfeited — Vested (612,244 ) US$ 0.01193 Non-vested at December 31, 2015 — US$ 0.01193 |
Share Option Activities | The following table summarizes the Red 5’s share option activities with its employees and directors: Number of Options Weighted- Weighted- Aggregate Outstanding at January 1, 2015 5,550,357 US$ 0.122 2.61 US$ 1,133,349 Granted 9,228,621 Exercised (300,000 ) US$ 0.045 US$ 1,200 Forfeited (3,829,085 ) US$ 0.120 Outstanding at December 31, 2015 10,649,893 US$ 0.061 4.73 Nil Vested and expected to vest at December 31, 2015 10,649,893 US$ 0.061 4.73 Nil Exercisable at December 31, 2015 3,422,692 US$ 0.087 3.67 Nil |
Fair Value of Options Valuation Assumptions | The fair value of options granted ranged from US$0.012 to US$0.149, measured on the grant date based on the Black-Scholes option pricing model with assumptions made regarding expected term and volatility, risk-free interest rate and dividend yield: Risk-free interest rate 0.78%-5.00 % Expected life (years) 4.00-6.00 Expected dividend yield 0 Volatility 38.89%-69.36 % |
LOSS PER SHARE (Tables)
LOSS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Loss Per Share Calculation | Loss per share is calculated as follows: For the year For the year For the year For the year RMB RMB RMB US$ (Note 3) Numerator: Net loss attributable to ordinary shareholders before accretion on redeemable noncontrolling interest (526,261,572 ) (86,622,470 ) (304,828,354 ) (47,057,389 ) Accretion on redeemable noncontrolling interest — (21,076,744 ) (79,805,706 ) (12,319,878 ) Net loss attributable to ordinary shareholders (526,261,572 ) (107,699,214 ) (384,634,060 ) (59,377,267 ) Denominator: Denominator for basic and diluted loss per share – weighted-average shares outstanding 23,174,823 23,164,695 23,235,848 23,235,848 Loss per share - Basic and diluted (22.71 ) (4.65 ) (16.55 ) (2.56 ) |
NONCONTROLLING INTEREST (Tables
NONCONTROLLING INTEREST (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
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, 2013, 2014 and 2015. December 31, 2013 December 31, 2014 December 31, 2015 RMB RMB RMB Net loss attributable to The9 Limited (526,261,572 ) (86,622,470 ) (304,828,354 ) Transfers (to) from the noncontrolling interest Increase in The9 Limited’s additional paid-in capital for issuance of shares by Red 5 upon stock option exercise 25,992 552,426 75,563 Change in equity interest attributable to non-controlling interest due to restructuring of Red 5 Singapore (1) — 15,068,103 Change in The9 Limited’s additional paid-in capital for adjustment on noncontrolling interest due to change in ownership interest as a result of loan conversion (2) — (31,784,850 ) — 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 3,072,133 (42,692,211 ) 80,903 Change from net loss attributable to The9 Limited and transfers (to) from noncontrolling interests (523,163,447 ) (145,479,002 ) (304,671,888 ) (1) In August 2014, Red 5 issued 27,438,952 Series B redeemable convertible preferred shares of Red 5 to a new investor (see Note 31). As the license to publish Firefall belongs to Red 5 Singapore (Note 11), as a condition for the investment by the new investor, the Group is required to transfer the license to Red 5. As such, in June 2014, the Group transferred its equity interests in Red 5 Singapore, a wholly owned subsidiary of the Group to Red 5, a 79.2% owned subsidiary at a nominal price. At the time of transfer, 20.8% of the accumulated deficit of Red 5 Singapore, amounted to RMB 15,068,103, was attributable to the noncontrolling interest of Red 5 with no consideration, which was recorded as an equity transaction in the Consolidated Statements of Changes in Equity. (2) In August 2014, the Group converted its convertible loan and certain other loans due from Red 5 with a book value of US$50.0 million (RMB307.6 million), into 63,301,276 common shares of Red 5. The equity of Red 5 increased by RMB307.6 million while the impact attributable to noncontrolling interest of Red 5 was RMB31,784,850 as a result of the loan conversion. |
REDEEMABLE NON-CONTROLLING IN63
REDEEMABLE NON-CONTROLLING INTEREST (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Reconciliation of Redeemable Noncontrolling Interest | A reconciliation of Redeemable noncontrolling interest is as follows: Year ended December 31, 2014 2015 Redeemable noncontrolling interest opening balance — 131,497,104 Issuance of Redeemable noncontrolling interest 131,296,977 — Net loss attributable to redeemable noncontrolling interest (20,876,617 ) (32,697,713 ) Accretion of Redeemable noncontrolling interest 21,076,744 79,805,706 Redeemable noncontrolling interest ending balance 131,497,104 178,605,097 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Future Minimum Lease Payments for Non-cancellable Operating Leases | Future minimum lease payments for non-cancellable operating leases as of December 31, 2015 are as follows: RMB US$ (Note 3) 2016 8,389,540 1,295,122 2017 7,159,779 1,105,279 2018 6,819,782 1,052,793 2019 6,497,790 1,003,086 2020 5,414,825 835,905 34,281,716 5,292,185 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
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, 2013, 2014 and 2015: 2013 2014 2015 2015 RMB RMB RMB US$ (Note 3) PRC 85,483,458 41,969,350 33,201,421 5,125,416 North America 13,135,914 14,906,530 8,382,753 1,294,074 Other areas 6,156,697 7,401,011 4,827,157 745,185 Total 104,776,069 64,276,891 46,411,331 7,164,675 |
Company's Principal Subsidiarie
Company's Principal Subsidiaries and VIE Subsidiaries (Detail) | 12 Months Ended |
Dec. 31, 2015 | |
GameNow.net (Hong Kong) Limited ("GameNow Hong Kong") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2000-01 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
The9 Computer Technology Consulting (Shanghai) Co., Ltd. ("The9 Computer") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2000-06 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
China The9 Interactive Limited ("C9I") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2003-10 |
Place of incorporation | 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 incorporation | 2005-02 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
9Dream Limited ("9Dream") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2005-07 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
China The9 Interactive (Beijing) Limited ("C9I Beijing") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2007-03 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Jiu Jing Era Information Technology (Beijing) Limited ("Jiu Jing") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2007-04 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Jiu Tuo (Shanghai) Information Technology Limited ("Jiu Tuo") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2007-07 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
China Crown Technology Limited ("China Crown Technology") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2007-11 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
Asian Way Development Limited ("Asian Way") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2007-11 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
New Star International Development Limited ("New Star") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2008-01 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
The9 Development Center Limited ("TDC") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2008-06 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
TDC (Asia) Limited ("TDC Asia") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2009-04 |
Place of incorporation | British Virgin Islands |
Legal Ownership | 100.00% |
Red 5 Studios, Inc. ("Red 5") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2005-06 |
Place of incorporation | USA |
Legal Ownership | 73.00% |
Red 5 Singapore Pte. Ltd. ("Red 5 Singapore") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2010-04 |
Place of incorporation | Singapore |
Legal Ownership | 73.00% |
The9 Interactive, Inc. ("The9 Interactive") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2010-06 |
Place of incorporation | USA |
Legal Ownership | 100.00% |
The9 Korea Co., Ltd. ("The9 Korea") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2011-02 |
Place of incorporation | Korea |
Legal Ownership | 100.00% |
Red 5 Korea, LLC ("Red 5 Korea") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2010-11 |
Place of incorporation | Korea |
Legal Ownership | 100.00% |
City Channel Ltd. ("City Channel") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2006-06 |
Place of incorporation | Hong Kong |
Legal Ownership | 100.00% |
Shanghai The9 Information Technology Co., Ltd. ("Shanghai IT") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2000-09 |
Place of incorporation | PRC |
Shanghai Mengxiang Hulian Digital Technology Co., Ltd. ("Mengxiang Hulian") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2011-12 |
Place of incorporation | PRC |
Legal Ownership | 20.00% |
Shanghai Fire Wing Information Technology Co., Ltd. ("Shanghai Fire Wing") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2012-01 |
Place of incorporation | PRC |
Shanghai Jiushi Interactive Network Technology Co., Ltd. ("Jiushi") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2011-07 |
Place of incorporation | PRC |
Legal Ownership | 80.00% |
Shanghai The9 Education Technology Co., Ltd. ("The9 Education") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2012-05 |
Place of incorporation | PRC |
Legal Ownership | 70.00% |
Beijing Chuan Yun Interactive Network Technology Co., Ltd. ("Chuan Yun") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2014-02 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Shanghai Jiu Chang Investment Co., Ltd. ("Jiu Chang") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2014-12 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Hangzhou Firerain Network Technology Co. Ltd. ("HZ Firerain") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2008-10 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Shanghai Shencai Chengjiu Information Technology co., Ltd. ("SH Shencai") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2015-05 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Wuxi Chuang You Technology Co., Ltd. ("Chuang You") | |
Subsidiary of Limited Liability Company or Limited Partnership [Line Items] | |
Date of incorporation | 2015-07 |
Place of incorporation | PRC |
Legal Ownership | 100.00% |
Principal Accounting Policies -
Principal Accounting Policies - Additional Information (Detail) | 1 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2016CNY (¥) | Mar. 31, 2016USD ($) | Dec. 31, 2015CNY (¥)Segment | Dec. 31, 2015USD ($)Segment | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Jun. 30, 2014 | Dec. 31, 2012CNY (¥) | |
Significant Accounting Policies [Line Items] | |||||||||||
Accumulated deficit | ¥ (2,304,020,698) | ¥ (1,999,192,344) | $ (355,679,505) | ||||||||
Net loss | (354,181,969) | $ (54,676,274) | (128,942,408) | ¥ (562,916,605) | |||||||
Cash equivalents, bank deposits | 100,000 | $ 4,900,000 | |||||||||
Cash and cash equivalents | 49,010,541 | 181,482,300 | 156,987,201 | 7,565,924 | $ 28,016,039 | ¥ 554,278,809 | |||||
Allowance for doubtful accounts receivable | 711,908 | 109,900 | 76,246 | 1,224,425 | |||||||
Trading securities | 0 | 0 | 0 | ||||||||
Held-to-maturity securities | 0 | 0 | 0 | ||||||||
Advertising expenses | 3,200,000 | 500,000 | 22,500,000 | 52,800,000 | |||||||
Unrestricted government subsidies from local government | ¥ 300,000 | $ 40,000 | 1,200,000 | ¥ 1,000,000 | |||||||
Number of operating segment | Segment | 1 | 1 | |||||||||
Carrying value of convertible notes | ¥ 129,300,000 | 20,000,000 | |||||||||
Fair value of convertible notes | 193,500,000 | 29,800,000 | |||||||||
Red 5 Studios, Inc. ("Red 5") | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Equity interest | 79.20% | ||||||||||
Subsequent Event | Bank of Shanghai | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Credit facility | ¥ 50,000,000 | $ 7,700,000 | |||||||||
Proceeds from credit facility | ¥ 4,900,000 | $ 800,000 | |||||||||
Subsequent Event | MOU | Red 5 Studios, Inc. ("Red 5") | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Equity interest exchanged by company | 30.60% | 30.60% | |||||||||
Equity interest exchanged by other participating shareholders | 14.40% | 14.40% | |||||||||
Equity interest | 45.00% | 45.00% | |||||||||
Exchange value of Red 5 | 76,500,000 | ||||||||||
Controlled by PRC State Administration for Foreign Exchange, under authority of People's Bank of China | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Cash and cash equivalents | ¥ 48,100,000 | ¥ 150,500,000 | $ 7,400,000 | ||||||||
Minimum | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Premium features with a stated expiration time, range of days, revenue recognized ratably over the period starting from when the feature is first used to the expiration time | 1 day | 1 day | |||||||||
Share-based awards vesting period | 1 year | 1 year | |||||||||
Minimum | Subsequent Event | MOU | L&A International Holding Limited | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Ordinary shares value of L&A | $ 44,000,000 | ||||||||||
Maximum | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Premium features with a stated expiration time, range of days, revenue recognized ratably over the period starting from when the feature is first used to the expiration time | 180 days | 180 days | |||||||||
Perpetual features with no predetermined expiration, period over which revenue is recognized ratably over estimated average lives of the perpetual features | 1 year | 1 year | |||||||||
Share-based awards vesting period | 4 years | 4 years | |||||||||
Maximum | Subsequent Event | MOU | Red 5 Studios, Inc. ("Red 5") | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Price Adjustment Percentage | 15.00% | 15.00% | |||||||||
Maximum | Subsequent Event | MOU | L&A International Holding Limited | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Ordinary shares value of L&A | $ 60,000,000 | ||||||||||
Acquired game licenses | Minimum | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Intangible Assets, useful life | 2 years | 2 years | |||||||||
Acquired game licenses | Maximum | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Intangible Assets, useful life | 7 years | 7 years | |||||||||
Land use right | |||||||||||
Significant Accounting Policies [Line Items] | |||||||||||
Intangible Assets, useful life | 44 years | 44 years |
Estimated Useful Lives (Detail)
Estimated Useful Lives (Detail) | 12 Months Ended |
Dec. 31, 2015 | |
Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | the shorter of respective term of the leases or the estimated useful lives of the leasehold improvements |
Computer and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 3 years |
Computer and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 4 years |
Software | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 5 years |
Office furniture and fixtures | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 3 years |
Motor vehicles | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 5 years |
Office buildings | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 10 years |
Office buildings | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property plant and equipment, useful life | 20 years |
Convenience Translation - Addit
Convenience Translation - Additional Information (Detail) | Dec. 31, 2015¥ / $ |
Intercompany Foreign Currency Balance [Line Items] | |
Exchange rates used to translate amounts from RMB to US$ | 6.4778 |
Variable Interest Entities - Ad
Variable Interest Entities - Additional Information (Detail) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Variable Interest Entity [Line Items] | |||
Percentage of operating profit generated by the VIEs | 90.00% | ||
Initial term of exclusive technical service agreement | 20 years | ||
VIEs contribution on net revenue | 74.10% | 66.40% | 82.60% |
VIEs account on total assets | 26.30% | 25.10% | |
VIEs account on total liabilities | 37.00% | 72.20% | |
Shanghai Mengxiang Hulian Digital Technology Co., Ltd. ("Mengxiang Hulian") | |||
Variable Interest Entity [Line Items] | |||
Equity interest held | 20.00% | 20.00% |
Financial Information of VIE Su
Financial Information of VIE Subsidiaries included in Consolidated Financial Statements with Intercompany Balances and Transactions Eliminated (Detail) | 12 Months Ended | ||||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Dec. 31, 2015USD ($) | |
Variable Interest Entity [Line Items] | |||||
Total assets | ¥ 538,094,921 | ¥ 517,330,710 | $ 83,067,542 | ||
Total liabilities | 600,565,840 | 320,945,335 | 92,711,390 | ||
Net profit(loss) | (384,634,060) | $ (59,377,267) | (107,699,214) | ¥ (526,261,572) | |
Variable Interest Entity, Primary Beneficiary | Before elimination of intercompany balances and transactions | |||||
Variable Interest Entity [Line Items] | |||||
Total assets | 141,614,244 | 130,055,790 | 21,861,472 | ||
Total liabilities | 222,151,400 | 231,634,266 | $ 34,294,267 | ||
Net Revenue | 34,390,944 | 5,309,047 | 42,697,861 | 86,574,297 | |
Net profit(loss) | ¥ (95,285,846) | $ (14,709,600) | ¥ 101,628,848 | ¥ (201,412,786) |
Prepayment and Other Current As
Prepayment and Other Current Assets (Detail) | 12 Months Ended | ||
Dec. 31, 2014CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | |
Prepaid And Other Current Assets [Line Items] | |||
Receivable from a former equity method investee | ¥ 4,500,000 | ||
Consideration receivable for a disposal of a subsidiary | 12,750,575 | ||
Receivable from a supplier (Note 14) | 17,927,763 | ||
Prepayments and deposits | 10,929,101 | ¥ 3,220,205 | $ 497,114 |
Employee advances | 1,963,858 | 2,717,027 | 419,437 |
Others | 8,502,024 | 3,525,917 | 544,307 |
Prepayments and other current assets, total | ¥ 56,573,321 | ¥ 9,463,149 | $ 1,460,858 |
Prepaid Royalties and Deferre73
Prepaid Royalties and Deferred Costs - Additional Information (Detail) - CNY (¥) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items] | |||
Asset impairment loss | ¥ 8,439,580 | ¥ 3,555,845 | ¥ 29,741,076 |
Royalty Agreements | |||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items] | |||
Asset impairment loss | 0 | 0 | 10,400,000 |
Deferred cost impairment loss | ¥ 0 | ¥ 0 | ¥ 2,700,000 |
Investments in Equity Investe74
Investments in Equity Investees (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Schedule of Investments [Line Items] | |||
Equity method investments | ¥ 4,500,000 | ||
Investments in equity investees | ¥ 267,539,694 | $ 41,301,012 | 39,223,925 |
Shanghai Institute of Visual Art of Fudan University ("SIVA") | |||
Schedule of Investments [Line Items] | |||
Cost method investments | 10,000,000 | 1,543,734 | 10,000,000 |
G10 Entertainment Corporation ("G10") Ltd. | |||
Schedule of Investments [Line Items] | |||
Cost method investments | 24,892,921 | 3,842,805 | 24,892,921 |
"CrowdStar Inc. ("Crowdstar")" | |||
Schedule of Investments [Line Items] | |||
Cost method investments | 1,627,099 | 251,181 | 1,627,099 |
Tandem Fund II, L.P. ("Tandem Fund") | |||
Schedule of Investments [Line Items] | |||
Cost method investments | 2,636,885 | 407,065 | 2,636,885 |
ZTE9 network technology Co., Ltd., Wuxi ("ZTE9") | |||
Schedule of Investments [Line Items] | |||
Equity method investments | ¥ 67,020 | ||
System Link Corporation Limited ("System Link") | |||
Schedule of Investments [Line Items] | |||
Equity method investments | 215,631,351 | 33,287,744 | |
Shanghai Jiucheng Advertisement Co., Ltd. ("Shanghai Jiucheng Advertisement") | |||
Schedule of Investments [Line Items] | |||
Equity method investments | ¥ 12,751,438 | $ 1,968,483 |
Investments in Equity Investe75
Investments in Equity Investees - Additional Information (Detail) | 1 Months Ended | 12 Months Ended | ||||||||
Jun. 30, 2015CNY (¥) | Jun. 30, 2015USD ($) | Oct. 31, 2014CNY (¥) | Aug. 31, 2014USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Nov. 30, 2015 | Oct. 31, 2015 | |
Subsidiary, Sale of Stock [Line Items] | ||||||||||
License agreement, term | 5 years | |||||||||
Share of loss in equity method investments | ¥ (13,013,791) | $ (2,008,983) | ¥ (3,712,530) | ¥ (2,375,826) | ||||||
Share-based compensation expense | 34,007,629 | 5,249,873 | 3,672,300 | 29,237,416 | ||||||
Gain on disposal of subsidiaries | 3,339,394 | 515,514 | 165,392,382 | |||||||
Proceeds from disposal of equity method investees | 25,040,812 | |||||||||
Impairment charges of investment in equity investees | 0 | ¥ 0 | ¥ 41,700,000 | |||||||
Qihoo 360 Technology Co., Ltd., | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Investment in joint venture, ownership percentage | 50.00% | |||||||||
System Link Corporation Limited ("System Link") | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Investment in joint venture, ownership percentage | 50.00% | |||||||||
Payment for equity fund investment | 223,400,000 | 35,000,000 | ||||||||
Share of loss in equity method investments | (11,100,000) | (1,700,000) | ||||||||
Gain in other comprehensive income | 3,300,000 | 500,000 | ||||||||
Shanghai Jiucheng Advertisement Co., Ltd. ("Shanghai Jiucheng Advertisement") | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Investment in joint venture, ownership percentage | 42.00% | 46.70% | ||||||||
Sale of equity method investment ownership percentage | 33.30% | 33.30% | ||||||||
Consideration on sale of equity method investment | $ | $ 0 | |||||||||
Share-based compensation expense | ¥ 2,700,000 | |||||||||
Equity interest acquired in Fei Fan | 100.00% | |||||||||
Equity interest exchanged | 30.00% | |||||||||
Gain on disposal of subsidiaries | ¥ 3,300,000 | $ 500,000 | ||||||||
Equity Method Investee | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Sale of equity method investment ownership percentage | 100.00% | |||||||||
Gain on disposal of subsidiaries | ¥ 23,800,000 | |||||||||
Proceeds from disposal of equity method investees | 14,000,000 | |||||||||
Recovered loan receivables | ¥ 9,800,000 | |||||||||
Tandem Fund II, L.P. ("Tandem Fund") | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Sale of equity method investment ownership percentage | 75.00% | |||||||||
Gain on disposal of subsidiaries | ¥ 3,100,000 | |||||||||
Proceeds from disposal of equity method investees | ¥ 11,000,000 | |||||||||
Minimum | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
License agreements, expected payment | $ | $ 160,000,000 |
Available-for-Sale Investments
Available-for-Sale Investments - Additional Information (Detail) $ in Millions | 1 Months Ended | 12 Months Ended | ||||
Apr. 30, 2014CNY (¥) | Apr. 30, 2014USD ($) | Nov. 30, 2011USD ($)shares | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | Dec. 31, 2011 | |
Schedule of Available-for-sale Securities [Line Items] | ||||||
Gain on investment disposal | ¥ | ¥ 33,153,452 | |||||
Youjia | ||||||
Schedule of Available-for-sale Securities [Line Items] | ||||||
Redeemable and convertible preferred shares acquired | shares | 925,926 | |||||
Consideration for shares acquired | $ | $ 1 | |||||
Equity interest in investment | 6.67% | |||||
Consideration received on sale of investment | ¥ 6,300,000 | $ 1 | ||||
Gain on investment disposal | ¥ 6,300,000 | $ 1 |
Property, Equipment and Softw77
Property, Equipment and Software and Related Accumulated Depreciation and Amortization (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Property, Plant and Equipment [Line Items] | |||
Less: accumulated depreciation and amortization | ¥ (205,160,974) | $ (31,671,397) | ¥ (206,929,172) |
Property plant and equipment, net | 33,846,518 | 5,225,002 | 36,346,230 |
Office buildings | |||
Property, Plant and Equipment [Line Items] | |||
Property plant and equipment, gross | 69,276,652 | 10,694,472 | 67,881,751 |
Computer and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property plant and equipment, gross | 118,052,297 | 18,224,134 | 123,158,909 |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property plant and equipment, gross | 11,008,880 | 1,699,478 | 12,571,448 |
Office furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property plant and equipment, gross | 11,355,064 | 1,752,920 | 10,395,482 |
Motor vehicles | |||
Property, Plant and Equipment [Line Items] | |||
Property plant and equipment, gross | 10,889,632 | 1,681,070 | 11,092,117 |
Software | |||
Property, Plant and Equipment [Line Items] | |||
Property plant and equipment, gross | ¥ 18,424,967 | $ 2,844,325 | ¥ 18,175,695 |
Property, Equipment and Softw78
Property, Equipment and Software, Net - Additional Information (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization of property, equipment and software | ¥ 11,563,567 | $ 1,785,107 | ¥ 15,665,588 | ¥ 19,035,455 |
Impairment of long-lived assets | 5,725,046 | |||
Computer equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Impairment of long-lived assets | ¥ 0 | $ 0 | ¥ 0 | ¥ 1,900,000 |
Changes in Carrying Amount of G
Changes in Carrying Amount of Goodwill (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Goodwill [Line Items] | ||||
Gross Amount, Balance at beginning of period | ¥ 9,746,054 | ¥ 9,710,854 | ¥ 10,011,247 | |
Translation difference | 596,640 | 35,200 | (300,393) | |
Gross Amount, Balance at end of period | 10,342,694 | $ 1,596,637 | 9,746,054 | 9,710,854 |
Accumulated Impairment Loss, Balance at beginning of period | 0 | 0 | 0 | |
Accumulated Impairment Loss, Balance at end of period | 0 | 0 | 0 | 0 |
Net Amount, Balance at beginning of period | 9,746,054 | 9,710,854 | 10,011,247 | |
Translation difference | 596,640 | 35,200 | (300,393) | |
Net Amount, Balance at end of period | ¥ 10,342,694 | $ 1,596,637 | ¥ 9,746,054 | ¥ 9,710,854 |
Goodwill - Additional Informati
Goodwill - Additional Information (Detail) - CNY (¥) | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2010 | |
Goodwill [Line Items] | ||||
Goodwill recognized | ¥ 10,900,000 | |||
Goodwill impairment test | ¥ 0 | ¥ 0 | ¥ 0 |
Gross Carrying Amount, Accumula
Gross Carrying Amount, Accumulated Amortization and Net Book Value of Intangible Assets (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2015USD ($) | |
Finite-Lived Intangible Assets [Line Items] | ||||
Net book value of intangible assets subject to amortization | ¥ 78,876,486 | ¥ 97,539,341 | $ 12,176,431 | |
Amortizable intangible assets | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Acquired game licenses | 146,925,649 | 146,925,649 | 22,681,412 | |
Acquired game development cost | 12,285,000 | 12,285,000 | 1,896,477 | |
Less: Accumulated amortization | (74,875,427) | (55,738,585) | (11,558,774) | |
Impairment provision | (4,394,381) | (4,394,381) | (678,376) | |
Translation difference | (1,064,355) | $ (164,308) | (1,538,342) | |
Net book value of intangible assets subject to amortization | ¥ 78,876,486 | ¥ 97,539,341 | $ 12,176,431 |
Intangible Assets - Additional
Intangible Assets - Additional Information (Detail) ¥ in Millions, $ in Millions | 1 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2011USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Dec. 31, 2010USD ($) | Dec. 31, 2016CNY (¥) | Dec. 31, 2016USD ($) | |
Intangible Assets [Line Items] | ||||||||
Written off of acquired game licenses | ¥ 0 | $ 0 | ¥ 1.8 | |||||
License agreements, cash consideration | $ 24.7 | |||||||
License agreements, term | The initial term of the agreement is from February 2006 through the fifth anniversary of the first commercial release of the initial game. Thereafter, the agreement can be renewed in two-year terms. | The initial term of the agreement is from February 2006 through the fifth anniversary of the first commercial release of the initial game. Thereafter, the agreement can be renewed in two-year terms. | ||||||
License agreements, initial payments | $ 10 | |||||||
License agreements, addition payments | $ 12.7 | |||||||
Amortization expense related to intangible assets | ¥ 19.1 | $ 3 | 28.9 | ¥ 23 | ||||
Impairment of intangible assets | ¥ 0 | 0 | ¥ 0 | ¥ 3.8 | ||||
Scenario, Forecast | ||||||||
Intangible Assets [Line Items] | ||||||||
License agreements, current liabilities | ¥ 20 | $ 3.1 | ||||||
Backlog | ||||||||
Intangible Assets [Line Items] | ||||||||
Previously recognized backlog in relation to game development and license agreement acquired | $ 0.4 |
Estimated Aggregate Amortizatio
Estimated Aggregate Amortization Expense from Existing Intangible Assets (Detail) - Dec. 31, 2015 | CNY (¥) | USD ($) |
Expected Amortization Expense [Line Items] | ||
2,016 | ¥ 21,964,146 | $ 3,390,680 |
2,017 | 21,964,146 | 3,390,680 |
2,018 | 21,964,146 | 3,390,680 |
2,019 | 12,984,048 | 2,004,391 |
2,020 | 0 | 0 |
Total | ¥ 78,876,486 | $ 12,176,431 |
Gross Carrying Amount, Accumu84
Gross Carrying Amount, Accumulated Amortization and Net Book Value of Land Use Right (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Operating Leased Assets [Line Items] | |||
Land use right | ¥ 85,160,348 | $ 13,146,492 | ¥ 85,160,348 |
Less: accumulated amortization | (16,807,962) | (2,594,702) | (14,887,052) |
Net book value | ¥ 68,352,386 | $ 10,551,790 | ¥ 70,273,296 |
Land Use Right - Additional Inf
Land Use Right - Additional Information (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Operating Leased Assets [Line Items] | ||||
Amortization of land use right | ¥ 1,920,910 | $ 296,537 | ¥ 1,920,911 | ¥ 1,920,909 |
Other Long-Lived Assets (Detail
Other Long-Lived Assets (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Schedule of Other Assets [Line Items] | |||
Others | ¥ 1,879,021 | $ 290,071 | ¥ 453,573 |
Total | ¥ 1,879,021 | $ 290,071 | 8,348,409 |
World of Warcraft Game Points Refund Agent | |||
Schedule of Other Assets [Line Items] | |||
Long-term receivable, non current | ¥ 7,894,836 |
Schedule of Allowance (Reversal
Schedule of Allowance (Reversal of Allowance) of Long-Term Receivable (Detail) | 12 Months Ended | ||
Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | Dec. 31, 2013CNY (¥) | |
Allowance (Reversal of Allowance) of Long-Term Receivable [Line Items] | |||
Allowance (reversal of allowance) of receivables | ¥ (17,927,763) | $ (17,927,763) | ¥ 17,927,763 |
Total | ¥ (17,927,763) | $ (17,927,763) | ¥ 17,927,763 |
Allowance (Reversal of Allowa88
Allowance (Reversal of Allowance) of Long-Term Receivable - Additional Information (Detail) | 1 Months Ended | 12 Months Ended | |||||
Mar. 31, 2015CNY (¥) | Mar. 31, 2014CNY (¥) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | Dec. 31, 2013CNY (¥) | Dec. 31, 2015CNY (¥) | Dec. 31, 2011CNY (¥) | |
Allowance (Reversal of Allowance) of Long-Term Receivable [Line Items] | |||||||
Prepayment made to supplier | ¥ 11,800,000 | ¥ 20,000,000 | |||||
Refund of prepayment from supplier in first installment | ¥ 17,927,763 | ||||||
Allowance (reversal of allowance) of long-term receivables | ¥ (17,927,763) | $ (17,927,763) | ¥ 17,927,763 | ||||
Computers and equipment | |||||||
Allowance (Reversal of Allowance) of Long-Term Receivable [Line Items] | |||||||
Refund of prepayment from supplier in first installment | ¥ 17,900,000 | ¥ 2,000,000 | |||||
Impairment on prepaid amount receivable from supplier | ¥ 17,900,000 |
Schedule of Impairment on Prepa
Schedule of Impairment on Prepayment for Equipment and Other Assets (Detail) - CNY (¥) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment on prepayment for equipment and other assets | ¥ 3,555,845 | ¥ 11,813,313 |
Total | ¥ 3,555,845 | ¥ 11,813,313 |
Impairment on Prepayment for 90
Impairment on Prepayment for Equipment and Other Assets - Additional Information (Detail) - CNY (¥) ¥ in Millions | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2011 | |
Impaired Long-Lived Assets Held and Used [Line Items] | |||
Prepayment made to supplier | ¥ 11.8 | ¥ 20 | |
Impairment on prepayment for equipment | ¥ 3.6 |
Available- for- Sale Investment
Available- for- Sale Investment Measured at Fair Value on Recurring Basis Using Significant Level 3 Inputs (Detail) | 12 Months Ended |
Dec. 31, 2013CNY (¥) | |
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | |
Fair Value Beginning Balance | ¥ 6,285,500 |
Unrealized loss recognized in other comprehensive income | (16,600) |
Impairment losses included in earnings | (6,268,900) |
Fair Value Ending Balance | ¥ 0 |
Warrants Liability Measured at
Warrants Liability Measured at Fair Value on a Recurring Basis Using Significant Level 3 Inputs (Detail) - 12 months ended Dec. 31, 2015 | CNY (¥) | USD ($) |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Balance at issuance date | ¥ 57,285,780 | $ 8,843,400 |
Unrealized loss recognized in other comprehensive income | 7,129,161 | 1,100,553 |
Balance at the end of the year | ¥ 64,414,941 | $ 9,943,953 |
Assets and Liabilities Measured
Assets and Liabilities Measured at Fair Value on Non-Recurring Basis (Detail) - CNY (¥) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Impairment on assets | ¥ 5,725,046 | ||
Total | ¥ 8,439,580 | ¥ 3,555,845 | 29,741,076 |
Receivable from WoW Game Points Refund Agent | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Impairment on assets | 8,439,580 | ||
Prepayment for Equipment | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Impairment on assets | 11,813,313 | ||
Long-Term Receivables | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Impairment on assets | 17,927,763 | ||
Prepayment for Other Assets | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Impairment on assets | 3,555,845 | ||
Fair value, measurements, nonrecurring | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Total | 0 | 0 | 0 |
Fair value, measurements, nonrecurring | Receivable from WoW Game Points Refund Agent | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Prepayment for Equipment | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Long-Term Receivables | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Prepayment for Other Assets | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Quoted Price in Active Markets for Identified Assets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Total | 0 | 0 | 0 |
Fair value, measurements, nonrecurring | Quoted Price in Active Markets for Identified Assets (Level 1) | Receivable from WoW Game Points Refund Agent | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Quoted Price in Active Markets for Identified Assets (Level 1) | Prepayment for Equipment | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Quoted Price in Active Markets for Identified Assets (Level 1) | Long-Term Receivables | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Quoted Price in Active Markets for Identified Assets (Level 1) | Prepayment for Other Assets | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Significant Other Observable Inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Total | 0 | 0 | 0 |
Fair value, measurements, nonrecurring | Significant Other Observable Inputs (Level 2) | Receivable from WoW Game Points Refund Agent | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Significant Other Observable Inputs (Level 2) | Prepayment for Equipment | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Significant Other Observable Inputs (Level 2) | Long-Term Receivables | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Significant Other Observable Inputs (Level 2) | Prepayment for Other Assets | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Significant Unobservable Inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Total | 0 | 0 | 0 |
Fair value, measurements, nonrecurring | Significant Unobservable Inputs (Level 3) | Receivable from WoW Game Points Refund Agent | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | ¥ 0 | ||
Fair value, measurements, nonrecurring | Significant Unobservable Inputs (Level 3) | Prepayment for Equipment | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | 0 | ||
Fair value, measurements, nonrecurring | Significant Unobservable Inputs (Level 3) | Long-Term Receivables | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | ¥ 0 | ||
Fair value, measurements, nonrecurring | Significant Unobservable Inputs (Level 3) | Prepayment for Other Assets | |||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |||
Other assets | ¥ 0 |
Taxation - Additional Informati
Taxation - Additional Information (Detail) | 1 Months Ended | 12 Months Ended | ||||||||||
Oct. 31, 2014 | Nov. 30, 2008 | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2008 | Dec. 31, 2015USD ($) | |
Income Taxes [Line Items] | ||||||||||||
Statutory tax rate | 25.00% | 25.00% | 25.00% | 25.00% | ||||||||
Preferential enterprise income tax rate for three years | 15.00% | |||||||||||
Increase (decrease) in valuation allowance | ¥ 17,802,709 | $ 2,748,265 | ¥ (21,011,979) | |||||||||
Net operating loss carry forwards | 817,100,000 | |||||||||||
Net operating loss carry forwards expiring In 2016 | 162,900,000 | |||||||||||
Net operating loss carry forwards expiring In 2017 | 327,900,000 | |||||||||||
Net operating loss carry forwards expiring In 2018 | 190,200,000 | |||||||||||
Net operating loss carry forwards expiring In 2019 | 46,300,000 | |||||||||||
Net operating loss carry forwards expiring In 2020 | ¥ 89,800,000 | |||||||||||
Withholding income tax rate for dividends from profits of foreign invested enterprises | 10.00% | 10.00% | ||||||||||
Withholding income taxes for undistributed profits | ¥ 0 | $ 0 | 0 | ¥ 0 | ||||||||
Deferred tax liability attributable to undistributed earnings of financial interests in VIEs | 0 | 0 | 0 | $ 0 | ||||||||
Accumulated earnings | (2,304,020,698) | (1,999,192,344) | (355,679,505) | |||||||||
Unrecognized tax benefits | 0 | 0 | 0 | 0 | ||||||||
Significantly increase or decrease in unrecognized tax benefits within next twelve months | 0 | 0 | ||||||||||
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 | ||||||||||
Minimum | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Income tax, statute of limitation | 3 years | 3 years | ||||||||||
Minimum | Scenario 1 | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
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% | ||||||||||
Maximum | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Income tax, statute of limitation | 5 years | 5 years | ||||||||||
Maximum | Scenario 2 | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
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% | ||||||||||
Subsidiaries and VIE subsidiaries in PRC | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Statutory tax rate | 25.00% | 24.00% | 22.00% | 20.00% | 18.00% | |||||||
Shanghai The9 Information Technology Co., Ltd. ("Shanghai IT") | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Preferential enterprise income tax rate for three years | 15.00% | 15.00% | ||||||||||
Tax savings from reduced tax rate | ¥ 0 | $ 0 | 0 | 0 | ||||||||
Variable Interest Entity, Primary Beneficiary | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Accumulated earnings | ¥ 0 | ¥ 0 | ¥ 0 | 0 | ||||||||
United states | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Statutory tax rate | 34.00% | 34.00% | ||||||||||
State income tax rate | 0.48% | 0.48% | ||||||||||
Federal tax | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Net operating loss carry forwards | $ | 124,200,000 | |||||||||||
Net operating loss carry forwards, expiration year | 2,026 | 2,026 | ||||||||||
Tax credit available to offset future taxes payable | $ | 100,000 | |||||||||||
State income tax | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Net operating loss carry forwards | $ | 68,700,000 | |||||||||||
Net operating loss carry forwards, expiration year | 2,016 | 2,016 | ||||||||||
Tax credit available to offset future taxes payable | $ | $ 100,000 | |||||||||||
Foreign tax authority | ||||||||||||
Income Taxes [Line Items] | ||||||||||||
Foreign tax credit available to offset future taxes payable | $ | $ 2,500,000 | |||||||||||
Tax credit available to offset future taxes payable, expiration date | 2,016 | 2,016 |
Composition of Income Tax Expen
Composition of Income Tax Expense (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Income Taxes [Line Items] | ||||
Current income tax (expense) benefit | ¥ 0 | $ 0 | ¥ 0 | ¥ 0 |
Deferred taxation | 6,324,015 | 976,260 | (21,011,979) | 134,391,290 |
Change in valuation allowance | (6,324,015) | (976,260) | 21,011,979 | (134,391,290) |
Income tax (expense) benefit | 0 | 0 | 0 | 0 |
Domestic tax authority | ||||
Income Taxes [Line Items] | ||||
Current income tax (expense) benefit | 0 | 0 | 0 | 0 |
Deferred taxation | (31,447,143) | (4,854,602) | (62,051,840) | 70,063,810 |
Change in valuation allowance | 31,447,143 | 4,854,602 | 62,051,840 | (70,063,810) |
Foreign tax authority | ||||
Income Taxes [Line Items] | ||||
Current income tax (expense) benefit | 0 | 0 | 0 | 0 |
Deferred taxation | 37,771,158 | 5,830,862 | 41,039,861 | 64,327,480 |
Change in valuation allowance | ¥ (37,771,158) | $ (5,830,862) | ¥ (41,039,861) | ¥ (64,327,480) |
Reconciliation Between Statutor
Reconciliation Between Statutory EIT Rate and Group's Effective Tax Rate (Detail) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Schedule Of Effective Tax Rates [Line Items] | |||
PRC Statutory EIT rate | 25.00% | 25.00% | 25.00% |
Effect of different tax rates in other jurisdictions | (1.00%) | 10.00% | (2.00%) |
Effect of future tax rate change | (1.00%) | (1.00%) | 1.00% |
Change of prior year deferred tax assets | (1.00%) | 0.00% | 1.00% |
Change of valuation allowance | (2.00%) | (16.00%) | (24.00%) |
(Income) not subject to tax and non-deductible expenses, net | (1.00%) | 2.00% | 0.00% |
Effect of expired net operating loss | (19.00%) | (20.00%) | (1.00%) |
Effective EIT rate | 0.00% | 0.00% | 0.00% |
Significant Components of Defer
Significant Components of Deferred Tax Assets and Liabilities (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | Dec. 31, 2013CNY (¥) |
Schedule of Components of Deferred Tax Provision [Line Items] | |||||
Temporary differences related to expenses and accruals | ¥ 3,285,994 | $ 507,271 | ¥ 1,926,262 | ||
Temporary differences related to provision for advances to suppliers | 888,961 | 137,232 | 1,621,968 | ||
Temporary differences related to provision for doubtful accounts | 1,510,153 | 233,126 | 191,012 | ||
Other | 5,900,763 | 910,921 | 5,609,163 | ||
Temporary differences related to depreciation, amortization, and impairment of equipment and intangible assets | 12,728,642 | 1,964,964 | 11,710,677 | ||
Startup expenses and advertising fee | 26,010,125 | 4,015,271 | 25,761,300 | ||
Temporary differences related to research and development credits | 1,045,470 | 161,393 | 988,010 | ||
Temporary differences related to equity investment | 1,531,567 | 236,433 | 1,795,745 | ||
Foreign tax credits | 16,039,192 | 2,476,025 | 15,113,930 | ||
Temporary differences related to provision for prepayment for equipment | 5,000,000 | 771,867 | 5,000,000 | ||
Tax loss carry forwards | 505,784,660 | 78,079,697 | 492,204,751 | ||
Total deferred tax assets | 579,725,527 | 89,494,200 | 561,922,818 | ||
Less: Valuation allowance | (579,725,527) | (89,494,200) | (561,922,818) | $ (86,745,935) | ¥ (582,934,797) |
Total deferred tax assets | 0 | 0 | 0 | ||
Temporary differences related to amortization of intangible assets | ¥ 5,690,705 | $ 878,494 | ¥ 5,362,427 |
Movement of Valuation Allowance
Movement of Valuation Allowance on Deferred Tax Assets (Detail) | 12 Months Ended | ||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | |
Valuation Allowance [Line Items] | |||
Valuation Allowance Beginning Balance | ¥ 561,922,818 | $ 86,745,935 | ¥ 582,934,797 |
Increase (decrease) in valuation allowance | 17,802,709 | 2,748,265 | (21,011,979) |
Valuation Allowance Ending Balance | ¥ 579,725,527 | $ 89,494,200 | ¥ 561,922,818 |
Other Payables and Accruals (De
Other Payables and Accruals (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) |
Accounts Payable and Accrued Liabilities [Line Items] | |||
Staff cost related payables | ¥ 15,705,966 | $ 2,424,583 | ¥ 18,758,212 |
Professional services | 12,070,384 | 1,863,346 | 12,312,998 |
Product development services | 1,648,410 | 254,471 | 5,820,394 |
Marketing and promotion | 3,988 | 616 | 452,920 |
Others | 6,435,676 | 993,498 | 4,528,327 |
Accrued expense and other current liabilities | ¥ 35,864,424 | $ 5,536,514 | ¥ 41,872,851 |
Refund of WoW Game Points - Add
Refund of WoW Game Points - Additional Information (Detail) | 1 Months Ended | 12 Months Ended | |||||||
Feb. 29, 2012 | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Dec. 31, 2011CNY (¥) | Dec. 31, 2011USD ($) | Dec. 31, 2009CNY (¥) | Dec. 31, 2015USD ($) | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||
Liability related to refund of WOW game points | ¥ 169,998,682 | ¥ 169,998,682 | $ 26,243,274 | ||||||
Other operating income | ¥ 26,000,000 | $ 4,200,000 | |||||||
Legal liability | 2 years | 2 years | |||||||
Liability related to refund of WOW game points, release period | 20 years | 20 years | |||||||
World of Warcraft Game Points Refund Agent | |||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||
Liability related to refund of WOW game points | 170,000,000 | ¥ 200,400,000 | 26,200,000 | ||||||
Cash paid to refund WOW game points | 0 | $ 0 | ¥ 0 | ¥ 0 | ¥ 0 | $ 0 | 4,000,000 | ||
Advance Payments made to agent | 8,400,000 | ¥ 43,300,000 | 1,300,000 | ||||||
Installments period | 5 years | ||||||||
Amount of expected refund from advances made to agent, current | 8,400,000 | $ 1,300,000 | |||||||
Write off remaining receivable | ¥ 8,400,000 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Detail) | 12 Months Ended | ||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2015USD ($) | |
Debt Instrument [Line Items] | |||
Proceeds from bank borrowings | ¥ 31,624,560 | $ 4,881,991 | |
Long-term debt | 31,726,575 | $ 4,897,739 | |
Entrusted Bank Borrowing Agreement | |||
Debt Instrument [Line Items] | |||
Proceeds from bank borrowings | ¥ 31,600,000 | $ 4,900,000 | |
Debt instrument, maturity date | 2018-11 | 2018-11 | |
Debt instrument, extension period | 2 years | 2 years | |
Interest rate | 12.00% | 12.00% | |
Long-term debt | ¥ 31,700,000 | $ 4,900,000 | |
Interest payable | ¥ 100,000 | $ 20,000 |
Convertible Notes - Additional
Convertible Notes - Additional Information (Detail) | Nov. 24, 2015CNY (¥) | Nov. 24, 2015USD ($) | Dec. 31, 2015CNY (¥)shares | Dec. 31, 2015USD ($)shares | Dec. 31, 2015USD ($) | Nov. 24, 2015USD ($) |
Debt Instrument [Line Items] | ||||||
Notes due date | 2,018 | 2,018 | ||||
Beneficial conversion feature | ¥ 52,679,692 | $ 8,112,556 | ||||
12% Convertible Senior Notes Due 2018 | ||||||
Debt Instrument [Line Items] | ||||||
Debt Instrument, Principal Amount | ¥ 260,068,680 | $ 40,050,000 | ||||
Senior secured convertible bonds rate | 12.00% | 12.00% | ||||
Notes extension | 2 years | 2 years | ||||
Total net book value as secured notes | ¥ | ¥ 24.3 | |||||
Convertible shares of Group's ADS | shares | 11,695,513 | 11,695,513 | ||||
Beneficial conversion feature | 52,679,692 | $ 8,112,556 | ||||
Accretion period of debt discount | 3 years | 3 years | ||||
Carrying amount of convertible notes | ¥ 129,323,688 | ¥ 131,900,000 | $ 20,300,000 | $ 19,915,561 | ||
Interest payable | 3,300,000 | $ 500,000 | ||||
Interest expense recognized related to convertible note | ¥ 5,900,000 | $ 900,000 |
Schedule of Convertible Note (D
Schedule of Convertible Note (Detail) | Dec. 31, 2015USD ($)$ / shares |
Tranche A | |
Debt Instrument [Line Items] | |
Principle Amount | $ | $ 22,250,000 |
Conversion Price | $ / shares | $ 2.6 |
Tranche B | |
Debt Instrument [Line Items] | |
Principle Amount | $ | $ 13,350,000 |
Conversion Price | $ / shares | $ 5.2 |
Tranche C | |
Debt Instrument [Line Items] | |
Principle Amount | $ | $ 4,450,000 |
Conversion Price | $ / shares | $ 7.8 |
Convertible Notes at Net Carryi
Convertible Notes at Net Carrying Value at Date of Issuance (Detail) | Nov. 24, 2015CNY (¥) | Nov. 24, 2015USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Nov. 24, 2015USD ($) |
Debt Instrument [Line Items] | |||||
Fair value allocated to warrants (Note 22) | ¥ 57,300,000 | ¥ 64,414,941 | $ 9,943,953 | $ 8,800,000 | |
Beneficial conversion feature | 52,679,692 | $ 8,112,556 | |||
12% Convertible Senior Notes Due 2018 | |||||
Debt Instrument [Line Items] | |||||
Principle Amount | 260,068,680 | 40,050,000 | |||
Fair value allocated to warrants (Note 22) | 57,285,780 | 8,821,883 | |||
Beneficial conversion feature | 52,679,692 | $ 8,112,556 | |||
Issuance Cost | 20,779,520 | 3,200,000 | |||
Net carrying value | ¥ 129,323,688 | ¥ 131,900,000 | $ 20,300,000 | $ 19,915,561 |
Warrants - Additional Informati
Warrants - Additional Information (Detail) | 12 Months Ended | ||||
Dec. 31, 2015CNY (¥)shares | Dec. 31, 2015USD ($) | Dec. 31, 2015USD ($)shares | Nov. 24, 2015CNY (¥) | Nov. 24, 2015USD ($) | |
Class of Warrant or Right [Line Items] | |||||
Fair value of warrants | ¥ 64,414,941 | $ 9,943,953 | ¥ 57,300,000 | $ 8,800,000 | |
Fair value change on warrants liability | ¥ 7,129,161 | $ 1,100,553 | |||
Maximum | |||||
Class of Warrant or Right [Line Items] | |||||
Warrants issued to purchase of Company's ADS | 4,778,846 | 4,778,846 |
Warrants Issued in Conjunction
Warrants Issued in Conjunction with Convertible Notes (Detail) - $ / shares | Dec. 31, 2015 | Dec. 31, 2009 |
Class of Warrant or Right [Line Items] | ||
Exercise Price | $ 19.50 | |
Tranche I | ||
Class of Warrant or Right [Line Items] | ||
Principle Amount | 5,000,000 | |
Exercise Price | $ 1.5 | |
Tranche A | ||
Class of Warrant or Right [Line Items] | ||
Principle Amount | 2,750,000 | |
Exercise Price | $ 2.6 | |
Tranche B | ||
Class of Warrant or Right [Line Items] | ||
Principle Amount | 1,650,000 | |
Exercise Price | $ 5.2 | |
Tranche C | ||
Class of Warrant or Right [Line Items] | ||
Principle Amount | 550,000 | |
Exercise Price | $ 7.8 |
Assumptions Used in Black-Schol
Assumptions Used in Black-Scholes Option Pricing Model for Warrants (Detail) | 12 Months Ended |
Dec. 31, 2015 | |
Class of Warrant or Right [Line Items] | |
Risk-free interest rate | 1.71% |
Expected volatility of common stock | 63.25% |
Dividend yield | 0.00% |
Expected life of warrants | 5 years |
Share Repurchase Program - Addi
Share Repurchase Program - Additional Information (Detail) - USD ($) shares in Thousands | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock Repurchase Program [Line Items] | ||
Share buyback, authorized amount | $ 10,000,000 | |
Stocks repurchased under share repurchase program, value | $ 4,600,000 | $ 100,000 |
Stocks repurchased under share repurchase program (in shares) | 1,700 | 40 |
Shareholder Rights Plan - Addit
Shareholder Rights Plan - Additional Information (Detail) | 12 Months Ended |
Dec. 31, 2009Right$ / shares | |
Class of Warrant or Right [Line Items] | |
Rights distributed for each ordinary share outstanding | Right | 1 |
Exercise price of shareholders rights plan | $ / shares | $ 19.50 |
Shareholder rights plan, expiration date | Jan. 8, 2019 |
Minimum | |
Class of Warrant or Right [Line Items] | |
Shareholders rights plan, ownership interest for rights to be exercisable | 15.00% |
Employee Benefits - Additional
Employee Benefits - Additional Information (Detail) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Defined Benefit Plan Disclosure [Line Items] | ||||
Employee benefits expenses related to full-time employees of subsidiaries and VIE subsidiaries incorporated in PRC | ¥ 13.1 | $ 2 | ¥ 19.5 | ¥ 15.3 |
Share-Based Compensation - Addi
Share-Based Compensation - Additional Information (Detail) | Dec. 07, 2015shares | Nov. 17, 2015Employee$ / shares | Jun. 13, 2015Employee$ / shares | Apr. 22, 2013Employee$ / shares | Dec. 08, 2010USD ($)$ / sharesshares | Jul. 31, 2014shares | Jul. 31, 2013shares | Jul. 31, 2012$ / sharesshares | Jul. 31, 2011 | May. 31, 2011$ / sharesshares | Dec. 31, 2015CNY (¥)shares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014CNY (¥)shares | Dec. 31, 2014USD ($)shares | Dec. 31, 2013CNY (¥) | Dec. 31, 2013USD ($)$ / shares | Dec. 31, 2012¥ / shares | Dec. 31, 2015CNY (¥)shares | Dec. 31, 2015USD ($)$ / sharesshares | Nov. 30, 2015shares | Sep. 30, 2011shares | Dec. 31, 2010shares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Number of Options Vesting | 8,200,000 | 8,200,000 | ||||||||||||||||||||
Share-based compensation | ¥ 34,007,629 | $ 5,249,873 | ¥ 3,672,300 | ¥ 29,237,416 | ||||||||||||||||||
Ordinary granted to Incsight Limited (''Incsight'') | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Options, expiration date | Dec. 7, 2018 | |||||||||||||||||||||
Share-based compensation | ¥ 1,200,000 | $ 200,000 | 2,200,000 | 7,600,000 | ||||||||||||||||||
Equity granted | 500,000 | 1,500,000 | ||||||||||||||||||||
Stock award term | 3 years | 5 years | ||||||||||||||||||||
Fair value of equity granted | $ / shares | $ 6.48 | |||||||||||||||||||||
Cumulative profit | $ | $ 5,000,000 | |||||||||||||||||||||
Ordinary granted to Incsight Limited (''Incsight'') | Vest when Group achieves breakeven | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Equity granted | 500,000 | |||||||||||||||||||||
Ordinary granted to Incsight Limited (''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 | |||||||||||||||||||||
Tranche I | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Number of Options Vesting | 4,555,556 | 4,555,556 | ||||||||||||||||||||
Options granted, exercise price | $ / shares | $ 2.6 | |||||||||||||||||||||
Tranche II | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Number of Options Vesting | 2,733,334 | 2,733,334 | ||||||||||||||||||||
Options granted, exercise price | $ / shares | 5.2 | |||||||||||||||||||||
Tranche III | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Number of Options Vesting | 911,110 | 911,110 | ||||||||||||||||||||
Options granted, exercise price | $ / shares | $ 7.8 | |||||||||||||||||||||
Ordinary shares granted to each Four non-executive directors | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | (per share) | $ 6.03 | $ 6.03 | ¥ 6.03 | |||||||||||||||||||
Share-based compensation | ¥ 0 | $ 0 | 0 | 400,000 | ||||||||||||||||||
Equity granted | 30,000 | |||||||||||||||||||||
Equity expected to vest each year from 2011 to 2013 so long as such directors continue their services during period | 10,000 | |||||||||||||||||||||
Equity vested | 40,000 | 40,000 | 40,000 | |||||||||||||||||||
Maximum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Share-based awards vesting period | 4 years | 4 years | ||||||||||||||||||||
Minimum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Share-based awards vesting period | 1 year | 1 year | ||||||||||||||||||||
2004 Option Plan | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Maximum aggregate number of ordinary shares approved for issuance | 6,449,614 | 6,449,614 | 6,449,614 | 14,449,614 | ||||||||||||||||||
Stock options vesting percentage on each anniversary after grant date | 33.33% | 33.33% | ||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 12,877,718 | 12,877,718 | 12,877,718 | |||||||||||||||||||
Options to purchase ordinary shares, available for future grants | 120,925 | 120,925 | 120,925 | |||||||||||||||||||
Share-based compensation | ¥ 32,000,000 | $ 4,900,000 | ¥ 100,000 | 16,700,000 | ||||||||||||||||||
Unrecognized compensation cost | ¥ 25,400,000 | ¥ 25,400,000 | $ 3,900,000 | |||||||||||||||||||
Unrecognized compensation cost related to non-vested options, recognition period | 3 years 9 months 22 days | 3 years 9 months 22 days | ||||||||||||||||||||
2004 Option Plan | Maximum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Stock options contractual term | 5 years | 5 years | ||||||||||||||||||||
Stock Options | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 4,677,718 | 3,070,491 | 3,070,491 | 4,677,718 | 4,677,718 | |||||||||||||||||
Total intrinsic value of options exercised | $ | $ 0 | $ 21,701 | $ 119,624 | |||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.65 | $ 0.99 | ||||||||||||||||||||
Options granted | 1,910,000 | 1,910,000 | 0 | 0 | ||||||||||||||||||
Non-vested equity interest of Jiushi granted to employees | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Share-based compensation | ¥ 0 | $ 0 | ¥ 400,000 | 700,000 | ||||||||||||||||||
Equity interest granted | 20.00% | |||||||||||||||||||||
Fair value of equity granted | ¥ | ¥ 2,200,000 | ¥ 2,200,000 | ||||||||||||||||||||
Predetermined Market Condition | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 7,000,000 | 7,000,000 | 7,000,000 | |||||||||||||||||||
Options granted | 7,000,000 | 7,000,000 | ||||||||||||||||||||
Predetermined Market Condition | Tranche I | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.69 | |||||||||||||||||||||
Predetermined Market Condition | Tranche II | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | 0.68 | |||||||||||||||||||||
Predetermined Market Condition | Tranche III | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | 0.60 | |||||||||||||||||||||
Predetermined Market Condition | Maximum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | 0.69 | |||||||||||||||||||||
Predetermined Market Condition | Minimum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.60 | |||||||||||||||||||||
Predetermined Market Condition and Service Conditions | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 1,200,000 | 0 | 0 | 1,200,000 | 1,200,000 | |||||||||||||||||
Options granted | 1,200,000 | 1,200,000 | ||||||||||||||||||||
Service period | 3 years | 3 years | ||||||||||||||||||||
Predetermined Market Condition and Service Conditions | Tranche I | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.71 | |||||||||||||||||||||
Predetermined Market Condition and Service Conditions | Tranche II | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | 0.68 | |||||||||||||||||||||
Predetermined Market Condition and Service Conditions | Tranche III | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | 0.60 | |||||||||||||||||||||
Predetermined Market Condition and Service Conditions | Maximum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | 0.71 | |||||||||||||||||||||
Predetermined Market Condition and Service Conditions | Minimum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.60 | |||||||||||||||||||||
Modification of Share-Based Awards | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Number of employees affected | Employee | 15 | 25 | 234 | |||||||||||||||||||
Options granted, exercise price | $ / shares | $ 1.53 | $ 1.78 | $ 2.41 | |||||||||||||||||||
Original exercise price range, lower range limit | $ / shares | 1.78 | 7.36 | ||||||||||||||||||||
Original exercise price range, upper range limit | $ / shares | $ 2.41 | $ 4.78 | ||||||||||||||||||||
Options, expiration date | Aug. 26, 2020 | |||||||||||||||||||||
Incremental compensation cost recognized | ¥ 11,800,000 | $ 1,800,000 | ¥ 900,000 | $ 200,000 | 3,800,000 | $ 600,000 | ||||||||||||||||
Modification of Share-Based Awards | Maximum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Options, expiration date | Dec. 10, 2015 | |||||||||||||||||||||
Modification of Share-Based Awards | Minimum | ||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||
Options, expiration date | Aug. 26, 2015 | |||||||||||||||||||||
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 | ||||||||||||||||||||
Options to purchase ordinary share, outstanding shares | 10,649,893 | 5,550,357 | 5,550,357 | 10,649,893 | 10,649,893 | |||||||||||||||||
Options to purchase ordinary shares, available for future grants | 10,301,444 | 10,301,444 | 10,301,444 | |||||||||||||||||||
Total intrinsic value of options exercised | $ | $ 1,200 | $ 162,279 | $ 14,762 | |||||||||||||||||||
Options granted | 9,228,621 | 9,228,621 | ||||||||||||||||||||
Share-based compensation | ¥ 800,000 | $ 100,000 | ¥ 1,000,000 | ¥ 3,800,000 | ||||||||||||||||||
Unrecognized compensation cost | ¥ 800,000 | ¥ 800,000 | $ 100,000 | |||||||||||||||||||
Unrecognized compensation cost related to non-vested options, recognition period | 3 years 2 months 12 days | 3 years 2 months 12 days | ||||||||||||||||||||
Stock award term | 10 years | 10 years | ||||||||||||||||||||
Option granted | 38,191,879 | |||||||||||||||||||||
Share-based awards vesting period | 4 years | 4 years | ||||||||||||||||||||
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] | ||||||||||||||||||||||
Fair value of options granted | $ / shares | $ 0.149 | |||||||||||||||||||||
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 | $ 0.012 | |||||||||||||||||||||
Stock options, exercise price | $ / shares | $ 0.0001 |
Share Option Activities, 2014 O
Share Option Activities, 2014 Option Plan (Detail) - Stock Options - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Options | ||
Outstanding at beginning of period | 3,070,491 | |
Granted | 1,910,000 | 0 |
Exercised | 0 | |
Forfeited | (302,773) | |
Outstanding at end of period | 4,677,718 | 3,070,491 |
Vested and expected at end of period | 4,677,718 | |
Exercisable at end of period | 3,085,410 | |
Weighted-Average Exercise Price | ||
Outstanding at beginning of period | $ 2.41 | |
Granted | 0 | |
Exercised | 0 | |
Forfeited | 4.52 | |
Outstanding at end of period | 1.53 | $ 2.41 |
Vested and expected at end of period | 1.53 | |
Exercisable at end of period | $ 1.53 | |
Weighted-Average Remaining Contractual Term (years) | ||
Outstanding at end of period | 4 years 4 months 28 days | 1 year 11 days |
Vested and expected to vest at end of period | 4 years 4 months 28 days | |
Exercisable at end of period | 4 years 5 months 1 day | |
Aggregate Intrinsic Value | ||
Outstanding at end of period | $ 7,577,903 | |
Vested and expected to vest at end of period | 7,577,903 | |
Exercisable at end of period | $ 4,998,364 |
Fair Value of Options Measured
Fair Value of Options Measured based on Black-Scholes Option Pricing Model, 2004 Option Plan (Detail) - Stock Options - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 1.22% | 0.35% |
Expected life (years) | 3 years 4 months 6 days | 3 years 3 months |
Expected dividend yield | 0.00% | 0.00% |
Volatility | 59.74% | 59.39% |
Fair value of options at grant date | $ 0.65 | $ 0.99 |
Three Tranches of Share Options
Three Tranches of Share Options to Certain Directors, Officers and Key Employees with Predetermined Market Conditions (Detail) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of Options Vesting | 8,200,000 |
Tranche I | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Target Price | $ / shares | $ 2.6 |
Number of Options Vesting | 4,555,556 |
Tranche II | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Target Price | $ / shares | $ 5.2 |
Number of Options Vesting | 2,733,334 |
Tranche III | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Target Price | $ / shares | $ 7.8 |
Number of Options Vesting | 911,110 |
Share Option Activities, Predet
Share Option Activities, Predetermined Market Condition (Detail) - Predetermined Market Condition | 12 Months Ended |
Dec. 31, 2015USD ($)$ / sharesshares | |
Number of Options | |
Granted | shares | 7,000,000 |
Exercised | shares | 0 |
Forfeited | shares | 0 |
Outstanding at end of period | shares | 7,000,000 |
Vested and expected at end of period | shares | 7,000,000 |
Exercisable at end of period | shares | 3,888,889 |
Weighted-Average Exercise Price | |
Outstanding at beginning of period | $ 0 |
Granted | 1.53 |
Exercised | 0 |
Forfeited | 0 |
Outstanding at end of period | 1.53 |
Vested and expected at end of period | 1.53 |
Exercisable at end of period | $ 1.53 |
Weighted-Average Remaining Contractual Term (years) | |
Outstanding at end of period | 4 years 10 months 17 days |
Vested and expected to vest at end of period | 4 years 10 months 17 days |
Exercisable at end of period | 4 years 10 months 17 days |
Aggregate Intrinsic Value | |
Outstanding at end of period | $ | $ 11,340,000 |
Vested and expected to vest at end of period | $ | 11,340,000 |
Exercisable at end of period | $ | $ 6,300,000 |
Fair Value of Options Measur116
Fair Value of Options Measured based on Monte Carlo Simulation Mode, Predetermined Market Condition Only (Detail) - Predetermined Market Condition | 12 Months Ended |
Dec. 31, 2015$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 1.66% |
Expected dividend yield | 0.00% |
Volatility | 62.00% |
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 grant date | $ 0.60 |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected life (years) | 5 years |
Fair value of options at grant date | $ 0.69 |
Share Option Activities, Both P
Share Option Activities, Both Predetermined Market Condition and Service Conditions (Detail) - Predetermined Market Condition and Service Conditions | 12 Months Ended |
Dec. 31, 2015USD ($)$ / sharesshares | |
Number of Options | |
Outstanding at beginning of period | shares | 0 |
Granted | shares | 1,200,000 |
Exercised | shares | 0 |
Forfeited | shares | 0 |
Outstanding at end of period | shares | 1,200,000 |
Vested and expected at end of period | shares | 1,200,000 |
Exercisable at end of period | shares | 18,530 |
Weighted-Average Exercise Price | |
Outstanding at beginning of period | $ / shares | $ 0 |
Granted | $ / shares | 1.53 |
Exercised | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Outstanding at end of period | $ / shares | 1.53 |
Vested and expected at end of period | $ / shares | 1.53 |
Exercisable at end of period | $ / shares | $ 1.53 |
Weighted-Average Remaining Contractual Term (years) | |
Outstanding at end of period | 4 years 10 months 17 days |
Vested and expected to vest at end of period | 4 years 10 months 17 days |
Exercisable at end of period | 4 years 10 months 17 days |
Aggregate Intrinsic Value | |
Outstanding at end of period | $ | $ 1,944,000 |
Vested and expected to vest at end of period | $ | 1,944,000 |
Exercisable at end of period | $ | $ 30,019 |
Fair Value of Options Measur118
Fair Value of Options Measured based on Monte Carlo Simulation Mode, Predetermined Market and Service Conditions (Detail) - Predetermined Market Condition and Service Conditions | 12 Months Ended |
Dec. 31, 2015$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 1.66% |
Expected dividend yield | 0.00% |
Volatility | 62.00% |
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 grant date | $ 0.60 |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected life (years) | 5 years |
Fair value of options at grant date | $ 0.71 |
Fair Value of Options Measur119
Fair Value of Options Measured based on Black-Scholes Option Pricing Model, Modification of Share-Based Awards (Detail) - Modification of Share-Based Awards - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate, minimum | 0.50% | 0.09% |
Risk-free interest rate, maximum | 1.12% | 0.24% |
Expected dividend yield | 0.00% | 0.00% |
Volatility, minimum | 64.00% | 36.00% |
Volatility, maximum | 71.00% | 65.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected remaining life (years) | 1 year 3 months 26 days | 6 months 26 days |
Fair value of incremental cost | $ 0.21 | $ 0.16 |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected remaining life (years) | 2 years 7 months 10 days | 2 years 2 months 12 days |
Fair value of incremental cost | $ 0.73 | $ 0.43 |
Activity of Non-vested Shares b
Activity of Non-vested Shares by Incsight (Detail) - Ordinary granted to Incsight Limited (''Incsight'') | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Number of Options | |
Non-vested at January 1, 2015 | shares | 1,500,000 |
Granted | shares | 0 |
Forfeited | shares | 0 |
Vested | shares | (500,000) |
Non-vested at December 31, 2015 | shares | 1,000,000 |
Weighted-Average Grant-Date Fair Value | |
Non-vested at January 1, 2015 | $ / shares | $ 6.48 |
Granted | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Vested | $ / shares | 6.48 |
Non-vested at December 31, 2015 | $ / shares | $ 6.48 |
Share Option Activities, Stock
Share Option Activities, Stock Options Granted by Red 5 (Detail) - Stock options and ordinary shares granted by Red 5 - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Outstanding at beginning of period | 5,550,357 | ||
Granted | 9,228,621 | ||
Exercised | (300,000) | ||
Forfeited | (3,829,085) | ||
Outstanding at end of period | 10,649,893 | 5,550,357 | |
Vested and expected at end of period | 10,649,893 | ||
Exercisable at end of period | 3,422,692 | ||
Outstanding at beginning of period | $ 0.122 | ||
Exercised | 0.045 | ||
Forfeited | 0.120 | ||
Outstanding at end of period | 0.061 | $ 0.122 | |
Vested and expected at end of period | 0.061 | ||
Exercisable at end of period | $ 0.087 | ||
Weighted-Average Remaining Contractual Term (years) | |||
Outstanding at end of period | 4 years 8 months 23 days | 2 years 7 months 10 days | |
Vested and expected at end of period | 4 years 8 months 23 days | ||
Exercisable at end of period | 3 years 8 months 1 day | ||
Outstanding at beginning of period | $ 1,133,349 | ||
Exercised | 1,200 | $ 162,279 | $ 14,762 |
Outstanding at end of period | 0 | $ 1,133,349 | |
Vested and expected at end of period | 0 | ||
Exercisable at end of period | $ 0 |
Fair Value of Options Measur122
Fair Value of Options Measured based on Black-Scholes Option Pricing Model, Stock Options Granted by Red 5 (Detail) - Stock options and ordinary shares granted by Red 5 | 12 Months Ended |
Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate, minimum | 0.78% |
Risk-free interest rate, maximum | 5.00% |
Expected dividend yield | 0.00% |
Volatility, minimum | 38.89% |
Volatility, maximum | 69.36% |
Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected life (years) | 4 years |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected life (years) | 6 years |
Activity of Non-vested Share123
Activity of Non-vested Shares by Red 5 (Detail) - Ordinary Shares Granted By Red 5 | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Number of Options | |
Non-vested at January 1, 2015 | 612,244 |
Granted | 0 |
Forfeited | 0 |
Vested | (612,244) |
Non-vested at December 31, 2015 | |
Weighted-Average Grant-Date Fair Value | |
Non-vested at January 1, 2015 | $ / shares | $ 0.01193 |
Vested | $ / shares | 0.01193 |
Non-vested at December 31, 2015 | $ / shares | $ 0.01193 |
Related Party Transactions a124
Related Party Transactions and Balances - Additional Information (Detail) ¥ in Millions | 1 Months Ended | 12 Months Ended | ||||
Aug. 31, 2014USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | Dec. 31, 2015USD ($) | |
Related Party Transaction [Line Items] | ||||||
License agreement, term | 5 years | |||||
Minimum | ||||||
Related Party Transaction [Line Items] | ||||||
License agreements, expected payment | $ 160,000,000 | |||||
Jiucheng Advertisement | ||||||
Related Party Transaction [Line Items] | ||||||
Amount due to related party | ¥ 4 | $ 600,000 | ||||
ZTE9 network technology Co., Ltd., Wuxi ("ZTE9") | ||||||
Related Party Transaction [Line Items] | ||||||
Net royalty paid | 10.1 | $ 1,600,000 | ¥ 6.8 | |||
Amount due to related party | 7.7 | 6.3 | 1,200,000 | |||
Funds to related party | ¥ 9.9 | $ 1,500,000 | 5.3 | $ 900,000 | ||
Interest-free loan due date | The loan was interest-free and due in March-August, 2016. | The loan was interest-free and due in March-August, 2016. | ||||
Amount due from related party | ¥ 9.9 | ¥ 5.3 | 1,500,000 | |||
System Link Corporation Limited ("System Link") | ||||||
Related Party Transaction [Line Items] | ||||||
Investment in joint venture, ownership percentage | 50.00% | |||||
License Agreement | System Link Corporation Limited ("System Link") | ||||||
Related Party Transaction [Line Items] | ||||||
Amount received for license agreement | $ 10,000,000 | |||||
Due to related party, non-current | 63.4 | $ 9,800,000 | ||||
Revenue recognized | ¥ 1.7 | $ 300,000 |
Calculation of Loss Per Share (
Calculation of Loss Per Share (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥)¥ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014CNY (¥)¥ / sharesshares | Dec. 31, 2013CNY (¥)¥ / sharesshares | |
Numerator: | ||||
Net loss attributable to ordinary shareholders before accretion on redeemable noncontrolling interest | ¥ (304,828,354) | $ (47,057,389) | ¥ (86,622,470) | ¥ (526,261,572) |
Accretion on redeemable noncontrolling interest | (79,805,706) | (12,319,878) | (21,076,744) | |
Net loss attributable to holders of ordinary shares | ¥ (384,634,060) | $ (59,377,267) | ¥ (107,699,214) | ¥ (526,261,572) |
Denominator: | ||||
Denominator for basic and diluted loss per share - weighted-average shares outstanding | 23,235,848 | 23,235,848 | 23,164,695 | 23,174,823 |
Loss per share - Basic and diluted | (per share) | ¥ (16.55) | $ (2.56) | ¥ (4.65) | ¥ (22.71) |
Loss Per Share - Additional Inf
Loss Per Share - Additional Information (Detail) - shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Anti-dilutive securities excluded from computation of diluted loss per share | 18,656,564 | 4,570,491 | 4,797,391 |
Restricted Net Assets - Additio
Restricted Net Assets - Additional Information (Detail) | 12 Months Ended | |||||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | Dec. 31, 2012 | Dec. 31, 2015USD ($) | |
Restricted Cash and Cash Equivalents Items [Line Items] | ||||||
Appropriation of statutory reserves | ¥ 0 | $ 0 | ¥ 0 | ¥ 0 | ||
Accumulated reserves | 3,800,000 | |||||
Restricted registered capital | 19,500,000 | |||||
Amount of restricted net assets | ¥ 23,300,000 | $ 3,600,000 | ||||
Minimum | ||||||
Restricted Cash and Cash Equivalents Items [Line Items] | ||||||
Percentage of appropriation of statutory reserve from retained earnings after tax profits | 10.00% | |||||
Maximum | ||||||
Restricted Cash and Cash Equivalents Items [Line Items] | ||||||
Percentage of appropriations of statutory reserve of registered capital | 50.00% |
Schedule of Effects of Changes
Schedule of Effects of Changes in Ownership Interest of Subsidiaries (Detail) - CNY (¥) | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||
Noncontrolling Interest [Line Items] | ||||
Net loss attributable to The9 Limited | ¥ (304,828,354) | ¥ (86,622,470) | ¥ (526,261,572) | |
Transfers (to) from the noncontrolling interest | ||||
Increase in The9 Limited's additional paid-in capital for issuance of shares by Red 5 upon stock option exercise | 84,059 | 616,688 | 32,603 | |
Change from net loss attributable to The9 Limited and transfers (to) from noncontrolling interests | (304,671,888) | (145,479,002) | (523,163,447) | |
Additional paid-in capital | ||||
Transfers (to) from the noncontrolling interest | ||||
Increase in The9 Limited's additional paid-in capital for issuance of shares by Red 5 upon stock option exercise | 75,563 | 552,426 | 25,992 | |
Change in equity interest attributable to non-controlling interest due to restructuring of Red 5 Singapore | [1] | 15,068,103 | ||
Change in The9 Limited's additional paid-in capital for adjustment on noncontrolling interest due to change in ownership interest as a result of loan conversion | [2] | (31,784,850) | ||
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 | ¥ 80,903 | ¥ (42,692,211) | ¥ 3,072,133 | |
[1] | In August 2014, Red 5 issued 27,438,952 Series B redeemable convertible preferred shares of Red 5 to a new investor (see Note 31). As the license to publish Firefall belongs to Red 5 Singapore (Note 11), as a condition for the investment by the new investor, the Group is required to transfer the license to Red 5. As such, in June 2014, the Group transferred its equity interests in Red 5 Singapore, a wholly owned subsidiary of the Group to Red 5, a 79.2% owned subsidiary at a nominal price. At the time of transfer, 20.8% of the accumulated deficit of Red 5 Singapore, amounted to RMB 15,068,103, was attributable to the noncontrolling interest of Red 5 with no consideration, which was recorded as an equity transaction in the Consolidated Statements of Changes in Equity. | |||
[2] | In August 2014, the Group converted its convertible loan and certain other loans due from Red 5 with a book value of US$50.0 million (RMB307.6 million), into 63,301,276 common shares of Red 5. The equity of Red 5 increased by RMB307.6 million while the impact attributable to noncontrolling interest of Red 5 was RMB31,784,850 as a result of the loan conversion. |
Schedule of Effects of Chang129
Schedule of Effects of Changes in Ownership Interest of Subsidiaries (Parenthetical) (Detail) - Red 5 Studios, Inc. ("Red 5") | 1 Months Ended | ||||
Aug. 31, 2014CNY (¥)shares | Aug. 31, 2014USD ($)shares | Jun. 30, 2014CNY (¥) | Jun. 30, 2014USD ($) | Jan. 31, 2014shares | |
Noncontrolling Interest [Line Items] | |||||
Amount attributable to noncontrolling interest | ¥ 15,068,103 | ||||
Percentage of equity interest | 79.20% | 79.20% | |||
Purchase consideration transferred | $ | $ 0 | ||||
Book value of convertible loan and certain other loans due | ¥ 307,600,000 | $ 50,000,000 | |||
Number of common shares issued upon conversion of convertible loans | shares | 63,301,276 | 63,301,276 | |||
Equity interest increased after conversion | ¥ 307,600,000 | ||||
Change on noncontrolling interest impacted from increased equity interest | ¥ 31,784,850 | ||||
Series B Redeemable Convertible Preferred Shares | |||||
Noncontrolling Interest [Line Items] | |||||
Redeemable convertible preferred shares issued to third party investor | shares | 27,438,952 | 27,438,952 | 27,438,952 | ||
Accumulated deficit | |||||
Noncontrolling Interest [Line Items] | |||||
Percentage of equity interest | 20.80% | 20.80% |
Redeemable Non-controlling I130
Redeemable Non-controlling Interest - Additional Information (Detail) $ / shares in Units, ¥ in Millions | 1 Months Ended | 12 Months Ended | ||
Aug. 31, 2014shares | Jan. 31, 2014CNY (¥)ExecutiveOfficersshares | Jan. 31, 2014USD ($)ExecutiveOfficersshares | Dec. 31, 2015USD ($)$ / shares | |
Ordinary shares | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
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. | |||
Initial conversion ratio | 1 | |||
Series B Redeemable Convertible Preferred Shares | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
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. | |||
Redemption date of preferred stock | Apr. 1, 2017 | |||
Liquidation description of preferred stock | The holders of Preferred Shares shall be entitled to receive 100% of the original issue price("preferred liquidation"). The holders of Preferred Shares are also entitled to distribution of remaining assets from preferred liquidation, along with other shareholders, while the total distribution entitled to the holders of Preferred Shares should not exceed 200% of the original issue price. | |||
Series B Redeemable Convertible Preferred Shares | Minimum | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Original issue price, percentage | 100.00% | |||
Series B Redeemable Convertible Preferred Shares | Maximum | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Original issue price, percentage | 200.00% | |||
Red 5 Studios, Inc. ("Red 5") | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Difference between fair value and purchase price | ¥ 131.3 | $ 21,200,000 | ||
Common shares purchased from number of executives | ExecutiveOfficers | 2 | 2 | ||
Recognized compensation paid | ¥ 13 | $ 2,100,000 | ||
Red 5 Studios, Inc. ("Red 5") | Ordinary shares | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Common shares purchased by Oriental Pearl, shares | 5,948,488 | 5,948,488 | ||
Common shares purchased by Oriental Pearl, value | ¥ 25.6 | $ 4,200,000 | ||
Red 5 Studios, Inc. ("Red 5") | Minimum | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Gross proceeds from public offering | $ | $ 30,000,000 | |||
Red 5 Studios, Inc. ("Red 5") | Series B Redeemable Convertible Preferred Shares | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Redeemable convertible preferred shares issued, shares | 27,438,952 | 27,438,952 | 27,438,952 | |
Redeemable convertible preferred shares issued, value | ¥ 118.3 | $ 19,200,000 |
Reconciliation of Redeemable No
Reconciliation of Redeemable Noncontrolling Interest (Detail) | 12 Months Ended | ||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | |
Redeemable Noncontrolling Interest [Line Items] | |||
Redeemable noncontrolling interest opening balance | ¥ 131,497,104 | ||
Issuance of Redeemable noncontrolling interest | ¥ 131,296,977 | ||
Net loss attributable to redeemable noncontrolling interest | (32,697,713) | $ (5,047,657) | (20,876,617) |
Accretion of Redeemable noncontrolling interest | 79,805,706 | 21,076,744 | |
Redeemable noncontrolling interest ending balance | ¥ 178,605,097 | $ 27,571,876 | ¥ 131,497,104 |
Disposal of Subsidiaries - Addi
Disposal of Subsidiaries - Additional Information (Detail) | 1 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2014CNY (¥)Shareholder | Dec. 31, 2014USD ($) | Jul. 31, 2014CNY (¥) | Jul. 31, 2014USD ($) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥)Shareholder | Dec. 31, 2014USD ($)Shareholder | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Gain on disposal of subsidiaries | ¥ 3,339,394 | $ 515,514 | ¥ 165,392,382 | |||||
Huopu Cloud | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Total consideration of consolidated subsidiary | ¥ 200,000,000 | $ 32,200,000 | ||||||
Payment related to disposal | ¥ 30,000,000 | $ 4,800,000 | ||||||
Operating costs and expenses attributable to disposal | ¥ 19,000,000 | $ 3,100,000 | ||||||
Amount of prepayment for games promotion | 11,000,000 | ¥ 11,000,000 | $ 1,800,000 | |||||
Gain on disposal of subsidiaries | 140,000,000 | 22,500,000 | ||||||
Kaiyue | ||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||
Total consideration of consolidated subsidiary | 25,500,000 | 4,100,000 | ||||||
Gain on disposal of subsidiaries | ¥ 25,500,000 | $ 4,100,000 | ||||||
Investments under equity method, Percentage | 85.00% | 85.00% | 85.00% | |||||
Percentage of ownership interest sold in subsidiary | 85.00% | 85.00% | ||||||
Number of shareholders | 2 | 2 | 2 |
Future Minimum Lease Payments f
Future Minimum Lease Payments for Non-cancellable Operating Leases (Detail) - Dec. 31, 2015 | CNY (¥) | USD ($) |
Operating Leased Assets [Line Items] | ||
2,016 | ¥ 8,389,540 | $ 1,295,122 |
2,017 | 7,159,779 | 1,105,279 |
2,018 | 6,819,782 | 1,052,793 |
2,019 | 6,497,790 | 1,003,086 |
2,020 | 5,414,825 | 835,905 |
Future minimum lease payments for non-cancellable operating leases | ¥ 34,281,716 | $ 5,292,185 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) ¥ in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Loss Contingencies [Line Items] | ||||
Operating lease rental expenses | ¥ 19.4 | $ 3 | ¥ 22.2 | ¥ 38.2 |
Segment Reporting - Additional
Segment Reporting - Additional Information (Detail) | 12 Months Ended |
Dec. 31, 2015Segment | |
Segment Reporting Information [Line Items] | |
Number of operating segment | 1 |
Schedule of Geographic Area Inf
Schedule of Geographic Area Information Includes Revenue (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenues | ¥ 46,411,331 | $ 7,164,675 | ¥ 64,276,891 | ¥ 104,776,069 |
PRC | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenues | 33,201,421 | 5,125,416 | 41,969,350 | 85,483,458 |
North America [Member] | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenues | 8,382,753 | 1,294,074 | 14,906,530 | 13,135,914 |
Other areas | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Net revenues | ¥ 4,827,157 | $ 745,185 | ¥ 7,401,011 | ¥ 6,156,697 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Detail) - 1 months ended Mar. 31, 2016 - Subsequent Event $ in Millions | CNY (¥) | USD ($) | USD ($) |
Bank of Shanghai | |||
Subsequent Event [Line Items] | |||
Credit facility | ¥ 50,000,000 | $ 7.7 | |
Proceeds from credit facility | ¥ 4,900,000 | $ 0.8 | |
MOU | Red 5 Studios, Inc. ("Red 5") | |||
Subsequent Event [Line Items] | |||
Equity interest exchanged by company | 30.60% | 30.60% | |
Equity interest exchanged by other participating shareholders | 14.40% | 14.40% |
Financial Information of Par138
Financial Information of Parent Company - Condensed Statements of Comprehensive Loss (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Condensed Statement of Income Captions [Line Items] | ||||
Cost of revenue | ¥ (67,743,995) | $ (10,457,871) | ¥ (85,782,569) | ¥ (107,803,360) |
Gross loss | (21,332,664) | (3,293,196) | (21,505,678) | (3,027,291) |
Operating expenses: | ||||
Product development | (135,042,829) | (20,847,020) | (156,253,036) | (213,243,567) |
Sales and marketing | (31,692,522) | (4,892,482) | (51,758,100) | (116,672,411) |
General and administrative | (131,768,503) | (20,341,552) | (111,157,250) | (161,958,423) |
Total operating expenses | (303,604,040) | (46,868,387) | (139,404,086) | (527,340,523) |
Loss from operations | (326,500,222) | (50,402,949) | (160,834,764) | (530,247,814) |
Fair value change on convertible bonds and warrants | (7,129,161) | (1,100,553) | ||
Other income (expenses), net | (1,916,755) | (295,896) | (963,125) | 9,301,565 |
Loss before income tax expense and share of loss in equity method investments | (341,168,178) | (52,667,291) | (125,229,878) | (560,540,779) |
Income tax expense | 0 | 0 | 0 | 0 |
Net loss | (354,181,969) | (54,676,274) | (128,942,408) | (562,916,605) |
Other comprehensive income (loss) | ||||
Unrealized loss on available-for-sale investment | (16,600) | |||
Currency translation adjustments | 5,009,430 | 773,323 | (1,203,960) | (688,963) |
Total comprehensive loss | (349,172,539) | (53,902,951) | (130,146,368) | (563,622,168) |
Parent Company | ||||
Condensed Statement of Income Captions [Line Items] | ||||
Cost of revenue | (127,706) | |||
Gross loss | (127,706) | |||
Operating expenses: | ||||
Product development | (70,941) | (10,951) | 632,437 | (1,284,261) |
Sales and marketing | (120,735) | (18,638) | 0 | (14,536,253) |
General and administrative | (38,475,787) | (5,939,640) | (9,392,137) | (32,056,416) |
Total operating expenses | (38,667,463) | (5,969,229) | (8,759,700) | (47,876,930) |
Loss from operations | (38,667,463) | (5,969,229) | (8,759,700) | (48,004,636) |
Interest income (expenses), net | (5,858,848) | (904,450) | 32 | 869 |
Fair value change on convertible bonds and warrants | (7,129,161) | (1,100,553) | ||
Other income (expenses), net | (2,267,335) | (350,016) | 9,756 | (69,198) |
Loss before income tax expense and share of loss in equity method investments | (53,922,807) | (8,324,248) | (8,749,912) | (48,072,965) |
Income tax expense | 0 | 0 | 0 | 0 |
Equity in income (loss) of subsidiaries and VIEs | (250,905,547) | (38,733,141) | (77,872,558) | (478,188,607) |
Net loss | (304,828,354) | (47,057,389) | (86,622,470) | (526,261,572) |
Other comprehensive income (loss) | ||||
Unrealized loss on available-for-sale investment | (16,600) | |||
Currency translation adjustments | 5,266,016 | 812,933 | 348,437 | (2,259,470) |
Total comprehensive loss | ¥ (299,562,338) | $ (46,244,456) | ¥ (86,274,033) | ¥ (528,537,642) |
Financial Information of Par139
Financial Information of Parent Company - Condensed Balance Sheets (Detail) | Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Nov. 24, 2015CNY (¥) | Nov. 24, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2014USD ($) | Dec. 31, 2013CNY (¥) | Dec. 31, 2012CNY (¥) |
ASSETS | ||||||||
Cash and cash equivalents | ¥ 49,010,541 | $ 7,565,924 | ¥ 181,482,300 | $ 28,016,039 | ¥ 156,987,201 | ¥ 554,278,809 | ||
Prepayments and other current assets, net | 9,463,149 | 1,460,858 | 56,573,321 | |||||
Total current assets | 77,258,122 | 11,926,599 | 255,853,455 | |||||
Investments in subsidiaries | 267,539,694 | 41,301,012 | 39,223,925 | |||||
Total assets | 538,094,921 | 83,067,542 | 517,330,710 | |||||
Current liabilities: | ||||||||
Accounts payable | 41,248,455 | 6,367,665 | 40,213,660 | |||||
Other payables and accruals | 6,435,676 | 993,498 | 4,528,327 | |||||
Warrants | 64,414,941 | 9,943,953 | ¥ 57,300,000 | $ 8,800,000 | ||||
Total current liabilities | 427,966,024 | 66,066,570 | 296,590,707 | |||||
Convertible notes | 135,182,536 | 20,868,587 | ||||||
Total liabilities | 600,565,840 | 92,711,390 | 320,945,335 | |||||
SHAREHOLDERS' EQUITY | ||||||||
Ordinary shares | 1,917,620 | 296,030 | 1,885,153 | |||||
Additional paid-in capital | 2,080,041,288 | 321,103,042 | 2,075,900,461 | |||||
Statutory reserves | 28,071,982 | 4,333,567 | 28,071,982 | |||||
Accumulated other comprehensive loss | (3,372,588) | (520,638) | (8,638,604) | |||||
Accumulated deficit | (2,304,020,698) | (355,679,505) | (1,999,192,344) | |||||
Total shareholders' equity | (197,362,396) | (30,467,504) | 98,026,648 | |||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY (DEFICIT) | 538,094,921 | 83,067,542 | 517,330,710 | |||||
Parent Company | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | 28,984 | 4,474 | 2,754,295 | $ 425,191 | ¥ 5,789,184 | ¥ 4,832,694 | ||
Prepayments and other current assets, net | 912,003 | 140,791 | 55,258 | |||||
Amounts due from intercompany | 1,425,500,136 | 220,059,300 | 1,188,956,211 | |||||
Total current assets | 1,426,441,123 | 220,204,565 | 1,191,765,764 | |||||
Investments in subsidiaries | (1,420,228,235) | (219,245,461) | (1,092,897,996) | |||||
Total assets | 6,212,888 | 959,104 | 98,867,768 | |||||
Current liabilities: | ||||||||
Accounts payable | 148,204 | 22,879 | 164,162 | |||||
Other payables and accruals | 3,829,603 | 591,189 | 676,958 | |||||
Warrants | 64,414,941 | 9,943,953 | ||||||
Total current liabilities | 68,392,748 | 10,558,021 | 841,120 | |||||
Convertible notes | 135,182,536 | 20,868,587 | ||||||
Total liabilities | 203,575,284 | 31,426,608 | 841,120 | |||||
SHAREHOLDERS' EQUITY | ||||||||
Ordinary shares | 1,917,620 | 296,030 | 1,885,153 | |||||
Additional paid-in capital | 2,080,041,288 | 321,103,042 | 2,075,900,461 | |||||
Statutory reserves | 28,071,982 | 4,333,567 | 28,071,982 | |||||
Accumulated other comprehensive loss | (3,372,588) | (520,638) | (8,638,604) | |||||
Accumulated deficit | (2,304,020,698) | (355,679,505) | (1,999,192,344) | |||||
Total shareholders' equity | (197,362,396) | (30,467,504) | 98,026,648 | |||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' EQUITY (DEFICIT) | ¥ 6,212,888 | $ 959,104 | ¥ 98,867,768 |
Financial Information of Par140
Financial Information of Parent Company - Condensed Statements of Cash Flows (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥) | Dec. 31, 2015USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013CNY (¥) | |
Cash flows from operating activities: | ||||
Net loss | ¥ (354,181,969) | $ (54,676,274) | ¥ (128,942,408) | ¥ (562,916,605) |
Adjustments for: | ||||
Employee share-based compensation expense | 34,007,629 | 5,249,873 | 3,672,300 | 29,237,416 |
Fair value change on warrants liability | 7,129,161 | 1,100,553 | ||
Amortization of discount on convertible note | 2,609,771 | 402,879 | ||
Change in prepayments and other current assets | (11,928,473) | (1,841,439) | 1,767,972 | (23,085,521) |
Change in accounts payable | 565,870 | 87,355 | (9,104,630) | 8,665,354 |
Change in other payables and accruals | (1,465,002) | (226,155) | (7,118,898) | (4,815,188) |
Net cash used in operating activities | (175,586,790) | (27,105,930) | (269,097,406) | (357,569,636) |
Cash flows from financing activities: | ||||
Proceeds from stock option exercises | 812,635 | 4,304,447 | ||
Proceeds from the issuance of convertible bonds | 260,068,680 | 40,147,686 | ||
Repurchase of ordinary shares | (29,030,699) | |||
Net cash provided by (used in) financing activities | 257,936,935 | 39,818,601 | 100,221,650 | (38,688,942) |
Net change in cash and cash equivalents | (132,471,759) | (20,450,115) | 24,495,099 | (397,291,608) |
Cash and cash equivalents, beginning of year | 181,482,300 | 28,016,039 | 156,987,201 | 554,278,809 |
Cash and cash equivalents, end of year | 49,010,541 | 7,565,924 | 181,482,300 | 156,987,201 |
Parent Company | ||||
Cash flows from operating activities: | ||||
Net loss | (304,828,354) | (47,057,389) | (86,622,470) | (526,261,572) |
Adjustments for: | ||||
Employee share-based compensation expense | 33,184,307 | 5,122,772 | 2,337,019 | 24,683,804 |
Fair value change on warrants liability | 7,129,161 | 1,100,553 | ||
Amortization of discount on convertible note | 2,609,771 | 402,879 | ||
Equity in income (loss) of subsidiaries and VIEs | 250,905,547 | 38,733,141 | 77,872,558 | 478,188,607 |
Change in prepayments and other current assets | (856,745) | (132,259) | (199) | 14,253,727 |
Change in accounts payable | (15,958) | (2,463) | (27,382) | (31,607) |
Change in amounts due from intercompany | (236,543,924) | (36,516,087) | 4,294,984 | 32,990,799 |
Change in other payables and accruals | 6,401,724 | 988,255 | (1,702,034) | 1,858,984 |
Net cash used in operating activities | (242,014,471) | (37,360,598) | (3,847,524) | 25,682,742 |
Cash flows from financing activities: | ||||
Proceeds from stock option exercises | 812,635 | 4,304,447 | ||
Proceeds from the issuance of convertible bonds | 260,068,680 | 40,147,686 | ||
Payment for the issuance cost related to convertible bonds | (20,779,520) | (3,207,805) | ||
Repurchase of ordinary shares | (29,030,699) | |||
Net cash provided by (used in) financing activities | 239,289,160 | 36,939,881 | 812,635 | (24,726,252) |
Net change in cash and cash equivalents | (2,725,311) | (420,717) | (3,034,889) | 956,490 |
Cash and cash equivalents, beginning of year | 2,754,295 | 425,191 | 5,789,184 | 4,832,694 |
Cash and cash equivalents, end of year | ¥ 28,984 | $ 4,474 | ¥ 2,754,295 | ¥ 5,789,184 |
Financial Information of Par141
Financial Information of Parent Company - Additional Information (Detail) | 12 Months Ended | |||
Dec. 31, 2015CNY (¥)¥ / $ | Dec. 31, 2015USD ($)¥ / $ | Dec. 31, 2014CNY (¥)¥ / $ | Dec. 31, 2013CNY (¥) | |
Condensed Financial Statements, Captions [Line Items] | ||||
Exchange rates used to translate amounts from RMB to US$ | 6.4778 | 6.4778 | ||
Parent Company | ||||
Condensed Financial Statements, Captions [Line Items] | ||||
Dividend paid | ¥ 0 | $ 0 | ¥ 0 | ¥ 0 |
Exchange rates used to translate amounts from RMB to US$ | 6.4788 | 6.4788 | 6.4788 | |
Parent Company | Minimum | ||||
Condensed Financial Statements, Captions [Line Items] | ||||
Restricted net assets of consolidated subsidiaries as percent of consolidated net assets | 25.00% | 25.00% |