UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________ to _____________________

Commission File Number:  000-54429
 
China Xingbang Industry Group Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
99-0366034
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
7/F West Tower, Star International Mansion,
No.6-20 Jinsui Rd.,
Tianhe District, Guangzhou,
Guangdong Province, P.R.C. 510623
(Address of principal executive offices) (Zip Code)
 
(011) 86 20 38296988
(Registrant*s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if
changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (∫232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ※large accelerated filer,§ ※accelerated filer§ and ※smaller reporting company§ in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o  (Do not check if a  smaller reporting company)
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  “  No  x
 
Indicate the number of shares outstanding of each of the issuer*s classes of common stock, as of the latest practicable date: 81,244,000 shares of common stock, par value $0.001, as of November 13, 2013. 
 


 
 

 
 
CHINA XINGBANG INDUSTRY GROUP INC.

QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS
 
Title
 
Page No.
     
PART I - FINANCIAL INFORMATION
   
       
Item 1.
Financial Statements
 
F-1 - F-12
       
Item 2.
Management*s Discussion and Analysis of Financial Condition and Results of Operations
 
1
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
11
       
Item 4.
Controls and Procedures
 
11
       
PART II - OTHER INFORMATION
   
       
Item 1.
Legal Proceedings
 
11
       
Item 1A.
Risk Factors
 
12
       
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
12
       
Item 3.
Defaults Upon Senior Securities
 
12
       
Item 4.
Mine Safety Disclosures
 
12
       
Item 5.
Other Information
 
12
       
Item 6.
Exhibits
 
13

* * *
 
In this quarterly report, unless otherwise specified or the context otherwise requires, the terms ※we§ ※us,§ ※our,§ and the ※Company§ refer to China Xingbang Industry Group Inc. and our consolidated subsidiaries taken together as a whole.

Pursuant to Item 10(f) of Regulation S-K promulgated under the Securities Act of 1933, as amended, we have elected to comply throughout this quarterly report with the scaled disclosure requirements applicable to ※smaller reporting companies.§ Except as specifically included in the quarterly report, items not required by the scaled disclosure requirements have been omitted.
 
 
 

 
 
PART I
 
Item 1.
Financial Information
 
CHINA XINGBANG INDUSTRY GROUP INC.
 
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2013
 
CONTENTS
 
 
Pages
   
Condensed Consolidated Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012
F-2
   
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2013 and 2012 (Unaudited)
F-3
   
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)
F-4
   
Notes to the Condensed Consolidated Financial Statements (Unaudited)
F-5 每 F-12
 
 
F-1

 
 
CHINA XINGBANG INDUSTRY GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
As of
   
As of
 
   
September 30,
   
December 31,
 
   
2013
   
2012
 
   
(Unaudited)
       
ASSETS
CURRENT ASSETS
           
Cash and cash equivalents
 
$
158,506
   
$
197,530
 
Prepaid expenses and other current assets
   
30,744
     
97,568
 
          Total Current Assets
   
189,250
     
295,098
 
                 
PROPERTY AND EQUIPMENT, NET
   
990,589
     
354,420
 
WEBSITE DEVELOPMENT COST, NET
   
-
     
445,930
 
CONSTRUCTION IN PROGRESS
   
160,102
     
761,726
 
TOTAL ASSETS
 
$
1,339,941
   
$
1,857,174
 
                 
LIABILITIES AND STOCKHOLDERS* DEFICIT
                 
CURRENT LIABILITIES
               
Accounts payable
 
$
-
   
$
2,183
 
Deferred revenue
   
53,896
     
72,533
 
Other payables and accrued expenses
   
615,337
     
632,071
 
Income tax payable
   
-
     
66,967
 
Due to shareholders
   
1,770,751
     
1,605,110
 
Due to related companies
   
1,879,712
     
136,039
 
          Total Current Liabilities
   
4,319,696
     
2,514,903
 
                 
COMMITMENTS AND CONTINGENCIES
   
-
     
-
 
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock ($0.001 par value, 60,000,000 shares authorized, no shares issued as of September 30, 2013 and December 31, 2012)
   
-
     
-
 
Common stock ($0.001 par value, 300,000,000 shares authorized, 81,244,000 shares issued and outstanding as of September 30, 2013 and  December 31, 2012)
   
81,244
     
81,244
 
Additional paid-in capital
   
959,330
     
959,330
 
Unappropriated accumulated deficits
   
(4,122,625
)
   
(1,830,964
)
Appropriated retained earnings
   
72,493
     
72,493
 
Accumulated other comprehensive income
   
29,803
     
60,168
 
         Total Stockholders' Deficit
   
(2,979,755
)
   
(657,729
                 
TOTAL LIABILITIES AND STOCKHOLDERS* DEFICIT
 
$
1,339,941
   
$
1,857,174
 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.
 
 
F-2

 
 
CHINA XINGBANG INDUSTRY GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
 
     
Three months ended
September 30,
     
Nine months ended
September 30,
 
     
2013
     
2012
     
2013
     
2012
 
REVENUE
                               
Advertising
 
$
35
   
$
112,059
   
$
10,062
   
$
460,184
 
Consulting service
   
34
     
144,398
     
 9,730
     
 395,132
 
E-commerce
   
 -
     
-
     
-
     
-
 
Total revenue
   
69
     
256,457
     
19,792
     
855,316
 
                                 
COST OF REVENUE
                               
Advertising
   
1,317
     
(15,026
   
21,154
     
146,482
 
Consulting service
   
19,408
     
17,047
     
58,930
     
52,203
 
E-commerce
   
84,238
     
72,235
     
320,225
     
293,209
 
Total cost of revenue
   
104,963
     
74,256
     
400,309
     
491,894
 
                                 
GROSS (LOSS) PROFIT
   
(104,894
)
   
182,201
     
(380,517
)
   
363,422
 
                                 
OPERATING EXPENSES
                               
Selling expenses
   
78,867
     
188,918
     
357,072
     
806,841
 
General and administrative expenses
   
322,802
     
181,667
     
1,048,009
     
556,498
 
Impairment of website development cost
   
72,955
     
-
     
479,918
     
-
 
Depreciation 每 property and equipment
   
22,852
     
24,891
     
74,778
     
76,053
 
Total Operating Expenses, net
   
497,476
     
395,476
     
1,959,777
     
1,439,392
 
                                 
NET LOSS FROM OPERATIONS
   
(602,370
)
   
(213,275
)
   
(2,340,294
)
   
(1,075,970
)
                                 
OTHER INCOME (EXPENSES), NET
                               
Interest income
   
176
     
1,923
     
1,092
     
4,059
 
Other income
   
50,065
     
650
     
50,065
     
819
 
Other expenses
   
(5,665
)
   
(988
)
   
(7,156
)
   
(2,654
)
Gain (loss) on disposal of property and equipment
   
4,632
     
(4
)
   
4,632
     
2,292
 
Total Other Income, net
   
49,208
     
1,581
     
48,633
     
4,516
 
                                 
NET LOSS BEFORE TAXES
   
(553,162
)
   
(211,694
)
   
(2,291,661
)
   
(1,071,454
                                 
Income tax (expenses) benefit
   
-
     
(69,941
   
-
     
54,588
 
                                 
NET LOSS
   
(553,162
)
   
(281,635
)
   
(2,291,661
)
   
(1,016,866
)
                                 
OTHER COMPREHENSIVE (LOSS) INCOME
                               
Foreign currency translation (loss) gain
   
(5,405
)
   
4,633
     
(30,365
)
   
(5,390
)
                                 
TOTAL COMPREHENSIVE LOSS
 
$
(558,567
)
 
$
(277,002
)
 
$
(2,322,026
)
 
$
(1,022,256
)
                                 
Net loss per share
                               
- basic and diluted
 
$
(0.01
)
 
$
(0.00
)
 
$
(0.03
)
 
$
(0.01
)
                                 
Weighted average number of shares outstanding during the period
                               
- basic and diluted
   
81,244,000
     
81,244,000
     
81,244,000
     
81,244,000
 
 
  The accompanying notes are an integral part of the condensed consolidated financial statements.
 
 
F-3

 
 
CHINA XINGBANG INDUSTRY GROUP INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Nine months ended September 30,
 
   
2013
   
2012
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
 
$
(2,291,661
)
 
$
(1,016,866
)
Adjusted to reconcile net loss to net cash used in operating activities:
               
Depreciation 每 property and equipment
   
74,778
     
76,053
 
Amortization - website development cost
   
112,900
     
114,794
 
Impairment of website development cost
   
479,918
     
-
 
Gain on disposal of property and equipment
   
(4,632
)
   
(2,292
)
Changes in operating assets and liabilities
               
(Increase) decrease in:
               
Accounts receivable
   
-
     
1,266,107
 
Prepaid expenses and other current assets
   
68,060 
     
37,410
 
Deferred tax assets
   
-
     
(92,141
)
Increase (decrease) in:
               
Accounts payable
   
(2,205
)
   
11,721
 
Deferred revenue
   
(19,791
)
   
(241,941
)
Other payables and accrued expenses
   
(27,892
)
   
(224,274
)
Income tax payable
   
(67,655
)
   
(1,766
)
Deferred tax liabilities
   
-  
     
39,397
 
Net cash used in operating activities
   
(1,678,180
)
   
(33,798
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of property and equipment
   
(89,821
)
   
(39,906
)
Payments for website development cost
   
(142,303
)
   
(239,431
)
Proceeds from disposals of property and equipment
   
5,319
     
3,589
 
Repayments from related companies
   
-
     
3,635
 
Net cash used in investing activities
   
(226,805
)
   
(272,113
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Due to related companies
   
1,728,039
     
(272
)
Due to shareholders
   
135,729
     
1,579,579
 
Net cash provided by financing activities
   
1,863,768
     
1,579,307
 
                 
EFFECT OF EXCHANGE RATES ON CASH
   
2,193
     
(279
)
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
   
(39,024
   
1,273,117
 
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
   
197,530
     
199,188
 
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
158,506
   
$
1,472,305
 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
                 
Cash paid for interest expenses
 
$
-
   
$
-
 
                 
Cash paid for income tax
 
$
17,584
   
$
-
 
 
  The accompanying notes are an integral part of the condensed consolidated financial statements.
 
 
F-4

 
 
CHINA XINGBANG INDUSTRY GROUP INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
NOTE 1
BASIS OF PRESENTATION
 
The accompanying unaudited condensed consolidated group financial statements of China Xingbang Industry Group Inc. (the ※Company§), its subsidiaries and variable interest entities (※VIEs§) (collectively the ※Group§) have been prepared in accordance with generally accepted accounting principles in the United States of America (※GAAP§) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (※SEC§). Accordingly, they do not include all of the information and footnotes required by GAAP for complete audited financial statements. Unless otherwise specified, all amounts set out in the condensed consolidated financial statements are expressed in US Dollars.
 
In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the Company's consolidated financial position as of September 30, 2013, the results of operations and comprehensive loss for the three and nine months ended September 30, 2013 and 2012 and statements of cash flows for the nine months ended September 30, 2013 and 2012. The consolidated results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes of the Company for the year ended December 31, 2012.
 
NOTE 2
GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company*s operations resulted in a net loss of $2,291,661 and used cash in operations of $1,678,180 for the nine months ended September 30, 2013. As of September 30, 2013, the Company had an unappropriated accumulated deficit of $4,122,625 and a working capital deficiency of $4,130,446.

In the course of its development activities, the Company continues to sustain losses. The Company expects to finance its operations primarily through capital contributions from shareholder and its affiliates. The Company borrowed from Mr. Xiaohong Yao ("Mr. Yao"), the Chief Executive Officer of the Company and his spouse, and companies controlled by them a net amount of $1,863,768 during the first three quarters of 2013, and the related parties agreed to lend more funds to the Company as needed for management to execute its business plan for at least the next twelve months.

These conditions raise substantial doubt about the Company*s ability to continue as a going concern. The Company*s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until such time as it can generate sources of recurring revenues and to ultimately attain profitability when the Company*s e-commerce and showroom business are fully developed. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
NOTE 3
ORGANIZATION

China Xingbang Industry Group Inc. (※China Xingbang§ or the ※Company§) was incorporated in Nevada on April 12, 2011 as a holding company.

Xing Bang Industry Group Limited (※Xingbang BVI§) was incorporated in the British Virgin Islands (※BVI§) on March 24, 2011 as a holding company and is wholly owned by China Xingbang.

China Group Purchase Alliance Limited (※Xingbang HK§) was incorporated in Hong Kong on August 5, 2008 as a holding company and is wholly owned by Xingbang BVI. Xingbang HK established Guangzhou Xingbang Information Consulting Co., Ltd., a wholly foreign owned enterprise (※Guangzhou Xingbang§ or the ※WFOE§), on May 12, 2011 in the People*s Republic of China (※PRC§) to provide consulting, investment and technical services to Guangdong Xingbang Industry Information & Media Co., Ltd. (※Guangdong Xingbang§).
 
Guangdong Xingbang was incorporated in the PRC on January 17, 2005 as a limited liability company. Guangdong Xingbang is a print media operator serving the home furnishing industry in the PRC. Guangdong Xingbang also provides marketing consulting service to clients in the home furnishing industry and local government in the PRC. Starting from August 2011, Guangdong Xingbang began to provide e-commerce services, namely B2B2C (Business-to-Business-to-Consumer), to manufacturers and distributors, and brick-and-mortar stores located in different parts of the PRC through an e-commerce platform, referred to as ju51 Mall, developed by Guangdong Xingbang.
 
Xinyu Xingbang Information Industry Co., Ltd (※Xinyu Xingbang§) was incorporated in the PRC on June 11, 2012 for the purpose of continuing the business of Guangdong Xingbang in the near future as Guangdong Xingbang winds down its operations. Pursuant to the Articles of Association of Xinyu Xingbang, Guangdong Xingbang and the WFOE each invested $787,030 (RMB 5,000,000) in Xinyu Xingbang and each owns 50% of the equity interest of Xinyu Xingbang. Under the Xinyu Xingbang Articles of Association, the WFOE is entitled to appoint the sole director and all members of the management team of Xinyu Xingbang and the WFOE is entitled to receive 99.99% of Xinyu Xingbang*s net profit. Based on the relevant PRC regulations, an Internet Content Provider license, or ICP license, issued by the Chinese Ministry of Industry and Information Technology, is required for Xinyu Xingbang to conduct business as currently contemplated.  In order to be granted the ICP license, foreign investor*s ownership of Xinyu Xingbang cannot exceed 50%. Xinyu Xingbang obtained its ICP license in February 2013. Guangdong Xingbang will gradually wind down its operations and Xinyu Xingbang will carry out Guangdong Xingbang*s business except that Guangdong Xingbang will fulfill its contractual obligations under the existing customer contracts. Guangdong Xingbang will grant an exclusive license to Xinyu Xingbang to permit Xinyu Xingbang to use the trademark, domain names, intellectual property rights and any know-how Guangdong Xingbang owns. Guangdong Xingbang will also assign the management right and right to receive revenue from the ju51 Mall and our newspaper publication, called Industry Economy Review, to Xinyu Xingbang. Guangdong Xingbang will continue its corporate existence to hold the equity interest in Xinyu Xingbang.
 
 
F-5

 
 
Pursuant to (i) a series of contractual arrangements between the WFOE, Guangdong Xingbang and all the shareholders of Guangdong Xingbang, (ii) the share exchange agreement between China Xingbang, Xingbang BVI and all the shareholders of Xingbang BVI, and (iii) the WFOE*s 50% equity ownership of Xinyu Xingbang, the results of all these entities are consolidated together. Since they are under common control, the contractual arrangements and share exchange were accounted for as a reorganization of entities under common control.
 
The Company accounts for its VIEs in accordance with ASC 810, which requires the consolidation of VIEs in which a company has both the power to direct the activities of the VIE that most significantly impact the VIE*s economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE. The Company assesses all newly created entities and those with which the Company becomes involved to determine whether such entities are VIEs and, if so, whether or not the Company is their primary beneficiary.
 
As required by ASC 810-10, the Company performs a qualitative assessment to determine whether the Company remains the primary beneficiary of Guangdong Xingbang, which also owns 50% of Xinyu Xingbang.  A qualitative assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity*s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and the parties involved in the design of the entity. The Company*s assessment on the involvement with Guangdong Xingbang reveals that the Company has the absolute power to direct the most significant activities that impact the economic performance of Guangdong Xingbang. Under the accounting guidance, the Company is deemed to be the primary beneficiary of Guangdong Xingbang and the results of Guangdong Xingbang and Xinyu Xingbang are consolidated in the Company*s group financial statements for financial reporting purposes. As of September 30, 2013 and December 31, 2012, the Company has no equity interest in Guangdong Xingbang, none of the Company*s assets serve as collateral for Guangdong Xingbang; creditors of Guangdong Xingbang have no recourse to the Company; and the Company has not provided any guarantees to Guangdong Xingbang.
  
The assets and liabilities associated with Guangdong Xingbang and Xinyu Xingbang are combined and presented on a gross basis, prior to consolidation adjustments with other entities in the Group, and are as follows:
 
   
As of
September 30,
2013
   
As of
December 31,
2012
 
         
    (Unaudited)        
Cash and cash equivalents
 
$
100,512
   
$
138,982
 
Prepaid expenses and other current assets
   
30,744
     
83,568
 
Due from group companies
   
1,606,602
     
1,134,828
 
Property and equipment, net
   
990,589
     
354,420
 
Website development cost, net
   
-
     
445,930
 
Construction in progress
   
160,102
     
761,726
 
Total assets
 
$
2,888,549
   
$
2,919,454
 
                 
Accounts payable
 
$
-
   
$
2,183
 
Deferred revenue
   
53,896
     
72,533
 
Other payables and accrued expenses
   
603,836
     
585,485
 
Income tax payable
   
-
     
66,967
 
Due to group companies
   
945,752
     
720,374
 
Due to shareholders
   
953,758
     
802,555
 
Due to related companies
   
1,879,712
     
136,039
 
Total current liabilities
   
4,436,954
     
2,386,136
 
Equity of variable interest entities
   
(1,548,405
)
   
533,318
 
Total liabilities and equity
 
$
2,888,549
   
$
2,919,454
 
  
 
F-6

 
 
In 2011, the Company agreed to waive the management fee payable by Guangdong Xingbang for a period of 3 years from May 13, 2011 to May 12, 2014 in order for Guangdong Xingbang to preserve enough cash to fund its e-commerce business.
 
The liabilities recognized as a result of combining the VIE do not necessarily represent additional claims on the Company*s general assets; rather, they represent claims against the specific assets of the combined VIE. Conversely, assets recognized as a result of combining the VIE do not represent additional assets that could be used to satisfy claims by the Company*s creditors as they are not legally included within the Company*s general assets.
 
Immediately prior to the PRC restructuring transactions that were completed on May 13, 2011, the Chief Executive Officer of the Company and his spouse controlled Guangdong Xingbang as they owned 90% and 10%, respectively, of its registered capital. The Chief Executive Officer also indirectly controlled Guangzhou Xingbang as he owned 56.25% of the issued share capital of Xingbang BVI, the sole shareholder of Guangzhou Xingbang. As Guangzhou Xingbang and Guangdong Xingbang are under common control, the contractual arrangements have been accounted for as a reorganization of entities under common control and the Group*s financial statements were prepared as if the reorganization occurred at the beginning of the first period presented.
 
(B)
Share exchange

On May 13, 2011, China Xingbang entered into a share exchange agreement with Xingbang BVI and the shareholders of Xingbang BVI in which the shareholders of Xingbang BVI exchanged 100% of the issued share capital of Xingbang BVI, valued at $80,000, for 79,999,000 shares of common stock of China Xingbang. Xingbang BVI became a wholly owned subsidiary of China Xingbang. Prior to the share exchange, the sole shareholder of China Xingbang owned 56.25% of the issued share capital of Xingbang BVI. As both companies are under common control, the share exchange involving China Xingbang and Xingbang BVI is being treated for accounting purposes as a capital transaction and a reorganization of entities under common control with China Xingbang as the accounting acquirer and Xingbang BVI as the accounting acquiree. The consolidated financial statements were prepared as if the reorganization occurred at the beginning of the first period presented.

Accordingly, these group financial statements include the following:

1.
The balance sheets consisting of the net assets of the acquirer and acquiree at historical cost; and
2.
The statement of operations including the operations of the acquirer and acquiree for the periods presented.
 
NOTE 4
PRINCIPLES OF CONSOLIDATION

The accompanying group financial statements for the nine months ended September 30, 2013 and 2012 include the financial statements of China Xingbang, its wholly owned subsidiaries, Xingbang BVI, Xingbang HK and the WFOE, its contractually controlled affiliate, Guangdong Xingbang and Xinyu Xingbang which is 50% owned by Guangdong Xingbang and 50% owned by Guangzhou Xingbang.

All significant inter-company accounts and transactions have been eliminated in consolidation.
 
 
F-7

 
 
NOTE 5
USE OF ESTIMATES

The preparation of the unaudited condensed consolidated group financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the group financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
NOTE 6
THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

There have been no new accounting pronouncements during the nine months ended September 30, 2013 that are of significance, or potentially significance, to the Group.

NOTE 7
CONSTRUCTION IN PROGRESS

As of September 30, 2013 and December 31, 2012, the Company had construction in progress of $160,102 and $761,726, respectively. The construction in progress as of September 30, 2013 represents the leasehold improvement projects for the 7 showrooms that Xinyu Xingbang leased from October 1, 2012 to September 30, 2016. The Company will invite furniture suppliers and service providers to hold exhibitions in these showrooms when the construction is completed.

Xinyu Xingbang leases these showrooms from Xinyu Xingbang Industry Co., Ltd. under an operating lease at a monthly rental of $46,066. Mr. Yao and his spouse own 90% and 10%, respectively, of the registered capital of Xinyu Xingbang Industry Co., Ltd.

NOTE 8
WEBSITE DEVELOPMENT COST
 
On February 14, 2012, the Company exempted channel service providers from paying service charges at the technical service stations or from paying franchise fees based on sales volume generated on the ju51 Mall from October 2011 to June 2012. However, in June 2012, the Company terminated all the contracts with channel service providers on the e-commerce website, www.ju51.com as they failed to meet the agreed operating goals. The company also determined that the e-commerce platform would not be launched until it was fully developed. Besides, since June 2013, the Company has entered into franchise agreements with companies who are interested in setting up an online retail store on the e-commerce website, and physical showrooms in the Company*s ※Home Furnishing Procurement Headquarters,§ which is located in Xinyu City, China. As the e-commerce website has been put on hold until it is fully developed, the website development cost has been fully written off since second quarter of 2013.
 
Starting from 2012, the Company shifted its focus to develop the e-commerce business model. Therefore, investments are made to develop the website, www.ju51.com, as the Company*s e-commerce platform. Costs incurred to develop our website are capitalized and amortized over the estimated useful life of the project. The Company evaluates the useful lives of these assets on an annual basis and determines impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. Nevertheless, the Company has not been able to generate revenue from the e-commerce platform since 2012 and as such, has been monitoring the situation to determine the recoverability of the website development costs. While the Company forecasts to generate revenue from the e-commerce platform in the foreseeable future, there is however no concrete evidence to show the future benefit of the assets because the ability to generate revenue and cash flow is not certain. This uncertainty was not deemed to impact the recoverability of the assets until June 30, 2013. Therefore, as of September 30, 2013, the Company fully impaired the unamortized website development cost of $479,918 as the website did not meet the asset recoverability test. There was no impairment loss recognized on unamortized website development cost during the nine month ended September 30, 2012.
 
NOTE 9
OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses consisted of the following:
  
   
As of
September 30,
2013
   
As of
December 31,
2012
 
   
(unaudited)
       
Receipt in advance
 
$
107,503
   
$
105,603
 
Business and other taxes payable
   
4,367
     
2,364
 
Other payables
   
439,825
     
447,461
 
Accrued expenses
   
63,642
     
76,643
 
   
$
615,337
   
$
632,071
 
 
NOTE 10
SEGMENTS

The Company operates in three reportable segments, advertising, consulting service and e-commerce. The Company evaluates segment performance based on income from operations. All inter-company transactions between segments have been eliminated on consolidation. As a result, the components of operating income for one segment may not be comparable to another segment.

The following is a summary of the Company*s segment information for the three months ended September 30, 2013 and 2012.
 
For the three months ended September 30, 2013
 
Advertising
   
Consulting
service
   
E-commerce
   
Elimination
   
Total
 
Revenue
 
$
35
   
$
34
   
$
-
   
$
-
   
$
69
 
Gross loss
   
(1,282
)
   
(19,374
)
   
(84,238
)
   
-
     
(104,894
)
Net loss
   
(240,270
)
   
(58,927
)
   
(195,477
)
   
-
     
(494,674
)
Total assets as of September 30, 2013
   
964,758
     
107,195
     
267,988
     
-
     
1,339,941
 
Capital expenditure
   
7,279
     
1,829
     
79,078
     
-
     
88,186
 
Depreciation and amortization
   
14,895
     
2,348
     
9,086
     
-
     
26,329
 
 
For the three months ended September 30, 2012
 
Advertising
   
Consulting
service
   
E-commerce
   
Elimination
   
Total
 
Revenue
 
$
134,209
   
$
144,398
   
$
-
   
$
(22,150
)
 
$
256,457
 
Gross profit (loss)
   
149,235
     
127,351
     
(94,385
)
   
-
     
182,201
 
Net (loss) income
   
(145,090
)
   
96,450
     
(109,942
)
   
-
     
(158,582
)
Total assets as of September 30, 2012
   
1,676,151
     
172,417
     
780,429
     
-
     
2,628,997
 
Capital expenditure
   
27,264
     
2,781
     
101,472
     
-
     
131,517
 
Depreciation and amortization
   
21,421
     
1,952
     
53,774
     
-
     
77,147
 
 
 
F-8

 
 
A reconciliation is provided for unallocated amounts relating to corporate operations which are not included in the segment information.
 
   
Three months ended
September 30,
 
   
2013
   
2012
 
             
Total net loss for reportable segments
 
$
(494,674
)
 
$
(158,582
)
                 
Unallocated amounts relating to corporate operations
   
(58,488
)
   
(123,053
)
Total loss
 
$
(553,162
)
 
$
(281,635
)
 
The following is a summary of the Company's segment information for the nine months ended September30, 2013 and 2012.
 
For the nine months ended September 30, 2013
 
Advertising
   
Consulting
service
   
E-commerce
   
Elimination
   
Total
 
Revenue
 
$
10,062
   
$
9,730
   
$
-
   
$
-
   
$
19,792
 
Gross loss
   
(11,092
)
   
(49,200
)
   
(320,225
)
   
-
     
(380,517
)
Net loss
   
(1,227,953
)
   
(185,319
)
   
(662,199
)
   
-
     
(2,075,471
)
Total assets as of September 30, 2013
   
964,758
     
107,195
     
267,988
     
-
     
1,339,941
 
Capital expenditure
   
64,671
     
7,186
     
160,267
     
-
     
232,124
 
Depreciation and amortization
   
53,840
     
5,982
     
127,856
     
-
     
187,678
 
 
For the nine months ended September 30, 2012
 
Advertising
   
Consulting
service
   
E-commerce
   
Elimination
   
Total
 
Revenue
 
$
625,603
   
$
395,132
   
$
-
   
$
(165,419
)
 
$
855,316
 
Gross profit (loss)
   
479,121
     
342,929
     
(458,628
)
   
-
     
363,422
 
Net (loss) income
   
(366,471
)
   
255,947
     
(620,329
)
   
-
     
(730,853
)
Total assets as of September 30, 2012
   
1,676,151
     
172,417
     
780,429
     
-
     
2,628,997
 
Capital expenditure
   
30,836
     
3,172
     
245,329
     
-
     
279,337
 
Depreciation and amortization
   
58,769
     
6,045
     
126,033
     
-
     
190,847
 
 
 
F-9

 
 
A reconciliation is provided for unallocated amounts relating to corporate operations which are not included in the segment information.
 
   
Nine months ended
 September 30,
 
   
2013
   
2012
 
             
Total net loss for reportable segments
 
$
(2,075,471
)
 
$
(730,853
)
                 
Unallocated amounts relating to corporate operations
   
(216,190
)
   
(286,013
)
Total loss
 
$
(2,291,661
)
 
$
(1,016,866
)
 
NOTE 11
STOCKHOLDERS* EQUITY
 
Appropriated retained earnings
 
The Company*s PRC subsidiaries are required to make appropriation to the statutory surplus reserve at 10% of the after-tax net income annually until the total contributions equal to 50% of the entities* registered capital. The statutory reserve funds are restricted for use to set off against prior period losses, expansion of production and operations or for the increase in the registered capital of the respective companies. This reserve is therefore not available for distribution except in liquidation.

As of September 30, 2013 and December 31, 2012, the Company appropriated $72,493 and $72,493, respectively, to its reserve funds based on its net income in accordance with the laws and regulations of the PRC.   
 
NOTE 12
COMMITMENTS AND CONTINGENCIES

(a)           Defined contribution retirement plans
 
The full time employees of Guangdong Xingbang and Xinyu Xingbang are entitled to employee benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a Chinese government mandated multi-employer defined contribution plan. Guangdong Xingbang and Xinyu Xingbang are required to accrue for those benefits based on certain percentages of the employees* salaries and make contributions to the plans out of the amounts accrued for medical and pension benefits. The total provision and contributions made for such employee benefits for the three months ended September 30, 2013 and 2012 were $12,520 and $20,258, respectively. The total provision and contributions made for such employee benefits for the nine months ended September 30, 2013 and 2012 were $35,023 and $75,567, respectively. The Chinese government is responsible for the medical benefits and the pension liability to be paid to these employees.
 
(b)            Rental leases commitment

Guangdong Xingbang leases office premises from two shareholders (Mr. Yao and his spouse) under an operating lease at a monthly rental of $13,127 which was due to expire on December 31, 2012. Guangdong Xingbang renewed the lease with a one-year term and is obligated to pay monthly rent of approximately RMB93,000 (approximately $15,196) until December 31, 2013.
 
 
F-10

 
 
Xinyu Xingbang leases office premises from Xinyu Xingbang Industry Co., Ltd under an operating lease at a monthly rental of $2,778, which expires on June 30, 2015. Mr. Yao and his spouse own 90% and 10%, respectively, of the registered capital of Xinyu Xingbang Industry Co., Ltd.

Xinyu Xingbang leases showrooms from Xinyu Xingbang Industry Co., Ltd pursuant to a lease agreement and pays a monthly rental of $46,066, which expires on September 30, 2016.
 
As of September 30, 2013, the Company had outstanding commitments with respect to the above operating leases, which are due as follows:
 
Three months ending December 31, 2013
 
$
224,010
 
Fiscal years ending December 31,
       
2013
   
224,010
 
2014
   
713,687
 
2015
   
709,491
 
2016
   
547,677
 
2017
   
37,412
 
2018
   
24,942
 
Total
 
$
2,257,219
 
 
Rental expenses for the three and nine months ended 30 September 2013 and 2012 was $193,826, $48,282, $573,846 and $131,995, respectively.
 
(c)            Capital commitment
 
Since October 2012, Xinyu Xingbang entered various construction contracts for leasehold improvement of offices or premises to be used as showrooms.
 
As of September 30, 2013, the Company had contracted capital commitments of $49,450 for the leasehold improvements of showrooms.
 
As of December 31, 2012, the Company had contracted capital commitments of $7,936 for the purchase of office furniture.
 
NOTE 13
RELATED PARTY TRANSACTIONS

For the three and nine months ended September 30, 2013 and 2012, Guangdong Xingbang paid relevant rent to two shareholders (Mr. Yao and his spouse) of $45,553, $38,626, $135,729 and $116,263, respectively.
 
In October 2012, Xinyu Xingbang entered into a lease agreement with Xinyu Xingbang Industry Co., Ltd for showrooms with a monthly rental of $46,066. The lease starts on October 1, 2012 and expires on September 30, 2016. For the three and nine months ended September 30, 2013 and 2012, Xinyu Xingbang paid the relevant rent to Xinyu Xingbang Industry Co., Ltd. of $138,090, $0, $411,450 and $0, respectively.
 
In June 2012, Xinyu Xingbang entered into a lease agreement with Xinyu Xingbang Industry Co., Ltd for office use with a monthly rental of $2,778. The lease starts on July 1, 2012 and expires on June 30, 2015.  Mr. Yao and his spouse own 90% and 10%, respectively, of the registered capital of Xinyu Xingbang Industry Co., Ltd. For the three and nine months ended September 30, 2013 and 2012, Xinyu Xingbang paid the relevant rent to Xinyu Xingbang Industry Co., Ltd. of $8,327, $8,056, $24,811 and $8,056, respectively.
  
As of September 30, 2013 and December 31, 2012, WFOE owed $816,993 and $802,555, respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 11, 2012 and is due for repayment on June 10, 2013. On May 31, 2013, the loan was renewed, and the loan period started on June 12, 2013 and is due for repayment on June 11, 2014.

As of September 30, 2013 and December 31, 2012, Guangdong Xingbang owed $816,993 and $802,555, respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 19, 2012 and is due for repayment on June 18, 2013. On June 10, 2013, the loan was renewed, and the loan period started on June 19, 2013 and is due for repayment on June 18, 2014.

As of September 30, 2013 and December 31, 2012, Guangdong Xingbang owed $136,765 and $0, respectively, to Mr. Yao and his spouse for lease of office premises. The amounts due are unsecured, interest free and repayable on demand.
 
As of September 30, 2013 and December 31, 2012, Guangdong Xingbang owed $0 and $5,457, respectively, to ZhongshanXingbang Purchase & Exhibition Service Co., Ltd (※ZhongshanXingbang§) which is interest free, unsecured and repayable on demand. Mr. Yao is the director of ZhongshanXingbang. The amount due is unsecured, interest free and repayable on demand.
 
As of September 30, 2013 and December 31, 2012, Xinyu Xingbang owed $547,523 and $130,582, respectively, to Xinyu Xingbang Industry Co., Ltd for rental expense of showrooms. The amount due is unsecured, interest free and repayable on demand.
 
As of September 30, 2013 and December 31, 2012, Xinyu Xingbang owed $25,000 and $0, respectively, to Xinyu Xingbang Industry Co., Ltd for rental expense of office used by Xinyu Xingbang. The amount due is unsecured, interest free and repayable on demand.
 
On January 3, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $163,400. The loan is interest free and unsecured with a loan period started on January 5, 2013 and is due for repayment on January 4, 2014. The use of this loan is only for the operation of Guangdong Xingbang.
 
 
F-11

 
 
On January 10, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $816,993. The loan is interest free and unsecured with a loan period started on January 15, 2013 and is due for repayment on January 14, 2014. The use of this loan is only for the operation of  Xinyu Xingbang.
 
On May 30, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on June 6, 2013 and is due for repayment on June 5, 2014. The use of this loan is only for the operation of Guangdong Xingbang.
 
On July 25, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co.,Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on July 31, 2013 and is due for repayment on July 30, 2014. The use of this loan is only for the operation of Guangdong Xingbang.
 
On September 5, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co.,Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on September 12, 2013 and is due for repayment on September 11, 2014. The use of this loan is only for the operation of Xinyu Xingbang.
 
On September 5, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co.,Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on September 10, 2013 and is due for repayment on September 10, 2014. The use of this loan is only for the operation of Guangdong Xingbang.
 
NOTE 14
CONCENTRATIONS AND CREDIT RISKS
 
As of September 30, 2013 and December 31, 2012, all of the Company*s assets were located in the PRC and Hong Kong and all of the Company*s revenues were derived from customers located in the PRC.
 
Details of the suppliers accounting for 10% or more of the Company*s purchases are as follows:
 
   
Supplier A
    Supplier B  
For the three months ended
             
September 30, 2013
   
-
     
-
 
September 30, 2012
   
48
   
52

   
Supplier A
    Supplier B  
For the nine months ended
             
September 30, 2013
   
-
     
-
 
September 30, 2012
   
76
   
12
 
As of September 30, 2013 and December 31, 2012, the accounts payable for these suppliers were $0 and $2,183, respectively.
 
Details of the customers accounting for 10% or more of the Company*s sales are as follows:
 
   
Customer A
   
Customer B
 
For the three months ended
           
September 30, 2013
   
-
     
-
 
                 
September 30, 2012
   
-
     
43

   
Customer A
   
Customer B
 
For the nine months ended
           
September 30, 2013
   
82
   
-
 
                 
September 30, 2012
   
-
     
33
 
As of September 30, 2013 and December 31, 2012, the accounts receivable from these customers were $0 and $0, respectively.
 
NOTE 15
SUBSEQUENT EVENT
 
In accordance with ASC Topic 855-10, the company has analyzed its operations subsequent to September 30, 2013 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.
 
 
F-12

 
 
Item 2. Management*s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion and analysis of our results of operations and financial condition should be read together with our consolidated group financial statements and the notes thereto and other financial information, which are included elsewhere in our annual report on Form 10-K for fiscal year ended December 31, 2012. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In addition, our financial statements and the financial information included in this report reflect our organization transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.
 
This section contains forward-looking statements. These forward-looking statements are subject to various factors, risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Further, as a result of these factors, risks and uncertainties, the forward-looking events may not occur. Relevant factors, risks and uncertainties include, but are not limited to, those discussed in ※Item 1. Business,§ ※Item 1A. Risk Factors§ and elsewhere in our annual report on Form 10-K for fiscal year ended December 31, 2012. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management*s beliefs and opinions as of the date of this report. We are not obligated to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Overview and Strategy

In this Quarterly Report on Form 10-Q, unless the context requires or is otherwise specified, references to the ※Company,§ ※we,§ ※us,§ ※our§ and similar expressions include the following entities (as defined herein):

(i)            China Xingbang Industry Group Inc., a Nevada corporation (※ China Xingbang §);

(ii)           Xing Bang Industry Group Limited, a British Virgin Islands company and a wholly-owned subsidiary of the Registrant (※ Xingbang BVI §);

(iii)          China Group Purchase Alliance Limited, a Hong Kong company and a wholly-owned subsidiary of Xingbang BVI (※ Xingbang HK §);

(iv)          Guangzhou Xingbang Information Consulting Co., Ltd., a wholly foreign-owned enterprise, or the ※ WFOE §, formed in the People*s Republic of China (※ PRC §) and a wholly-owned subsidiary of Xingbang HK;
 
(v)           Guangdong Xingbang Industry Information & Media Co. Ltd., our principal operating subsidiary, which is a Chinese variable interest entity that the WFOE controls through certain contractual arrangements (※ Guangdong Xingbang §); and

(vi)          Xinyu Xingbang Information Industry Co., Ltd., an entity incorporated in the PRC which the WFOE and Guangdong Xingbang each owns 50% of its equity interest, (※  Xinyu Xingbang §). Xinyu Xingbang will continue the business of Guangdong Xingbang.
 
Through our wholly owned subsidiaries, Xingbang BVI and Xingbang HK, we own the WFOE, which controls Guangdong Xingbang, a variable interest entity (※VIE§), through a series of variable interest entity, or VIE contractual arrangements.  Guangdong Xingbang is currently our sole source of income and operations.  A summary of our business is described below.

We were formed as a Nevada corporation on April 12, 2011 to acquire operational control over Guangdong Xingbang. Since foreign investors are restricted by the laws and regulations of the People*s Republic of China to operate the media and e-commerce business in China, we operate our business through ownership of the WFOE that provides management, consulting, investment and technical services to Guangdong Xingbang. We do not own any direct equity interest in Guangdong Xingbang. In May 2011, the WFOE entered into a series of contractual arrangements which effectively give the WFOE operational control over Guangdong Xingbang despite the lack of direct ownership. As a result of these contractual arrangements, we treat Guangdong Xingbang as a variable interest entity, or VIE, under U.S. generally accepted accounting principles, and we have included its historical financial results in our consolidated financial statements.
 
Our subsidiaries, Xingbang BVI and Xingbang HK are holding companies which do not have any operations or own any assets except for the ownership of the WFOE.  The only current operation of the WFOE is to provide consulting and management services to Guangdong Xingbang.  Currently, we rely on results of operations of Guangdong Xingbang and Xinyu Xingbang. If the PRC government declares the VIE agreements are not enforceable, we will not be able to exercise effective control over Guangdong Xingbang and consolidate the financial results of Guangdong Xingbang.  In such case, our results of operations and financial position will be materially adversely affected.
 
Guangdong Xingbang was founded in 2005 as a print-media based advertising operator and consulting services provider.  In 2010, we made a significant shift of our business model and began laying the groundwork to transition to the business of operating a home furnishings e-commerce platform, ju51 Online Mall. Since 2012, we have been phasing out our advertising and consulting segments and, as of September 30, 2013, our advertising and consulting operations generate negligible revenue. We are currently in the process of building out our e-commerce platform and, once the platform is fully operational, we expect to derive all of our revenue from this business.
 
 
1

 
 
Xinyu Xingbang was incorporated in the PRC in June 2012 for the purpose of continuing the business of Guangdong Xingbang in the near future as Guangdong Xingbang winds down its operations. Pursuant to the Articles of Associations of Xinyu Xingbang, Guangdong Xingbang and the WFOE each invested $787,030 (RMB 5,000,000) in Xinyu Xingbang and each owns 50% of the equity interest of Xinyu Xingbang. Under the Xinyu Xingbang Articles of Association, the WFOE is entitled to appoint the sole director and all members of the management team of Xinyu Xingbang and the WFOE is entitled to receive 99.99% of Xinyu Xingbang*s net profit. Based on the relevant PRC regulations, an Internet Content Provider license, or ICP license, issued by the Chinese Ministry of Industry and Information Technology, is required for Xinyu Xingbang to conduct business as currently contemplated.  In order to be granted the ICP license, foreign investor*s ownership of Xinyu Xingbang cannot exceed 50%. Xinyu Xingbang obtained its ICP license in February 2013. Guangdong Xingbang will gradually wind down its operations and Xinyu Xingbang will carry out Guangdong Xingbang*s business except that Guangdong Xingbang will fulfill its contractual obligations under the existing customer contracts. Guangdong Xingbang will grant an exclusive license to Xinyu Xingbang to permit Xinyu Xingbang to use trademark, domain names, intellectual property rights and any know-how Guangdong Xingbang owns. Guangdong Xingbang will also assign the management right and right to receive revenue from the ju51 Mall and our newspaper publication, called Industry Economy Review , to Xinyu Xingbang. Guangdong Xingbang will continue its corporate existence to hold the equity interest in Xinyu Xingbang.
 
 Below is our updated organizational structure after the incorporation of Xinyu Xingbang.
 
 
 
2

 
 
Historically, our revenue has highly correlated to the Chinese real estate market and was seasonal. Chinese government*s policies restraining real estate growth will result in decrease in the demand for home furnishings, which will have a significant impact on our revenue. Generally, the first half of the year is low season for the home furnishings market, as people generally do not decorate their home during this period because of wet weather and other factors, so our revenue in advertising and consulting (except for consulting provided to local governments) has been relatively low during this period.  We expect our revenue derived from our new ju51 Mall, once operational, to continue to follow these seasonal patterns.
 
In 2012, the Company decided to phase out its advertising and consulting operations and focus its efforts on its e-commerce business model. Therefore revenue from advertising and consulting dropped significantly during 2012. We previously intended to have our distributors develop our technical service stations as well as deliver products from manufactures to technical service stations. On February 14, 2012, the board of directors exempted its distributors, or the so called ※channel service providers,§ from paying service charges from October 2011 to June 2012, considering that the distributors recorded losses resulting from low sales volume on the ju51 Mall, and in order to maintain a good and sustainable cooperation relationship with them. The board also authorized Mr. Xiaohong Yao (※Mr. Yao§), the Company*s Chairman, CEO and President, to exempt distributors from paying service charges at the technical service stations or from paying franchise fees based on sales volume generated on the ju51 Mall. However in the first and second quarters of 2012, we found that many distributors failed to meet the agreed operating goals. As a result, in June 2012, the Company terminated all the contracts with its distributors. Management also determined that the e-commerce platform would not be launched until it was fully developed. We do not expect revenue generated from service charges and commissions from the transactions on the e-commerce platform until the platform is fully operational.
 
Since February 2012, the Company has been developing direct sales stores (later rebranded as ※technical service stations§)  and recruiting interior designers and decoration technicians to join a web portal called ※China Decoration Technicians Network§ at http://www.zgzxjg.com as part of our sales effort. The web portal is owned by Xinyu Zhongxing Decoration Technicians Network Company Limited, a related party that is 80% owned by Mr. Yao and 20% owned by his spouse. The technical service stations (previously called ※direct sales stores§) are intended to function as our local representative offices. Interior designers and decoration technicians will help us reach out to consumers and act as shopping guides, using the technical service stations as their physical base. Consumers who place orders through of the interior designers and decoration technicians will enjoy a special ※membership price§, which will be lower than the direct sale price listed on the ju51 Mall. Interior designers and decoration technicians will earn commissions from the flagship stores.

Since June 2013, Xingyu Xingbang has entered into franchise agreements with companies who are interested in setting up an online retail store on the e-commerce website, www.ju51.com. Some of the franchisees had set up physical showroom in the Company*s ※Home Furnishing Procurement Headquarters,§ which is located in Xinyu City, China. The purpose of the agreement is to generate transactional volume on the e-commerce platform. At this stage, the agreements do not require a franchise fee or service charge for the services provided by Xingyu Xingbang, only a security deposit of $3,268 (RMB 20,000), which is refundable within two months after termination or expiration of the agreement. Once the ju51 Mall is operational, Xingyu Xingbang will begin to collect fees under the agreement, unless such fees are otherwise waived. As of September 30, 2013, Xingyu Xingbang had signed agreements with 491 companies, 18 of them had set up their showrooms and paid the security deposits.  In order to attract more franchisees, on all new franchise agreements signed in the third quarter of 2013, we agreed postpone the retainer payment until revenue is generated.  Our promotional efforts resulted in a total of 474 new franchise agreements were signed in the third quarter of 2013, as compared to 17 agreements in the preceding quarter.

We are experiencing delays in our schedule for rolling out our e-commerce platform and to date have not generated any revenue from this business. We did not generate any revenue from this business during the nine months ended September 30, 2013 due to the restructuring of our marketing team and marketing strategy. We have made substantial progress in setting up our infrastructure, establishing 84 new technical service stations in the third quarter of 2013. However, to date we have been unable to identify qualified personnel to oversee the build out of our technical service stations, online flagship stores, and physical showrooms.
 
 
3

 
 
Critical Accounting Policies and Estimates
 
In preparing our condensed consolidated group financial statements in conformity with accounting principles generally accepted in the United States, we make estimates and assumptions that affect the accounting, recognition and disclosure of our assets, liabilities, stockholders* equity, revenues and expenses. We make these estimates and assumptions because certain information that we use is dependent upon future events, which cannot be calculated with a high degree of precision from data available or cannot be readily calculated based upon generally accepted methodologies. In some cases, these estimates are particularly difficult and therefore require a significant amount of judgment. Actual results could differ from the estimates and assumptions that we use in the preparation of our consolidated group financial statements.
 
During the nine months ended September 30, 2013, there were no significant changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K for the year ended December 31, 2012.
 
Results of Operations 〞 Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012.
 
The following table presents, for the three months indicated, our consolidated statements of operations information.
 
   
Three months ended
September 30,
 
   
2013
   
2012
 
             
REVENUE
           
Advertising
 
$
35
   
$
112,059
 
Consulting service
   
34
     
144,398
 
E-commerce
   
-
     
-
 
Total revenue
   
69
     
256,457
 
                 
COST OF REVENUE
               
Advertising
   
1,317
     
(15,026
Consulting service
   
19,408
     
17,047
 
E-commerce
   
84,238
     
72,235
 
Total cost of revenue
   
104,963
     
74,256
 
                 
GROSS (LOSS) PROFIT
   
(104,894
)
   
182,201
 
                 
OPERATING EXPENSES
               
Selling expenses
   
78,867
     
188,918
 
General and administrative expenses
   
322,802
     
181,667
 
Impairment of website development cost
   
72,955
     
-
 
Depreciation 每 property and equipment
   
22,852
     
24,891
 
Total Operating Expenses, net
   
497,476
     
395,476
 
                 
NET LOSS FROM OPERATIONS
   
(602,370
)
   
(213,275
)
                 
OTHER INCOME (EXPENSES), NET
               
Interest income
   
176
     
1,923
 
Other income
   
50,065
     
650
 
Other expenses
   
(5,665
)
   
(988
)
Gain (Loss) on disposal of property and equipment
   
4,632
     
(4
)
Total Other Income, net
   
49,208
     
1,581
 
                 
NET LOSS BEFORE TAXES
   
(553,162
)
   
(211,694
)
                 
Income tax expenses
   
-
     
(69,941
                 
NET LOSS
   
(553,162
)
   
(281,635
)
                 
OTHER COMPREHENSIVE LOSS
               
Foreign currency translation loss
   
(5,405
)
   
4,633
 
                 
TOTAL COMPREHENSIVE LOSS
 
$
(558,567
)
 
$
(277,002
)
                 
Net loss per share
               
- basic and diluted
 
$
(0.01
)
 
$
(0.00
)
                 
Weighted average number of shares outstanding during the period
               
- basic and diluted
   
81,244,000
     
81,244,000
 
 
 
4

 
 
Revenue

During the three months ended September 30, 2013, we had total revenue of $69, a decrease of 99.97% compared to the same period in 2012. Of this, $35 was attributable to revenue generated from advertising and $34 was attributable to consulting service rendered. During the three months ended September 30, 2012, total revenue was $256,457. Of this, $112,059 was attributable to revenue generated from advertising and $144,398 was attributable to consulting service rendered. The decrease of $256,388 was mainly due to decrease in advertising and consulting revenue as a result of the change of our business model to focus on revamping our e-commerce business. We spent the year ended December 31, 2012 and the first three quarters of 2013 repositioning the Company to shift our core business from advertising and consulting to e-commerce. During this time, management does not think it is appropriate to generate revenue from our e-commerce platform until our new e-commerce revenue models are finalized and driver supports are ready. Therefore revenue from e-commerce was $0 for the three months ended September 30, 2013 and 2012.
 
Cost of revenue

Cost of revenue is comprised of printing cost, editorial fee, agent fee, salaries of consulting service providers, amortization of website development costs, salaries of website administrators and business tax relating to advertising and consulting service rendered.
  
Cost of revenue for the three months ended September 30, 2013 was $104,963, compared to $74,256 for the three months ended September 30, 2012, an increase of $30,707, or approximately 41.35%. The increase was due to the approximate 108.76% increase in the cost of advertising revenue, which was $16,343, the approximate 13.85% increase in the cost of consulting revenue, which was $2,361, and the 16.62% increase in the cost of e-commerce, which was $12,003. The reason for the increase in cost of revenue was the increase in agent fee, printing cost, business tax relating to advertising, amortization of website development costs and salary of website administrators.
 
Gross (loss) profit

Gross loss was $104,894 for the three months ended September 30, 2013, a decrease of $287,095, or approximately 157.57%, compared to a gross profit of $182,201 of the same period in 2012. The decrease was mainly due to the decrease in advertising and consulting revenue.
 
Operating expenses

Operating expenses consist of selling, general and administrative expenses, impairment of website development cost and depreciation.
 
Operating expenses for the three months ended September 30, 2013 were $497,476, mainly composed of $78,867 in selling expenses, $322,802 in general and administrative expenses, $72,955 in impairment of website development cost, and $22,852 in depreciation. Operating expenses for the three months ended September 30, 2012 were $395,476, mainly composed of $188,918 in selling expenses, $181,667 in general and administrative expenses, and $24,891 in depreciation. The increase in operating expenses from the three months ended September 30, 2012 to the three months ended September 30, 2013 was $102,000, or approximately 25.79%. And it was mainly due to the increase in the impairment of website development cost of $72,955.
 
Other income (expenses), net

Other income (expenses), net, consists mainly of net of interest income, other income, other expenses, and gain/loss on disposal of property and equipment.
 
Other income, net, for the three months ended September 30, 2013 was $49,208 compared to other income, net of $1,581 for the three months ended September 30, 2012, an increase of $47,627, or approximately 3,012.46%. The increase in other income (expenses), net, was mainly due to the increase in other income of $49,415, representing the prior year over provision of income tax, for the three months ended September 30, 2013, as compared to $650 for the same period in 2012.
 
Income tax expenses

Income tax benefit was $0 for the three months ended September 30, 2013, as compared to income tax expenses of $69,941 for the three months ended September 30, 2012. The Company did not recognize the deferred tax asset arising from the net loss for the three months ended September 30, 2013, due to the fact that the Company has sustained continuous losses over the years. Our effective income tax rate was 0% and approximately 33% for the three months ended September 30, 2013 and 2012, respectively. Under PRC law, the Company*s qualification as a ※New or High Technology Enterprise§ is subject to review every year.
 
Net Loss
 
Net loss was $553,162 and $281,635 for the three months ended September 30, 2013 and 2012, respectively. The increase was mainly the result of a decrease in advertising and consulting revenue, the revamp of the e-commerce business model, and also the Company*s waiver of fees charged for the use of its former e-commerce platform in 2012. Another reason for the increase was due to the increase in rental expenses in general and administrative expenses. Moreover, the unamortized website development cost was fully impaired since second quarter of 2013.
 
Other comprehensive loss

Other comprehensive loss was $5,405 and a gain of $4,633 for the three months ended September 30, 2013 and 2012, respectively. The change of foreign currency translation loss was primarily caused by the fluctuation in the RMB to U.S. dollar exchange rate in 2013 compared to 2012.
 
 
5

 
 
Results of Operations 〞 Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012.
 
The following table presents, for the nine months indicated, our consolidated statements of operations information.
 
   
Nine months ended
September 30,
 
   
2013
   
2012
 
             
REVENUE
           
Advertising
 
$
10,062
   
$
460,184
 
Consulting service
   
9,730
     
395,132
 
E-commerce
   
-
     
-
 
Total revenue
   
19,792
     
855,316
 
                 
COST OF REVENUE
               
Advertising
   
21,154
     
146,482
 
Consulting service
   
58,930
     
52,203
 
E-commerce
   
320,225
     
293,209
 
Total cost of revenue
   
400,309
     
491,894
 
                 
GROSS (LOSS) PROFIT
   
(380,517
)
   
363,422
 
                 
OPERATING EXPENSES
               
Selling expenses
   
357,072
     
806,841
 
General and administrative expenses
   
1,048,009
     
556,498
 
Impairment of website development cost
   
479,918
     
-
 
Depreciation 每 property and equipment
   
74,778
     
76,053
 
Total Operating Expenses, net
   
1,959,777
     
1,439,392
 
                 
NET LOSS FROM OPERATIONS
   
(2,340,294
)
   
(1,075,970
)
                 
OTHER INCOME (EXPENSES), NET
               
Interest income
   
1,092
     
4,059
 
Other income
   
50,065
     
819
 
Other expenses
   
(7,156
)
   
(2,654
)
Gain on disposal of property and equipment
   
4,632
     
2,292
 
Total Other Income, net
   
48,633
     
4,516
 
                 
NET LOSS BEFORE TAXES
   
(2,291,661
)
   
(1,071,454
)
                 
Income tax benefit
   
-
     
54,588
 
                 
NET LOSS
   
(2,291,661
)
   
(1,016,866
)
                 
OTHER COMPREHENSIVE LOSS
               
Foreign currency translation loss
   
(30,365
)
   
(5,390
)
                 
TOTAL COMPREHENSIVE LOSS
 
$
(2,322,026
)
 
$
(1,022,256
)
                 
Net loss per share
               
- basic and diluted
 
$
(0.03
)
 
$
(0.01
)
                 
Weighted average number of shares outstanding during the period
               
- basic and diluted
   
81,244,000
     
81,244,000
 
 
 
6

 
 
Revenue
 
During the nine months ended September 30, 2013, we had total revenue of $19,792, a decrease of 97.69% compared to the same period in 2012. Of this, $10,062 was attributable to revenue generated from advertising and $9,730 was attributable to consulting service rendered. During the nine months ended September 30, 2012, total revenue was $855,316. Of this, $460,184 was attributable to revenue generated from advertising and $395,132 was attributable to consulting service rendered. The decrease of $835,524 was mainly due to a decrease in advertising and consulting revenue as a result of the change of our business model to focus on revamping our e-commerce business. In the third quarter of 2013, 84 new technical service stations were created, compared to none in the second quarter of 2013, as well as 474 new franchise agreements signed in the third quarter of 2013, compared to 17 agreements in the second quarter of 2013. We spent the year ended December 31, 2012 and the first three quarters of 2013 repositioning the Company to shift our core business from advertising and consulting to e-commerce. During this time, management does not think it is appropriate to generate revenue from our e-commerce platform until our e-commerce revenue models are finalized and driver supports are ready. Therefore revenue from e-commerce was $0 for the nine months ended September 30, 2013 and 2012.
 
Cost of revenue

Cost of revenue is comprised of printing cost, editorial fee, agent fee, salaries of consulting service providers, amortization of website development costs, salaries of website administrators and business tax relating to advertising and consulting service rendered.
 
Cost of revenue for the nine months ended September 30, 2013 was $400,309, compared to $491,894 for the nine months ended September 30, 2012, a decrease of $91,585, or approximately 18.62%. The decrease was due to the approximate 85.56% decrease in the cost of advertising revenue, which was $125,328, the approximately 12.89% increase in the cost of consulting revenue, which was $6,727 and the 9.21% increase in the cost of e-commerce, which was $27,016. The reason for the decrease was mainly due to the decrease in agent fees, printing cost and business tax relating to advertising services.
 
Gross (loss) profit

Gross loss was $380,517 for the nine months ended September 30, 2013, a decrease of $743,939, or approximately 204.70%, compared to a gross profit of $363,422 of the same period in 2012. The decrease was mainly due to the decrease in advertising and consulting revenue.
 
Operating expenses

Operating expenses consist of selling, general and administrative expenses, impairment of website development cost and depreciation.
 
Operating expenses for the nine months ended September 30, 2013 were $1,959,777, mainly composed of $357,072 in selling expenses, $1,048,009 in general and administrative expenses, $479,918 in impairment of website development cost, and $74,778 in depreciation. Operating expenses for the nine months ended September 30, 2012 were $1,439,392, mainly composed of $806,841 in selling expenses, $556,498 in general and administrative expenses and $76,053 in depreciation. The increase in operating expenses from the quarter ended September 30, 2012 to the quarter ended September 30, 2013 was $520,385, or approximately 36.15%. And it was mainly due to the impairment of website development costs of $479,918.
 
Other income (expenses), net

Other income (expenses), net, consists mainly of net of interest income, other income, other expenses, and gain on disposal of property and equipment.
 
Other income, net, for the nine months ended September 30, 2013 was $48,633 compared to $4,516 for the nine months ended September 30, 2012, an increase of $44,117, or approximately 976.90%. The increase in other income, net, was primarily due to the increase in other income of $49,246, representing the prior year over provision of income tax, for the nine months ended September 30, 2013, compared to $819 for the same period in 2012.

Income tax benefit

Income tax benefit was $0 for the nine months ended September 30, 2013, as compared to income tax benefit of $54,588 for the nine months ended September 30, 2012. The Company did not recognize any deferred tax asset arising from the net loss for the nine months ended September 30, 2013, due to the fact that the Company has sustained continuous losses over the years. Our effective income tax rate was 0% and approximately 5% for the nine months ended September 30, 2013 and 2012, respectively. Under PRC law, the Company*s qualification as a ※New or High Technology Enterprise§ is subject to review every year.
 
Net Loss
 
Net loss was $2,291,661 and $1,016,866 for the nine months ended September 30, 2013 and 2012, respectively. The increase was mainly the result of a decrease in advertising and consulting revenue, and the revamp of the e-commerce business model and also the Company waiver of the fees paid to it for the use of the platform. Another reason for the increase was due to the increase in rental expenses in general and administrative expenses. Moreover, the unamortized website development cost was fully impaired since second quarter of 2013.
 
Other comprehensive loss

Other comprehensive loss was $30,365 and $5,390 for the nine months ended September 30, 2013 and 2012, respectively. The change of foreign currency translation loss was primarily caused by the fluctuation in the RMB to U.S. dollar exchange rate in 2013 compared to 2012.
 
Liquidity and Capital Resources
 
Cash and cash equivalents
 
Cash and cash equivalents consist primarily of cash on hand and demand deposits at banks. We had $158,506 and $197,530 of cash and cash equivalents on hand as of September 30, 2013 and December 31, 2012, respectively. There was a decrease of $39,024 in our cash and cash equivalents from December 31, 2012 to September 30, 2013.
 
 
7

 
 
The decrease in our cash and cash equivalents from December 31, 2012 to September 30, 2013 was largely attributable to the combined effect of net loss for the period of $2,291,661, payments for website development cost of $142,303 and advances from related companies of $1,728,039.
 
We require cash for working capital, capital expenditures, repayment of debt, salaries, commissions and related benefits and other operating expenses and income taxes. We estimate that the actual amount of approximately $2,547,000 is needed in the near term to continue the operations. We expect that our working capital needs will increase for the foreseeable future, as we continue to develop and grow our business. See ※Business 〞 General§ in our 10-K filed with the SEC on April 1, 2013.
 
The following table summarizes our cash flows for the nine months ended September 30, 2013 and 2012:
 
   
Nine months ended September 30,
 
   
2013
   
2012
 
Net cash (used in) operating activities
 
$
(1,678,180
)
 
$
(33,798
)
Net cash (used in) investing activities
 
$
(226,805
)
 
$
(272,113
)
Net cash provided by financing activities
 
$
1,863,768
   
$
1,579,307
 
 
Net Cash Used in Operating Activities. Net cash used in operating activities was $1,678,180 and $33,798 for the nine months ended September 30, 2013 and 2012, respectively. The most significant items affecting the comparison of our operating cash flow for the nine months ended September 30, 2013 and 2012 are summarized below:
 
Increase in cash loss from operations - Our net loss from operations, excluding depreciation, amortization, impairment of website development cost and gain on disposal of property and equipment, increased by $800,386 on a period-to-period basis, from cash loss of $828,311 for the nine months ended September 30, 2012 to cash loss of $1,628,697 for the nine months ended September 30, 2013, which negatively impacted our cash flows from operations. The increase in cash loss from operations was mainly due to the decrease in revenue and increase in rental expenses in general and administrative expenses in the first three quarters in 2013 from the same period last year.
  
Decrease in accounts receivable 每 The decrease in account receivable was $0 during the nine months ended September 30, 2013, while it decreased by $1,266,107 for the same period in 2012. The reason for the decrease was that we did not collect any accounts receivables in the first three quarters of 2013 as we decided to render services after a retainer was paid by our customers. Revenue decreased from $855,316 during the nine months ended September 30, 2012 to $19,792 during the nine months ended September 30, 2013. No collection of accounts receivable and no increase of deferred revenue received from the customers during the first three quarters of 2013 led to an increase in cash used in operating activities.
 
Decrease in other payables and accrued expenses - Other payables and accrued expenses decreased by $27,892 during the first three quarters of 2013, while it decreased by $224,274 for the same period in 2012. Other payables and accrued expenses consisted of other tax payables, accrued professional fees, accrued expenses, deposits received from customers, other payable, accrued website development cost, accrued wages and accrued welfare. The decrease in other payables and accrued expenses was the net effect of the decrease of the accrued professional fee, accrued payables, and increase in accrued wages and other payables, which was mainly arising from the payments for construction in progress.
 
 
8

 
 
Net Cash Used in Investing Activities. Our investing activities for the nine months ended September 30, 2013 and 2012 used cash of $226,805 and $272,113, respectively. The net cash used in investing activities are comparable between two periods.
 
Net Cash Provided by Financing Activities. Our financing activities for the nine months ended September 30, 2013 and 2012 provided cash of $1,863,768 and $1,579,307, respectively. Although there were advances of $1,728,039 from a related company, Xinyu Xingbang Industry Co., Ltd., the amount received from Mr. Yao and his spouse was decreased to $135,729 during the nine months ended September 30, 2013 from $1,579,579 in the prior period. The net result leads to a decrease in cash provided by financing activities.
 
Capital Resources
 
We had negative working capital of $4,130,446 as of September 30, 2013 and $2,219,805 as of December 31, 2012, respectively. The reason for the increase in negative working capital from December 31, 2012 to September 30, 2013 was primarily due to the increase in amount due to related companies.
 
Under the VIEs* agreements, Guangdong Xingbang pays the WFOE a consulting service fee, payable in RMB each quarter, equivalent to all of its net income for such quarter based on its quarterly financial statements, prepared in accordance with generally accepted accounting principles of the PRC. The WFOE then may transfer the cash payment to the offshore holding companies (Xingbang HK, Xingbang BVI and China Xingbang) via dividend payment, after deduction of relevant taxes.  If we obtain funds through financing in the US, Xingbang HK may invest in the WFOE. It is generally prohibited for PRC resident enterprises, including foreign owned entities, to make inter-company loans. However, management believes it is in compliance with the current PRC law for the WFOE to deposit the funds into a PRC bank account and request the PRC bank to lend the funds to Guangdong Xingbang, and may use such means to obtain capital funding in the future.

We are a holding company with no significant revenue-generating operations of our own, and thus any cash flows from operations are and will be generated by Guangdong Xingbang through our WFOE*s existing consulting service management arrangement with Guangdong Xingbang. Our ability to service our debt and fund our ongoing operations is dependent on the results of these operations and their ability to provide us with cash. The WFOE*s ability to make loans or pay dividends are restricted under PRC law and may be restricted under the terms of future indebtedness, its governing documents or other agreements. With the cash on hand and the anticipated cash to be received from our operations, we may not be able to generate enough cash to support the expansion of the business operations. However, the Guangdong Xingbang*s Shareholders are fully committed to provide cash as needed to support the Company*s ongoing operations and continued growth. Therefore, we believe that our sources of liquidity will be sufficient to enable us to meet our cash needs for at least the next 12 months.
 
Nonetheless, our liquidity and capital position could be adversely affected by:
 
loss of revenue from advertising and consulting service;
continued failure to generate revenue in the e-Commerce business;
any change of policy on accounts receivable;
the enactment of new laws and regulations;
 
 
9

 
 
our inability to grow our business as we anticipate by expanding our revamped e-commerce business;
any other changes in the cost structure of our underlying business model; and
any of the other risks and uncertainties described in ※Item 1A. Risk Factors,§ and in our annual report on Form 10-K for the fiscal year ended December 31, 2012.
 
Debt Obligations
 
The following is a summary of amounts outstanding under our debt obligations as of September 30, 2013 and December 31, 2012.

   
As of
September 30,
2013
   
As of
December 31,
2012
 
Due to related companies
 
$
1,879,712
   
$
136,039
 
Due to shareholders
   
1,770,751
     
1,605,110
 
Accounts payable
   
-
     
2,183
 
Total debt
 
$
3,650,463
   
$
1,743,332
 
 
Due to related companies
 
As of September 30, 2013 and December 31, 2012, Guangdong Xingbang owed $0 and $5,457, respectively, to ZhongshanXingbang Purchase & Exhibition Service Co., Ltd (※ZhongshanXingbang§) which is interest free, unsecured and repayable on demand. Mr. Yao is the director of ZhongshanXingbang.

As of September 30, 2013 and December 31, 2012, Xinyu Xingbang owed $547,523 and $130,582, respectively, to Xinyu Xingbang Industry Co., Ltd for rental expense of showrooms. The amount due is unsecured, interest free and repayable on demand.
 
As of September 30, 2013 and December 31, 2012, Xinyu Xingbang owed $25,000 and $0, respectively, to Xinyu Xingbang Industry Co., Ltd for rental expense of office used by Xinyu Xingbang. The amount due is unsecured, interest free and repayable on demand.
 
On September 5, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on September 10, 2013 and is due for repayment on September 10, 2014. The use of this loan is only for the operation of Guangdong Xingbang.

On September 5, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on September 12, 2013 and is due for repayment on September 11, 2014. The use of this loan is only for the operation of Xinyu Xingbang.

On July 25, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on July 31, 2013 and is due for repayment on July 30, 2014. The use of this loan is only for the operation of Guangdong Xingbang.

On May 30, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $81,699. The loan is interest free and unsecured with a loan period started on June 6, 2013 and is due for repayment on June 5, 2014. The use of this loan is only for the operation of Guangdong Xingbang.

On January 10, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $816,993. The loan is interest free and unsecured with a loan period started on January 15, 2013 and is due for repayment on January 14, 2014. The use of this loan is only for the operation of  Xinyu Xingbang.
 
On January 3, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Xingbang Industry Co., Ltd, with an amount of $163,400. The loan is interest free and unsecured with a loan period started on January 5, 2013 and is due for repayment on January 4, 2014. The use of this loan is solely for the operations of Guangdong Xingbang.
 
Due to shareholders
 
As of September 30, 2013 and December 31, 2012, WFOE owed $816,993 and $802,555, respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 11, 2012 and is due for repayment on June 10, 2013. On May 31, 2013, the loan was renewed, and the loan period started on June 12, 2013 and is due for repayment on June 11, 2014. The proceeds of the loan was used as the capital investment in Xinyu Xingbang, which is 50% owned by WFOE and 50% owned by Guangdong Xingbang.
 
As of September 30, 2013 and December 31, 2012, Guangdong Xingbang owed $816,993 and $802,555, respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 19, 2012 and is due for repayment on June 18, 2013. On June 10, 2013, the loan was renewed, and the loan period started on June 19, 2013 and is due for repayment on June 18, 2014.
 
As of September 30, 2013 and December 31, 2012, Guangdong Xingbang owed $136,765 and $0, respectively, to Mr. Yao and his spouse for lease of office premises. The amounts due are unsecured, interest free and repayable on demand.
 
 
10

 
 
Off-Balance Sheet Arrangements
 
On February 14, 2012, the board of directors resolved to exempt distributors from paying service charges from October 2011 to June 2012 and to authorize Mr. Yao to exempt distributors from paying service charges, and brick-and-mortar stores or decoration companies from paying franchise fees. As of September 30, 2013 and December 31, 2012, we did not have any off-balance sheet obligations involving unconsolidated subsidiaries that provide financing or potentially expose us to unrecorded financial obligations. All of our obligations with respect to Guangdong Xingbang have been presented on our consolidated balance sheets as of each such date.
 
Recently Issued Accounting Pronouncements
 
There have been no new accounting pronouncements during the nine months ended September 30, 2013 that are of significance, or potentially significance, to us.
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
Not applicable to smaller reporting companies.
 
Item 4. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures.
 
The Company*s management, including our Chief Executive Officer and interim Chief Financial Officer, reassessed the effectiveness of the design and operation of the Company*s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of September 30, 2013 and has subsequently determined that our disclosure controls and procedures were not effective as of September 30, 2013 due to certain material weaknesses, including: (i) a lack of sufficient accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements; and (ii) a lack of standard charter of accounts and written accounting manual and closing procedures to facilitate preparation of financial statements under U.S. GAAP for financial reporting processes. As a result of such material weaknesses, our disclosure controls and procedures were not effective. Our management has worked, and will continue to work to remedy the above material weaknesses in our disclosure controls and procedures.
 
Limitations on the Effectiveness of Disclosure Controls.
 
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.
 
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting during the first three quarters of 2013 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting, except as disclosed above.
 
PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
We may be involved in litigation and other legal proceedings from time to time in the ordinary course of our business. Except as otherwise set forth in this quarterly report, we believe the ultimate resolution of these matters will not have a material effect on our financial position, results of operations or cash flows.
 
 
11

 
 
Item 1A. Risk Factors.
 
As a smaller reporting company, we are not required to provide the information required by this Item.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
There were no issuances of our equity securities during the quarter ended September 30, 2013.
 
  Limitations on Our Payment of Dividends
 
We have not paid any cash dividends to date and we do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
 
In the future, we may be a party to agreements that limit or restrict our ability to pay dividends.
 
In addition, Nevada corporate law prohibits us from making any distribution (including a dividend) on our capital stock at a time when:
 
we would not be able to pay our debts as they become due in the usual course of business; or
our total assets would be less than the sum of (i) our total liabilities plus (ii) the amount that would be needed, if we were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution (although we presently do not have any shareholders with such preferential rights).
 
WFOE is a wholly-foreign owned enterprise under the laws of the PRC. The principal regulations governing dividend distributions by wholly foreign owned enterprises and Sino-foreign equity joint ventures include:
 
The Wholly Foreign Owned Enterprise Law (1986), as amended;
The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
The Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and
The Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.
 
Under these regulations, wholly foreign owned enterprises and sino-foreign equity joint ventures in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, before paying dividends to their shareholders, these foreign invested enterprises are required to set aside at least 10% of their profits each year, if any, to fund certain reserve funds until the amount of the cumulative total reserve funds reaches 50% of the relevant company*s registered capital. Accordingly, the WFOE is allowed to distribute dividends only after having set aside the required amount of its profits into the reserve funds as required under applicable PRC laws and regulations.
 
Item 3. Defaults Upon Senior Securities.
 
Not applicable.
 
Item 4. Mine Safety Disclosures.
 
Not applicable.
 
Item 5.Other Information.
 
Not applicable.
 
 
12

 
 
Item 6. Exhibits.
 
Exhibit No.
 
Description
31.1*
   
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*
 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1*
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
 
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**
 
XBRL Instance Document
101.SCH**
 
XBRL Taxonomy Extension Schema Document
101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
* filed herein.
 
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
13

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
China Xingbang Industry Group Inc.
     
Date: November 14, 2013
By:
/s/ Xiaohong Yao
   
Xiaohong Yao, Chairman, President and Chief Executive Officer
   
(principal executive officer)
     
 
By:
/s/ Haigang Song
   
Haigang Song, Chief Financial Officer
(principal financial and accounting officer)
 
 
14
EXHIBIT 31.1
 
I, Xiaohong Yao, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2013 of China Xingbang Industry Group Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:    November 14, 2013
By:
/s/ Xiaohong Yao
   
Xiaohong Yao
Chief Executive Officer
(Principal Executive Officer)
 
EXHIBIT 31.2

I, Haigang Song, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2013 of China Xingbang Industry Group Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.  
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.  
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
 
b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:      November 14, 2013 
By:
/s/ Haigang Song
   
Haigang Song
Chief Financial Officer
(Principal Finance and Accounting Officer)
EXHIBIT 32.1

Certification Pursuant To
Section 906 of Sarbanes-Oxley Act of 2002

I, Xiaohong Yao, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 
1.
The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and
 
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:     November 14, 2013 
By:
/s/ Xiaohong Yao
   
Xiaohong Yao
   
Chief Executive Officer
(Principal Executive Officer)
 
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EXHIBIT 32.2

Certification Pursuant To
Section 906 of Sarbanes-Oxley Act of 2002

I, Haigang Song, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 
1.
The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and
 
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:     November 14, 2013
By:
/s/ Haigang Song
   
Haigang Song
   
Chief Finance Officer
(Principal Financial and Accounting Officer)
 
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.