China Xingbang Industry Group Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - China Xingbang Industry Group Inc.	Financial_Report.xls
EX-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 - China Xingbang Industry Group Inc.	f10q0912ex32i_chinaxingbang.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - China Xingbang Industry Group Inc.	f10q0912ex31ii_chinaxingbang.htm
EX-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 - China Xingbang Industry Group Inc.	f10q0912ex32ii_chinaxingbang.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - China Xingbang Industry Group Inc.	f10q0912ex31i_chinaxingbang.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

o 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 x 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 x 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	Smaller reporting company	x
(Do not check if a smaller reporting company)

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 14, 2012.

CHINA XINGBANG INDUSTRY GROUP INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2012

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	10

Item 4.	Controls and Procedures	10

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	10

Item 1A.	Risk Factors	10

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	10

Item 3.	Defaults on Senior Securities	11

Item 4.	Mine Safety Disclosure	11

Item 5.	Other Information	11

Item 6.	Exhibits	11

* * *

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, 2012

CONTENTS

			Pages

Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011			F-2

Condensed Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2012 (Consolidated) and 2011 (Combined) (Unaudited)			F-3

Condensed Statements of Cash Flows for the nine months ended September 30, 2012 (Consolidated) and 2011 (Combined) (Unaudited)			F-4

Notes to Condensed Consolidated/Combined Financial Statements (Unaudited)			F-5 – F-12

F-1

CHINA XINGBANG INDUSTRY GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of			As of
	September 30,			December 31,
	2012			2011
	Unaudited
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,472,305		$	199,188
Accounts receivable, net		264,568			1,497,482
Prepaid expenses and other current assets		44,953			80,358
Deferred tax assets		164,500			69,708
Due from related companies		-			3,561
Total Current Assets		1,946,326			1,850,297


PROPERTY AND EQUIPMENT, NET		222,769			260,110
WEBSITE DEVELOPMENT COSTS, NET		459,902			344,355
TOTAL ASSETS	$	2,628,997		$	2,454,762

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	32,035		$	19,670
Deferred revenue		43,319			279,117
Other payables and accrued expenses		686,059			897,074
Income tax payable		66,382			66,282
Deferred tax liabilities		39,685			-
Due to a related company		10,175			10,161
Due to a director		1,591,140			-
Total Current Liabilities		2,468,795			1,272,304

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock ($0.001 par value, 60,000,000 shares
authorized, none issued as of September 30, 2012
and December 31, 2011)		-			-
Common stock ($0.001 par value, 300,000,000 shares
authorized, 81,244,000 shares issued and outstanding
as of September 30, 2012 and December 31, 2011)		81,244			81,244
Additional paid-in capital		959,330			959,330
Accumulated deficits		(1,019,284	)		(2,418	)
Appropriated retained earnings		72,493			72,493
Accumulated other comprehensive gain		66,419			71,809
Total Stockholders’ Equity		160,202			1,182,458

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,628,997		$	2,454,762

F-2

CHINA XINGBANG INDUSTRY GROUP INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
	Consolidated			Combined			Consolidated			Combined
REVENUE
Advertising	$	112,059		$	287,059		$	460,184		$	849,706
Consulting service		144,398			317,901			395,132			1,386,771
E-commerce		-			1,431,179			-			1,431,179
Total revenue		256,457			2,036,139			855,316			3,667,656

COST OF REVENUE
Advertising		(15,026	)		208,540			146,482			592,482
Consulting service		17,047			22,049			52,203			163,400
E-commerce		72,235			143,713			293,209			143,713
Total cost of revenue		74,256			374,302			491,894			899,595

GROSS PROFIT		182,201			1,661,837			363,422			2,768,061

OPERATING EXPENSES
Selling expenses		188,918			394,908			806,841			1,455,826
General & Administrative expenses		181,667			382,256			556,498			917,910
Depreciation and amortization		24,891			29,705			76,053			95,317
Loss (gain) on disposal of property and equipment		4			4,305			(2,292	)		5,751
Total Operating Expenses, net		395,480			811,174			1,437,100			2,474,804

NET (LOSS) INCOME FROM OPERATIONS		(213,279	)		850,663			(1,073,678	)		293,257

OTHER INCOME (EXPENSES), NET
Interest income		1,923			997			4,059			2,523
Interest expenses		-			-			-			(6,293	)
Other income		650			923			819			2,605
Other expenses		(988	)		(5,661	)		(2,654	)		(10,730	)
Total Other Income (Expenses), net		1,585			(3,741	)		2,224			(11,895	)

NET (LOSS) INCOME BEFORE TAXES		(211,694	)		846,922			(1,071,454	)		281,362

Income tax (expenses) benefit		(69,941	)		(199,690	)		54,588			(163,457	)

NET (LOSS) INCOME		(281,635	)		647,232			(1,016,866	)		117,905

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation gain (loss)		4,633			31,130			(5,390	)		46,971

TOTAL COMPREHENSIVE (LOSS) INCOME	$	(277,002	)	$	678,362		$	(1,022,256	)	$	164,876

Net (loss) earnings per share
- basic and- basic and diluted	$	(0.00	)	$	0.01		$	(0.01	)	$	0.00

Weighted average number of shares
outstanding during the period
- basic and diluted		81,244,000			80,148,739			81,244,000			80,040,641

F-3

CHINA XINGBANG INDUSTRY GROUP INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended September 30,
	2012			2011
	Consolidated			Combined
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(1,016,866	)	$	117,905
Adjusted to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization		190,847			100,269
(Gain) loss on disposal of property and equipment		(2,292	)		5,751
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable		1,266,107			(1,389,245	)
Prepaid expenses and other current assets		37,410			(6,698	)
Deferred tax assets		(92,141	)		(4,442	)
Increase (decrease) in:
Accounts payable		11,721			(23,317	)
Deferred revenue		(241,941	)		(117,377	)
Other payables and accrued expenses		(224,274	)		400,730
Income tax payable		(1,766	)		72,675
Deferred tax liabilities		39,397			-
Net cash used in operating activities		(33,798	)		(843,749	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(39,906	)		(99,703	)
Payments for website development cost		(239,431	)		(105,363	)
Proceeds from disposals of property and equipment		3,589			811
Repayment from related companies		3,635			1,157,144
Due from a director		-			91,159
Net cash (used in) provided by investing activities		(272,113	)		1,044,048

CASH FLOWS FROM FINANCING ACTIVITIES
Bank loans repaid		-			(307,853	)
Proceeds from issuance of shares		-			297,291
Capital contribution by stockholders		-			47,382
Repayments to a related company		(272	)		(4,618	)
Advances from a director		1,579,579			-
Net cash provided by financing activities		1,579,307			32,202

EFFECT OF EXCHANGE RATES ON CASH		(279	)		44,175

NET INCREASE IN CASH AND CASH EQUIVALENTS		1,273,117			276,676

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		199,188			737,939

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,472,305		$	1,014,615

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expenses	$	-		$	6,293
Cash paid for income tax	$	-		$	89,453

F-4

CHINA XINGBANG INDUSTRY GROUP INC.

NOTES TO THE CONDENSED CONSOLIDATED/COMBINED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1

BASIS OF PRESENTATION

The accompanying unaudited condensed group financial statements of China Xingbang Industry Group Inc., its subsidiaries and variable interest entity (“VIE”) (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.

In the opinion of management, the unaudited 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, 2012, the results of operations and comprehensive loss/income for the three and nine months ended September 30, 2012 and 2011 and statements of cash flows for the nine months ended September 30, 2012 and 2011. The consolidated results for the three and nine months ended September 30, 2012 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 financial statements and footnotes of the Company for the years ended December 31, 2011 (consolidated) and 2010 (combined).

NOTE 2

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 services 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 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 is currently in the process of applying for the ICP license and it is anticipated to be obtained by the end of year 2012. After it obtains the ICP license, Guangdong Xingbang will gradually wind down its operations and any new business and activities shall be done by and in the name of Xinyu Xingbang. The ownership of the e-commerce website, ju51 Mall, will also be transferred to Xinyu Xingbang. Guangdong Xingbang and Xinyu Xingbang did not enter into any asset transfer or other agreement. It is anticipated that Xinyu Xingbang will enter into new contracts with customers while Guangdong Xingbang will continue to serve customers pursuant to existing contracts.

Pursuant to (i) a series of contractual arrangements between the WFOE, Guangdong Xingbang and all the stockholders of Guangdong Xingbang (ii) the share exchange agreement between China Xingbang, Xingbang BVI and all the stockholders 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 (See Note 4).

F-5

NOTE 3

VARIABLE INTEREST ENTITY

In accordance with Accounting Standards Codification (“ASC”) 810, the Company analyzes its variable interests including its equity investments. The Company determines its interests in potential VIEs and then assesses whether the Company is the primary beneficiary of each VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates its assets, liabilities, results of operations and cash flows (see note 4A). If the Company is not the primary beneficiary, the Company accounts for such interests using other applicable GAAP. The Company determined that it is the primary beneficiary of Guangdong Xingbang and thus consolidates its assets, liabilities, results of operations and cash flows. The Company also consolidates XinyuXingbang, a joint venture formed between Guangdong Xingbang and Guangzhou Xingbang.

NOTE 4

GROUP RESTRUCTURING

(A)

Variable interest entity

On May 13, 2011, the Company, through its PRC subsidiary Guangzhou Xingbang, entered into a series of contractual arrangements consisting of five agreements with Guangdong Xingbang and all the stockholders of Guangdong Xingbang. These five agreements and their consequences are described below.

(i)

a consulting service agreement, pursuant to which Guangdong Xingbang grants Guangzhou Xingbang the right to manage and operate Guangdong Xingbang. In return, Guangdong Xingbang agreed to pay 100% of its net income, in each quarter, as consulting fee to Guangzhou Xingbang. The Consulting Services Agreement is effective until it is terminated by either party in the event the other party becomes bankrupt or insolvent, Guangzhou Xingbang ceases operations, or if circumstances arise which materially and adversely affect the performance or the objectives of such agreement. Guangzhou Xingbang may also terminate such agreement if Guangdong Xingbang fails to remediate a material breach, or in its sole discretion with or without cause.

(ii)

a voting rights proxy agreement, pursuant to which the stockholders of Guangdong Xingbang irrevocably grant Guangzhou Xingbang with all of their voting rights as stockholder of Guangdong Xingbang. The Voting Right Proxy Agreement is effective until terminated by mutual agreement or by the WFOE with a 30-day prior written notice.

(iii)

an option agreement, pursuant to which:

		(a)	Guangzhou Xingbang or its designee has an exclusive option to purchase all or part of the equity interests in Guangdong Xingbang, and;
		(b)	Guangdong Xingbang may not enter into any transaction that could materially affect its assets, liabilities, equity or operations without the prior written consent of Guangzhou Xingbang. The Operating Agreement is effective for the maximum period of time permitted by Chinese law (currently 20 years).

(iv)

an equity pledge agreement, pursuant to which each of the stockholders of Guangdong Xingbang has pledged his or her equity interest in Guangdong Xingbang to Guangzhou Xingbang to secure their obligations under the relevant contractual control agreements, including but not limited to, the obligations of Guangdong Xingbang and its subsidiaries under the exclusive services agreement, the call option agreement, the voting rights proxy agreement described above, and each of them has agreed not to transfer, sell, pledge, dispose of or create any encumbrance on their equity interest in Guangdong Xingbang without the prior written consent of Guangzhou Xingbang. The equity pledge agreement is effective for the maximum period of time permitted by Chinese law (currently 20 years). In the event Guangdong Xingbang fails to cure a material breach, Guangzhou Xingbang may, among other remedies available, terminate such agreement, and;

F-6

(v)

an operating agreement, pursuant to which each of the stockholders of Guangdong Xingbang has agreed to appoint the members recommended by Guangzhou Xingbang as the Directors of Guangdong Xingbang, and shall appoint members of Guangzhou Xingbang’s senior management as Guangdong Xingbang’s Chief Executive Officer, President, Chief Financial Officer, and other senior officers. The Operating Agreement is effective for the maximum period of time permitted by Chinese law (currently 20 years), unless terminated by Guangzhou Xingbang with a 30-day prior written notice. In addition, the WFOE has the right to terminate the Operating Agreement in the event any of the agreements between Guangzhou Xingbang and Guangdong Xingbang are terminated or expire.

In the PRC restructuring transaction described above, the Company gained indirect control of Guangdong Xingbang and Guangdong Xingbang is now a VIE for which the Company is the primary beneficiary.

The Company accounts for its VIE 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, 2012 and December 31, 2011, 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,		As of December 31,
	2012		2011

Cash and cash equivalents	$	1,414,235	$	141,860
Accounts receivable, net		264,568		1,497,482
Prepaid expenses and other current assets		44,848		79,938
Deferred tax assets		164,500		69,708
Due from related companies		-		3,561
Due from group companies		728,520		476,199
Property and equipment, net		222,769		260,110
Website development cost, net		459,902		344,355

Total assets	$	3,299,342	$	2,873,213

Accounts payable	$	32,035	$	19,670
Deferred revenue		43,319		279,117
Other payables and accrued expenses		383,350		559,421
Income tax payable		66,382		66,282
Deferred tax liabilities		39,685		-
Due to a group company		395,876		395,303
Due to a related company		10,175		10,161
Due to a director		795,570		-
Equity of variable interest entities		1,532,950		1,543,259

Total liabilities and equity	$	3,299,342	$	2,873,213

As of September 30, 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.

F-7

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 stockholder 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 stockholders of Xingbang BVI in which the stockholders 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 stockholder 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 combined 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 5

PRINCIPLES OF CONSOLIDATION AND COMBINATION

The accompanying group financial statements for the three and nine months ended September 30, 2012 and 2011 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 (only consolidated for the three and nine months ended September 30, 2012), 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 and combination.

NOTE 6

USE OF ESTIMATES

The preparation of the unaudited condensed 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 7

THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement related to offsetting of assets and liabilities on the balance sheet (FASB ASC Topic 210). The amendments require additional disclosures related to offsetting either in accordance with GAAP or master netting arrangements. The provisions for this pronouncement are effective for fiscal years, and interim periods within those years, beginning after January 1, 2013. The Company will adopt this pronouncement for its fiscal year beginning March 1, 2013. The Company does not expect this pronouncement to have a material effect on our consolidated financial statements.

On September 15, 2011 the FASB issued Accounting Standards Update (“ASU”) 2011-08, Testing Goodwill for Impairment (the revised standard). The revised standard is intended to reduce the cost and complexity of the annual goodwill impairment test by providing both public and nonpublic entities with the option of performing a “qualitative” assessment to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted for certain companies. The Company has assessed the potential impact the adoption of ASU 2011-08 on its consolidated results of operations and consolidated financial position and concluded that there is no impact.

F-8

In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income". The guideline eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders' equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This new guidance is to be applied retrospectively. This guidance will be effective for the Company beginning January 1, 2012. The Company believes the adoption of ASU 2011-05 concerns presentation and disclosure only and will not have an impact on the Company’s consolidated financial position or results of operations.

NOTE 8

OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses consisted of the following:

	As of September 30, 2012		As of December 31, 2011

Customers deposits and prepayments	$	219,770	$	177,156
Business and other taxes payable		52,106		107,569
Other payables		64,739		67,325
Accrued expenses		349,444		545,024
	$	686,059	$	897,074

NOTE 9

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 and nine months ended September 30, 2012 and 2011.

For the three months ended September 30, 2012	Advertising			Consulting service			E-commerce			Elimination			Total
Revenues	$	134,209		$	144,398		$	-		$	(22,150	)	$	256,457
Gross profit		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

For the three months ended September 30, 2011	Advertising			Consulting service			E-commerce			Elimination			Total
Revenues	$	287,059		$	317,901		$	1,431,179		$	-		$	2,036,139
Gross profit		78,519			295,852			1,287,466			-			1,661,837
Net (loss) income		(96,329	)		(225,082	)		1,105,978			-			784,567
Total assets as of September 30, 2011		999,041			1,898,178			432,918			-			3,330,137
Capital expenditure		34,670			66,335			26,658			-			127,663
Depreciation and amortization	$	5,835		$	11,479		$	12,391		$	-		$	29,705

F-9

A reconciliation is provided for unallocated amounts relating to corporate operations which are not included in the segment information

	Three months ended September 30,
			2012			2011
Total net (loss) income for reportable segments		$	(158,582	)	$	784,567

Unallocated amounts relating to corporate operations
Professional fees			(43,055	)		(124,608	)
Others			(79,998	)		(12,727	)
Total (loss) income		$	(281,635	)	$	647,232

For the nine months ended September 30, 2012	Advertising			Consulting service		E-commerce			Elimination			Total
Revenues	$	625,603		$	395,132	$	-		$	(165,419	)	$	855,316
Gross profit		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

For the nine months ended September 30, 2011	Advertising			Consulting service		E-commerce			Elimination			Total
Revenues	$	849,706		$	1,386,771	$	1,431,179		$	-		$	3,667,656
Gross profit		257,224			1,223,371		1,287,466			-			2,768,061
Net (loss) income		(867,373	)		457,321		1,105,978			-			695,926
Total assets as of September 30, 2011		999,041			1,898,178		432,918			-			3,330,137
Capital expenditure		61,520			116,888		26,658			-			205,066
Depreciation and amortization	$	28,595		$	54,331	$	12,391		$	-		$	95,317

A reconciliation is provided for unallocated amounts relating to corporate operations which are not included in the segment information.

	Nine months ended September 30,
			2012			2011
Total net (loss) income for reportable segments		$	(730,853	)	$	695,926

Unallocated amounts relating to corporate operations
Professional fees			(178,243	)		(565,294	)
Others			(107,770	)		(12,727	)
Total (loss) income		$	(1,016,866	)	$	117,905

NOTE 10

STOCKHOLDERS’ EQUITY

Appropriated retained earnings

WFOE, Guangdong Xingbang and Xinyu Xingbang 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, 2012 and December 31, 2011, Guangdong Xingbang appropriated $72,493 and $72,493 respectively to the relevant reserves based on its net income in accordance with the laws and regulations of the PRC.

F-10

NOTE 11

COMMITMENTS AND CONTINGENCIES

(a) Defined contribution retirement plans

The full time employees of Guangdong 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 is 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, 2012 and 2011 were $20,258 and $48,410 respectively. The total provision and contributions made for such employee benefits for the nine months ended September 30, 2012 and 2011 were $75,567 and $82,495 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 stockholders under an operating lease at a monthly rental of $13,013 which expires on December 31, 2012.

Xinyu Xingbang leases office premises from Xinyu Xingbang Industry Co., Ltd under an operating lease at a monthly rental of $2,705 which expires on June 30, 2015. The Chief Executive Officer of the Company Mr. Xiaohong Yao (“Mr. Yao”) and his spouse own 90% and 10% respectively of the registered capital of Xinyu Xingbang Industry Co., Ltd.

As of September 30, 2012, the Company had outstanding commitments with respect to the above operating leases, which are due as follows:

Three months ending December 31, 2012	$	47,153
Fiscal years ending December 31,
2012		47,153
2013		32,460
2014		32,460
2015		16,230
Thereafter		-
Total	$	128,303

NOTE 12

RELATED PARTY TRANSACTIONS

In June 2012, Xinyu Xingbang entered into an operating lease agreement with Xinyu Xingbang Industry Co., Ltd at a monthly rental of $2,705 which 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.

As of September 30, 2012 and December 31, 2011, two related companies owed $0 and $3,561 respectively to the Company which is interest free, unsecured and repayable on demand.

As of September 30, 2012 and December 31, 2011, the Company owed $10,175 and $10,161 respectively to a related company which is interest free, unsecured and repayable on demand.

As of September 30, 2012 and December 31, 2011, the Company owed $1,591,140 and $0 respectively to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on June 19, 2012 and is due and payable on June 18, 2013.

For the three months ended September 30, 2012 and 2011, the Company paid two stockholders $38,626 and $38,241 for lease of office premises.

For the nine months ended September 30, 2012 and 2011, the Company paid two stockholders $116,263 and $113,295 for lease of office premises.

NOTE 13

CONCENTRATIONS AND CREDIT RISKS

As of September 30, 2012 and December 31, 2011, 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.

F-11

Details of the suppliers accounting for 10% or more of the Company’s purchases are as follows:

	Supplier A		Supplier B			Supplier C
For the three months ended
September 30, 2012		48%		52	%		-
September 30, 2011		36%		53	%		11	%

	Supplier A		Supplier B			Supplier C
For the nine months ended
September 30, 2012		76%		12	%		-
September 30, 2011		60%		36	%		-

As of September 30, 2012 and December 31, 2011, the accounts payable for these suppliers were $1,948 and $19,670 respectively.

Details of the customers accounting for 10% or more of the Company’s sales are as follows:

	Customer A
For the three months ended
September 30, 2012		43	%

	Customer A
For the nine months ended
September 30, 2012		33	%

No single customer accounted for more than 10% of the turnover for the three and nine months ended September 30, 2011.

As of September 30, 2012 and December 31, 2011, the accounts receivable from these customers were $119,336 and $0 respectively

Details of the customers accounting for 10% or more of the Company’s accounts receivable are as follows:

	Customer A			Customer B
As of
September 30, 2012		45	%		24	%
December 31, 2011		-			11	%

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 condensed 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, 2011.. 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, 2011. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s beliefs and opinions as of the date ofthis 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. See “Forward-Looking Statements.”

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”). After Xinyu Xingbang obtains the operating ICP license, 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 from operating in 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 of which the Company is the primary beneficiary, and we have therefor included its historical financial results in our group 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 solely rely on results of operations of Guangdong 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 combine the financial results of Guangdong Xingbang. In such case, our results of operations and financial position will be materially adversely affected.

Guangdong Xingbang, which was founded in 2005, derives revenue primarily from three types of business: e-commerce related revenue derived from our ju51 Mall, advertising revenue, and revenue from consulting services provided to businesses and local governments in China.

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 is currently in the process of applying for the ICP license and it is anticipated to be obtained by the end of year 2012. After it obtains the ICP license, Guangdong Xingbang will gradually wind down its operations and any new business and activities shall be done by and in the name of Xinyu Xingbang. The ownership of the e-commerce website, ju51 Mall, will also be transferred to Xinyu Xingbang. Guangdong Xingbang and Xinyu Xingbang did not enter into any asset transfer or other agreement. It is anticipated that Xinyu Xingbang will enter into new contracts with customers while Guangdong Xingbang will continue to serve customers pursuant to existing contracts.

Below is our updated organizational structure after the incorporation of Xinyu Xingbang.

Our revenue highly correlates to the Chinese real estate market and is seasonal. Since January 2010, the Chinese government began to put forth policies restraining real estate growth and, as a result, the demand for home furnishings began to decrease in the fourth quarter of 2010. Manufacturers and distributors cut their advertising and consulting budgets in the first quarter of 2011 and the decreased demand had a significant impact on our revenue and deferred revenue in the first three quarters of 2011. Management believes it is possible for the Chinese government to continue its policy to restrain high housing prices in the foreseeable future. Such policy is intended to incentivize consumers who previously were not able to afford the high home prices and spend on home furnishings. Prior to the policy change, many apartments and houses were purchased by speculators who bought them and did not spend any money to furnish them. We believe an increased number of home buyers buying for personal occupancy will lead to increased growth in the home furnishings market and we expect to see more aggressive marketing initiatives by the home furnishings industry in the future. 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, and revenue generated by our ju51 Mall) is relatively low during this period.

On February 2, 2012, to avoid confusion by consumers and to better reflect their functions, we rebranded direct sale stores as technical service stations. Besides brick-and-mortar stores, we also decided to license decoration companies to become our technical service stations.

As part of our operation of the ju51 Mall, we seek to capitalize on our relationship with distributors by engaging the distributors, or “channel service providers”, to develop technical service stations, potential advertising and consulting services clients and distribute our newspapers. We also intend to build representative offices throughout China to develop technical service stations. Distributors will receive commission based on the franchise fee paid by technical service stations, the advertising and consulting services revenue generated by such distributor, and will be compensated for its distribution costs. By doing so, our management believes we can develop the ju51 Mall quickly and increase our advertising and consulting revenues in the foreseeable future.

We also decided to develop membership of decoration technicians as shopping guides to help increase sales volume on the ju51 Mall. To promptly develop membership of decoration technicians and better organize and manage them, we will develop decoration companies to be our technical service stations. In principle, we only develop a technical service station within a county or a district of a city to protect their economic interests. Technical service stations will earn commissions, paid by flagship stores, based on a percentage of the sales in the geographical area they are franchised to cover. A decoration technician will also earn commissions, paid by flagship stores, based on a percentage of the amount he/she sells as a shopping guide. Flagship stores are set up by the manufacturers in the online mall where they showcase and sell their products, list prices for products and process orders placed online by consumers. Customers, who input the membership number of the decoration technician when they place orders, will enjoy membership price lower than the direct sale price listed on the ju51 Mall. To help consumers learn more about or check the personal information of decoration technicians, we founded a web portal of China Decoration Technician the web address is http://www.zgzxjg.com in November 2011.This website is owned by the Company and the development cost of the website is expensed as incurred.

During the second quarter of 2012, we combined our two newspapers, “China Ceramics Weekly” and “ Guzhen Lighting Weekly”, and changed the name to “Industry Economy Remark”

As of February 14, 2012, the board of directors exempted distributors from paying service charges from October 2011 to June 2012, considering that the distributors have undergone loss resulting from low sales volume on the ju51 Mall, and in order to maintain a good and sustainable cooperation relationship with them, and also authorized Mr. Yao, the Chairman, Chief Executive Officer and President, to exempt distributors from paying service charges, direct sale stores (later rebranded as technical service stations) from paying license fees. Accordingly, we do not expect revenues to be generated from service charges until the first quarter of 2013 at the earliest.

Critical Accounting Policies and Estimates

In preparing our condensed 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 condensed group financial statements.

During the nine months ended September 30, 2012, 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, 2011.

Results of Operations — Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011.

The following table presents, for the three months indicated, our condensed statements of operations information.

	Three months ended September 30,
	2012			2011
	Consolidated			Combined
REVENUE
Advertising	$	112,059		$	287,059
Consulting service		144,398			317,901
E-commerce		-			1,431,179
Total revenue		256,457			2,036,139

COST OF REVENUE
Advertising		(15,026	)		208,540
Consulting service		17,047			22,049
E-commerce		72,235			143,713
Total cost of revenue		74,256			374,302

GROSS PROFIT		182,201			1,661,837

OPERATING EXPENSES
Selling expenses		188,918			394,908
General & Administrative expenses		181,667			382,256
Depreciation and amortization		24,891			29,705
Loss on disposal of property and equipment		4			4,305
Total Operating Expenses, net		395,480			811,174

NET (LOSS) INCOME FROM OPERATIONS		(213,279	)		850,663

OTHER INCOME (EXPENSES), NET
Interest income		1,923			997
Interest expenses		-			-
Other income		650			923
Other expenses		(988	)		(5,661	)
Total Other Income (Expenses), net		1,585			(3,741	)

NET (LOSS) INCOME BEFORE TAXES		(211,694	)		846,922

Income tax expenses		(69,941	)		(199,690	)

NET (LOSS) INCOME		(281,635	)		647,232

OTHER COMPREHENSIVE INCOME
Foreign currency translation gain		4,633			31,130

TOTAL COMPREHENSIVE(LOSS) INCOME	$	(277,002	)	$	678,362

Net (loss) earnings per share
- basic and diluted	$	(0.00	)	$	0.01

Weighted average number of shares
outstanding during the period
- basic and diluted		81,244,000			80,148,739

Revenue

During the three months ended September 30, 2012, we had total revenue of $256,457, a decrease of 87.40% compared to the same period in 2011. Of this, $112,059 was attributable to revenue generated from advertising, $144,398 was attributable to consulting services rendered, and $0 was contributed by e-commerce. During the three months ended September 30, 2011, total revenue was $2,036,139. Of this, $287,059 was attributable to revenue generated from advertising, $317,901 was attributable to consulting services rendered, and $1,431,179 was from e-commerce. The decrease of $1,779,682 was mainly due to decrease in e-commerce revenue as a result of our plan to revamp our e-commerce business model. The Company waived the fee for the use of the platform since October 1, 2011 by the channel service providers so as to compensate for loss incurred by the channel service providers when the platform was suspended during the prior period. The decrease was also due to decreases in advertising and consulting revenue as a result of our focused effort on revamping our e-commerce business as well as the slowdown of the real estate market in China since 2011.

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, services rendered and e-commerce.

Cost of revenue for the three months ended September 30, 2012 was $74,256, compared to $374,302 for the three months ended September 30, 2011, a decrease of $300,046, or approximately 80.16%. The decrease was due to the approximate 107.21% decrease in the cost of advertising revenue, which was $223,566, the approximately 22.69% decrease in the cost of consulting revenue, which was $5,002 and the decrease in the cost of e-commerce, which was $71,478. The reason for the decrease was the decrease in agent fees, salaries of consulting service providers and business tax relating to advertising and consulting service rendered.

Gross profit

Gross profit was $182,201 for the three months ended September 30, 2012, a decrease of $1,479,636, or approximately 89.04%, compared to gross profit of $1,661,837 from the same period prior year. The decrease was mainly due to the decrease in e-commerce revenue.

Operating expenses

Operating expenses consist of selling, general and administrative expenses, depreciation and amortization and loss on disposal of property and equipment.

Operating expenses for the three months ended September 30, 2012 were $395,480, mainly composed of $370,585 in selling, general and administrative expense and $24,891 in depreciation and amortization. Operating expenses for the three months ended September 30, 2011 were $811,174, mainly composed of $777,164 in selling, general and administrative expenses and $29,705 in depreciation and amortization. The decrease in operating expenses from the quarter ended September 30, 2011 to the quarter ended September 30, 2012 was $415,694, or approximately 51.25%. The decrease was mainly due to the decrease in selling, general and administrative expenses. The reason for the decrease was due to the decrease in wages and salaries as we focused on restructuring the business.

Other income (expenses), net

Other income (expenses), net, consists mainly of net of interest income, interest expenses, other income, and other expenses.

Other income, net, for the three months ended September 30, 2012 was $1,585 and other expenses, net were $3,741 for the three months ended September 30, 2011, an increase of $5,326, or approximately 142.37%. The increase in other income, net, was primarily attributable to the increase in interest income, which was $926, or 92.88% and the decrease in other expenses, which was $4,673, or approximately 82.55%.

Income tax expenses

Income tax expenses were $69,941 for the three months ended September 30, 2012, as compared to income tax expense $199,690 for the three months ended September 30, 2011. The decrease in income tax expenses was mainly attributable to the continuous loss for the past period. Our effective income tax rate was approximately 33% and 24% respectively for the three months ended September 30, 2012 and 2011, because we are qualified as a “New or High Technology Enterprise” under PRC laws, which is subject to review every year.

Net (Loss) Income

Net loss was $281,635 and net income was $647,232 for the three months ended September 30, 2012 and 2011, respectively. The decrease mainly was the result of a decrease in e-commerce revenue as we continued to restructure our business and revamp our e-commerce business model.

Comprehensive (loss) income

Comprehensive loss was $277,002 for the three months ended September 30, 2012. Comprehensive income was $678,362 for the three months ended September 30, 2011. The change was caused by the increase of net loss in 2012. The change of foreign currency translation gains was primarily caused by the fluctuation in the RMB to U.S. dollar exchange rate in 2012 compared to 2011.

Results of Operations — Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011.

The following table presents, for the nine months indicated, our condensed statements of operations information.

	Nine months ended September 30,
	2012			2011
	Consolidated			Combined
REVENUE
Advertising	$	460,184		$	849,706
Consulting service		395,132			1,386,771
E-commerce		-			1,431,179
Total revenue		855,316			3,667,656

COST OF REVENUE
Advertising		146,482			592,482
Consulting service		52,203			163,400
E-commerce		293,209			143,713
Total cost of revenue		491,894			899,595

GROSS PROFIT		363,422			2,768,061

OPERATING EXPENSES
Selling expenses		806,841			1,455,826
General & Administrative expenses		556,498			917,910
Depreciation and amortization		76,053			95,317
(Gain) Loss on disposal of property and equipment		(2,292	)		5,751
Total Operating Expenses, net		1,437,100			2,474,804

NET (LOSS) INCOME FROM OPERATIONS		(1,073,678	)		293,257

OTHER INCOME (EXPENSES), NET
Interest income		4,059			2,523
Interest expenses		-			(6,293	)
Other income		819			2,605
Other expenses		(2,654	)		(10,730	)
Total Other Income (Expenses), net		2,224			(11,895	)

NET (LOSS) INCOME BEFORE TAXES		(1,071,454	)		281,362

Income tax benefit (expenses)		54,588			(163,457	)

NET (LOSS) INCOME		(1,016,866	)		117,905

OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation (loss) gain		(5,390	)		46,971

TOTAL COMPREHENSIVE(LOSS) INCOME	$	(1,022,256	)	$	164,876

Net (loss) earnings per share
- basic and- basic and diluted	$	(0.01	)	$	0.00

Weighted average number of shares
outstanding during the period
- basic and diluted		81,244,000			80,040,641

Revenue

During the nine months ended September 30, 2012, we had total revenue of $855,316. Of this, $460,184 was attributable to revenue generated from advertising, $395,132 was attributable to consulting services rendered, and $0 was contributed by e-commerce. During the nine months ended September 30, 2011, total revenue was $3,667,656. Of this, $849,706 was attributable to revenue generated from advertising, $1,386,771 was attributable to consulting services rendered, and $1,431,179 was from e-commerce. The decrease of $2,812,340 or approximately 76.68% was mainly due to a decrease in e-commerce revenue as a result of our plan to revamp our e-commerce business model. The Company waived the fee for the use of the platform since October 1, 2011 by the channel service providers so as to compensate for loss incurred by the channel service providers when the platform was suspended during the prior period. The decrease was also due to decreases in advertising and consulting revenue as a result of our focused effort on revamping our e-commerce business as well as the slowdown of the real estate market in China since 2011.

Cost of revenue

Cost of revenue for the nine months ended September 30, 2012 was $491,894, compared to $899,595 for the nine months ended September 30, 2011, a decrease of $407,701, or approximately 45.32%. The decrease was due to the approximate 75.28% decrease in the cost of advertising revenue, the approximate 68.05% decrease in the cost of consulting revenue and the increase in the cost of e-commerce, which was $149,496. The reason for the decrease of cost of advertising and consulting was the decrease in agent fee, salaries of consulting service providers and business tax relating to advertising and consulting services rendered. The reason for the increased cost of e-commerce was due to the expenses related to the development of the ju51 Mall website, the platform of our e-commerce business.

Gross profit

Gross profit was $363,422 for the nine months ended September 30, 2012, a decrease of $2,404,639, or approximately 86.87%, compared to gross profit of $2,768,061 from the same period of the prior year. The reason for the decrease was mainly due to the decrease in advertising revenue, consulting revenue and e-commerce revenue.

Operating expenses

Operating expenses consist of selling, general and administrative expenses, depreciation and amortization and gain/loss on disposal of property and equipment.

Operating expenses for the nine months ended September 30, 2012 were $1,437,100, mainly composed of $1,363,339 in selling, general and administrative expenses, and $76,053 in depreciation and amortization. Operating expenses for the nine months ended September 30, 2011 were $2,474,804, mainly composed of $2,373,736 in selling, general and administrative expenses, and $95,317 in depreciation and amortization. The decrease in operating expenses from the nine months ended September 30, 2011 to the nine months ended September 30, 2012 was $1,037,704, or approximately 41.93%. Of this, selling, general and administrative expenses decreased by $1,010,397, or approximately 42.57%, and depreciation and amortization decreased by $19,264, or approximately 20.21%. The reason for the decrease in the selling, general and administrative expenses was due to the decrease in wages and salaries as we focused on restructuring the business.

Other income (expenses), net

Other income (expenses), net, consists mainly of net of interest income, interest expenses, other income, and other expenses.

Other income, net, for the nine months ended September 30, 2012 was $2,224 and other expenses, net were $11,895 for the nine months ended September 30, 2011, an increase of $14,119, or approximately 118.70%. The increase in other income, net was primarily attributable to the increase in interest income, which was $1,536, or 60.88%, the decrease in other expenses, which was $8,076, or approximately 75.27% and the decrease in interest expense which was $6,293, or 100%.

Income tax benefit (expenses)

Income tax benefit was $54,588 for the nine months ended September 30, 2012, as compared to income tax expense of $163,457 for the nine months ended September 30, 2011. The increase in income tax benefit was mainly attributable to the continuous loss for the past periods. Our effective income tax rate was approximately 5% and 58% respectively for the nine months ended September 30, 2012 and 2011, because we are qualified as a “New or High Technology Enterprise” under PRC laws, which is subject to review every year.

Net (Loss) Income

Net loss was $1,016,886 and net income was $117,905 for the nine months ended September 30, 2012 and 2011, respectively. The decrease mainly was the result of a decrease in revenue across all business lines and our continued efforts to develop our e-commerce platform as part of our plans to revamp the e-commerce business.

Comprehensive (loss) income

Comprehensive loss was $1,022,256 for the nine months ended September 30, 2012. Comprehensive income was $164,876 for the nine months ended September 30, 2011. The change was caused by the increase of net loss in 2012. The change of foreign currency translation gains was primarily caused by the fluctuation in the RMB to U.S. dollar exchange rate in 2012 compared to 2011.

Liquidity and Capital Resources

Cash and cash equivalents

Cash and cash equivalents consist primarily of cash on hand and demand deposits at a bank. We had $1,472,305 and $199,188 of cash and cash equivalents on hand as of September 30, 2012 and December 31, 2011, respectively. There was an increase of $1,273,117 in our cash and cash equivalents from December 31, 2011 to September 30, 2012.

The increase in our cash and cash equivalents from December 31, 2011 to September 30, 2012 was largely attributable to an increase in net cash provided by financing activities, which was $1,579,307, on a period-to-period basis. The increase in cash provided by financing activities was largely caused by the increase of advances from Mr. Yao, our Chairman, President and CEO. Such advances of $1,579,579 represent funds borrowed from Mr. Yao to invest in Xinyu Xingbang. The loan is interest free and unsecured. The loan was made on June 19, 2012 and is due and payable on June 18, 2013.

We require cash for working capital, capital expenditures, repayment of debt, salaries, commissions and related benefits and other operating expenses and income taxes. 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 March 26, 2012.”

The following table summarizes our cash flows for the nine months ended September 30, 2012 and 2011:

	Nine months ended September 30,
	2012			2011
Net cash used in operating activities	$	(33,798	)	$	(843,749	)
Net cash (used in) provided by investing activities	$	(272,113	)	$	1,044,048
Net cash provided by financing activities	$	1,579,307		$	32,202

Net Cash Used in Operating Activities. Net cash used in operating activities was $33,798 and $843,749 for the nine months ended September 30, 2012 and 2011, respectively. The most significant items affecting the comparison of our operating cash flow for the nine months ended September 30, 2012 and 2011 are summarized below:

●

Increase in cash loss from operations - Our net loss from operations, excluding depreciation, amortization and (gain) loss on disposal of property and equipment, increased by $604,386 on a period-to-period basis, from cash income of $223,925 for the nine months ended September 30, 2011 to cash loss of $828,311 for the nine months ended September 30, 2012, which negatively impacted our cash flows from operations. The increase in cash loss from operations was due to the decrease of revenue in the first three quarters in 2012 from the same period last year.

●

Decrease in deferred revenue - Deferred revenue decreased by $241,941 for the first three quarters of 2012, while they decreased by $117,377 for the same period in 2011. The reason for the change was that we entered into less advertising and consulting contracts.

●

Decrease in accounts receivable –Accounts receivable decreased by $1,266,107 for the first three quarters in 2012, while they increased by $1,389,245 for the same period in 2011. The reason for the decrease was that we collected service charges in the first three quarters of 2012 payable by the channel service providers.

Net Cash Used in Investing Activities. Our investing activities for the nine months ended September 30, 2012 and 2011 used cash of $272,113 and provided cash of $1,044,048, respectively. The increase in cash used in investing activities was largely caused by the decrease of cash inflow of $1,153,509 due to the repayment of other payables due to us from related companies.

Net Cash Provided by Financing Activities. Our financing activities for the nine months ended September 30, 2012 and 2011 provided cash of $1,579,307 and $32,202, respectively. The increase in cash provided by financing activities was largely caused by the increase of advances from Mr. Yao, our Chairman, President and CEO. Such advances of $1,579,579 represent funds borrowed from Mr. Yao to invest in Xinyu Xingbang. The loan is interest free and unsecured. The loan was made on June 19, 2012 and is due and payable on June 18, 2013.

Guangdong Xingbang borrows funds from Mr. Yao from time to time when it is short of cash for operations. As of September 30, 2012 and December 31, 2011, the Company owed $1,591,140 and $0 respectively to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on June 19, 2012 and is due and payable on June 18, 2013.

Capital Resources

We had negative working capital of $522,469 as of September 30, 2012 and positive working capital of $577,993 as of December 31, 2011, respectively. The reason for the decrease from December 31, 2011 to September 30, 2012 was primarily due to the decrease in accounts receivable and increase in amount due to a director.

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 services 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 services;

●	continued failure to generate revenue in the e-Commerce business;

●	any change of policy on accounts receivable;

●	the enactment of new laws and regulations;

●	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, 2011.

Debt Obligations

The following is a summary of amounts outstanding under our debt obligations as of September 30, 2012 and December 31, 2011.

	As of September 30, 2012		As of December 31, 2011
Due to a related company		10,175		10,161
Due to a director		1,591,140		-
Accounts payable		32,035		19,670
Total debt		1,633,350		29,831

Due to a related company or party

As of September 30, 2012 and December 31, 2011, Guangdong Xingbang owed Zhongshan Xingbang Purchase & Exhibition Service Co., Ltd (“Zhongshan Xingbang”) $10,175 and $10,161, respectively under an unsecured, interest-free, demand loan. Zhongshan Xingbang is an entity controlled by Mr. Yao, our Chairman of the Board, Chief Executive Officer and President.

Accounts payable

As of September 30, 2012 and December 31, 2011, Guangdong Xingbang owed the printing company which prints its newspaper, $32,035 and $19,670, respectively.

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, the Chairman, CEO and President, to exempt distributors from paying service charges, and brick-and-mortar stores or decoration companies from paying franchise fees. As of September 30, 2012 and December 31, 2011, 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 condensed consolidated balance sheets as of each such date.

Recently Issued Accounting Pronouncements

See Note 7 of Notes to Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements” for a description of recently issued and adopted accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial position, and cash flows.

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, 2012 and has subsequently determined that our disclosure controls and procedures were not effective as of September 30, 2012 due to certain material weaknesses including (i) lack of sufficient accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements; and (ii) 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 2012 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.

Item 1A.

Risk Factors.

There have not been any material changes to the risk factors that were included in our From 10-K for fiscal year ended December 31, 2011, filed with the SEC on March 26, 2012 except for addition of the following risk factor:

Our business depends on a few key customers for a significant portion of our sales and our operations depends on some key suppliers. A significant adverse change in a customer or supplier relationship or in a customer’s or supplier's performance or financial position could harm our business and financial condition.

For the nine month period ended September 30, 2012, our largest customer represented approximately 33% of our total sales , although for the year ended December 31, 2011, no customer accounted for more than 10% of our total revenue. A decision by this customer, whether motivated by competitive considerations, strategic shifts, financial requirements or difficulties, economic conditions or otherwise, to decrease its purchases from us or to change its manner of doing business with us, could adversely affect our business and financial condition. Our contract with this customer expires on February 28, 2013, according to which we provide consulting services to it. Even though we believe we will be able to replace this customer if we lose it in the next 12 months, such loss could have a material adverse effect on our earnings, financial condition and future growth prospects.

For the nine months ended September 30, 2012, we are entirely dependent on two suppliers to print our newspaper, . Although we will be able to replace these suppliers if we lose them in the next 12 months since no unique printing technology is required, loss of either of these suppliers may force us to search for appropriate printing suppliers and thus could adversely affect our business and financial condition.

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, 2012.

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 stockholders whose preferential rights are superior to those receiving the distribution (although we presently do not have any stockholders 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 on Senior Securities.

Not applicable.

Item 4.

Mine Safety Disclosure.

Not applicable.

Item 5.

Other Information.

Not applicable.

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

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, 2012	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)

China Xingbang Industry Group Inc. - FORM 10-Q - November 14, 2012

Attached files

China Xingbang Industry Group Inc. Reports