YOU ON DEMAND HOLDINGS, INC. (Form: 10-Q, Received: 05/16/2016 16:36:07)

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

FORM 10-Q

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

For the quarterly period ended March 31, 2016

[ ] 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: 000-19644

YOU ON DEMAND HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Nevada	20-1778374
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

375 Greenwich Street, Suite 516
New York, New York 10013
(Address of principal executive offices)

212-206-1216
(Registrant's telephone number, including area code)

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 “larger accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	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:
28,861,344 shares as of May 12, 2016.

QUARTERLY REPORT ON FORM 10-Q
OF YOU ON DEMAND HOLDINGS, INC.
FOR THE PERIOD ENDED MARCH 31, 2016

TABLE OF CONTENTS

PART I	-FINANCIAL INFORMATION

Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II	-OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33
Signatures		35

References

Except as otherwise indicated by the context, references in this report to (i) the “Company,” “YOU On Demand,” “we,” “us,” and “our” are to YOU On Demand Holdings, Inc., a Nevada corporation, and its subsidiaries and consolidated variable interest entities; (ii) “CB Cayman” are to our wholly-owned subsidiary China Broadband, Ltd., a Cayman Islands company; (iii) “YOD Hong Kong” are to YOU On Demand (Asia) Limited (formerly known as Sinotop Group Limited), a Hong Kong company wholly-owned by CB Cayman; (iv) “YOD WFOE” are to YOU On Demand (Beijing) Technology Co., Ltd., a PRC company wholly-owned by YOD Hong Kong; (v) “Sinotop Beijing” or “Sinotop” are to Beijing Sino Top Scope Technology Co., Ltd, a PRC company controlled by YOD WFOE through contractual arrangements; (vi) “Zhong Hai Video” are to Zhong Hai Shi Xun Information Technology Co., Ltd., a PRC company 80% owned by Sinotop Beijing; (vii) “Hua Cheng” are to Hua Cheng Hu Dong (Beijing) Film and Television Communication Co., Ltd., a PRC company 39% owned by Sinotop Beijing and 20% owner of Zhong Hai Video; (viii) “SEC” are to the United States Securities and Exchange Commission; (ix) “Securities Act” are to Securities Act of 1933, as amended; (x) “Exchange Act” are to the Securities Exchange Act of 1934, as amended; (xi) “PRC” and “China” are to People’s Republic of China; (xii) “Renminbi” and “RMB” are to the legal currency of China; (xiii) “U.S. dollar,” “$” and “US$” are to United States dollars; and (xiv) “VIEs” refers to our current consolidated variable interest entities, Sinotop Beijing, and Tianjin Sevenstarflix Network Technology Limited.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

YOU ON DEMAND HOLDINGS, INC., ITS SUBSIDIARIES AND VARIABLE INTEREST ENTITY
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 2016

	Page
Unaudited Consolidated Balance Sheets	5
Unaudited Consolidated Statements of Operations	6
Unaudited Consolidated Statements of Comprehensive Loss	7
Unaudited Consolidated Statements of Cash Flows	8
Unaudited Consolidated Statements of Equity	9
Notes to Unaudited Consolidated Financial Statements	11

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED BALANCE SHEETS

		March 31,			December 31,
		2016			2015
ASSETS
Current assets:
Cash	$	12,035,320		$	3,768,897
Restricted cash		-			2,994,364
Accounts receivable, net		2,843,010			1,689,415
Licensed content, current		298,711			556,591
Prepaid expenses		278,809			362,421
Deferred issuance cost		-			551,218
Other current assets		163,534			157,594
Total current assets		15,619,384			10,080,500
Property and equipment, net		120,625			154,434
Licensed content, non-current		17,732,899			21,085
Intangible assets, net		2,350,399			2,412,591
Goodwill		6,648,911			6,648,911
Equity method investments		441,916			450,115
Other non-current assets		58,318			58,089
Total assets	$	42,972,452		$	19,825,725

LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND EQUITY
Current liabilities:
Accounts payable (including accounts payable of consolidated variable interest entity (“VIE”) without recourse to the Company of $44,306 and $44,867 as of March 31, 2016 and December 31, 2015, respectively)	$	46,025		$	45,788
Deferred revenue (including deferred revenue of VIE without recourse to the Company of nil and $15,080 as of March 31, 2016 and December 31, 2015, respectively)		-			15,080
Accrued expenses (including accrued expenses of VIE without recourse to the Company of $599,891 and $280,038 as of March 31, 2016 and December 31, 2015, respectively)		1,619,330			1,196,066
Accrued salaries (including accrued salaries of VIE without recourse to the Company of nil and $10,861 as of March 31, 2016 and December 31, 2015, respectively)		1,335,554			1,058,124
Other current liabilities (including other current liabilities of VIE without recourse to the Company of $343,890 and $298,422 as of March 31, 2016 and December 31, 2015, respectively)		356,208			312,170
Accrued license content fees (including accrued license content fees of VIE without recourse to the Company of $1,336,040 and $933,532 as of March 31, 2016 and December 31, 2015, respectively)		1,336,040			933,532
Convertible promissory notes		20,593,967			3,000,000
Warrant liabilities		358,194			395,217
Deposit payable		-			2,994,364
Total current liabilities		25,645,318			9,950,341
Deferred income taxes		321,512			330,124
Total liabilities		25,966,830			10,280,465

Commitments and contingencies

Convertible redeemable preferred stock:
Series A - 7,000,000 shares issued and outstanding, liquidation or deemed liquidation preference of $3,500,000 as of March 31, 2016 and December 31, 2015, respectively		1,261,995			1,261,995
Equity:
Series E Preferred Stock - $0.001 par value; 16,500,000 shares authorized, 7,254,997 shares issued and outstanding, liquidation preference of $12,696,245 as of March 31, 2016 and December 31, 2015, respectively		7,255			7,255
Common stock, $0.001 par value; 1,500,000,000 shares authorized, 28,861,344 and 24,249,109 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively		28,861			24,249
Additional paid-in capital		107,229,200			97,512,542
Accumulated deficit		(88,594,311	)		(86,457,840	)
Accumulated other comprehensive loss		(396,391	)		(414,910	)
Total YOU On Demand shareholder’s equity		18,274,614			10,671,296
Non-controlling interest		(2,530,987	)		(2,388,031	)
Total equity		15,743,627			8,283,265
Total liabilities, convertible redeemable preferred stock and equity	$	42,972,452		$	19,825,725

The accompanying notes are an integral part of these consolidated financial statements.

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended
		March 31,			March 31,
		2016			2015

Revenue	$	1,269,726		$	1,027,928
Cost of revenue		915,780			1,042,999
Gross profit (loss)		353,946			(15,071	)

Operating expenses:
Selling, general and administrative expense		2,165,053			2,448,302
Professional fees		367,446			288,718
Depreciation and amortization		97,463			89,743
Total operating expense		2,629,962			2,826,763

Loss from operations		(2,276,016	)		(2,841,834	)

Interest and other income (expense)
Interest expense, net		(33,473	)		(28,323	)
Change in fair value of warrant liabilities		37,023			(15,295	)
Equity share of losses on equity method investments		(10,348	)		(32,403	)
Other		162			(9,767	)

Loss before income taxes and non-controlling interest		(2,282,652	)		(2,927,622	)

Income tax benefit		8,612			8,612

Net loss		(2,274,040	)		(2,919,010	)

Net loss attributable to non-controlling interest		137,569			120,221

Net loss attributable to YOU On Demand common shareholders	$	(2,136,471	)	$	(2,798,789	)

Basic and diluted loss per share	$	(0.09	)	$	(0.12	)

Weighted average shares outstanding:
Basic and diluted		24,484,562			23,815,720

The accompanying notes are an integral part of these consolidated financial statements.

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

		Three Months Ended
		March 31,			March 31,
		2016			2015
Net loss	$	(2,274,040	)	$	(2,919,010	)
Other comprehensive loss, net of tax
Foreign currency translation adjustments		13,132			961
Comprehensive loss		(2,260,908	)		(2,918,049	)
Comprehensive loss attributable to non-controlling interest		142,956			121,445
Comprehensive loss attributable to YOU On Demand shareholders	$	(2,117,952	)	$	(2,796,604	)

The accompanying notes are an integral part of these consolidated financial statements.

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three Months Ended
		March 31,			March 31,
		2016			2015
Cash flows from operating activities:
Net loss	$	(2,274,040	)	$	(2,919,010	)
Adjustments to reconcile net loss to net cash used in operating activities
Share-based compensation expense		138,770			403,676
Provision for doubtful accounts		-			9,087
Depreciation and amortization		97,463			89,743
Income tax benefit		(8,612	)		(8,612	)
Equity share of loss on equity method investments		10,348			32,403
Loss on disposal of assets		-			941
Change in fair value of warrant liabilities		(37,023	)		15,295
Foreign currency exchange losses		10,590			-

Change in assets and liabilities:
Accounts receivable		(1,153,595	)		(693,574	)
Licensed content		263,913			(133,819	)
Prepaid expenses and other assets		140,391			(364,559	)
Accounts payable		237			(80,485	)
Accrued expenses, salary and other current liabilities		691,914			876,426
Deferred revenue		(15,080	)		116,442
Accrued license content fees		402,508			259,564
Net cash used in operating activities		(1,732,216	)		(2,396,482	)

Cash flows from investing activities:
Acquisition of property and equipment		-			(20,693	)
Net cash used in investing activities		-			(20,693	)

Cash flows from financing activities
Proceeds from issuance of shares and warrant (Note 9)		10,000,000			-
Net cash provided by financing activities		10,000,000			-
Effect of exchange rate changes on cash		(1,361	)		296
Net increase (decrease) in cash		8,266,423			(2,416,879	)

Cash at beginning of period		3,768,897			10,812,371

Cash at end of period	$	12,035,320		$	8,395,492

Supplemental Cash Flow Information:

Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	-		$	-
Exchange of Series E Preferred Stock for common stock	$	-		$	39
Issuance of convertible note for licensed content (Note 9)	$	17,717,847		$	-
Issuance of shares for the settlement of liability	$	75,000		$	-

The accompanying notes are an integral part of these consolidated financial statements.

YOU On Demand Holdings, Inc. and Its Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2015

															Accumulated			YOU On
	Series E			Series E						Additional					Other			Demand			Non-
	Preferred			Par		Common		Par		Paid-in		Accumulated			Comprehensive			Shareholders'			controlling			Total
	Stock			Value		Stock		Value		Capital		Deficit			Loss			Equity			Interest			Equity
Balance, January 1, 2015	7,365,283		$	7,365		23,793,702	$	23,794	$	96,347,272	$	(78,356,567	)	$	(66,032	)	$	17,955,832		$	(1,982,119	)	$	15,973,713
Share-based compensation	-			-		-		-		214,404		-			-			214,404			-			214,404
Common stock issued for services	-			-						39,272		-			-			39,272			-			39,272
Conversion of Series E Preferred Stock into common stock	(38,857	)		(39	)	38,857		39		-		-			-			-			-			-
Net loss attributable to YOU On Demand shareholders	-			-		-		-		-		(2,798,789	)		-			(2,798,789	)		(120,221	)		(2,919,010	)
Foreign currency translation adjustments	-			-		-		-		-		-			2,185			2,185			(1,224	)		961

Balance, March 31, 2015	7,326,426		$	7,326		23,832,559	$	23,833	$	96,600,948	$	(81,155,356	)	$	(63,847	)	$	15,412,904		$	(2,103,564	)	$	13,309,340

The accompanying notes are an integral part of these consolidated financial statements.

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2016

														Accumulated			YOU On
	Series E		Series E					Additional						Other			Demand			Non-
	Preferred		Par	Common		Par		Paid-in			Accumulated			Comprehensive			Shareholders'			controlling			Total
	Stock		Value	Stock		Value		Capital			Deficit			Loss			Equity			Interest			Equity
Balance, January 1, 2016	7,254,997	$	7,255	24,249,109	$	24,249	$	97,512,542		$	(86,457,840	)	$	(414,910	)	$	10,671,296		$	(2,388,031	)	$	8,283,265
Share-based compensation	-		-	25,000		25		88,745			-			-			88,770			-			88,770
Common stock issuance	-		-	4,545,455		4,545		9,273,029			-			-			9,277,574			-			9,277,574
Warrants issued in connection with common stock issuance	-		-	-		-		722,426			-			-			722,426			-			722,426
Issuance cost in connection with the issuance of common stock and warrants	-		-	-		-		(442,500	)		-			-			(442,500	)		-			(442,500	)
Common stock issued for settlement of liability	-		-	41,780		42		74,958			-			-			75,000			-			75,000
Net loss attributable to YOU On Demand shareholders	-		-	-		-		-			(2,136,471	)		-			(2,136,471	)		(137,569	)		(2,274,040	)
Foreign currency translation adjustments, net of nil tax	-		-	-		-		-			-			18,519			18,519			(5,387	)		13,132
Balance, March 31, 2016	7,254,997	$	7,255	28,861,344		28,861		107,229,200			(88,594,311	)		(396,391	)		18,274,614			(2,530,987	)		15,743,627

The accompanying notes are an integral part of these consolidated financial statements.

1.	Organization and Principal Activities

	YOU On Demand Holdings, Inc., is a Nevada corporation that primarily operates in China (“PRC”) through its subsidiaries and consolidated variable interest entities (“VIEs”) and the consolidated subsidiary of its VIEs. The Company, its subsidiaries and consolidated VIEs are collectively referred to as YOU On Demand (“YOU On Demand”, “we”, “us”, or “the Company”).

	YOU On Demand provides premium content and integrated value-added service solutions for the delivery of VOD and paid video programming to digital cable providers, Internet Protocol Television (“IPTV”) providers, Over-the-Top (“OTT”) streaming providers, mobile manufacturers and operators.

	In the opinion of management, these financial statements reflect all adjustments, which are of a normal and recurring nature that is necessary for a fair statement of the results for the periods presented in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and with the instructions to Form 10-Q in Article 10 of SEC Regulation S-X. The results of operations for the interim periods presented are not necessarily indicative of results for the full year.

	Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 30, 2016 (our “2015 Annual Report”).

	In 2016, the Company adopted the Accounting Standards Update ("ASU") No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires the debt issuance costs be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability, instead of reported on the balance sheet as an asset. The costs will continue to be amortized as interest expense using the effective interest method. The adoption of ASU 2015-03 did not have any impact on prior period financial statements as no debt issuance cost were incurred for the debt that was outstanding as of December 31, 2015.

2.	Going Concern and Management’s Plans

	For the three months ended March 31, 2016 and 2015, we incurred net losses from continuing operations of approximately $2.3 million and $2.9 million, respectively, and cash used in operations was approximately $1.7 million and $2.4 million, respectively. Further, we had an accumulated deficit of approximately $88.6 million and $81.2 million as of March 31, 2016 and 2015, respectively, due to recurring losses since our inception. Due to the issuance of a convertible promissory note during the three months ended March 31, 2016, we had negative working capital of approximately $10.0 million as of March 31, 2016.

	The Company must continue to rely on proceeds from debt and equity issuances to pay for ongoing operating expenses in order to execute its business plan. On January 31, 2014, we completed a Series E Preferred Share financing in which we raised $19.0 million and on March 28, 2016, we completed a common stock financing in which we raised an additional $10.0 million. In addition, the convertible promissory note issued to Beijing Sun Seven Stars Culture Development Limited (“SSS”) is automatically convertible into our common stock upon receiving the necessary shareholder approvals so we do not anticipate to settle this note of approximately $17.7 million by use of cash. We also have the ability to raise funds through various methods by either issuing debt or equity instruments. However, additional financing may not be available to the Company on terms acceptable to us, or at all, or such resources may not be received in a timely manner.

	These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

3.	VIE Structure and Arrangements

	To comply with PRC laws and regulation that prohibit or restrict foreign ownership of companies that provides value-added telecommunication services, the Company provides its services through Sinotop Beijing and its subsidiary, Zhong Hai Video, which holds the licenses and approvals to provide digital distribution and Internet content services in the PRC. The Company has the ability to control Sinotop Beijing and Zhong Hai Video through a series of contractual agreements entered into among YOD WFOE, YOD Hong Kong, Sinotop Beijing and the legal shareholders of Sinotop Beijing.

	Prior to January 2016, the legal shareholder of Sinotop Beijing was Zhang Yan (the spouse of our then-CEO) and we entered into a series of contractual agreements to give us the ability to control Sinotop Beijing with Zhang Yan. In January 2016, in connection with the appointment of our new CEO and in accordance with our rights under the contractual agreements, (1) the legal ownership of Sinotop Beijing was transferred from Zhang Yan to Bing Wu, the brother of our current Chairman and Yun Zhu, our Vice President and former Vice President of SSS, (2) the Company terminated the series of contractual arrangement with Zhang Yan, and (3) the Company entered into new contractual agreements with Bing Wu and Yun Zhu (collectively, the “New Sinotop VIE Agreements”). Although the New Sinotop VIE Agreements resulted in changes to the legal shareholders of Sinotop Beijing, there was no change in the Company’s ability to control Sinotop Beijing or the Company’s rights to 100% of the economic benefits of Sinotop Beijing. The Company was the primary beneficiary of Sinotop Beijing prior to the signing of the New Sinotop VIE Agreements and the Company remained the primary beneficiary of Sinotop Beijing after the signing of the New Sinotop VIE Agreements. Accordingly, the Company did not consider the change in legal ownership of Sinotop Beijing to have any impact to the Company’s consolidation of Sinotop Beijing. The key terms of the New Sinotop VIE Agreements are summarized as follows:

Equity Pledge Agreement

Pursuant to the Equity Pledge Agreement among YOD WFOE, Sinotop Beijing, Bing Wu and Yun Zhu (collectively, the “Nominee Shareholders”), the Nominee Shareholders pledged all of their equity interests in Sinotop Beijing (the “Collateral”) to YOD WFOE as security for the performance of the obligations of Sinotop Beijing to make all the required technical service fee payments pursuant to the Technical Services Agreement and for performance of the Nominee Shareholders’ obligation under the Call Option Agreement. The terms of the Equity Pledge Agreement expire upon satisfaction of all obligations under the Technical Services Agreement and Call Option Agreement.

Call Option Agreement

Pursuant to the Call Option Agreement among YOD WFOE, Sinotop Beijing and the Nominee Shareholders, and entered into in connection with the Technical Services Agreement, the Nominee Shareholders granted an exclusive option to YOD WFOE, or its designee, to purchase, at any time and from time to time, to the extent permitted under PRC law, all or any portion of the Nominee Shareholders’ equity in Sinotop Beijing. The exercise price of the option shall be determined by YOD WFOE at its sole discretion, subject to any restrictions imposed by PRC law. The term of the agreement is until all of the equity interest in Sinotop Beijing held by the Nominee Shareholders are transferred to YOD WFOE, or its designee and may not be terminated by any part to the agreement without consent of the other parties.

Power of Attorney

Pursuant to the Power of Attorney agreements among YOD WFOE, Sinotop Beijing and each of the respective Nominee Shareholders, each of the Nominee Shareholders granted YOD WFOE the irrevocable right, for the maximum period permitted by law, all of its voting rights as shareholders of Sinotop Beijing. The Nominee Shareholders may not transfer any of its equity interest in Sinotop Beijing to any party other than YOD WFOE. The Power of Attorney agreements may not be terminated except until all of the equity in Sinotop Beijing has been transferred to YOD WFOE or its designee.

Technical Service Agreement

Pursuant to the Technical Service Agreement between YOD WFOE and Sinotop Beijing, YOD WFOE has the exclusive right to provide technical service, marketing and management consulting service, financial support service and human resource support services to Sinotop Beijing, and Sinotop Beijing is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by YOD WFOE. As compensation for providing the services, YOD WFOE is entitled to receive service fees from Sinotop Beijing equivalent to YOD WFOE’s cost plus 30% of such costs. YOD WFOE and Sinotop Beijing agree to periodically review the service fee and make adjustments as deemed appropriate. The term of the Technical Services Agreement is perpetual, and may only be terminated upon written consent of both parties.

Spousal Consent

Pursuant to the Spousal Consent, undersigned by the respective spouse of Nominee Shareholders (collectively, the “Spouses”), the Spouses unconditionally and irrevocably agreed to the execution of the Equity Pledge Agreement, Call Option Agreement and Power of Attorney agreement. The Spouses agreed to not make any assertions in connection with the equity interest of Sinotop Beijing and to waived consent on further amendment or termination of the Equity Pledge Agreement, Call Option Agreement and Power of Attorney agreement. The Spouses further pledge to execute all necessary documents and take all necessary actions to ensure appropriate performance under these agreements upon YOD WFOE’s request. In the event the Spouses obtain any equity interests of Sinotop Beijing which are held by the Nominee Shareholders, the Spouses agreed to be bound by the New Sinotop VIE Agreements, including the Technical Services Agreement, and comply with the obligations thereunder, including sign a series of written documents in substantially the same format and content as the New Sinotop VIE Agreements.

Letter of Indemnification

Pursuant to the Letter of Indemnification among YOD WFOE and Bing Wu and YOD WFOE and Yun Zhu, YOD WFOE agreed to indemnify Nominee Shareholders against any personal, tax or other liabilities incurred in connection with their role in equity transfer to the greatest extent permitted under PRC law. YOD WFOE further waived and released Nominee Shareholders from any claims arising from, or related to, their role as the legal shareholder of Sinotop Beijing, provided that their actions as a nominee shareholder are taken in good faith and are not opposed to YOD WFOE’s best interests. Conversely, the Nominee Shareholders will not be entitled to dividends or other benefits generated therefrom, or receive any compensation in connection with this arrangement. The Letter of Indemnification will remain valid until either Nominee Shareholders or YOD WFOE terminates the agreement by giving the other party hereto sixty (60) days’ prior written notice.

In addition to the New Sinotop VIE Agreements, the Management Service Agreement between Sinotop Beijing and YOD Hong Kong continued to remain in effect, the key terms of which is as follows:

Management Services Agreement

Pursuant to a Management Services Agreement, as of March 9, 2010, YOD Hong Kong has the exclusive right to provide to Sinotop Beijing management, financial and other services related to the operation of Sinotop Beijing’s business, and Sinotop Beijing is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by YOD Hong Kong. As compensation for providing the services, YOD Hong Kong is entitled to receive a fee from Sinotop Beijing, upon demand, equal to 100% of the annual net profits of Sinotop Beijing during the term of the Management Services Agreement. YOD Hong Kong may also request ad hoc quarterly payments of the aggregate fee, which payments will be credited against Sinotop Beijing’s future payment obligations.

The Management Services Agreement also provides YOD Hong Kong, or its designee, with a right of first refusal to acquire all or any portion of the equity of Sinotop Beijing upon any proposal by the sole shareholder of Sinotop Beijing to transfer such equity. In addition, at the sole discretion of YOD Hong Kong, Sinotop Beijing is obligated to transfer to YOD Hong Kong, or its designee, any part or all of the business, personnel, assets and operations of Sinotop Beijing which may be lawfully conducted, employed, owned or operated by YOD Hong Kong, including:

(a) business opportunities presented to, or available to Sinotop Beijing may be pursued and contracted for in the name of YOD Hong Kong rather than Sinotop Beijing, and at its discretion, YOD Hong Kong may employ the resources of Sinotop Beijing to secure such opportunities;

(b) any tangible or intangible property of Sinotop Beijing, any contractual rights, any personnel, and any other items or things of value held by Sinotop Beijing may be transferred to YOD Hong Kong at book value;

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by YOD Hong Kong by acquisition, lease, license or otherwise, and made available to Sinotop Beijing on terms to be determined by agreement between YOD Hong Kong and Sinotop Beijing;

(d) contracts entered into in the name of Sinotop Beijing may be transferred to YOD Hong Kong, or the work under such contracts may be subcontracted, in whole or in part, to YOD Hong Kong, on terms to be determined by agreement between YOD Hong Kong and Sinotop Beijing; and

(e) any changes to, or any expansion or contraction of, the business may be carried out at the sole discretion of YOD Hong Kong, and in the name of and at the expense of, YOD Hong Kong; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of YOD Hong Kong) or adversely affecting any license, permit or regulatory status of Sinotop Beijing.

The term of the Management Services Agreement is 20 years, and may not be terminated by Sinotop Beijing, except with the consent of, or a material breach by, YOD Hong Kong.

Pursuant to the above contractual agreements, YOD WFOE can have the assets transferred freely out of Sinotop Beijing without any restrictions. Therefore, YOD WFOE considers that there is no asset of Sinotop Beijing or Zhong Hai Video that can be used only to settle obligations of Sinotop Beijing or Zhong Hai Video, except for the registered capital of these two entities amounting to RMB17.0 million (approximately $2.6 million) as of March 31, 2016. As Sinotop Beijing and Zhong Hai Video are incorporated as limited liability companies under PRC Company Law, creditors of these two entities do not have recourse to the general credit of other entities of the Company.

Financial Information

The following financial information of our VIE’s, as applicable for the periods presented, affected the Company's consolidated financial statements.

		March 31,		December 31,
		2016		2015
ASSETS
Current assets:
Cash	$	419,065	$	1,001,094
Accounts receivable, net		2,843,010		1,689,415
Licensed content, current		298,711		556,591
Prepaid expenses		78,600		98,893
Other current assets		137,502		133,582
Intercompany receivables due from the Company's subsidiaries ⁽ⁱ⁾		161,825		161,017
Total current assets		3,938,713		3,640,592
Property and equipment, net		117,432		149,880
Licensed content, non-current		15,052		21,085
Intangible assets, net		230,203		253,771
Long-term equity investments		441,916		450,115
Other non-current assets		58,317		58,026
Total assets	$	4,801,633	$	4,573,469

LIABILITIES
Current liabilities:
Accounts payable	$	44,306	$	44,867
Deferred revenue		-		15,080
Accrued expenses		599,891		280,038
Other current liabilities		343,890		298,422
Accrued salaries		-		10,861
Accrued license content fees		1,336,040		933,532
Intercompany payables due to the Company's subsidiaries ⁽ⁱ⁾		12,534,809		12,512,954
Total current liabilities		14,858,936		14,095,754
Total liabilities	$	14,858,936	$	14,095,754

		Three Months Ended
		March 31,			March 31,
		2016			2015
Revenue	$	1,269,726		$	1,027,928
Net loss	$	(479,887	)	$	(633,487	)

		Three Months Ended
		March 31,			March 31,
		2016			2015
Net cash used in operating activities	$	(603,884	)	$	(233,114	)
Net cash used in investing activities	$	-		$	(20,693	)
Net cash provided by intercompany financing activities ⁽ⁱ⁾	$	21,855		$	-

(i)

Intercompany receivables, payables and financing activities are eliminated upon consolidation

The revenue producing assets that are held by the VIEs and a VIE’s subsidiary comprise of licensed content, network equipment, charter/cooperation agreements, software and licenses and website and mobile app development. Substantially all of such assets are recognized in the Company’s consolidated financial statements, except for certain Internet Content Provider licenses, internally developed software, trademarks and patent applications which were not recorded on the Company’s consolidated balance sheets as they do not meet all the capitalization criteria. The VIEs also have assembled work force for sales, marketing and operations.

4.	Property and Equipment

	The following is a breakdown of our property and equipment:

		March 31,			December 31,
		2016			2015

Furniture and office equipment	$	910,420		$	910,420
Leasehold improvements		190,722			190,722
Total property and equipment		1,101,142			1,101,142
Less: accumulated depreciation		(980,517	)		(946,708	)
Property and Equipment, net	$	120,625		$	154,434

We recorded depreciation expense of approximately $34,000 and $51,000, which is included in our selling, general and administrative expense for the three months ended March 31, 2016 and 2015, respectively.

5.	Intangible Assets

	The Company intangible assets primarily arose from the acquisition of YOD Hong Kong.

	As of March 31, 2016 and December 31, 2015, the Company’s amortizing and indefinite lived intangible assets consisted of the following:

		March 31, 2016					December 31, 2015
Amortizing Intangible assets		Gross Carrying Amount	Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Charter/ Cooperation agreements	$	2,755,821	(780,821	)	1,975,000	$	2,755,821	$	(746,372	)	$	2,009,449
Software and licenses		253,930	(238,495	)	15,435		253,930		(234,947	)		18,983
Website and mobile app development		653,830	(428,156	)	225,674		653,830		(403,961	)		249,869
Total amortizing intangible assets	$	3,663,581	(1,447,472	)	2,216,109	$	3,663,581	$	(1,385,280	)	$	2,278,301
Indefinite lived intangible assets:
Website name		134,290	-		134,290		134,290		-			134,290
Total intangible assets	$	3,797,871	(1,447,472	)	2,350,399	$	3,797,871	$	(1,385,280	)	$	2,412,591

We recorded amortization expense related to our finite lived intangible assets of approximately $63,000 and $39,000 for the three months ended March 31, 2016 and 2015, respectively.

The following table outlines the amortization expense for the next five years and thereafter:

Years ending December 31,		Amortization to be Recognized
2016 (9 months)	$	187,764
2017		238,162
2018		193,490
2019		138,412
2020		137,792
2021		137,792
Thereafter		1,182,697
Total amortization to be recognized	$	2,216,109

7.	Fair Value Measurements

Accounting standards require the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The various levels of the fair value hierarchy are described as follows:

	•	Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.

	•	Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

	•	Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Accounting standards require the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

We review the valuation techniques used to determine if the fair value measurements are still appropriate on an annual basis, and evaluate and adjust the unobservable inputs used in the fair value measurements based on current market conditions and third party information.

Common stock is valued at closing price reported on the active market on which the individual securities are traded.

The fair value of the warrant liabilities at March 31, 2016 were valued using the Black-Scholes Merton method as an estimate for the Monte Carlos Simulation method which was the method used at the year ended December 31, 2015. The following assumptions were incorporated:

	Black Scholes	Monte Carlo
	March 31,	December 31,
	2016	2015
Risk-free interest rate	0.66%	0.92%
Expected volatility	60%	60%
Expected term (years)	1.42	1.67
Expected dividend yield	0%	0%

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis at March 31, 2016 and December 31, 2015, respectively:

		March 31, 2016
		Fair Value Measurements
		Level 1		Level 2		Level 3		Total Fair Value
Liabilities
Warrant liabilities (see Note 10)	$	-	$	-	$	358,194	$	358,194

		December 31, 2015
		Fair Value Measurements
		Level 1		Level 2		Level 3		Total Fair Value
Liabilities
Warrant liabilities (see Note 10)	$	-	$	-	$	395,217	$	395,217

The table below reflects the components effecting the change in fair value for the three months ended March 31, 2016:

		Level 3 Assets and Liabilities
		For the Three Months Ended March 31, 2016
						Change in
		January 1,				Fair Value			March 31,
		2016		Settlements		gain			2016
Liabilities:
Warrant liabilities (see Note 10)	$	395,217	$	-	$	(37,023	)	$	358,194

On March 28, 2016, the Company issued common stock and warrant for the purchase of the Company’s unregistered shares to SSS (see Note 9). The warrant is considered an equity classified instrument and the fair value of the warrant on March 28, 2016 was $672,727, which was valued using the Monte Carlos Simulation method. The following assumptions were incorporated:

		Monte Carlo
		March 28, 2016
Risk-free interest rate		0.89%
Expected volatility		60%
Expected term (years)		2
Expected dividend yield		0%

The significant unobservable inputs used in the fair value measurement of the Company’s warrant includes the risk free interest rate, expected volatility, expected term and expected dividend yield. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement.

The carrying amount of cash, accounts receivable, accounts payable, accrued expenses and other payables as of March 31, 2016 and December 31, 2015, approximate fair value because of the short maturity of these instruments.

8.	Related Party Transactions

(a) $3.0 Million Convertible Note

On May 10, 2012, the Company’s then–Executive Chairman and Principal Executive Officer and current Vice Chairman, Mr. Shane McMahon, made a loan to the Company in the amount of $3,000,000. In consideration for the loan, the Company issued a convertible note to Mr. McMahon in the aggregate principal amount of $3,000,000 (the “McMahon Note”) at a 4% interest rate computed on the basis of a 365–day year. Upon issuance, the conversion price of the McMahon Note was equal to the price per share paid for securities by investors in the most recent financing (as of the date of conversion) of equity or equity-linked securities of the Company.

Effective on January 31, 2014, the Company and Mr. McMahon entered into an amendment pursuant to which the McMahon Note is, at Mr. McMahon’s option, payable on demand or convertible on demand into shares of Series E Preferred Stock of the Company (the “Series E Preferred Stock”) at a conversion price of $1.75, until December 31, 2015. As a result, in 2014, the Company recognized a beneficial conversion feature discount calculated as the difference between the fair value of the common stock at the commitment date for the Series E Preferred Stock investment and the effective conversion price and recognized a beneficial conversion feature of approximately $2,126,000 as interest expense and additional paid-in capital since the note was payable upon demand.

Effective December 30, 2014, the Company and Mr. McMahon entered into another amendment pursuant to which the maturity date of the McMahon Note was extended to December 31, 2016. The McMahon Note remains payable on demand or convertible on demand into shares of Series E Preferred Stock at a conversion price of $1.75 at Mr. McMahon’s option.

For the three months ended March 31, 2016 and 2015, the Company recorded interest expense of $30,000 and $30,000 related to the Note.

(b) Revenue and Accounts Receivable

In March 2015, Zhong Hai Video entered into an agreement with C Media Limited (“C Media”), a beneficial owner of more than 5% of our capital stock and controlled by our director, Xuesong Song, to provide video content services via C Media’s proprietary railway Wi-Fi service platform. For the three months ended March 31, 2016 and 2015, total revenue recognized amounted to nil and $182,000, respectively. As of March 31, 2016, total accounts receivable due from C Media amounted to $93,000.

(c) Cost of Revenue

Hua Cheng, the minority shareholder of Zhong Hai Video, charged us licensed content fees of approximately $56,000 and $39,000 for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, total accrued license content fees due to Hua Cheng amounted to $75,000.

9.	SSS Agreements

	On November 23, 2015, the Company entered into a series of agreements for a strategic investment by SSS, a PRC company in the media and entertainment industry that is controlled by our Chairman, Bruno Wu. The strategic investment by SSS included a private placement of equity securities of the Company, a content licensing agreement and the potential for Tianjin Enternet Network Technology Limited (“Tianjin Enternet”), an affiliate of SSS, to earn additional shares of the Company’s common stock contingent on the performance of a to-be formed subsidiary, Tianjin Sevenstarflix Network Technology Limited (“SSF”). SSF intends to provide a branded pay content service, consumer payments and behavior data analysis service, customer management and data-based service and mobile social TV-based customer management service.

	On December 21, 2015, the Company entered into an Amended and Restated Securities Purchase Agreement (the “Amended SSS Purchase Agreement”) and a Revised Content License Agreement (the “Revised Content Agreement”) with SSS which amended certain terms of the original agreements dated November 23, 2015. In addition, the Company also entered into an Amended and Restated Share Purchase Agreement (the “Amended Tianjin Agreement”) with Tianjin Enternet.

	*(a)* *Amended SSS Purchase Agreement*

	On March 28, 2016, pursuant to the Amended SSS Purchase Agreement, the Company sold, and SSS purchased, 4,545,455 shares of the Company’s common stock for a purchase price of $2.20 per share, or an aggregate of $10.0 million. In addition, SSS received a two-year warrant to acquire an additional 1,818,182 unregistered shares of the Company’s common stock at an exercise price of $2.75 per share (the “SSS Warrant”). Until receipt of necessary shareholder approvals, the SSS Warrant may not be exercised to the extent that such exercise would result in SSS and its affiliates beneficially owning more than 19.99% of the Company’s outstanding common stock.

	Since the SSS Warrant does not embody any future obligation for the Company to repurchase its own shares, is indexed to the Company’s own stock, may only be settled by the physical delivery of shares and no conditions exist in which net cash settlement could be forced upon the Company by SSS or in any other circumstances, the SSS Warrant is considered an equity classified instrument. The investment proceeds of $10.0 million, net of issuance cost of approximately $443,000, was allocated to common stock and SSS Warrant based on their relative fair value as of March 28, 2016 of approximately $8,227,000 and $673,000, respectively. Accordingly, the Company recorded approximately $722,000 in additional paid-in capital for the SSS Warrant.

	*(b)* *Revised Content Agreement*

	On March 28, 2016, pursuant to the Amended SSS Purchase Agreement, SSS granted the Company non-exclusive royalty-free distribution rights for certain video content value at approximately $29.1 million in exchange for a convertible promissory note (the “SSS Note”). The SSS Note has a stated principal amount of approximately $17,718,000, matures on May 21, 2016 and bears interest at the rate of 0.56% per annum. Immediately upon the receipt of the required shareholder approval to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock, the SSS Note is automatically converted into 9,208,860 unregistered shares of the Company’s common stock.

	In connection with the issuance of the SSS Note, the Company recorded debt issuance costs of approximately $131,000 which is to be amortized over the period of the SSS Note’s maturity date, of which approximately $7,000 was recognized during the three months ended March 31, 2016.

	The Company measured the effective conversion price of the SSS Note on March 28, 2016 and compared it to the fair value of the Company’s common stock on that date. As the effective conversion price of the SSS Note of $1.92 exceeded the fair value of the Company’s common stock, no beneficial conversion feature was recognized.

	On May 12, 2016, the Company and SSS entered into an amendment agreement to extend the maturity date of the SSS Note to July 31, 2016 (see Note 17(e)).


	*(c) Amended Tianjin Agreement*

	Pursuant to the Amended Tianjin Agreement dated December 21, 2015, Tianjin Enternet agreed to grant 100% of the equity ownership of SSF, a newly-formed subsidiary of Tianjin Enternet, to the Company. Contingent on the performance of SSF, Tianjin will receive unregistered shares of the Company’s common stock over three years, with the exact number not exceeding 5.0 million shares, provided the earn- out provisions for each of the 2016, 2017 and 2018 annual periods (the “Earn-Out Share Award”) are achieved. The earn-out provision for 2016, 2017 and 2018 are either 50.0 million homes/users passed or $4.0 million net income, 100.0 million homes/users Passed or $6.0 million net income and 150.0 million homes/users passed or $8.0 million net income, respectively.

	If the Company is unable to obtain the required shareholder approval to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock by the time of settlement of the Earn-Out Share Award, the Company shall be obligated to issue a convertible promissory note to Tianjin Enternet with the principal amount equal to 5,000,000 shares multiplied by the Applicable Stock Price as defined in the Amended Tianjin Agreement. This convertible promissory note shall bear interest at 0.56% per annum and be automatically converted into the Company’s common stock once the necessary shareholder approval for SSS to beneficially own more than 19.99% of the Company’s outstanding common stock is received.

	On April 5, 2016, YOD WFOE entered into VIE agreements with SSF and its legal shareholders in order to comply with PRC regulatory requirements on certain industries. SSF is 99% owned by Lan Yang, the spouse of Bruno Zheng Wu, the Company’s Chairman, and 1% owned by Yun Zhu, a Vice President of YOD. By virtue of these VIE agreements, YOD WFOE obtained financial controlling interest in SSF, including the power to direct the activities of SSF, and is therefore the primary beneficiary of SSF. As the control of SSF was transferred to YOD WFOE through both the VIE agreements and physical handover of company documents on April 5, 2016, the transaction was determined to be completed on that date.

	At the time YOD WFOE obtained control over SSF, SSF had no assets, liabilities, employees or operating activities, nor did it hold any licenses, trade names or other intellectual properties. The Company also did not receive any assets, employees, contracts, sales or distribution systems or intellectual property from Tianjin Enternet in connection with the transaction. Since the acquisition of SSF did not include any input or processes, as defined under ASC 805-10-20, the transaction was not considered a business combination under ASC 805. Accordingly, the Company accounted for the acquisition of SSF as an asset acquisition.

10.	Warrant Liabilities

	In connection with our August 30, 2012 private financing, we issued investors and a broker warrants to acquire 977,063 shares of the Company’s common stock. In accordance with FASB ASC 815-40-15-5, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock , the warrants have been accounted as derivative liabilities to be re- measured at the end of every reporting period with the change in value reported in the consolidated statement of operations. On August 30, 2012, such warrants were valued at $1,525,000 utilizing a valuation model and were initially recorded as a liability. The warrants are revalued at each year end based on the Monte Carlo valuation.

	As of March 31, 2016 and December 31, 2015, the warrant liability was re-valued as disclosed in Note 7, and recorded at its current fair value of approximately $358,000 and $395,000, respectively, as determined by the Company, resulting in a gain of approximately $37,000 for the three months ended March 31, 2016. There were no warrants exercised during three months ended March 31, 2016.


11.	Share-Based Payments

	As of March 31, 2016, the Company had 1,722,325 options and 2,191,847 warrants outstanding to purchase shares of our common stock.

	*(a) Stock Options*

	The Company awards common stock and stock options to employees and directors as compensation for their services, and accounts for its stock option awards to employees and directors pursuant to the provisions of ASC 718, Stock Compensation . The fair value of each option award is estimated on the date of grant using the Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period, which is generally the vesting period.

Total share-based payments expense recorded by the Company during the three months ended March 31, 2016 and 2015 is as follows:

		Three Months Ended
		March 31	March 31
		2016	2015
Employees and directors share-based payments	$	139,000 $	404,000

Effective as of December 3, 2010, our Board of Directors approved the YOU On Demand Holdings, Inc. 2010 Stock Incentive Plan (“the Plan”) pursuant to which options or other similar securities may be granted. The maximum aggregate number of shares of our common stock that may be issued under the Plan is 4,000,000 shares. As of March 31, 2016, options available for issuance are 1,860,068 shares.

Stock option activity for the three months ended March 31, 2016 is summarized as follows:

					Weighted Average
					Remaining	Aggregated
	Options			Weighted Average	Contractual Life	Intrinsic
	Outstanding			Exercise Price	(Years)	Value
Outstanding at January 1, 2016	1,734,429		$	2.77
Granted	-			-
Exercised	-			-
Expired	-			-
Forfeited	(12,104	)		1.65
Outstanding at March 31, 2016	1,722,325			2.78	4.13	46,079
Vested and expected to vest as of March 31, 2016	1,722,325			2.78	4.13	46,079
Options exercisable at March 31, 2016 (vested)	1,708,261			2.79	4.11	43,267

As of March 31, 2016, approximately $18,000 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of approximately 1.42 years. The total fair value of shares vested during the three months ended March 31, 2016 and 2015 was approximately $16,000 and $214,000 respectively.

(b) Warrants

In connection with the Company’s financings, the Warner Brother Agreement and the service agreements, the Company issued warrants to service providers to purchase unregistered common stock of the Company.

As of March 31, 2016, the weighted average exercise price of the warrants was $2.20 and the weighted average remaining life was 2.14 years. The following table outlines the warrants outstanding and exercisable as of March 31, 2016 and December 31, 2015:

	March 31,	December 31,
	2016	2015
	Number of	Number of
	Warrants	Warrants		Exercise	Expiration
Warrants Outstanding	Outstanding	Outstanding		Price	Date
	and Exercisable	and Exercisable

May 2011 Warner Brothers Warrants	200,000	200,000	$	6.60	05/11/16
2011 Service Agreement Warrants	26,667	26,667	$	7.20	06/15/16
2012 August Financing Warrants ⁽ⁱ⁾	536,250	536,250	$	1.50	08/30/17
2013 Broker Warrants (Series D Financing)	228,571	228,571	$	1.75	07/05/18
2013 Broker Warrants (Convertible Note)	114,285	114,285	$	1.75	11/04/18
2014 Broker Warrants (Series E Financing)	1,085,714	1,085,714	$	1.75	01/31/19
	2,191,487	2,191,487

(i)

The warrants are classified as derivative liabilities as disclosed in Note 10

12.

Net Loss Per Common Share

Basic net loss per common share attributable to YOU On Demand shareholders is calculated by dividing the net loss attributable to YOU On Demand shareholders by the weighted average number of outstanding common shares during the applicable period. Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares is anti-dilutive.

For the three months ended March 31, 2016 and 2015, the number of securities convertible or exercisable into common shares but not included in diluted loss per common share because the effect would have been anti-dilutive consists of the following:

	March 31,	March 31,
	2016	2015
Warrants	4,009,669	2,191,487
Options	1,722,325	1,764,447
Series A Preferred Stock	933,333	933,333
Series E Preferred Stock	7,254,997	7,326,426
Convertible promissory notes	11,190,292	1,912,673
Total	25,110,616	14,128,366

The Company has reserved its authorized but unissued common stock for possible future issuance in connection with the following:

	March 31,	March 31,
	2016	2015
Exercise of stock warrants	4,009,669	2,191,487
Exercise and future grants of stock options	3,928,870	3,986,074
Conversion of preferred stock	8,188,330	8,259,759
Issuable shares from conversion of promissory notes payable	11,190,292	1,912,673
Total	27,317,161	16,349,993

13.

Income Taxes

As of March 31, 2016, the Company had approximately $27.4 million of the U.S domestic cumulative tax loss carryforwards and approximately $15.4 million of the foreign cumulative tax loss carryforwards, which may be available to reduce future income tax liabilities in certain jurisdictions. These U.S. and foreign tax loss carryforwards will expire beginning year 2028 through 2036 and year 2017 to year 2021, respectively. We have established a 100% valuation allowance against our net deferred tax assets due to our history of pre-tax losses and the likelihood that the deferred tax assets will not be realizable. The valuation allowance increased approximately $1.2 million during the three months ended March 31, 2016.

As of March 31, 2016, there are no unrecorded tax benefits which would impact our financial position or our results of operations.

14.

Contingencies and Commitments

(a) Severance Commitment

The Company has employment agreements with certain employees that provide severance payments upon termination of employment under certain circumstances, as defined in the applicable agreements. As of March 31, 2016, the Company's potential minimum cash obligation to these employees was approximately $252,000.

(b) Operating Lease Commitment

The Company is committed to paying leased property costs related to our offices in China through 2019 as follows:

		Leased Property
Years ending December 31,		Costs
2016 (9 months)	$	345,000
2017		118,000
2018		118,000
2019		59,000
Total	$	640,000

(c) Licensed Content Commitment

The Company is committed to paying content costs through 2017 as follows:

Years ending December 31,		Content Costs
2016 (9 months)	$	5,269,000
2017		200,000
Total	$	5,469,000

(d) Lawsuits and Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of March 31, 2016, there are no such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

(e) Acquisition of Property Commitment

In consideration of the Company’s business expansion and rising rental costs, on February 2016, the Company entered into an agreement with Beijing Kuntin Taiming Investment Management Co., Ltd. for purchase of an office building. Total consideration for the office building acquisition is approximately $4,239,000 (RMB27 million) and the Company expects to receive the title transfers after payment is complete. As of March 31, 2016, the Company is committed to paying office building acquisition costs through 2016 as follows:

Years ending December 31,		Property
2016 (9 months)		4,239,000
Total	$	4,239,000

(f) Advertising and Marketing Expense Commitment

The Company is committed to paying advertising and marketing expense through 2016 as follows:

Years ending December 31,		Marketing expenses
2016 (9 months)		421,000
Total	$	421,000

15.

Concentration, Credit and Other Risks

(a) PRC Regulations

The PRC market in which the Company operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of the Company to conduct wireless telecommunication services through contractual arrangements in the PRC since the industry remains highly regulated. The Company conducts all of its operations in China through Zhong Hai Video, which the Company controls as a result of a series of contractual arrangements entered among YOD WFOE, Sinotop Beijing as the parent company of Zhong Hai Video and the legal shareholders of Sinotop Beijing. The Company believes that these contractual arrangements are in compliance with PRC law and are legally enforceable. If Sinotop Beijing or its legal shareholders fail to perform the obligations under the contractual arrangements or any dispute relating to these contracts remains unresolved, YOD WFOE or YOD HK can enforce its rights under the VIE contracts through PRC law and courts. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements. In particular, the interpretation and enforcement of these laws, rules and regulations involve uncertainties. If YOD WFOE had direct ownership of Sinotop Beijing, it would be able to exercise its rights as a shareholder to effect changes in the board of directors of Sinotop Beijing, which in turn could effect changes at the management level, subject to any applicable fiduciary obligations. However, under the current contractual arrangements, the Company relies on Sinotop Beijing and its legal shareholder to perform their contractual obligations to exercise effective control. The Company also gives no assurance that PRC government authorities will not take a view in the future that is contrary to the opinion of the Company. If the current ownership structure of the Company and its contractual arrangements with the VIEs and their equity holders were found to be in violation of any existing or future PRC laws or regulations, the Company's ability to conduct its business could be impacted and the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changes in the PRC laws which may result in deconsolidation of the VIEs.

In addition, the telecommunications, information and media industries remain highly regulated. Restrictions are currently in place and are unclear with respect to which segments of these industries foreign owned entities, like YOD WFOE, may operate. The PRC government may issue from time to time new laws or new interpretations on existing laws to regulate areas such as telecommunications, information and media, some of which are not published on a timely basis or may have retroactive effect. For example, there is substantial uncertainty regarding the Draft Foreign Investment Law, including, among others, what the actual content of the law will be as well as the adoption and effective date of the final form of the law. Administrative and court proceedings in China may also be protracted, resulting in substantial costs and diversion of resources and management attention. While such uncertainty exists, the Company cannot assure that the new laws, when it is adopted and becomes effective, and potential related administrative proceedings will not have a material and adverse effect on the Company's ability to control the affiliated entities through the contractual arrangements. Regulatory risk also encompasses the interpretation by the tax authorities of current tax laws, and the Company’s legal structure and scope of operations in the PRC, which could be subject to further restrictions resulting in limitations on the Company’s ability to conduct business in the PRC.

(b) Major Customers

The Company relies on agreements with distribution partners, including digital cable operators, IPTV operators, OTT streaming operators and mobile smartphone manufacturers and operators, during the course of its business. A distribution partner that individually generates more than 10% of the Company’s revenue is considered a major customer.

For the three months ended March 31, 2016, two customers individually accounted for more than 10% of the Company’s revenue. Four customers individually accounted for 10% of the Company’s net accounts receivables as of March 31, 2016.

For the three months ended March 31, 2015, four customers individually accounted for more than 10% of the Company’s revenue. Four customers individually accounted for 10% of the Company’s net accounts receivables as of March 31, 2015.

(c) Major Suppliers

The Company relies on agreements with studio content partners to acquire video contents. A content partner that accounts for more than 10% of the Company’s cost of revenues is considered a major supplier.

For the three months ended March 31, 2016, four suppliers individually accounted for more than 10% of the Company’s cost of revenues. Two suppliers individually accounted for 10% of the Company’s accrued license content fees as of March 31, 2016.

For the three months ended March 31, 2015, four suppliers individually accounted for more than 10% of the Company’s cost of revenues. Two suppliers individually accounted for 10% of the Company’s accrued license content fees as of March 31, 2015.

(d) Concentration of Credit Risks

Financial instruments that potentially subject the Company to significant concentration of credit risk primarily consist of cash and accounts receivable. As of March 31, 2016 and 2015, the Company’s cash was held by financial institutions located in the PRC, Hong Kong and the United States that management believes have acceptable credit. Accounts receivable are typically unsecured and are mainly derived from revenues from the Company’s VOD content distribution partners. The risk with respect to accounts receivable is mitigated by regular credit evaluations that the Company performs on its distribution partners and its ongoing monitoring of outstanding balances.

(e) Foreign Currency Risks

A majority of the Company’s operating transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities is denominated in RMB. RMB is not freely convertible into foreign currencies. The value of the RMB is subject to changes in the central government policies and to international economic and political developments. In the PRC, certain foreign exchange transactions are required by laws to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to complete the remittance.

Cash consist of cash on hand and demand deposits at banks, which are unrestricted as to withdrawal.

Demand deposits maintained at banks consist of the following:

		March 31,	December 31,
		2016	2015
RMB denominated bank deposits with financial institutions in the PRC	$	457,704	1,076,430
US dollar denominated bank deposits with a financial institutions in the PRC	$	2,318,379	2,613,834
US dollar denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”)	$	9,234,058	23,460
US dollar denominated bank deposits with financial institutions in The United States of America (“USA”)	$	24,132	53,231
US dollar denominated bank deposits with financial institutions in Cayman Islands (“Cayman”)	$	157	99
RMB restricted cash denominated bank deposits with financial institutions in the PRC	$	-	2,994,364

As of March 31, 2016 and December 31, 2015 deposits of $296,636 and $241,807 were insured, respectively. To limit exposure to credit risk relating to bank deposits, the Company primarily places bank deposits only with large financial institutions in the PRC, HK SAR, USA and Cayman with acceptable credit rating.

16.

Defined Contribution Plan

During 2011, the Company began sponsoring a 401(k) defined contribution plan ("401(k) Plan") that provides for a 100% employer matching contribution of the first 3% and a 50% employer matching contribution of each additional percent contributed by an employee up to 5% of each employee’s pay. Employees become fully vested in employer matching contributions after six months of employment. Company 401(k) matching contributions were approximately $1,000 and $5,000 for the three months ended March 31, 2016 and 2015, respectively.

17.

Subsequent Event

	(a)	In order to comply with PRC regulatory requirements, on April 5, 2016, YOD WFOE entered into variable interest entity agreements with SSF and its nominee shareholders pursuant to the Amended Tianjin Agreement dated December 21, 2015 (see Note 9 (c)).

	(b)	On April 13, 2016, the Company entered into a Series A Preferred Stock Agreement (the “Frequency SPA”) with Frequency Networks, Inc. (“Frequency”) for purchase of 5,710,847 shares of Frequency’s Series A Preferred Stock (the “Frequency Preferred Stock”), par value $0.001 per share, for total cash investment of $2.0 million. In a subsequent closing on April 28, 2016, the Company purchased an additional 2,855,424 shares of Frequency Preferred Stock for a total cash investment of $1.0 million.

The Frequency Preferred Stock is entitled to non-cumulative dividends at the rate of $0.02548 per share per annum, declared at the discretion of Frequency’s board of directors. The Frequency Preferred Stock is also convertible into shares of Frequency common stock at the Company’s election any time after issuance on a 1:1 basis, subject to certain adjustment. Holders of the Frequency Preferred Stock may also vote on an as-converted basis and the holders of the outstanding Frequency Preferred Stock, as a class, have the right to elect one member of the board of directors of Frequency. Each share of Frequency Preferred Stock also has a liquidation preference of $0.42467 per share, plus any declared but unpaid dividends.

(c)

On April 13, 2016, simultaneous with the Frequency SPA, the Company and Frequency also entered into a Joint Venture Agreement (the “Frequency JV Agreement”), pursuant to which the Company and Frequency have agreed to form a new joint-venture company (the “JVC”) to, among other things, launch Frequency in certain parts of Asia, undertake certain third party integrations and create over-the-top packages and digital networks that will aggregate both parties’ licensed content into branded, genre-specific channels.

The JVC will have exclusive distribution rights for such channels and content in certain territories, including Singapore, Brunei, Malaysia, Thailand, Indonesia, Philippines, Vietnam, Laos, Cambodia, Myanmar and China, including Hong Kong, Macao and Taiwan. The equity ownership of the JVC will be 49% owned by Frequency and 51% owned by the Company. Frequency’s initial contribution to the JVC shall be exclusive use of its platform and licensed content in the aforementioned territories and the Company shall contribute certain licensed content, sales and marketing, and operating capital, as determined by the Company. As of the date of this report, the JVC has yet to be established.

(d)

On April 13, 2016, SSF entered into a Game Right Assignment Agreement with SSS for the acquisition of certain game IP rights (the “Game IP Rights”) for cash based on total fair value of the Game IP Rights, which was determined to be approximately $2.7 million (RMB18 million). On April 15, 2016, SSF entered into a Capital Increase Agreement with Nanjing Tops Game Co., Ltd. (“Topsgame”) and its shareholders whereby SSF transferred the Game IP Rights to Topsgame in exchange for 13% of Topsgame’s equity ownership. Topsgame is a fast-growing PRC company that specializes in the independent development and operation of online, stand-alone and other games as well as the distribution of domestic and overseas games. The investment was part of the Company’s strategy to enter into the gaming industry.


	(e)	On May 12, 2016, the Company and SSS entered into Amendment No. 1 to the SSS Note, pursuant to which the maturity date of the SSS Note was extended to July 31, 2016. The SSS Note remains automatically convertible into 9,208,860 shares of the Company’s common stock upon receipt of the required shareholder approval to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock.

Cautionary Note Regarding Forward Looking Statements

This Form 10-Q contains “forward-looking” statements that involve risks and uncertainties. You can identify these statements by the use of forward-looking words such as "may", "will", "expect", "anticipate", "estimate", "believe", "continue", or other similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or financial condition or state other "forward-looking" information. We believe that it is important to communicate our future expectations to our investors. However, these forward-looking statements are not guarantees of future performance and actual results may differ materially from the expectations that are expressed, implied or forecasted in any such forward-looking statements. There may be events in the future that we are unable to accurately predict or control, including weather conditions and other natural disasters which may affect demand for our products, and the product–development and marketing efforts of our competitors. Examples of these events are more fully described in the Company’s 2015 Annual Report under Part I. Item 1A. Risk Factors.

Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents the Company files from time to time with the SEC, particularly its Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, Current Reports on Form 8-K and all amendments to those reports.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward-looking statements.

Overview

YOU On Demand is a premium Video On Demand (“VOD”) service provider with primary operations in the People’s Republic of China (PRC”). YOU On Demand Holdings, Inc. was incorporated in the State of Nevada on October 19, 2004.

YOU On Demand, through its subsidiaries and consolidated variable interest entities, provide enhanced premium content and integrated value-added service solutions for the delivery of VOD and paid video programming to digital cable providers, Internet Protocol Television (“IPTV”) providers, Over-the-Top (“OTT”) streaming providers, mobile manufacturers and operators, as well as direct customers. By leveraging and optimizing its existing operations, YOU On Demand has positioned itself to evolve into a mobile-driven, “new medial” platform for enterprises and consumers.

We launched our VOD service through the acquisition of YOD Hong Kong, formerly Sinotop Group Limited, on July 30, 2010. Through a series of contractual agreements, YOD WFOE, the subsidiary of YOD Hong Kong, controls Beijing Sino Top Scope Technology Co., Ltd. (“Sinotop Beijing”), a corporation established in the PRC. Sinotop Beijing is the 80% owner of Zhong Hai Shi Xun Information Technology Co., Ltd. (“Zhong Hai Video”), though which we provide: 1) integrated value-added business-to-business (“B2B”) service solutions for the delivery of VOD and enhanced premium content for digital cable; 2) integrated value-added business-to-business-to-customer (“B2B2C”) service solutions for the delivery of enhanced premium content for IPTV and OTT providers and; 3) a direct to user, or B2C, mobile video service app. As a result of the contractual arrangements with Sinotop Beijing, we have the right to control management decisions and direct the economic activities that most significantly impact Sinotop Beijing and Zhong Hai Video, and accordingly, under generally accepted accounting principles in the United States (“U.S. GAAP”), we consolidate these operating entities in our consolidated financial statements.

Recent Development

On April 5, 2016, YOD WFOE entered into a series of contractual agreements with Tianjin Sevenstarflix Network Technology Limited (“SSF”) and its legal shareholders. SSF is a newly-formed entity which the Company plans to use to: offer a branded pay content service delivered to customers ubiquitously through all its platform partners, track and share consumer payment and other behavior data, operate a customer management and data-based service and develop mobile and social TV-based customer management portals. By virtue of the contractual agreements, YOD WFOE obtained control of the economic interests of SSF, including the power to direct the activities of SSF, and is therefore determined to be the primary beneficiary in this arrangement. Accordingly, under generally accepted accounting principles in U.S. GAAP, we consolidate SSF in our consolidated financial statements.

On April 13, 2016, the Company entered into a Joint Venture Agreement (the “Frequency JV Agreement”) with Frequency Networks, Inc. (“Frequency”), pursuant to which the Company and Frequency have agreed to form a new joint-venture company (the “JVC”) to, among other things, launch Frequency in certain parts of Asia, undertake certain third party integrations and create over-the-top packages and digital networks that will aggregate both parties’ licensed content into branded, genre-specific channels. The JVC will have exclusive distribution rights for such channels and content in certain territories, including Singapore, Brunei, Malaysia, Thailand, Indonesia, Philippines, Vietnam, Laos, Cambodia, Myanmar and China, including Hong Kong, Macao and Taiwan. The equity ownership of the JVC will be 49% owned by Frequency and 51% owned by the Company.

Principal Factors Affecting Our Financial Performance

Our operating results are primarily affected by the following factors:

	•	*Our ability to adapt our product and service offerings to meet consumer demands* . Our expansion prospect is dependent on continued development of our product and services. The content distribution industry in China is highly competitive and dominated by large Internet companies that have more resources than us. The growth of our business will depend on whether we can develop new services and products that can offer higher quality contents, technological innovation and unique user experience.

	•	*Our ability to expand our subscriber base* . Our business is affected by the overall size of our user base, which in turn is determined by, among other factors, (i) user experience of our service and products, (ii) our relationship with distribution platforms, such as digital cable and IPTV providers and mobile product manufacturers, (iii) expansion of our business to include increased service offerings and (iv) the expansion of our subscribers beyond smartphones to mobile tablets and other Internet-enabled mobile devices.

	•	*Our ability to achieve revenue growth and meet internal or external expectations of future performance* . In the latter half of 2013, we shifted our focus to our core multi-platform video streaming services and our business model is still evolving. Our financial performance is affected by, among other things, our ability to come to favorable business terms with our distribution partners, manage and procure contents in a cost-effective manner and manage our operating expenses. Overall, our normalized operating expenses have been decreasing but we have also incurred certain additional costs related to our financing activities, maintaining our public company status and making staff reductions.

	•	*Changes in China’s economic, political or social policies or conditions* . We operate in China and derive all of our revenues from sales to customers in China. Accordingly, our business, financial condition and results of operation is significantly influenced by the political, social and economic policies and conditions in China. While the Chinese economy has experienced significant growth over the past decade, growth has been uneven, both geographically and among various sectors of the economy. In addition, the Chinese government continues to play a significant role in regulating telecommunication and Internet industry development by imposing certain laws and regulations concerning Internet access and distribution of video content and other information over traditional and new media platforms. Some of the laws and regulations are also relatively new and involving and their interpretation and enforcement involve significant uncertainty.

Taxation

United States

YOU On Demand Holdings, Inc. is subject to United States tax. No provision for income taxes in the United States has been made as YOU On Demand Holdings, Inc. had no income taxable in the United States since inception.

Cayman Islands

CB Cayman was incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, it is not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands.

Hong Kong

Our subsidiary, YOD Hong Kong, was incorporated in Hong Kong and under the current laws of Hong Kong, is subject to Profits Tax of 16.5% . No provision for Hong Kong Profits Tax has been made as YOD Hong Kong has no taxable income.

The People’s Republic of China

Under the Enterprise Income Tax Law, our Chinese subsidiaries and VIEs are subject to an earned income tax of 25.0% .

Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income and non-tax deductible expenses incurred. Our management carefully monitors these legal developments to determine if there will be any change in the statutory income tax rate.

Consolidated Results of Operations

Comparison of Three Months Ended March 31, 2016 and 2015

		Three Months Ended
		March 31, 2016			March 31, 2015			Amount Change		% Change
Revenue	$	1,270,000		$	1,028,000		$	242,000		24%
Cost of revenue		916,000			1,043,000			(127,000	)	-12%
Gross profit (loss)		354,000			(15,000	)		369,000		-2460%

Operating expense:
Selling, general and administrative expenses		2,165,000			2,448,000			(283,000	)	-12%
Professional fees		367,000			289,000			78,000		27%
Depreciation and amortization		97,000			90,000			7,000		8%
Total operating expense		2,629,000			2,827,000			(198,000	)	-7%

Loss from operations		(2,275,000	)		(2,842,000	)		567,000		-20%

Interest and other income (expense)
Interest expense, net		(33,000	)		(28,000	)		(5,000	)	18%
Change in fair value of warrant liabilities		37,000			(15,000	)		52,000		-347%
Equity share of losses on equity method investments		(10,000	)		(32,000	)		22,000		-69%
Others		-			(10,000	)		10,000		-100%

Loss before income taxes and non-controlling interest		(2,281,000	)		(2,927,000	)		646,000		-22%

Income tax benefit		9,000			9,000			-		-

Net loss		(2,272,000	)		(2,918,000	)		646,000		-22%

Net loss attributable to non-controlling interest		138,000			120,000			18,000		15%

Net loss attributable to YOU On Demand common shareholders	$	(2,134,000	)		(2,798,000	)		664,000		-24%

Revenues

Revenue for the three months ended March 31, 2016 was $1,270,000, as compared to $1,028,000 for the same period in 2015, an increase of approximately $242,000, or 24%. This revenue increase was primarily attributed to our new distribution channels on OTT platforms, the aggregate of which comprised 51% of total revenues for the first three months ended March 31, 2016. In addition, the Company has increased focus on new and existing distribution channels that allow for more in depth cooperation and bring along long-term sustainable revenue through recurring revenue sharing contracts. Revenue generated from revenue sharing accounted for 19% of total revenues for the three months ended March 31, 2016.

Cost of revenues

Cost of revenues was $916,000 for the three months ended March 31, 2016, as compared to $1,043,000 for the three months ended March 31, 2015. The decrease of $127,000, or 12%, was primarily due to delay in expected revenue from specific content titles which impacted our content license cost amortization pattern. Our cost of revenues is primarily comprised of content licensing fees. Our content licensing agreements with production companies incorporate minimum guarantee payment levels. As of March 31, 2016 and 2015, our revenues did not exceed the level of minimum guarantees to cause additional costs to be incurred.

Gross loss

Our gross profit for the three months ended March 31, 2016 was $354,000, as compared to gross loss of $15,000 during the same period in 2015. The increase in gross profit of approximately $369,000 was primarily due to increase in revenues from new and existing distribution channels.

Selling, general and administrative expenses

Our selling, general and administrative expenses for the three months ended March 31, 2016, decreased approximately $283,000, to $2,165,000, as compared to $2,448,000 for the three months ended March 31, 2015.

Salaries and personnel costs are the primary components of selling, general and administrative expenses, accounting for 33% and 35% of our selling, general and administrative expenses for the three months ended March 31, 2016 and 2015, respectively. For the first quarter of 2016, salaries and personnel costs totaled $709,000, a decrease of $146,000, or 17%, as compared to $855,000 for the same period of 2015. The decrease was primarily due to staff reductions made as part of business transformation and re-alignment strategy, which will be our primary focus for the 2016 fiscal year.

The other major components of our selling, general and administrative expenses include marketing and promotion expenses, outsourced technology costs, rent and severance. For the three months ended March 31, 2016, these costs totaled $1,456,000, a net decrease of $137,000, or 9%, as compared to $1,593,000 for the same period in 2015. The decrease was primarily attributed to decrease in stock-based compensation expenses, technology outsourcing costs and other staff-related costs.

Professional fees

Professional fees are generally related to public company reporting and governance expenses. Our costs for professional fees increased $78,000, or 27%, to $367,000 for the three months ended March 31, 2016, from $289,000 for the same period in 2015. The increase in professional fees was related to legal, audit and advisory expenses incurred in connection with our investment and financing activities.

Depreciation and amortization

Our depreciation and amortization expense increased by $7,000, or 8%, to $97,000 in the three months ended March 31, 2016, from $90,000 during the three months ended March 31, 2015. The increase was mainly due to amortization of costs related to development of our mobile app starting in late 2015.

Change in fair value of warrant liabilities

Certain of our warrants are recognized as derivative liabilities and re-measured at the end of every reporting period and upon settlement, with the change in value reported in the statement of operations. We reported a gain of $37,000 and a loss of $15,000 for the three months ended March 31, 2016 and 2015, respectively. The changes are primarily due to fluctuation in our closing stock price.

Net loss attributable to non-controlling interest

Hua Cheng has a 20% non-controlling interest in Zhong Hai Video and as such we allocate 20% of the operating loss of Zhong Hai Video to Hua Cheng. During the three months ended March 31, 2016, $138,000 of our operating loss from Zhong Hai Video was allocated to Hua Cheng. For the three months ended March 31, 2015, operating loss attributable to non-controlling interest was $120,000.

Liquidity and Capital Resources

As of March 31, 2016, the Company had cash of approximately $12,035,000 and negative working capital of approximately $10,026,000. In addition, we had accumulated deficits of approximately $88.6 million and $81.2 million as of March 31, 2016 and 2015, respectively, due to recurring losses since our inception. Subsequent to March 31, 2016, we also entered into asset acquisition and investment agreements, the total of which require aggregate cash commitments from us of approximately $9.9 million. These factors could raise substantial doubt about the Company’s ability to continue as a going concern.

We continue to rely on debt and equity financing to pay for ongoing operating expenses and execution of our business plan. On March 28, 2016, we completed a common stock financing for $10.0 million, and we also have the ability to raise funds through various methods by either issuing debt or equity instruments. In addition, once necessary shareholder approvals are received to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock, our $17.7 million convertible promissory note issued to SSS shall be automatically converted into the Company’s common stock.

The consolidated financial statements included in this report have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

The following table provides a summary of our net cash flows from operating, investing and financing activities.

		Three Months Ended
		March 31,			March 31,
		2016			2015
Net cash used in operating activities	$	(1,733,000	)	$	(2,396,000	)
Net cash used in investing activities		-			(21,000	)
Net cash provided by financing activities		10,000,000			-
Effect of exchange rate changes on cash		(1,000	)		-
Net increase (decrease) in cash		8,266,000			(2,417,000	)

Cash at beginning of period		3,769,000			10,812,000

Cash at end of period	$	12,035,000		$	8,395,000

Operating Activities

Cash used in operating activities decreased for the three months ended March 31, 2016 compared to 2015 primarily due to decrease in net loss and increase in accounts receivable collection during the three months ended March 31, 2016. This decrease was partially offset by increase in payments of accrued expenses and other liabilities.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2016 was due to investment proceeds of $10,000,000 received from the sales of 4,545,455 shares of the Company’s common stock and issuance of a two-year warrant to acquire an additional 1,818,182 shares of the Company’s common stock at an exercise price of $2.75 per share to SSS.

Effects of Inflation

Inflation and changing prices have had an effect on our business and we expect that inflation or changing prices could materially affect our business in the foreseeable future. Our management will closely monitor the price change and make efforts to maintain effective cost control in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.

Variable Interest Entities

We account for entities qualifying as variable interest entities (VIEs) in accordance with Financial Accounting Standards Boards (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation . For our consolidated VIEs, management has made evaluations of the relationships between our VIEs and the economic benefit flow of contractual arrangement with VIEs. In connection with such evaluation, management also took into account the fact that, as a result of such contractual arrangements, we control the legal shareholders’ voting interests and have power of attorney in the VIEs, and therefore we are able to direct all business activities of the VIEs. As a result of such evaluation, management concluded that we are the primary beneficiary of our consolidated VIEs.

We have consulted our PRC legal counsel in assessing our ability to control our PRC VIEs. Any changes in PRC laws and regulations that affect our ability to control our PRC VIEs may preclude us from consolidating these companies in the future.

Revenue Recognition

When persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectability is reasonably assured, we recognize revenue as services are performed. For certain contracts that involve sub-licensing content within the specified license period, revenue is recognized in accordance with ASC Subtopic 926-605, Entertainment-Films - Revenue Recognition, whereby revenue is recognized upon delivery of films when the arrangement includes a nonrefundable minimum guarantee, delivery is complete and we have no substantive future obligations to provide future additional services. Payments received from customers for the performance of future services are recognized as deferred revenue, and subsequently recognized as revenue in the period that the service obligations are completed.

In accordance with ASC 605-25, Revenue Recognition – Multiple Element Arrangements, contracts with multiple element deliverables are separated into individual units for accounting purposes when the unit determined to have standalone value to the customer. Since the contract price is for all deliverables, we allocated the arrangement consideration to all deliverables at the inception of the arrangement based on their relative selling price. We use (a) vendor-specific objective evidence of selling price, if it exists, or, (b) the management’s best estimate of the selling price for that deliverable to determine the relative selling price of each individual unit.

The recognition of revenue involves certain judgments and changes in our assumptions, judgments or estimations may have a material impact on the amount and timing of our revenue recognition.

Licensed Content

We obtain content through content licensing agreements with studios and distributors. We recognize licensed content when the license fee and the specified content titles are known or reasonably determinable. Prepaid license fees are classified as an asset on the consolidated balance sheets as licensed content and accrued license content fees payable are classified as a liability on the consolidated balance sheets.

We amortize licensed content in cost of revenues over the contents contractual window of availability based on the expected revenue derived from the licensed content, beginning with the month of first availability, such that our revenues bear a representative amount of the cost of the licensed content. We review factors that impact the amortization of licensed content on a regular basis, including factors that may bear direct impact on expected revenue from specific content titles. We estimate expected revenue by reviewing relevant factors, including marketing considerations, programming efforts, relationship with our channel partners, expected customer renewals and content offered by other distributors on the same platform. Changes in our expected revenue from licensed content could have a significant impact on our amortization pattern.

Intangible Assets and Goodwill

We account for intangible assets and goodwill, in accordance with ASC 350, Intangibles – Goodwill and Other . ASC 350 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be evaluated for impairment at least annually. ASC 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment whenever events indicate the carrying amount may not be recoverable. In accordance with ASC 350, goodwill is allocated to reporting units, which are either the operating segment or one reporting level below the operating segment. On an annual basis, we review goodwill for impairment by first assessing qualitative factors to determine whether the existence of events or circumstances makes it more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If we determine that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, goodwill is further tested for impairment by comparing the carrying value to the estimated fair value of its reporting units, determined using externally quoted prices (if available) or a discounted cash flow model and, when deemed necessary, a market approach.

Application of goodwill impairment tests requires significant management judgment, including the identification of reporting units, assigning assets, liabilities and goodwill to reporting units and determination of fair value of each reporting unit. Judgment applied when performing the qualitative analysis includes consideration of macroeconomic, industry and market conditions, overall financial performance of the reporting unit, composition, personnel or strategy changes affecting the reporting unit and recoverability of asset groups within a reporting unit. Judgments applied when performing the quantitative analysis includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these judgments, estimates and assumptions could materially affect the determination of fair value for each reporting unit.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, ‘ Revenue from Contracts with Customers (Topic 606). This guidance supersedes current guidance on revenue recognition in Topic 605, Revenue Recognition . In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. In August 2015, the FASB issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. For public business entities that follow U.S. GAAP, the deferral results in the new revenue standard are being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. Management is currently evaluating the impact of adopting this standard on our consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest – Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30). The guidance simplifies presentation of debt issuance costs and require that debt issuance costs related to recognized debt liability to be presented in the balance sheet as a direct reduction from the carry amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This amendment is effective for fiscal years beginning after December 15, 2015 and interim periods within the fiscal year beginning after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued. The Company adopted this amendment for the interim period of March 31, 2016. The adoption of ASU 2015-03 did not have any impact on prior period financial statements as there was no debt issued by the Company for the year ended December 31, 2015.

On March 30, 2016, the FASB issued ASU 2016-09, C ompensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Management is currently evaluating the impact of this amendment on our financial position, statement of operations or cash flow.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Vice President of Finance, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Vice President of Finance, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2016. Based on that evaluation, our Chief Executive Officer and Vice President of Finance concluded that as of March 31, 2016, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control for the quarter ended March 31, 2016, which have materially affected or would likely materially affect our internal control over financial reporting. The Company continues to invest resources in order to upgrade internal controls.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which we are a party or to which any of our property is subject. To the best of our knowledge, no such actions against us are contemplated or threatened.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our 2015 Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K is not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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

There were no unregistered sales of equity securities during the fiscal quarter ended March 31, 2016, other than those that were previously reported in our Current Reports on Form 8-K.

Item 3. Defaults Upon Senior Securities

There were no defaults upon senior securities during the fiscal quarter ended March 31, 2016.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On December 21, 2015, the Company entered into an Amended and Restated Securities Purchase Agreement with Beijing Sun Seven Stars Culture Development Limited (“SSS”) (as previously disclosed in our Current Report on Form 8-K filed on December 24, 2015), under which SSS granted the Company non-exclusive royalty-free distribution rights for certain video content value at approximately $29.1 million in exchange for a convertible promissory note (the “SSS Note”). The SSS Note has a stated principal amount of approximately $17,718,000 and bears interest at the rate of 0.56% per annum. Immediately upon the receipt of the required shareholder approval to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock, the SSS Note will automatically convert into 9,208,860 unregistered shares of the Company’s common stock.

Effective on May 12, 2016, the Company and SSS entered into Amendment No. 1 to the SSS Note pursuant to which the maturity date of the SSS Note, which was on May 21, 2016, is now extended to be July 31, 2016.

The foregoing description of Amendment No. 1 to the SSS Note is qualified in its entirety by reference to the actual Amendment No. 1 to the SSS Note, a copy of which is filed as Exhibit 10.13 hereto and incorporated herein by reference.

Item 6. Exhibits

See Exhibit Index.

Exhibit
No.	Description
10.1	Equity Pledge Agreement among YOD WFOE, Lan Yang and Yun Zhu, dated April 5, 2016.*
10.2	Call Option Agreement among YOD WFOE, Tianjin Sevenstarflix Network Technology Limited, Lan Yang and Yun Zhu, dated April 5, 2016.*
10.3	Power of Attorney agreements, among YOD WFOE, Tianjin Sevenstarflix Network Technology Limited, Lan Yang and Yun Zhu, dated April 5, 2016.*
10.4	Technical Services Agreement among YOD WFOE and Tianjin Sevenstarflix Network Technology Limited, dated April 5, 2016.*
10.5	Spousal Consents, dated April 5, 2016.*
10.6	Letter of Indemnification among YOD WFOE, Lan Yang and Yun Zhu, dated April 5, 2016.*
10.7	Loan Agreement among YOD WFOE, Lan Yang and Yun Zhu, dated April 5, 2016.*
10.8	Management Services Agreement among YOU On Demand (Asia) Limited and Tianjin Sevenstarflix Network Technology Limited, dated April 6, 2016.*
10.9	Joint Venture Agreement by and between the Company and Frequency Networks, Inc., dated April 13, 2016.*
10.10	Series A Preferred Stock Purchase Agreement by and between the Company and Frequency Networks, Inc., dated April 13, 2016.*
10.11	Game Right Assignment Agreement by and between Tianjin Sevenstarflix Network Technology Limited and Beijing Sun Seven Stars Cultural Development Limited, dated April 13, 2016.*
10.12	Capital Increase Agreement by and between Tianjin Sevenstarflix Network Technology Limited, Nanjing Tops Game Co., Ltd. and Nanjing Tops Game Co., Ltd.’s shareholders, dated April 15, 2016.*
10.13	Amendment No. 1 to Convertible Promissory Note issued to Beijing Sun Seven Stars Culture Development Limited, dated May 12, 2016.*
31.1	Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certifications of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	XBRL Instance Document
101.SCH	Taxonomy Extension Schema Document
101.CAL	Taxonomy Extension Calculation Linkbase Document
101.DEF	Taxonomy Extension Definition Linkbase Document
101.LAB	Taxonomy Extension Label Linkbase Document
101.PRE	Taxonomy Extension Presentation Linkbase Document

*Filed herewith
**Furnished herewith

SIGNATURES

In accordance with 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 on May 16, 2016.

YOU ON DEMAND HOLDINGS, INC.

By: /s/ Mingcheng Tao

Name: Mingcheng Tao
Title: Chief Executive Officer
(Principal Executive Officer and an Authorized Officer)

___________________________________________________________

Equity Pledge Agreement

___________________________________________________________

by and between

YOU On Demand (Beijing) Technology Co., Ltd.

and

Yang Lan

and

Zhu Yun

April 5, 2016

TABLE OF CONTENTS

Article		Page
1.	DEFINITIONS AND INTERPRETATIONS	2
2.	PLEDGE	3
3.	REGISTRATION	3
4.	EXERCISE OF PLEDGE	3
5.	REPRESENTATIONS AND WARRANTIES OF PARTY B AND PARTY C	3
6.	COVENANTS OF PARTY B AND PARTY C	4
7.	EVENTS OF DEFAULT	4
8.	TERM	5
9.	BREACH OF CONTRACT	6
10.	FEES AND EXPENSES	6
11.	CONFIDENTIALITY	6
12.	FORCE MAJEURE	7
13.	GOVERNING LAW	8
14.	DISPUTE RESOLUTION	8
15.	MISCELLANEOUS	8

This EQUITY PLEDGE AGREEMENT (“ Agreement ”) is entered into on this 5th day of April, 2016 (“ Signing Date ”) in Beijing, People’s Republic of China (“ PRC ”) , by and between:

(1)	YOU On Demand (Beijing) Technology Co., Ltd. , a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 2603, 26/F, Tower A, 10 Jintongxi Road, Chaoyang District, Beijing, PRC (“ Party A ”);

(2)	Yang Lan, a PRC citizen and holder of identity card number 110108196803315727 (“ Party B ”); and

(3)	Zhu Yun, a PRC citizen and holder of identity card number 630104197402260543 (“ Party C ”).

(collectively, the “ Parties ”, individually, a “ Party ”)

WHEREAS :

A.	Party B holds 99% and Party C holds 1% of the equity interests (“ Equity Interests ”) of Tianjin Sevenstarflix Network Technology Limited, “ Company ”), a limited liability company incorporated and doing certain business activities in the PRC (“ Business ”). The Equity Interests represent RMB 50 million in the registered capital of the Company.

B.	On 1 April 2016, Party A and the Company entered into a Technical Services Agreement (“ Technical Services Agreement ”), pursuant to which the Company shall pay service fees to Party A for various technical, marketing and management consulting and other services in connection with the Business.

C.	On 1 April 2016, Party A, Party B, Party C and the Company entered into a Call Option Agreement (“ Call Option Agreement ”), pursuant to which Party B and Party C grant to Party A an option to purchase all or any part of their Equity Interests.

D.	As security for a total debts of RMB 20 million: (a) the performance by the Company of its obligations under the Technical Services Agreement for a security of RMB 10 million; and (b) the performance by Party B and Party C of their obligations under the Call Option Agreement for a security of RMB 10 million, Party B and Party C have agreed to pledge 39.6% of the Equity Interests (representing RMB 19.8 million in the registered capital of the Company and 0.4% of the Equity Interests (representing RMB 0.2 million in the registered capital of the Company) respectively to Party A, and Party A has agreed to accept such a pledge, in accordance with the terms and conditions set out in this Agreement.

NOW THEREFORE, the Parties agree as follows:

Equity Pledge Agreement

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1.	DEFINITIONS AND INTERPRETATIONS

1.1

Definitions . Unless otherwise provided in this Agreement, the terms below shall have the meanings set out below:

	Business Day	means a day on which commercial banks are open for business in the PRC;

	Call Option Agreement	means the Call Option Agreement entered into by the Parties and the Company on 1 April 2016, as described in Paragraph C of the Recitals;

	Confidential Information	means any information of a confidential nature relating to the Parties and the Company, including without limitation any confidential information concerning their respective structure, business activities (including financial information, client lists and business policies), technology, released or unreleased software or hardware products, marketing plans, regardless of the format in which such information is stored or communicated, and including any excerpts, summaries or other derivative forms of the same;

	Event of Default	means an event described in Article 7;

	Force Majeure	means any fire, flood, war, act of government or other natural or man-made event which is unforeseen by the Parties (or if foreseen, reasonably unavoidable) and which prevents the performance of this Agreement by any or all of the Parties, but excluding any shortage of credit;

	Pledge	means the pledge created over each of Party B’s and Party C’s entire share of the Equity Interests in favor of Party A under Article 2.1;

	Technical Services Agreement	means the Technical Services Agreement entered into by Party A and the Company, as described in Paragraph B of the Recitals.

1.2

Interpretation . All headings used herein are for reference purposes only and shall not affect the meaning or interpretation of any provision. Any reference to an Article or Appendix is to an article or appendix of this Agreement. For purposes of this Agreement, the term “PRC” refers to Mainland China, and unless explicitly provided herein does not include the Special Administrative Regions of Hong Kong and Macau or the territory of Taiwan. References to the masculine shall include the feminine and vice versa.

Equity Pledge Agreement

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2.	PLEDGE

	2.1	Pledge . Each of Party B and Party C hereby agrees to pledge his share of the Equity Interests to Party A pursuant to the terms of this Agreement (“ Pledge ”).

	2.2	Effective Date . The Pledge shall be effective on the date on which it has been duly registered pursuant to Article 3. For the avoidance of doubt, until Party A has acquired the Equity Interests by means of exercising its option under the Call Option Agreement, the Pledge will continue to be effective.

3.	REGISTRATION

	Party B and Party C covenant with Party A that, within [30] Business Days after the execution of this Agreement, Party B and Party C shall complete the registration of the Pledge with the relevant local branch of the PRC Administration for Industry and Commerce (“ AIC ”) as instructed by Party A, and Party A shall provide any necessary assistance to Party B and Party C to register the Pledge in accordance with this Agreement.

4.	EXERCISE OF PLEDGE

	4.1	Exercise of Pledge . During the term of this Agreement, Party A shall be entitled to exercise the Pledge if the Company fails to pay any of the service fees due under the Technical Services Agreement, or otherwise breaches the Technical Services Agreement, and fails to rectify such breach within 30 days of Party A’s written demand for the same.

	4.2	No Hindrance . Party B and Party C shall render Party A all necessary assistance in exercising the Pledge, and shall not hinder Party A’s exercise thereof hereunder.

5.	REPRESENTATIONS AND WARRANTIES OF PARTY B AND PARTY C

Party B and Party C each hereby represents and warrants that:

	5.1	he is the legal owner of the Equity Interests; and

	5.2	he has not pledged or encumbered his respective share of the Equity Interests to any person or entity other than Party A.

Equity Pledge Agreement

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6.	COVENANTS OF PARTY B AND PARTY C

For the duration of this Agreement, Party B and Party C each covenants to Party A that he will:

	6.1	not transfer or assign his share of the Equity Interests, collect any dividends from the Equity Interests, or create or permit to be created any pledge or other encumbrance on the Equity Interests other than the Pledge, without the prior written consent of Party A;

	6.2	comply with all laws and regulations governing the Pledge;

	6.3	deliver to Party A any notice, order, or opinion with respect to the Pledge which is issued by a competent government authority within 5 Business Days of receiving the same, and comply with or object to such notice, order or opinion at the direction of Party A;

	6.4	notify Party A in a timely manner of any action, omission or other event which may adversely affect the Equity Interests or any of the Parties’ rights therein, or which may change or preclude his performance of any of his obligations under this Agreement;

	6.5	not initiate, nor authorize any other person to initiate, any legal procedure or other action which could suspend or hamper Party A’s right to exercise the Pledge; and

	6.6	execute in good faith all title certificates and contracts, perform any necessary actions, and provide any additional assistance necessary to perfect Party A’s rights hereunder as requested by Party A.

7.	EVENTS OF DEFAULT

7.1

Events of Default . Each of the following events shall be considered to be an Event of Default:

	7.1.1	the Company fails to make full and timely payment of the service fees under the Technical Service Agreement, or if Party A incurs any economic loss due to the Company’s breach of its obligations under the Technical Services Agreement;

	7.1.2	Party B and/or Party C breach(es) this Agreement, including by making any material misleading or fraudulent representations, warranties or covenants under Articles 5 and 6;

	7.1.3	Party B and/or Party C waive his/their rights in or to the Equity Interests, or transfer or assign any portion of the Equity Interests, without the prior written consent of Party A;

Equity Pledge Agreement

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	7.1.4	any loan, security, compensation, covenant and/or other liability of Party B and/or Party C is/are required to be repaid or performed prior to the scheduled date, or is/are due but cannot be repaid or performed as scheduled, and thereby causes Party A to deem that the capacity of Party B and/or Party C to perform his/their obligations under this Agreement has been adversely affected;

	7.1.5	Party B and/or Party C is/are incapable of repaying its general debt or other debt;

	7.1.6	laws are promulgated which render Party B and/or Party C incapable of continuing to perform his/their obligations hereunder without violating such laws, or which render this Agreement illegal;

	7.1.7	any approval, permit, license, or authorization from the competent government authorities needed to perform or validate this Agreement is withdrawn, suspended, invalidated, or materially amended; and

	7.1.8	other circumstances occur whereby Party A is incapable of exercising the right to dispose of the Pledge in accordance with applicable law and the Parties’ intentions hereunder.

	7.2	Notice . Party B and/or Party C shall immediately serve Party A with a written notice if either or both of them become aware that an Event of Default has occurred.

	7.3	Party A’s Event of Default Rights . Party A may, at any time upon the occurrence of an Event of Default: (a) serve a written default notice to Party B and/or Party C requiring either or both of them immediately to make, or cause to be immediately made, full payment of the outstanding payment obligations under the Technical Services Agreement; or (b) exercise the Pledge in accordance with Article 4. For the avoidance of doubt, Party A’s rights under this Article 7.3 shall be separate from and additional to its rights for breach of contract as set out in Article 9.

TERM

This Agreement shall take effect on the date first indicated above and remain in full force and effect until the earlier of the date on which:

8.1

the Technical Services Agreement and Call Option Agreement have been performed in full or otherwise terminated;

Equity Pledge Agreement

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	8.2	the Pledge is exercised in accordance with Article 4, and all subsequent records and other necessary actions have been undertaken by Party B and Party C for purposes of the same; and

	8.3	Party A gives, at its sole discretion, notice of release of the Pledge to Party B and Party C or other clear instruction in writing to the effect that the Pledge under this Agreement shall no longer survive.

9.	BREACH OF CONTRACT

9.1

Breach . A Party shall be deemed to be in breach of this Agreement if:

	9.1.1	it fails to perform its obligations under this Agreement fully and in a timely manner, and does not rectify any such failure within 30 days after written demand from any other Party requesting the same; or

	9.1.2	any representation or warranty made by such Party hereunder is as of the Signing Date or becomes, materially false, misleading or untrue.

9.2

Liability for Breach . Any Party that breaches this Agreement shall indemnify the other Parties against, and compensate them for, any damages or losses incurred as a result, including third party claims.

10.

FEES AND EXPENSES

Party A shall be solely responsible for all fees and expenses incurred in relation to this Agreement, including, without limitation, legal fees, taxes and government charges, and shall fully indemnify Party B and Party C against the payment of any fees or expenses incurred at the request and upon the instruction of Party A. Notwithstanding the foregoing, each of the Parties shall be responsible for their own legal fees incurred as a result of engaging legal counsel for the purpose of entering into this Agreement and in the event that any dispute arises in connection with this Agreement.

11.

CONFIDENTIALITY

11.1

Confidentiality Obligations . Each Party (“ Receiving Party ”) shall maintain the strict confidentiality of any and all Confidential Information of any other Party(ies) (“ Disclosing Party ”) to which it may become privy before or during the performance of this Agreement, and shall not disclose any such Confidential Information to any third party except to its relevant employees, affiliates, officers and advisors (as applicable) on a “need-to-know” basis and provided that the aforesaid recipients of Confidential Information are subject to written confidentiality undertakings which are no less strict than the obligations set out herein. Any Confidential Information of the Disclosing Party which is received by the Receiving Party hereunder shall be used for the sole purpose of performing this Agreement and such other purpose as the Disclosing Party shall have permitted in writing.

Equity Pledge Agreement

- 6 -

11.2

Exceptions . The disclosure of Confidential Information by the Receiving Party shall not be deemed a breach of its confidentiality obligations under the following circumstances;

	11.2.1	the Disclosing Party has given its prior written consent to the disclosure;

	11.2.2	the Confidential Information has entered the public domain through no fault or wrongful act of the Receiving Party;

	11.2.3	the Confidential Information has been rightfully received by the Receiving Party from a third party which developed such information independently and was not subject to any confidentiality obligation with regard to the same;

	11.2.4	the Confidential Information was, prior to this Agreement or any other separate non-disclosure agreement previously existing between the Parties and independently developed by the Receiving Party without the use, directly or indirectly, of the Confidential Information; or

	11.2.5	where the disclosure of Confidential Information is required pursuant to law or a court order of competent jurisdiction, provided that such disclosure shall be limited to the extent required by such applicable law or court order, and provided further that the Receiving Party has notified the Disclosing Party of the need to disclose the Confidential Information in question, such that the Disclosing Party shall have the opportunity to oppose the disclosure thereof by means of any available objections or appeals.

12.

FORCE MAJEURE

A Party who is not able to perform its obligations hereunder as a direct result of Force Majeure, shall not be deemed to be in breach of this Agreement, provided that the following conditions are satisfied simultaneously:

	12.1	its failure to perform its obligations hereunder has been directly caused by Force Majeure;

	12.2	it has used commercially reasonable efforts to perform its obligations hereunder and, has taken necessary precautions to reduce the losses to the other Parties arising from the Force Majeure;

Equity Pledge Agreement

- 7 -

	12.3	it has immediately informed the other Parties in writing after the occurrence of Force Majeure; and

	12.4	it has provided written information and supporting documentation, including a statement of the reasons for the delay in implementing or partially implementing this Agreement, within 15 days after the occurrence of Force Majeure.

13.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the PRC, without giving either reference or effect to any principle of conflict of laws or choice of laws.

14.

DISPUTE RESOLUTION

	14.1	If any dispute arises in connection with this Agreement, the Parties shall attempt in the first instance to resolve it through friendly consultations or mediation. If any dispute cannot be resolved within thirty (30) days after the commencement of discussions, such dispute shall be referred to and finally resolved by arbitration in Beijing under the auspices of the China International Economic and Trade Arbitration Commission in accordance with the Commission’s then-current arbitration rules. The arbitration shall be conducted in [both the English and Chinese languages] before a tribunal of three (3) arbitrators appointed in accordance with the said rules.

	14.2	The arbitral award shall be final and binding on the parties. The winning party may, at the cost and expense of the losing party(ies), apply to any court of competent jurisdiction for enforcement of such arbitral award.

	14.3	During the period when the dispute is being resolved, except for the matters under dispute, the Parties shall continue to perform this Agreement in all respects.

15.

MISCELLANEOUS

15.1

Notices . All notices or other communications hereunder shall be written in English, and delivered in person (including by courier), by first class mail or facsimile, to the addresses set forth below. A notice shall be deemed to have been delivered (a) on the date of signing of the delivery receipt in the case of delivery in person (including by courier); (b) on the 10th day of the mailing date in the case of delivery by mail; and (c) on the date recorded in the transmission record in the case of facsimile, unless delivery is made after 5 pm on a Business Day or on a non-Business Day in the place of receipt, in which case delivery shall be deemed to occur at 9 am on the following Business Day.

Equity Pledge Agreement

- 8 -

	Party A:	YOU On Demand (Beijing) Technology Co., Ltd.

	Address:	Suite 2603, 26/F, Tower A, 10 Jintongxi Road,
		Chaoyang District, Beijing, PRC
	Tel:	+86 10 8590 6561
	Fax:	+86 10 8590 6577
	Attn:	Grace He

	Party B:	Yang Lan

	Address:	No. 602 Unit 1 18/F, No. 19 West Third Ring North
		Road, Haidian District, Beijing, PRC
	Tel:	+86 10 8776 2856

	Party C:	Zhu Yun

	Address:	No.501, Room 13, 15th Floor, Liuheyuan,
		Shijingshan District, Beijing, PRC.
	Tel:	+86 138 0111 9910

	15.2	Entire Agreement . This Agreement and any appendices attached to it constitutes the entire agreement between the Parties in respect of the subject matter hereof and shall supersede any previous discussions, negotiations and agreements related thereto.

	15.3	Amendment . This Agreement may be amended only by a written agreement signed by the Parties, which amendment shall be attached to this Agreement as an Appendix. If required by law, the Parties shall obtain all requisite approvals from the relevant authorities to give effect to the amendment.

	15.4	No Waiver . Unless otherwise agreed upon by the Parties in writing, any failure or delay on the part of any Party to exercise any right, authority or privilege under this Agreement, or under any other related agreement, shall not operate as a waiver thereof; nor shall any single or partial exercise of any right, authority or privilege preclude any other future exercise thereof.

	15.5	Severability . The provisions of this Agreement are severable from each other. The invalidity of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

Equity Pledge Agreement

- 9 -

	15.6	Successors. This Agreement shall be valid and binding on the Parties, their successors and permitted assigns (if any).

	15.7	Assignment . Party B and Party C shall not assign any of their rights or obligations hereunder without the prior written consent of Party A. Party A shall have the right to assign all or any of its rights or obligations under this Agreement to a designated person at any time. Party B and Party C shall cooperate fully with Party A to affect any such assignment, including without limitation signing any documentation.

	15.8	Counterparts . For the convenience of the Parties, this Agreement may be executed in any number of counterparts. Each such counterpart shall be deemed to be an original instrument, and all such counterparts shall together constitute one and the same instrument.

	15.9	Languages and Versions . This Agreement is executed in four (4) original sets with both English and Chinese language versions. Each Party shall retain one (1) original set and the other one (1) original set shall be submitted to the AIC. The English and Chinese language versions shall have the same legal effect. In the event of any inconsistencies between the English and Chinese language versions, the English language version shall prevail.

[ The space below is intentionally left blank. ]

Equity Pledge Agreement

- 10 -

IN WITNESS WHEREOF , the Parties have executed or have caused this Agreement to be executed by their duly authorized representatives on the date first indicated above.

For and on behalf of
YOU On Demand (Beijing) Technology Co., Ltd.
(Company Seal)

By:	/s/ Wang Baoyun
Name:	Wang Baoyun
Title:	Legal Representative

Yang Lan

By:	/s/ Yang Lan

Zhu Yun

By:	/s/Zhu Tun

Signature Page to Equity Pledge Agreement

________________________________________________

Call Option Agreement

________________________________________________

by and between

YOU On Demand (Beijing) Technology Co., Ltd.

and

Yang Lan

and

Zhu Yun

and

Tianjin Sevenstarflix Network Technology Limited

April 5, 2016

TABLE OF CONTENTS

Article		Page
1.	DEFINITIONS AND INTERPRETATIONS	1
2.	OPTION	2
3.	UNDERTAKINGS	3
4.	REPRESENTATIONS AND WARRANTIES	5
5.	TERM	6
6.	BREACH OF CONTRACT	6
7.	CONFIDENTIALITY	6
8.	FORCE MAJEURE	7
9.	GOVERNING LAW	8
10.	DISPUTE RESOLUTION	8
11.	MISCELLANEOUS	8

This CALL OPTION AGREEMENT (“ Agreement ”) is entered into on this 5th day of April, 2016 in Beijing, People’s Republic of China (“ PRC ”), by and between:

(1)	YOU On Demand (Beijing) Technology Co., Ltd. , a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 2603, 26/F, Tower A, 10 Jintongxi Road, Chaoyang District, Beijing, PRC (“ Party A ”);

(2)	Yang Lan, a PRC citizen and holder of identity card number 110108196803315727 (“ Party B ”);

(3)	Zhu Yun, a PRC citizen and holder of identity card number 630104197402260543 (“ Party C ”); and

(4)	Tianjin Sevenstarflix Network Technology Limited , a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 305-55, 3/F, Zonghe Service Building D, Nangang Industrial Zone of Tianjin Economic Development Zone, Tianjin, PRC (“ Company ”).

WHEREAS :

A.	The Company is engaged in certain business activities in the PRC (“ Business ”). Party A has the expertise in consulting, and Party A and the Company have entered into a Technical Services Agreement dated as of 1 April 2016 to provide the Company with various technical, marketing and management consulting and other services in connection with the Business.

B.	Party B holds 99% and Party C holds 1% of the equity interests of the Company (collectively, “ Equity Interests ”). The Equity Interests represent RMB 50 million in the registered capital of the Company.

C.	Party B and Party C wish to grant Party A the option to purchase the entire Equity Interests, and Party A is willing to accept such option, in accordance with the terms and conditions set out below.

NOW THEREFORE , the parties agree as follows:

1.	DEFINITIONS AND INTERPRETATIONS

1.1

Definitions . Unless otherwise provided in this Agreement, the following terms shall have the meanings set forth below:

	Business Day	means a day on which commercial banks are open for business in the PRC;

	Call Notice	means the written notice sent by Party A to exercise the Option;

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	Confidential Information	means any information of a confidential nature relating to the parties and the Company, including without limitation any confidential information concerning their respective structure, business activities (including financial information, client lists and business policies), technology, released or unreleased software or hardware products, and marketing plans, regardless of the format in which such information is stored or communicated, and including any excerpts, summaries or other derivative forms of the same;

	Designated Person	means any person designated by Party A in writing;

	Equity Pledge Agreement	means the Equity Pledge Agreement entered into between Party A, Party B and Party C on 1 April 2016;

	Force Majeure	means any fire, flood, war, act of government or other natural or man-made event which is unforeseen by the parties (or if foreseen, reasonably unavoidable) and which prevents the performance of this Agreement by any or all of the parties, but excluding any shortage of credit;

	Option	means the option for Party A or any Designated Person to purchase, at any time, all or part of the Equity Interests; and

	Security Interest	means any security, right or interest of a third party, any purchase right, right of acquisition, right of set-off, or other security arrangement, including any security interest subject to this Agreement or the Equity Pledge Agreement.

1.2

Interpretation . All headings used herein are for reference purposes only and shall not affect the meaning or interpretation of any provision. Any reference to an Article or Appendix is to an article or appendix of this Agreement. For purposes of this Agreement, the term “PRC” refers to Mainland China, and unless explicitly provided herein does not refer to the Special Administrative Regions of Hong Kong and Macao or the territory of Taiwan. References to the masculine shall include the feminine and vice versa.

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2.	OPTION

	2.1	Grant of Option . Each of Party B and Party C hereby irrevocably grants to Party A the Option to acquire his share of the Equity Interests in accordance with this Agreement.

	2.2	Procedures . Upon Party A’s decision to exercise the Option, it shall send a Call Notice to Party B and Party C setting out: (a) the Equity Interests amount Party A wishes to acquire; (b) details of the corresponding exercise price; and (c) whether the Equity Interests being purchased will be transferred to Party A or to a Designated Person.

	2.3	Exercise Price . The exercise price for the Equity Interests acquired by Party A or its Designated Person hereunder shall be determined by Party A at its discretion, subject to any restrictions imposed by PRC law.

	2.4	Exercise of Option Right . Each time that Party A exercises the Option Party B and Party C shall:

	2.4.1	convene a shareholders meeting, and pass the necessary resolutions to transfer the relevant portion of the Equity Interests to Party A or the relevant Designated Person; and

	2.4.2	cause the Company and its directors to, and shall themselves, take all action necessary to effect the Option, including without limitation executing all documents, obtaining all approvals and performing all required steps to transfer the valid ownership of the Equity Interests to Party A or the Designated Person.

3.	UNDERTAKINGS

3.1

Undertakings of Party B and Party C in Regard to the Company. Each of Party B and Party C undertakes to vote in accordance with its Equity Interests in the Company and to take all other necessary action to ensure that the Company:

	3.1.1	does not supplement or modify its articles of association or other constituent documents, increase or decrease its existing registered capital, change its business activities, or alter its capital structure, without the prior written consent of Party A;

	3.1.2	manages its business and handles its financial and commercial affairs prudently and in accordance with relevant laws and codes of practice;

	3.1.3	does not sell, assign, mortgage, or otherwise dispose of any legal or beneficial rights to or in any of its assets, business, or revenue, or permit the creation of any Security Interest at any time, without the prior written consent of Party A;

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	3.1.4	does not incur, assume or guarantee any debts, without the prior written consent of Party A;

	3.1.5	does not enter into any material contract valued in excess of RMB 10,000 without the prior written consent of Party A, except in the ordinary course of business;

	3.1.6	does not, under any circumstance, enter into any contract valued in excess of RMB 200,000 without the prior written consent of Party A;

	3.1.7	does not extend any loan or credit to any party, or provide any guarantee or assume any obligation of any party, without the prior written consent of Party A;

	3.1.8	provides all information relating to its operations and financial affairs to Party A upon Party A’s request;

	3.1.9	does not merge or consolidate with any third party or acquire or invest in any third party, without the prior written consent of Party A;

	3.1.0	notifies Party A immediately should any legal action, arbitration or administrative procedure relating to its assets, operations or income arise or become likely to arise;

	3.1.11	promptly executes all documents and takes all other actions which are reasonably necessary for the lawful performance of the provisions and aim of this Agreement and the documents beneficial to this Agreement;

	3.1.12	does not pay dividends or distributions of any kind to its shareholders without the prior written consent of Party A.

3.2

Personal Undertakings of Party B and Party C . Party B and Party C each further undertakes to:

	3.2.1	cause a shareholders meeting of the Company to vote in favor of the transfer of his share of the Equity Interests as contemplated hereunder, at the request of Party A;

	3.2.2	promptly execute all documents and take all other actions which are reasonably necessary for the lawful performance of the provisions and objective of this Agreement and the documents beneficial to this Agreement;

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	3.2.3	appoint only persons nominated by Party A to serve as directors of the Company; and

	3.2.4	strictly comply with and perform the provisions of this Agreement and any other contracts entered into jointly or separately by the parties, and further undertakes and represents that he will not do anything which will affect the validity and enforceability of such contracts.

4.	REPRESENTATIONS AND WARRANTIES

4.1

Party B and Party C. Each of Party B and Party C hereby represents and warrants to Party A that, as of the date of this Agreement:

	4.1.1	he has the legal capacity to enter into and perform this Agreement;

	4.1.2	his execution and performance of this Agreement will not result in a breach of any law, regulation, authorisation or agreement to which he is subject;

	4.1.3	this Agreement constitutes legal, valid, and binding obligations enforceable against him;

	4.1.4	he is the lawful owner of his share of the Equity Interests and has not created any Security Interest over such Equity Interests other than under the Equity Pledge Agreement; and

	4.1.5	there is no ongoing or pending dispute, action, arbitration, administrative procedure or other legal proceeding against him.

4.2

Company. The Company represents and warrants to Party A that, as of the date of this Agreement:

	4.2.1	it is a company incorporated and validly existing under the laws of the PRC;

	4.2.2	it has all due power and authority to enter into and perform this Agreement;

	4.2.3	its execution and performance of this Agreement will not result in a breach of any law, regulation, authorization or agreement to which it is subject;

	4.2.4	it is the lawful owner of its assets, and has not created any Security Interest over such assets;

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	4.2.5	it does not have any outstanding debts other than those incurred in the ordinary course of business and which have been disclosed to Party A; and

	4.2.6	there is no ongoing or pending dispute, action, arbitration, administrative procedure or other legal proceeding relating to the Equity Interests, its assets or itself.

TERM

This Agreement will take effect on the date first set out above, and shall continue with full force and effect until the earlier of the date on which:

	5.1	Party A has acquired the entire Equity Interests; and

	5.2	this Agreement is terminated by the mutual written consent of the parties.

6.	BREACH OF CONTRACT

6.1

Breach . A party shall be deemed to be in breach of this Agreement if:

	6.1.1	he fails to perform its obligations under this Agreement fully and in a timely manner, and does not rectify any such failure within 30 days after written demand from any other party requesting the same; or

	6.1.2	any representation or warranty made by such party hereunder proves to be or becomes materially false, misleading or untrue.

6.2

Liability for Breach . Any party that breaches this Agreement shall indemnify the other parties against, and compensate them for, any damages or loss incurred as a result, including third party claims.

7.	CONFIDENTIALITY

7.1

Confidentiality Obligations . Each party (“ Receiving Party ”) shall maintain the strict confidentiality of any and all Confidential Information of any other party (“ Disclosing Party ”) to which it may become privy before or during the performance of this Agreement, and shall not disclose any such Confidential Information to any third party except to its relevant employees, officers, affiliates and advisors (as applicable) on a “need-to-know” basis and provided that the aforesaid recipients of Confidential Information are subject to written confidentiality undertakings which are no less strict than the obligations set out herein. Any Confidential Information of the Disclosing Party which is received by the Receiving Party hereunder shall be used for the sole purpose of performing this Agreement and such other purpose as the Disclosing Party shall have permitted in writing.

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7.2

Exceptions . The disclosure of Confidential Information by the Receiving Party shall not be deemed a breach of its confidentiality obligations under the following circumstances;

	7.2.1	the Disclosing Party has given its prior written consent to the disclosure;

	7.2.2	the Confidential Information has entered the public domain through no fault or wrongful act of the Receiving Party;

	7.2.3	the Confidential Information has been rightfully received by the Receiving Party from a third party which developed such information independently and was not subject to any confidentiality obligation with regard to the same;

	7.2.4	the Confidential Information was, prior to this Agreement or any other separate non-disclosure agreement previously existing between the parties and independently developed by the Receiving Party without the use, directly or indirectly, of the Confidential Information; or

	7.2.5	where the disclosure of Confidential Information is required pursuant to law or a court order of competent jurisdiction, provided that such disclosure shall be limited to the extent required by such applicable law or court order, and provided further that the Receiving Party has notified the Disclosing Party of the need to disclose the Confidential Information in question, such that the Disclosing Party shall have the opportunity to oppose the disclosure thereof by means of any available objections or appeals.

8.	FORCE MAJEURE

8.1

A party who is not able to perform its obligations hereunder as a direct result of Force Majeure, shall not be deemed to be in breach of this Agreement, provided that the following conditions are satisfied simultaneously:

	8.1.1	its failure to perform its obligations hereunder has been directly caused by Force Majeure;

	8.1.2	it has used commercially reasonable efforts to perform its obligations hereunder and, has taken necessary precautions to reduce the losses to the other parties arising from the Force Majeure;

	8.1.3	it has immediately informed the other parties in writing after the occurrence of Force Majeure; and

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8.1.4

it has provided written information and supporting documentation, including a statement of the reasons for the delay in implementing or partially implementing this Agreement, within 15 days after the occurrence of Force Majeure.

9.	GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the PRC.

10.

DISPUTE RESOLUTION

	10.1	If any dispute arises in connection with this Agreement, the parties shall attempt in the first instance to resolve it through friendly consultations or mediation. If any dispute cannot be resolved within thirty (30) days after the commencement of discussions, such dispute shall be referred to and finally resolved by arbitration in Beijing under the auspices of the China International Economic and Trade Arbitration Commission in accordance with the Commission’s then-current arbitration rules. The arbitration shall be conducted in [both the English and Chinese] languages before a tribunal of three (3) arbitrators appointed in accordance with the said rules.

	10.2	The arbitral award shall be final and binding on the parties. The winning party may, at the cost and expense of the losing party(ies), apply to any court of competent jurisdiction for enforcement of such arbitral award.

	10.3	During the period when the dispute is being resolved, except for the matters under dispute, the parties shall continue performing this Agreement in all respects.

11.

MISCELLANEOUS

11.1

Notices . All notices or other communications hereunder shall be written in English, and delivered in person (including by courier), by first class mail or facsimile, to the addresses set forth below. A notice shall be deemed to have been delivered (a) on the date of signing of the delivery receipt in the case of delivery in person (including by courier); (b) on the 10 ^th day of the mailing date in the case of delivery by mail; and (c) on the date recorded in the transmission record in the case of facsimile, unless delivery is made after 5 pm on a Business Day or on a non-Business Day in the place of receipt, in which case delivery shall be deemed to occur at 9 am on the following Business Day.

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	Party A:	YOU On Demand (Beijing) Technology Co., Ltd.

	Address:	Suite 2603, 26/F, Tower A, 10 Jintongxi Road,
		Chaoyang District, Beijing, PRC
	Tel:	+86 10 8590 6561
	Fax:	+86 10 8590 6577
	Attn:	Grace He

	Party B:	Yang Lan

	Address:	No. 602 Unit 1 18/F, No. 19 West Third Ring North
		Road, Haidian District, Beijing, PRC
	Tel:	+86 10 8776 2856

	Party C:	Zhu Yun
	Address:	No.501, Room 13, 15th Floor, Liuheyuan,
		Shijingshan District, Beijing, PRC.
	Tel:	+86 138 0111 9910

	Company:	Tianjin Sevenstarflix Network Technology Limited

	Address:	Suite 305-55, 3/F, Zonghe Service Building D,
		Nangang Industrial Zone of Tianjin Economic
		Development Zone, Tianjin, PRC
	Tel:	+86 10 8590 6561
	Fax:	+86 10 8590 6577
	Attn:	Mei Chen

	11.2	Entire Agreement . This Agreement constitutes the entire agreement among the parties in respect of the subject matter hereof and shall supersede any previous discussions, negotiations and agreements related thereto.

	11.3	Amendment . This Agreement may be amended only by a written agreement signed by the parties, which amendment shall be attached to this Agreement as an Appendix. If required by law, the parties shall obtain all requisite approvals from the relevant authorities to give effect to the amendment.

	11.4	No Waiver . Unless otherwise agreed upon by the parties in writing, any failure or delay on the part of any party to exercise any right, authority or privilege under this Agreement, or under any other related agreement, shall not operate as a waiver thereof; nor shall any single or partial exercise of any right, authority or privilege preclude any other future exercise thereof.

	11.5	Severability . The provisions of this Agreement are severable from each other. The invalidity of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

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	11.6	Successors. This Agreement shall be valid and binding on the parties, their successors and permitted assigns (if any).

	11.7	Assignment . Party B, Party C and the Company shall not assign any of their rights or obligations hereunder without the prior written consent of Party A. Party A shall have the right to assign all or any of its rights or obligations under this Agreement to a Designated Person at any time. Party B, Party C and the Company shall cooperate fully with Party A to affect any such assignment, including without limitation signing any documentation.

	11.8	Counterparts . This Agreement may be executed in any number of counterparts. Each such counterpart shall be deemed to be an original instrument, and all such counterparts shall together constitute one and the same instrument.

	11.9	Languages and Versions . This Agreement is executed in four (4) original English language sets. Each party shall retain one (1) such original set.

[ The space below is intentionally left blank. ]

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IN WITNESS WHEREOF , the parties have executed or have caused this Agreement to be executed by their duly authorized representatives on the date first indicated above.

For and on behalf of
YOU On Demand (Beijing) Technology Co., Ltd.
(Company Seal)

Signature:	/s/ Wang Pao Yun
Name:	Wang Pao Yun
Title:	Legal Representative

Yang Lan

Signature:	/s/ Yang Lan

Zhu Yun

Signature:	/s/ Zhu Yun

For and on behalf of
Tianjin Sevenstarflix Network Technology Limited
(Company Seal)

Signature:	/s/ Zhu Yun
Name:	Zhu Yun
Title:	Legal Representative

Signature Page to Call Option Agreement

Power of Attorney

I, Yang Lan, a citizen of the People’s Republic of China (“ PRC ”) and holder of PRC resident ID card number 110108196803315727, hereby irrevocably grant, in my capacity as a shareholder of Tianjin Sevenstarflix Network Technology Limited, (“ Company ”), to any individual appointed in writing (“ Authorized Person ”) by YOU On Demand (Beijing) Technology Co., Ltd. in its sole discretion, the authority to exercise the following powers and rights during the term of this Power of Attorney:

(a)	to receive all notices on my behalf regarding the shareholders meetings of the Company;

(b)	to vote on my behalf at such shareholders meetings;

(c)	to make any decisions on my behalf in accordance with my rights as a shareholder of the Company as granted to me by law and in accordance with the Company’s articles of association; and

(d)	to sign any relevant documents on my behalf and to take any action on my behalf as a shareholder of the Company.

I hereby declare and covenant that during the term of this Power of Attorney, I shall not, without the prior written consent of the Authorized Person, exercise any of the powers and/or rights listed above.

This Power of Attorney shall enter into effect upon signing and shall remain effective and irrevocable until all of my equity in the Company has been transferred to the Company and/or an Authorized Person. This Power of Attorney will survive and remain valid and effective in the event of my death and/or mental or physical incapacity.

Name:	Yang Lan


By:	/s/ Yang Lan

Date:	April 5, 2016

Power of Attorney

I, Zhu Yun, a citizen of the People’s Republic of China (“ PRC ”) and holder of PRC resident ID card number 630104197402260543, hereby irrevocably grant, in my capacity as a shareholder of Tianjin Sevenstarflix Network Technology Limited, (“ Company ”), to any individual appointed in writing (“ Authorized Person ”) by YOU On Demand (Beijing) Technology Co., Ltd. in its sole discretion, the authority to exercise the following powers and rights during the term of this Power of Attorney:

(a)	to receive all notices on my behalf regarding the shareholders meetings of the Company;

(b)	to vote on my behalf at such shareholders meetings;

(c)	to make any decisions on my behalf in accordance with my rights as a shareholder of the Company as granted to me by law and in accordance with the Company’s articles of association; and

(d)	to sign any relevant documents on my behalf and to take any action on my behalf as a shareholder of the Company.

Name:	Zhu Yun


By:	/s/ Zhu Yun

Date:	April 5, 2016

Technical Services Agreement

by and between

Tianjin Sevenstarflix Network Technology Limited

and

YOU On Demand (Beijing) Technology Co., Ltd.

April 5, 2016

TABLE OF CONTENTS

Article		Page

1.	DEFINITIONS AND INTERPRETATIONS	1
2.	SERVICES	2
3.	SERVICE FEE AND METHOD OF PAYMENT	2
4.	INTELLECTUAL PROPERTY OWNERSHIP	3
5.	REPRESENTATIONS AND WARRANTIES	3
6.	CONFIDENTIALITY	4
7.	TERM AND TERMINATION	5
8.	BREACH	5
9.	FORCE MAJEURE	5
10.	GOVERNING LAW	6
11.	DISPUTE RESOLUTION	6
12.	MISCELLANEOUS	6

Appendix

I.	Scope of Services

This TECHNICAL SERVICES AGREEMENT (“ Agreement ”) is entered into on this 5th day of April, 2016 in Beijing, People’s Republic of China (“ PRC ”), by and between:

(1)	Tianjin Sevenstarflix Network Technology Limited , a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 305-55, 3/F, Zonghe Service Building D, Nangang Industrial Zone of Tianjin Economic Development Zone, Tianjin, PRC (“ Party A ”); and

(2)	YOU On Demand (Beijing) Technology Co., Ltd. , a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 2603, 26/F, Tower A, 10 Jintongxi Road, Chaoyang District, Beijing, PRC (“ Party B ”).

WHEREAS :

Party A wishes to retain Party B to provide the Services (defined below), and Party B is willing to provide the same to Party A, in accordance with the terms and conditions set forth below.

NOW, THEREFORE , the parties agree as follows:

1.	DEFINITIONS AND INTERPRETATIONS

	1.1	Definitions. Unless otherwise indicated, the following terms in this Agreement shall have the meanings set forth below:

	Business Day	means a day in which commercial banks are open for business in the PRC;

	Confidential Information	means any information of a confidential nature relating to the parties, including without limitation any confidential information concerning their respective structure, business activities (including financial information, client lists and business policies), technology, released or unreleased software or hardware products, and marketing plans, regardless of the format in which such information is stored or communicated, and including any excerpts, summaries or other derivative forms of the same;

	Costs	means the direct and indirect costs (other than Expenses) incurred by Party B and attributable to the Services performed by Party B hereunder, as determined in accordance with United States Generally Accepted Accounting Principles (US GAAP);

	Expenses	means all: (a) non-recoverable national, local, value added tax and other taxes (excluding taxes on the net income of Party B) paid by Party B in the performance of the Services; and (b) significant third party costs incurred by Party B for the benefit of Party A in the performance of the Services hereunder;

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	Force Majeure	means any fire, flood, war, act of government or other natural or man-made event which is unforeseen by the parties (or if foreseen, reasonably unavoidable) and which prevents the performance of this Agreement by any or all of the parties, but excluding any shortage of credit;

	RMB	means Renminbi, the lawful currency of the PRC;

	Services	means the services to be provided from Party B to Party A hereunder, as set forth in Appendix 1;

	Service Fee	has the meaning set forth in Article 3.1.

	1.2	Interpretations. All headings used herein are for reference purposes only and shall not affect the meaning or interpretation of any provision. Any reference to an Article or Appendix is to an article or appendix of this Agreement. For purposes of this Agreement, the term “PRC” refers to Mainland China, and unless explicitly stated herein does not include the Special Administrative Regions of Hong Kong and Macao or the territory of Taiwan.

2.	SERVICES

	2.1	Provision of Services. Party B agrees that it will provide the Services in accordance with the terms and conditions set forth herein, as and when requested by Party A.

	2.2	Service Period . Party B undertakes to provide the Services for the Term of this Agreement.

	2.3	Exclusivity. Party A hereby agrees to engage Party B as its exclusive provider for the Services for the Term of this Agreement. Without the prior written consent of Party B, Party A shall not directly or indirectly engage any third party to provide services that are identical or similar to the Services.

3.	SERVICE FEE AND METHOD OF PAYMENT

	3.1	Service Fee. As consideration for the Services, Party A agrees to pay Party B a service fee (“ Service Fee ”) equivalent to Party B’s Costs in providing the Services, plus 20% - 30% of such Costs. The Parties agree to periodically review the Service Fee and to make adjustments to the Service Fee as deemed appropriate to maintain an arm’s length compensation.

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	3.2	Expenses . In addition to the Service Fee, Party A shall reimburse Party B for all Expenses incurred in the provision of the Services. Such Expenses shall be reimbursed at cost.

	3.3	Method of Payment . The Service Fee shall be payable, and Expenses shall be reimbursed, in arrears on a quarterly basis within 10 days after the end of each calendar quarter to a bank account designated by Party B (net of all bank handling fees). Promptly after receiving each payment of the Service Fee and Expenses, Party B shall provide Party A with an official invoice for the same.

	3.4	Access to Books and Records . For purposes of verifying the Service Fee and Expenses, Party A agrees to grant Party B complete access to its financial records during normal business hours upon receipt of reasonable written notice from Party B, provided that such access does not cause undue disruption to Party A’s business operations.

4.	INTELLECTUAL PROPERTY OWNERSHIP

	For the avoidance of doubt, the parties agree that any invention, modification, creation, or design created or developed by Party B during its performance of this Agreement, and all related copyrights, trademarks, patents and all other intellectual property rights, whether registered or not, shall be owned exclusively by Party B. Where such ownership is precluded due to PRC law, Party A undertakes to sign any documents and take, or cause to be taken, any other action necessary, to effect the complete and irrevocable assignment of the said ownership rights to Party B.

5.	REPRESENTATIONS AND WARRANTIES

	5.1	Both Parties. Each party represents and warrants that, as of the date of signing hereof:

		5.1.1	it is a company incorporated and validly existing under the laws of the PRC;

		5.1.2	it has all due power and authority to enter into and perform this Agreement;

		5.1.3	it has obtained from the relevant government authorities all necessary approvals required to legally operate its business and to perform its obligations hereunder;

		5.1.4	neither the execution of this Agreement nor the performance of its obligations hereunder will conflict with, result in a breach of, or constitute a default under:

			5.1.4.1	its business license or any provision of its articles of association or any other constitutional document;

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			5.1.4.2	any applicable law, or any governmental authorization or approval; or

			5.1.4.3	any agreement to which it is a party;

		5.1.5	this Agreement constitutes legal, valid, and binding obligations enforceable against it; and

		5.1.6	there is no on-going or pending dispute, action, arbitration, administrative procedure or other legal proceeding relating to its assets or itself.

	5.2	Party A. Party A further represents and warrants that, as of the date of signing hereof, it has all necessary licenses and approvals to engage in the provision of technology information services.

	5.3	Party B. Party B further represents and warrants that, as of the date of signing hereof, it is duly authorized to provide the Services in the PRC.

6.	CONFIDENTIALITY

	6.1	Confidentiality Obligations. Each party (“ Receiving Party ”) shall maintain the strict confidentiality of any and all Confidential Information of the other party (“ Disclosing Party ”) to which it may become privy before or during the performance of this Agreement, and shall not disclose any such Confidential Information to any third party except to its relevant employees, affiliates, officers and advisors (as applicable) on a “need-to-know” basis and provided that the aforesaid recipients of Confidential Information are subject to written confidentiality undertakings which are no less strict than the obligations set forth herein. Any Confidential Information of the Disclosing Party which is received by the Receiving Party hereunder shall be used for the sole purpose of performing this Agreement and such other purpose as the Disclosing Party shall have permitted in writing.

	6.2	Exceptions. The disclosure of Confidential Information by the Receiving Party shall not be deemed a breach of its confidentiality obligations under the following circumstances;

		6.2.1	the Disclosing Party has given its prior written consent to the disclosure;

		6.2.2	the Confidential Information has entered the public domain through no fault or wrongful act of the Receiving Party;

		6.2.3	the Confidential Information has been rightfully received by the Receiving Party from a third party which developed such information independently and was not subject to any confidentiality obligation with regard to the same;

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		6.2.4	the Confidential Information was, prior to this Agreement or any other separate non-disclosure agreement previously existing between the parties, independently developed by the Receiving Party without use, directly or indirectly, of the Confidential Information; or

		6.2.5	where the disclosure of Confidential Information is required pursuant to a law or court order of competent jurisdiction, provided that such disclosure shall be limited to the extent required by such applicable law or court order, and provided further that the Receiving Party has notified the Disclosing Party of the need to disclose the Confidential Information in question, such that the Disclosing Party shall have the opportunity to oppose the disclosure thereof by means of any available objections or appeals.

7.	TERM AND TERMINATION

	7.1	Term . This Agreement will take effect on the date first set forth above and shall continue indefinitely with full force and effect until it is terminated pursuant to Article 7.2.

	7.2	Termination . This Agreement may be terminated as follows:

		7.2.1	with the mutual written consent of the parties; and

		7.2.2	by the non-breaching party by means of written notice with immediate effect, where the other party has breached this Agreement as set forth in Article 8.

	7.3	Survival . The confidentiality and payment obligations of the parties (including without limitation any payment obligations relating to the breach or termination of this Agreement), shall survive the termination of this Agreement for any reason indefinitely.

8.	BREACH

	8.1	Breach . A party shall be deemed to be in breach of this Agreement if:

		8.1.1	it fails to perform its obligations under this Agreement fully and in a timely manner, and does not rectify any such failure within 30 days after written demand from any other party requesting the same; or

		8.1.2	any representation or warranty made by such party hereunder proves to be or becomes materially false, misleading or untrue.

	8.2	Liability for Breach . If either party breaches this Agreement, it shall indemnify the other party against, and compensate it for, any damages or loss incurred as a result, including third party claims.

Technical Services Agreement

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9.	FORCE MAJEURE

	9.1	A party who is not able to perform its obligations hereunder as a direct result of Force Majeure shall not be deemed to be in breach of this Agreement, provided that the following conditions are satisfied simultaneously:

		9.1.1	its failure to perform its obligations hereunder shall be directly caused by Force Majeure;

		9.1.2	it has used commercially reasonable efforts to perform its obligations hereunder and, has taken necessary precautions to reduce the losses to the other parties arising from the Force Majeure;

		9.1.3	it has immediately informed the other parties in writing after the occurrence of Force Majeure; and

		9.1.4	it has provided written information and supporting documentation, including a statement of the reasons for the delay in implementing or partially implementing this Agreement, within 15 days after the occurrence of Force Majeure.

10.	GOVERNING LAW

	This Agreement shall be governed by and construed in accordance with the laws of the PRC.

11.	DISPUTE RESOLUTION

	11.1	If any dispute arises in connection with this Agreement, the parties shall attempt in the first instance to resolve it through friendly consultations or mediation. If any dispute cannot be resolved within 30 days after the commencement of discussions, such dispute shall be referred to and finally resolved by arbitration in Beijing under the auspices of the China International Economic and Trade Arbitration Commission in accordance with the Commission’s then-current arbitration rules. The arbitration shall be conducted in both the Chinese and English languages before a tribunal of 3 arbitrators appointed in accordance with the said rules.

	11.2	The arbitral award shall be final and binding on the parties. The winning party may, at the cost and expense of the losing party, apply to any court of competent jurisdiction for enforcement of such arbitral award.

	11.3	During the period when the dispute is being resolved, except for the matters under dispute, the parties shall continue performing this Agreement in all respects.

12.	MISCELLANEOUS

	12.1	Notices. All notices or other communications hereunder shall be written in English, and delivered in person (including by courier), by first class mail or facsimile, to the addresses set forth below. A notice shall be deemed to have been delivered (a) on the date of signing of the delivery receipt in the case of delivery in person (including by courier); (b) on the 10 ^th day of the mailing date in the case of delivery by mail; and (c) on the date recorded in the transmission record in the case of facsimile, unless delivery is made after 5 pm on a Business Day or on a non-Business Day in the place of receipt, in which case delivery shall be deemed to occur at 9 am on the following Business Day.

Technical Services Agreement

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	Party A:	Tianjin Sevenstarflix Network Technology Limited

	Address:	Suite 305-55, 3/F, Zonghe Service Building D, Nangang Industrial Zone of Tianjin Economic Development Zone, Tianjin, PRC
	Tel:	+86 10 8590 6578
	Fax:	+86 10 8590 6577
	Attn:	Mei Chen

	Party B:	YOU On Demand (Beijing) Technology Co., Ltd.

	Address:	Suite 2603, 26/F, Tower A, 10 Jintongxi Road, Chaoyang District, Beijing, PRC
	Tel:	+86 10 8590 6578
	Fax:	+86 10 8590 6577
	Attn:	Grace He

	12.2	Entire Agreement. This Agreement and its appendix attached hereto constitute the entire agreement between the parties in respect of the subject matter hereof and shall supersede any previous discussions, negotiations and agreements related thereto.

	12.3	Amendment. This Agreement may be amended only by a written agreement signed by the parties, which amendment shall be attached to this Agreement as an Appendix. If required by law, the parties shall obtain all requisite approvals from the relevant authorities to give effect to the amendment.

	12.4	No Waiver. Unless otherwise agreed upon by the parties in writing, any failure or delay on the part of either party to exercise any right, authority or privilege under this Agreement, or under any other related agreement, shall not operate as a waiver thereof; nor shall any single or partial exercise of any right, authority or privilege preclude any other future exercise thereof.

	12.5	Severability. The provisions of this Agreement are severable from each other. The invalidity of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

	12.6	Taxes and Fees. Unless otherwise stipulated herein, each party shall be responsible for any stamp duties, taxes and out-of-pocket expenses (including legal fees) incurred by it in connection with the preparation and performance of this Agreement.

	12.7	Successors. This Agreement shall be binding upon the parties, their respective successors and assigns (if any).

Technical Services Agreement

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	12.8	Assignment. Party A shall not assign any its rights or obligations hereunder without the prior written consent of Party B. Party B shall have the right to assign all or any of its rights or obligations under this Agreement to any third party (whether a natural person or legal entity) at any time. Party A shall cooperate fully with Party B to affect any such assignment, including without limitation signing any documentation.

	12.9	Counterparts. For the convenience of the parties, this Agreement may be executed in any number of counterparts. Each such counterpart shall be deemed to be an original instrument, and all such counterparts shall together constitute one and the same instrument.

	12.10	Languages and Versions. This Agreement is executed in two (2) original English language sets. Each party shall retain one (1) such original set.

[ The space below is intentionally left blank. ]

Technical Services Agreement

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed by their duly authorized representatives on the date first indicated above.

For and on behalf of
Tianjin Sevenstarflix Network Technology Limited
(Company Seal)

Signature:	/s/ Zhu Yun
Name:	Zhu Yun
Title:	Legal Representative

For and on behalf of
YOU On Demand (Beijing) Technology Co., Ltd.
(Company Seal)

Signature:	/s/ Wang Bao Yun
Name:	Wang Bao Yun
Title:	Legal Representative

Signature Page to Technical Services Agreement

Appendix I

Scope of Services

1.	Technical Services. Party B will provide technical services and training to Party A, taking advantage of Party B’s advanced software development and system integration technologies to improve Party A’s system integration. Such technical services shall include:

	(a)	administering, managing and maintaining information application systems and website system infrastructure;

	(b)	providing system optimisation plans and implementing optimisation features;

	(c)	procuring, installing and supporting Party B’s products, and providing training regarding the use of those products;

	(d)	managing and maintaining networks and providing technology to assure the reliability and efficiency thereof; and

	(e)	providing information technology services and assuring the reliable operation of information infrastructure.

2.	Marketing and Management Consulting. For the purposes of expanding Party A’s market share, marketing its products and creating an efficient internal operation for Party A, Party B will provide consulting services regarding marketing and management. Such consulting services shall include:

	(a)	providing strategic co-operation proposals and recommending partners to Party A, and assisting Party A to establish and develop cooperative relationships with partners for the development of information networks and value-added telecommunication services;

	(b)	providing Party A with market development strategies, including without limitation advice on the design and improvement of Party A’s products, services and business model; and

	(c)	training management personnel and providing management consultation services, including without limitation regular business training for Party A's management personnel and formulating practical and effective solutions to existing problems with respect to Party A’s business operations.

3.	Finance Support. Party B will provide Party A with finance-related services with respect to Party A’s business, including without limitation:

	(a)	management of accounts payable;

Appendix I

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	(b)	administration and reimbursement of expenses;

	(c)	asset management and project accounting;

	(d)	management of general ledger, procurement and cashier; and

	(e)	financial analysis.

4.	Human Resources Support. Party B will provide Party A with advice and assistance in the management of its workforce, including without limitation:

	(a)	generating and managing employment contracts, amendments and renewals;

	(b)	administering payroll;

	(c)	administering benefits;

	(d)	withholding and remitting individual income tax (IIT) and social taxes on behalf of Party A and Party A’s employee;

	(e)	recruiting new staff in accordance with Party A’s instruction;

	(f)	terminating the employment of staff in accordance with Party A’s instructions; and

	(g)	providing, supporting and managing human resources information system.

Appendix I

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Spousal Consent

The undersigned, Bruno Zheng Wu, a United States of America (“ USA ”) citizen with Passport No.: 530914122, is the lawful spouse of Yang Lan, a PRC citizen with PRC ID Card No.: 110108196803315727. I hereby unconditionally and irrevocably agree to the execution of the following documents by Yang Lan on April 1, 2016, and the disposal of the equity interests of Tianjin Sevenstarflix Network Technology Limited (“ Company ”) held by Yang Lan and registered inhername according to the following documents:

(a)	The Equity Pledge Agreement entered into between the YOU On Demand (Beijing) Technology Co., Ltd. (“WFOE ”), Yang Lan and Zhu Yun;

(b)	The Call Option Agreement entered into between the WFOE, Yang Lan, Zhu Yun and the Company; and

(c)	The Power of Attorney executed by Yang Lan.

(collectively, “ Transaction Documents ”).

I hereby undertake not to make any assertions in connection with the equity interests of the Company which are held by Yang Lan. I hereby further confirm that Yang Lan can perform the Transaction Documents and further amend or terminate the Transaction Documents absent authorization or consent from me.

I hereby undertake to execute all necessary documents and take all necessary actions to ensure appropriate performance of the Transaction Documents (as amended from time to time) upon the WFOE’s request.

I hereby agree and undertake that if I obtain any equity interests of the Company which are held by Yang Lan for any reasons, I shall be bound by the Transaction Documents, as well as the Technical Services Agreement entered into between the WFOE and the Company as of April 1, 2016 and comply with the obligations thereunder as a shareholder of the Company. For this purpose, upon the WFOE’s request, I shall sign a series of written documents in substantially the same format and content as the Transaction Documents, as well as the Technical Services Agreement.

Name:	Bruno Zheng Wu


By:	/s/ Bruno Zheng Wu

Date:	April 5, 2016

Spousal Consent

The undersigned, Liang Wen Gang, a People’s Republic of China (“ PRC ”) citizen with PRC ID Card No.: 150102196901233038, is the lawful spouse of Zhu Yun, a PRC citizen with PRC ID Card No.: 630104197402260543. I hereby unconditionally and irrevocably agree to the execution of the following documents by Zhu Yun on 1 April 2016, and the disposal of the equity interests of Tianjin Sevenstarflix Network Technology Limited (“ Company ”) held by Zhu Yun and registered in her name according to the following documents:

(a)	The Equity Pledge Agreement entered into between the YOU On Demand (Beijing) Technology Co., Ltd. (“WFOE ” ) , Yang Lan and Zhu Yun;

(b)	The Call Option Agreement entered into between the WFOE, Yang Lan, Zhu Yun and the Company; and

(c)	The Power of Attorney executed by Zhu Yun.

(collectively, “ Transaction Documents ”).

I hereby undertake not to make any assertions in connection with the equity interests of the Company which are held by Zhu Yun. I hereby further confirm that Zhu Yun can perform the Transaction Documents and further amend or terminate the Transaction Documents absent authorization or consent from me.

I hereby agree and undertake that if I obtain any equity interests of the Company which are held by Zhu Yun for any reasons, I shall be bound by the Transaction Documents, as well as the Technical Services Agreement entered into between the WFOE and the Company as of April 1, 2016 and comply with the obligations thereunder as a shareholder of the Company. For this purpose, upon the WFOE’s request, I shall sign a series of written documents in substantially the same format and content as the Transaction Documents, as well as the Technical Services Agreement.

Name:	Liang Wen Gang


By:	/s/ Liang Wen Gang

Date:	April 5, 2016

5 April 2016

Yang Lan
No. 602 Unit 1 18/F, No. 19 West Third Ring North Road, Haidian District, Beijing, PRC

Dear Yang Lan,

Re: Indemnification and Release of Claims

We are delighted that you have been assisting YOU On Demand (Beijing) Technology Co., Ltd. (“ WFOE ”) with our business plans in the People’s Republic of China.

For the purpose of clarifying the relationship between you and the WFOE, this Letter of Indemnification and Release (“ Letter ”) sets out below the general terms of the arrangement between you and the WFOE, which is further described in the relevant documents.

You have assumed and will continue to assume the role of a nominee shareholder of Tianjin Seven Starflix Network Technology Limited, a limited liability company established in Tianjin (“ Company ”). You agree to hold 99% of the entire equity interests in the Company, representing RMB 49.50 million in the registered capital of the Company, pursuant to the terms of a Call Option Agreement and an Equity Pledge Agreement, as well as other related documents (“ Trustee Documents ”).

You agree and accept that you will not assume any liability that might arise from your role as a registered shareholder of the Company, and conversely you will not be entitled to dividends or other benefits generated therefrom, or receive any compensation as a registered shareholder of the Company.

Indemnification and Release of Claims

Provided that you fully perform and comply with the Trustee Documents and all legal instructions, as they relate to the Trustee Documents, issued by the WFOE, the WFOE hereby agrees to indemnify you against any personal liability, tax or any other kind of liabilities, incurred in connection with your role in the equity transfer and as a registered shareholder of the Company. The WFOE will waive and release you unconditionally from any claims arising from, or related to, your role as the Company’s shareholder, provided that your actions to fulfill your responsibilities as a registered shareholder are taken in good faith.

Duration

The arrangement described above is deemed to have commenced automatically as at the time when you become a registered shareholder of the Company. The arrangement will remain valid until either you or the WFOE terminates this Letter by giving the other party hereto sixty (60) days’ prior written notice.

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Confidentiality

The confidentiality of this arrangement is of the utmost importance. Therefore, we request that you agree to keep the contents of this Letter completely confidential, and refrain from disclosing its contents to anyone, in words or in substance. Notwithstanding the preceding sentence, you may, however, disclose the terms and amount of this Letter to: (a) your immediate family, tax or other financial advisor, and/or lawyer, provided that you first obtain such person’s agreement to keep any such matters completely confidential and not to disclose them to anyone; and (b) the extent required by law or to the extent necessary to enforce your rights under this Letter.

Entire Agreement

With the exception of any employment agreement between you and the WFOE or its affiliates, this Letter supersedes any and all prior or contemporaneous oral and/or written agreements between you and the WFOE and sets out the entire agreement between you and the WFOE. No variations or modifications hereof will be deemed valid unless set out in writing and signed by the parties hereto.

Choice of Law and Dispute Resolution

This Letter is governed exclusively by the laws of the People’s Republic of China without giving effect to the conflict of laws principles thereof. The provisions of this Letter are severable, and if for any reason any part hereof is found to be unenforceable, the remaining portions will be enforceable in full. If any dispute arises from or in connection with this Letter, you and the WFOE shall first attempt to reach a resolution through amiable negotiation. If such dispute cannot be resolved within thirty (30) days after the commencement of such negotiation, the dispute shall be submitted to China International Economic and Trade Arbitration Commission (“ CIETAC ”) for arbitration which shall be conducted in accordance with the CIETAC’s arbitration rules in effect at the time of applying for arbitration. The arbitral award will be final and binding upon both parties. The arbitration shall be conducted in [both the English and Chinese languages] before a tribunal of three (3) arbitrators appointed in accordance with the CIETAC’s arbitration rules in effect at the time of applying for arbitration.

Again, on behalf of the WFOE, we extend to you our most sincere thanks and gratitude for your kind assistance.

Please let us know if you have any questions.

Sincerely,

For and on behalf of
YOU On Demand (Beijing) Technology Co., Ltd.
(Company Seal)

By:	/s/ Wang Bao Yun
Name:	Wang Bao Yun
Title:	Legal Representative

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Accepted and Agreed

By:	/s/ Yang Lan
Name:	Yang Lan

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5 April 2016

Zhu Yun
No.501, Room 13, 15th Floor, Liuheyuan, Shijingshan District, Beijing, PRC.

Dear Zhu Yun,

Re: Indemnification and Release of Claims

We are delighted that you have been assisting YOU On Demand (Beijing) Technology Co., Ltd. (“ WFOE ”) with our business plans in the People’s Republic of China.

You have assumed and will continue to assume the role of a nominee shareholder of Tianjin Sevenstarflix Network Technology Limited, a limited liability company established in Tianjin (“ Company ”). You agree to hold 1% of the entire equity interests in the Company, representing RMB 0.5 million in the registered capital of the Company, pursuant to the terms of a Call Option Agreement and an Equity Pledge Agreement, as well as other related documents (“ Trustee Documents ”).

Indemnification and Release of Claims

Duration

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Confidentiality

Entire Agreement

Choice of Law and Dispute Resolution

Again, on behalf of the WFOE, we extend to you our most sincere thanks and gratitude for your kind assistance.

Please let us know if you have any questions.

Sincerely,

For and on behalf of
YOU On Demand (Beijing) Technology Co., Ltd.
(Company Seal)

By:	/s/ Wang Bao Yun
Name:	Wang Bao Yun
Title:	Legal Representative

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Accepted and Agreed

By:	/s/ Zhu Yun
Name:	Zhu Yun

- 6 -

Loan Agreement

by and between

YOU On Demand (Beijing) Technology Co., Ltd.

and

Yang Lan

and

Zhu Yun

April 5, 2016

TABLE OF CONTENTS

Article		Page
1.	DEFINITIONS AND INTERPRETATIONS	1
2.	LOANS	3
3.	REPAYMENT OF LOANS	4
4.	REPRESENTATIONS AND WARRANTIES	4
5.	UNDERTAKINGS OF PARTY B AND PARTY C	5
6.	PENALTY INTEREST	7
7.	CONFIDENTIALITY	8
8.	BREACH	9
9.	FORCE MAJEURE	9
10.	GOVERNING LAW	10
11.	DISPUTE RESOLUTION	10
12.	MISCELLANEOUS	10

This LOAN AGREEMENT (“ Agreement ”) is entered into on this April 5, 2016 (“ Signing Date ”) in Beijing, People’s Republic of China (“ PRC ”), by and between:

(1)	YOU On Demand (Beijing) Technology Co., Ltd., a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 2603, 26/F, Tower A, 10 Jintongxi Road, Chaoyang District, Beijing, PRC (“ Party A ”);

(2)	Yang Lan, a PRC citizen and holder of identity card number 110108196803315727, whose residential address is at No. 602 Unit 1 18/F, No. 19 West Third Ring North Road, Haidian District, Beijing, PRC (“ Party B ”); and

(3)	Zhu Yun, a PRC citizen and holder of identity card number 630104197402260543, whose residential address is at No.501, Room 13, 15th Floor, Liuheyuan, Shijingshan District, Beijing, PRC. (“ Party C ”).

WHEREAS :

A.	Party A, through its affiliate, extended loans of RMB 19,800,000 and RMB 2,000,000 to individual bank accounts designated by Party B and Party C (collectively, the “ Loans ”) for the purpose of establishing Tianjin Sevenstarflix Network Technology Limited (“ Company ”) and developing its business.

B.	Party A, Party B and Party C wish to sign a written agreement formally setting forth the terms and conditions for the loan arrangements among them.

NOW, THEREFORE, the parties agree as follows:

1.	DEFINITIONS AND INTERPRETATIONS

	1.1	Definitions . Unless otherwise provided in this Agreement, the following terms shall have the meanings set forth below:

	Business Day	means a day on which commercial banks are open for business in the PRC;

	Call Option Agreement	means the call option agreement to be entered into among the parties and the Company;

	Confidential Information	means any information of a confidential nature relating to the parties and the Company, including without limitation any confidential information concerning their respective structure, business activities (including financial information, client lists and business policies), technology, released or unreleased software or hardware products, and marketing plans, regardless of the format in which such information is stored or communicated, and including any excerpts, summaries or other derivative products containing the same;

Loan Agreement

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	Designated Person	means any person designated by Party A in writing;

	Equity Interests	means the entire equity interests of the Company
		held by Party B and Party C respectively;

	Equity Pledge Agreement	means the equity pledge agreement to be entered into between the parties;

	Event of Default	means any event as described in Article 2.4;

	Force Majeure	means any fire, flood, war, act of government or other natural or man-made event which is unforeseen by the parties (or if foreseen, reasonably unavoidable) and which prevents the performance of this Agreement by any or all of the parties, but excluding any shortage of credit or lack of funding which may affect Party B or Party C’s ability to perform repayment of the entire amount or any portion of the Loans;

	Power of Attorney	means the irrevocable power of attorney issued by each of Party B and Party C on Arpil 1, 2016, pursuant to which Party A or the Designated Person(s) shall be authorised to act on behalf of Party B and Party C in exercising their rights and obligations as shareholders of the Company;

	Repayment Notice	means a written notice from Party A to either or both of Party B and Party C, demanding partial or total repayment of the Loans;

	Technical Services Agreement	means the Technical Services Agreement entered into between Party A and the Company on April 1, 2016.

1.2

Interpretation. All headings used herein are for reference purposes only and shall not affect the meaning or interpretation of any provision. Any reference to an Article or Appendix is to an article or appendix of this Agreement. For purposes of this Agreement, the term “PRC” refers to Mainland China, and unless explicitly stated herein does not refer to the Special Administrative Regions of Hong Kong and Macau or the territory of Taiwan. References to the masculine shall include the feminine and vice versa.

Loan Agreement

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2.	LOANS

	2.1	Timing and Amount . Party A, through its affiliate, extended the Loans to individual bank accounts designated by Party B and Party C in full as of [ ], 2016. Each of Party B and Party C confirmed in writing to Part A their receipt of the Loans and hereby represents that such designation is and was at his own free will, and he will be responsible for any liability and consequence resulting from the same.

	2.2	Purpose of the Loans . Each of Party B and Party C hereby represents that he shall use the Loans solely for the establishment of the Company and for the development of the Company’s business. Without Party A’s prior written consent, neither Party B nor Party C shall use the Loans for any other purpose.

	2.3	Term of the Loans . The term of the Loans shall continue indefinitely until the earlier of the following events, at which time they shall become immediately due and repayable in full (including any applicable interest thereon, in accordance with Article 3):

		2.3.1	the date on which Party B and/or Party C receives a Repayment Notice; and

		2.3.2	the date on which an Event of Default occurs.

	2.4	Event of Default . An Event of Default shall be deemed to have occurred if either (or both of) Party B or Party C:

		2.4.1	makes, or attempts to make, any transfer of his Equity Interests in the Company to which Party A has not consented;

		2.4.2	dies, or wholly or partially loses his capacity to perform civil or legal acts;

		2.4.3	is charged with a criminal offense; or

		2.4.4	becomes the subject of a third-party claim for an amount in excess of RMB 500,000.

Loan Agreement

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3.	REPAYMENT OF LOANS

	3.1	Repayment Method . The parties agree that the Loans shall be repaid through an equity transfer transaction pursuant to which Party B and Party C each transfers his Equity Interests in the Company to Party A and/or the Designated Person (as the case may be), as follows:

		3.1.1	Party A has the right, but not the obligation at any time to purchase, or authorise the Designated Person to purchase, all or part of Party B and/or Party C’s Equity Interests in the Company at such price as Party A shall determine (“ Transfer Price ”);

		3.1.2	All monies received by Party B and Party C through the payment of the Transfer Price shall be used solely to repay Party A for the Loans, in such manner as designated by Party A in accordance with this Agreement; and

		3.1.3	If the Transfer Price exceeds the principal amount of the Loans, the amount in excess of the principal amount of the Loans shall be deemed as interest payable on the Loans, and shall be payable to Party A in cash. Otherwise, the Loans shall be deemed to be interest-free.

	3.2	Repayment upon Default . Upon the occurrence of an Event of Default, the entire amount of the Loans, together with any applicable interest, will become immediately due and payable.

4.	REPRESENTATIONS AND WARRANTIES

	4.1	Party A’s Representations and Warranties . Party A represents and warrants as follows:

		4.1.1	it is a company incorporated and validly existing under the laws of the PRC;

		4.1.2	it has all due power and authority to enter into and perform this Agreement;

		4.1.3	its execution and performance of this Agreement will not result in a breach of any law, regulation, authorisation, or agreement to which it is subject; and

		4.1.4	this Agreement constitutes legal, valid, and binding obligations enforceable against it.

	4.2	Party B and Party C’s Representations and Warranties . Each of Party B and Party C represents and warrants as follows:

Loan Agreement

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		4.2.1	he has contributed to the Company all of the capital required to hold his Equity Interests in the Company in accordance with the laws of the PRC, and has obtained a corresponding capital verification report issued by a qualified accountant, upon the request and at the cost of Party A;

		4.2.2	he has the legal capacity to enter into and perform this Agreement;

		4.2.3	his execution and performance of this Agreement will not result in a breach of any law, regulation, authorisation, or agreement to which he is subject;

		4.2.4	this Agreement constitutes legal, valid, and binding obligations enforceable against him; and

		4.2.5	there is no on-going or pending dispute, action, arbitration, administrative procedure or other legal proceeding against him.

5.	UNDERTAKINGS OF PARTY B AND PARTY C

	5.1	Undertakings in Regard to the Company . Each of Party B and Party C undertakes to vote in accordance with his Equity Interests in the Company and to take all other necessary actions to ensure that the Company:

		5.1.1	obtains or completes each (as appropriate) governmental approval, authorisation, licence, registration and filing procedure which is necessary to perfect the ownership of its respective assets and to engage in the businesses specified in its business licence;

		5.1.2	does not supplement or modify its articles of association or other constituent documents, increase or reduce its registered capital, change its current business activities, or alter its shareholding structure, without the prior written consent of Party A;

		5.1.3	manages its business and handles its financial and commercial affairs prudently and in accordance with the relevant laws and codes of practice;

		5.1.4	does not sell, transfer, pledge or otherwise dispose of any legal or beneficial interest of its assets, businesses or income, or permit creation of such other security interest thereon, without the prior written consent of Party A;

Loan Agreement

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	5.1.5	does not incur, inherit, warrant or permit the existence of any debt or encumbrance without the prior written consent of Party A;

	5.1.6	does not enter into any contract valued in excess of RMB 10,000 without the prior written consent of Party A, except in the ordinary course of business;

	5.1.7	does not, under any circumstance, enter into any contract valued in excess of RMB 200,000 without the prior written consent of Party A;

	5.1.8	does not extend any loan or credit to any party, or provide any guarantee or assume any obligation of any party, without the prior written consent of Party A;

	5.1.9	provides all information relating to its operations and financial affairs to Party A upon Party A’s request;

	5.1.10	obtains and maintains insurance with insurers acceptable to Party A, for an amount and on terms and conditions which are comparable to the insurance maintained by companies engaging in similar businesses with similar assets or properties and in terms satisfactory to meet any insurance requirements at law in the jurisdictions in which the Company operates;

	5.1.11	does not merge or consolidate with any third party or acquire or invest in any third party, without the prior written consent of Party A;

	5.1.12	notifies Party A immediately should any legal action, arbitration or administrative procedure relating to his/her assets, operations or income arise or become likely to arise;

	5.1.13	does not pay dividends or distributions of any kind to its shareholders without the prior written consent of Party A; and

	5.1.14	promptly notifies Party A in writing of the occurrence of any event which has or might have a material adverse effect on its assets, obligations, rights or operations.

5.2	Personal Undertakings . Each of Party B and Party C further undertakes to:

	5.2.1	not sell, transfer, pledge or otherwise dispose of any of his Equity Interests in the Company, or permit creation of such other security interest thereon, without the prior written consent of Party A;

Loan Agreement

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		5.2.2	enter into all necessary or appropriate agreements, take all necessary or appropriate actions , and make all necessary or appropriate defences for the Company for the purpose of maintaining ownership of his Equity Interests in the Company (unless requested otherwise in writing by Party A) or as requested in writing by Party A;

		5.2.3	not cause any action and/or omission which may materially and adversely affect the assets, operations or liability of the Company, without the prior written consent of Party A;

		5.2.4	appoint only persons nominated by Party A to serve as directors of the Company;

		5.2.5	use all proceeds from the Transfer Price solely to repay the Loans (including any applicable interest on the same), in accordance with this Agreement;

		5.2.6	issue the Power of Attorney within 3 days after the establishment of the Company;

		5.2.7	execute the Call Option Agreement and Equity Pledge Agreement within 3 days after the establishment of the Company;

		5.2.8	take all actions to ensure that the Equity Pledge Agreement, Call Option Agreement, Power of Attorney and Technical Services Agreement remain in full effect and free of default for the duration of the Loans, and that each relevant filing, registration procedure, approval, and governmental proceedings are duly obtained or completed; and

		5.2.9	strictly observe all the provisions and perform all of his obligations under this Agreement, the Equity Pledge Agreement, the Call Option Agreement and the Power of Attorney, and not cause or contribute to any action or omission that may impair their validity or enforceability.

6.	PENALTY INTEREST

	6.1	If either Party B or Party C fails to comply with his repayment obligations under this Agreement, then interest shall be levied at the rate of 0.3% per day (compounded daily) upon the outstanding amount of the Loans, beginning on the date on which such amount becomes due and payable until the date on which the overdue amount is settled in full.

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	6.2	The aforesaid interest penalty shall be remitted by Party B and/or Party C (as the case may be) in cash into a bank account designated in writing by Party A within 5 days after such interest is levied.

7.	CONFIDENTIALITY

	7.1	Confidentiality Obligations . Each party (“ Receiving Party ”) shall maintain the strict confidentiality of any and all Confidential Information of the other parties (“ Disclosing Party ”) to which it may become privy before or during the performance of this Agreement, and shall not disclose any such Confidential Information to any third party except to its relevant employees, officers, affiliates and advisors (as applicable) on a “need-to-know” basis and provided that the aforesaid recipients of Confidential Information are subject to written confidentiality undertakings which are no less strict than the obligations set out herein. Any Confidential Information of the Disclosing Party which is received by the Receiving Party hereunder shall be used for the sole purpose of performing this Agreement and such other purpose as the Disclosing Party shall have permitted in writing.

	7.2	Exceptions . The disclosure of Confidential Information by the Receiving Party shall not be deemed a breach of its confidentiality obligations under the following circumstances:

		7.2.1	the Disclosing Party has given its prior written consent to the disclosure;

		7.2.2	the Confidential Information has entered the public domain through no fault or wrongful act of the Receiving Party;

		7.2.3	the Confidential Information has been rightfully received by the Receiving Party from a third party which developed such information independently and was not subject to any confidentiality obligation with regard to the same;

		7.2.4	the Confidential Information was, prior to this Agreement or any other separate non-disclosure agreement previously existing between the parties and independently developed by the Receiving Party without the use, directly or indirectly, of the Confidential Information; or

		7.2.5	where the disclosure of Confidential Information is required pursuant to law or a court order of competent jurisdiction, provided that such disclosure shall be limited to the extent required by such applicable law or court order, and provided further that the Receiving Party has notified the Disclosing Party of the need to disclose the Confidential Information in question, such that the Disclosing Party shall have the opportunity to oppose the disclosure thereof by means of any available objections or appeals.

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8.	BREACH

	8.1	Breach . A party shall be deemed to be in breach of this Agreement if:

		8.1.1	it fails to perform its obligations under this Agreement fully and in a timely manner, and does not rectify any such failure within 30 days after written demand from any other party requesting the same; or

		8.1.2	any representation or warranty made by such party hereunder is as of the Signing Date, or later becomes, materially false, misleading or untrue.

	8.2	Liability for Breach . Any party that breaches this Agreement shall indemnify the other parties against, and compensate them for, any damages or loss of any kind incurred as a result, including third party claims.

9.	FORCE MAJEURE

	9.1	A party who is not able to perform its obligations hereunder as a direct result of Force Majeure, shall not be deemed to be in breach of this Agreement, provided that the following conditions are satisfied simultaneously:

		9.1.1	its failure to perform its obligations hereunder has been directly caused by Force Majeure;

		9.1.2	it has used commercially reasonable efforts to perform its obligations hereunder and, has taken necessary precautions to reduce the losses to the other parties arising from the Force Majeure;

		9.1.3	it has immediately informed the other parties in writing after the occurrence of Force Majeure; and

		9.1.4	it has provided written information and supporting documentation, including a statement of the reasons for the delay in implementing or partially implementing this Agreement, within 15 days after the occurrence of Force Majeure.

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10.	GOVERNING LAW

	This Agreement shall be governed by and construed in accordance with the laws of the PRC.

11.	DISPUTE RESOLUTION

	11.1	If any dispute arises in connection with this Agreement, the parties shall attempt in the first instance to resolve it through friendly consultations or mediation. If any dispute cannot be resolved within 30 days after the commencement of discussions, such dispute shall be referred to and finally resolved by arbitration in Beijing under the auspices of the China International Economic and Trade Arbitration Commission in accordance with the Commission’s then-current arbitration rules. The arbitration shall be conducted in both the Chinese and English languages before a tribunal of 3 arbitrators appointed in accordance with the aforesaid rules.

	11.2	The arbitral award shall be final and binding on the parties. The winning party may, at the cost and expense of the losing party(ies), apply to any court of competent jurisdiction for enforcement of such arbitral award.

	11.3	During the period when the dispute is being resolved, except for the matters under dispute, the parties shall continue performing this Agreement in all respects.

12.	MISCELLANEOUS

	12.1	Notices . All notices or other communications hereunder shall be written in English, and delivered in person (including by courier), by first class mail or facsimile, to the addresses set forth below. A notice shall be deemed to have been delivered (a) on the date of signing of the delivery receipt in the case of delivery in person (including by courier); (b) on the 10th day of the mailing date in the case of delivery by mail; and (c) on the date recorded in the transmission record in the case of facsimile, unless delivery is made after 5 pm on a Business Day or on a non-Business Day in the place of receipt, in which case delivery shall be deemed to occur at 9 am on the following Business Day.

	Party A:	YOU On Demand (Beijing) Technology Co., Ltd.

	Address:	Suite 2603, 26/F, Tower A, 10 Jintongxi Road, Chaoyang District, Beijing, PRC
	Tel:	+86 10 8590 6561
	Fax:	+86 10 8590 6577
	Attn:	Grace He

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	Party B:	Yang Lan

	Address:	No. 602 Unit 1 18/F, No. 19 West Third Ring North Road, Haidian District, Beijing, PRC
	Tel:	+86 10 8776 2856

	Party C:	Zhu Yun

	Address:	No.501, Room 13, 15th Floor, Liuheyuan, Shijingshan District, Beijing, PRC.
	Tel:	+86 138 0111 9910

	12.2	Entire Agreement . This Agreement constitutes the entire agreement among the parties in respect of the subject matter hereof and shall supersede any previous discussions, negotiations and agreements related thereto.

	12.3	Amendment . This Agreement may be amended only by a written agreement signed by the parties, which amendment shall be attached to this Agreement as an Appendix. If required by law, the parties shall obtain all requisite approvals from the relevant authorities to give effect to the amendment.

	12.4	No Waiver . Unless otherwise agreed upon by the parties in writing, any failure or delay on the part of any party to exercise any right, authority or privilege under this Agreement, or under any other related agreement, shall not operate as a waiver thereof; nor shall any single or partial exercise of any right, authority or privilege preclude any other future exercise thereof.

	12.5	Severability . The provisions of this Agreement are severable from each other. The invalidity of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

	12.6	Successors . This Agreement shall be valid and binding on the parties, their successors and permitted assigns (if any).

	12.7	Assignment . Party B and Party C shall not assign any of their rights or obligations hereunder without the prior written consent of Party A. Party A shall have the right to assign all or any of its rights or obligations under this Agreement to a Designated Person at any time. Party B and Party C shall cooperate fully with Party A to affect any such assignment, including without limitation signing any documentation.

	12.8	Counterparts . This Agreement may be executed in any number of counterparts. Each such counterpart shall be deemed to be an original instrument, and all such counterparts shall together constitute one and the same instrument.

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12.9

Languages and Versions . This Agreement is executed in three (3) original sets with both Chinese and English language versions. Each party shall retain one (1) original set. The Chinese and English language versions shall have the same legal effect.

[ The space below has been intentionally left blank. ]

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IN WITNESS WHEREOF , the parties have executed or have caused their duly authorised representatives to execute this Agreement as of the date first indicated above.

For and on behalf of
YOU On Demand (Beijing) Technology Co., Ltd.

(Company Seal)

Signature:	/s/ Polly Wang
Name:	Polly Wang
Title:	Legal Representative

Yang Lan

Signature:

/s/ Yang Lan

Zhu Yun

Signature:

/s/ Zhu Yun

Signature Page to Loan Agreement

Execution Copy

MANAGEMENT SERVICES AGREEMENT

This MANAGEMENT SERVICES AGREEMENT (“ Agreement ”) is entered into as of April 6, 2016 (the “ Effective Date ”), by and between the following (each a “ Party ” and together the “ Parties ”):

	(i)	*Party A* : Tianjin Sevenstarflix Network Technology Limited, a limited liability company incorporated under the laws of the PRC, with its registered address at Suite 305-55, 3/F, Zonghe Service Building D, Nangang Industrial Zone of Tianjin Economic Development Zone, Tianjin, PRC; and

	(ii)	*Party B* : YOU On Demand (Asia) Limited, a company limited by shares incorporated under the laws of Hong Kong.

RECITALS

This Agreement is entered into with reference to the following facts:

A. Party A is a limited liability company incorporated under the laws of the People’s Republic of China. Party A is 99% owned by YANG Lan and 1% owned by ZHU Yun (collectively, the “ Nominee Shareholders ”). Party A is engaged in business activities that are not prohibited by law or applicable regulations in the People’s Republic of China (together with any expansion, contraction or other change to the scope of that business as contemplated by this Agreement, the “ Business ”).

B. Party B is a limited liability company incorporated under the laws of Hong Kong. Party B is 100% owned by China Broadband, Ltd., a Cayman Islands company, and Party B has executive and financial management experience and capability relevant to the Business.

C. Party A desires to engage Party B to provide management, financial and other services in connection with the operation of the Business, and Party B desires to provide those services to Party A. The Parties now desire to memorialize the terms and conditions pursuant to which those services will be provided by Party B to Party A, and pursuant to which Party A will compensate Party B therefor.

NOW, THEREFORE , in consideration for the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the Parties, and through friendly consultation, under the principle of equality and mutual benefits, in accordance with the relevant laws and regulations of the People’s Republic of China, the Parties agree as follows:

AGREEMENT

1. Management Services . During the Term of this Agreement, Party B will identify and provide to Party A executive and financial management personnel in sufficient numbers and with expertise and experience appropriate to provide the services identified in Appendix A , as it may be amended from time to time by written agreement of the Parties (the “ Management Services ”), and will provide those Services to Party A. Party A will take all commercially reasonable actions to permit and facilitate the provision of the Management Services by Party B and accept those Services.

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2. Compensation to Party B . As compensation for providing the Management Services, Party B will be entitled to receive a fee (the “ Management Services Fee ”), upon demand, equal to one hundred percent (100%) of the annual Net Profit of Party A during the Term of this Agreement. At the sole discretion of Party B, the Net Profit of Party A shall be calculated through the end of the immediately preceding fiscal year of Party A, and paid by Party A to Party B within sixty (60) days of demand therefor. Until and unless such demand is made, the Management Services Fee is not due and payable to Party A and it is the intent of the Parties that the income such Fee represents shall not be accrued by Party A. Any dispute between the Parties concerning any calculation or payment under this Section 2 will be resolved pursuant to the dispute resolution provisions of Section 15 .

For the purpose of this agreement, Net Profit means the net profit of Party A for the period immediately preceding the date for calculation of Net Profit set out in the Agreement, calculated as follows: (a) all revenue or income accrued by Party A, less (b) all costs, accrued expenses and taxes paid or accrued and payable.

3. Ad Hoc Payment . The Parties acknowledge that in order to provide the Management Services under this Agreement, Party B may incur expenses and costs from time to time, and the Parties further agree that Party B may request an ad hoc payment every calendar quarter and such payment may be credited against Party A’s future payment obligations of the Management Services Fee.

4. Credit for Amounts Paid Under Other Agreements . Party B and Party A are or may be parties to certain other agreements, such as the Technical Service Agreement, some or all of which may require certain payments to be made by Party A to affiliates and/or designee of Party B in consideration for services, equipment or other items of value provided by affiliates and/or designee of Party B. The Parties agree that any and all such amounts may be (a) separately paid by Party A and accordingly counted as expenses of Party A, reducing Party A’s Net Profit; or (b) included in the aggregate Net Profit of Party A and not separately paid to Party B.

5. Interest Penalty . If any amounts due and payable under this Agreement are not paid when due, interest will accumulate on such amounts at the rate of four percent (4%) per annum until paid. This interest penalty may be reduced or waived by the Party entitled to receive it in light of actual circumstances, including the reason for any delay in payment.

6. Guarantees . To the extent and only to the extent permitted by applicable law, each Party agrees to act as a guarantor of the indebtedness of the other, as and only as follows:

	(a)	Party A will not incur any indebtedness to any Person not a party to this Agreement without the advance written consent of Party B in the exercise of its obligations to provide comprehensive Management Services under this Agreement.

	(b)	Party B may, in the exercise of its reasonable business judgment, incur indebtedness to any Person not a party to this Agreement, provided that any such indebtedness may only be in connection with the Business. If Party B incurs any indebtedness as contemplated by this Section 6(b), Party A will act as a guarantor of that indebtedness.

7. Exclusivity . During the Term of this Agreement, (a) Party A will not contract with any other Person to provide services which are the same or similar to the Management Services. For purposes of this Section 7 only, “Person” does not include any Affiliate of either Party, including other entities that may become affiliated with either Party.

8. Operation of Business . During the Term of this Agreement:

(a)	The Party A will ensure that:

	(i)	the business of Party A, together with all business opportunities presented to or which become available to Party A, will be treated as part of the Business covered by the Management Services and this Agreement;

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	(ii)	all cash of Party A will be maintained in Company Bank Accounts or disposed of in accordance with this Agreement;

	(iii)	all business income, working capital, recovered accounts receivable, and any other funds which come into the possession of Party A or are derived from or related to the operation of the business of Party A, are deposited into a Company Bank Account;

	(iv)	all accounts payable, employee compensation and other employment-related expenses, and any payments in connection with the acquisition of any assets for the benefit of Party A or the satisfaction of any liabilities of Party A, are paid from amounts maintained in Company Bank Accounts;

	(v)	Party B or any third party designated by Party B will have full access to the financial records of Party A and from time to time, Party B may request, at its sole option, to conduct an auditing with regard to the financial status of Party A;

	(vi)	no action is taken without the prior written consent of Party B that that would have the effect of entrusting all or any part of the business of Party A to any other Person.

(b)	Party B will ensure that:

	(i)	it exercises with respect to the conduct of the Business the same level of care it exercises with respect to the operation of its own business and will at all times act in accordance with its Reasonable Business Judgment, including taking no action which it knows, or in the exercise of its Reasonable Business Judgment should have known, would materially adversely affect the status of any of permits, licenses and approvals necessary for the conduct of the Business or constitute a violation of all Legal Requirements;

	(ii)	neither it, nor any of its agents or representatives, takes any action that interferes with, or has the effect of interfering with, the operation of the Business in accordance with this Agreement, or which materially adversely affects its assets, operations, business or prospects;

	(iii)	use its Best Efforts to cooperate and assist Party A to maintain in effect all permits, licenses and other authorizations and approvals necessary or appropriate to the conduct of the Business; and

	(iv)	subject to the provisions of Section 10 relating to the Transition period, it will preserve intact the business and operations of Party A and take no action which it knows, or in the exercise of its Reasonable Business Judgment should have known, would materially adversely affect the business, operations, or prospects of Party A.

9. Material Actions . The Parties acknowledge and agree that the economic risk of the operation of the Business is being substantially assumed by Party A and that the continued business success of Party A is necessary to permit the Parties to realize the benefits of this Agreement. During the Term of this Agreement, the Parties therefore will ensure that Party A does not take any Material Action without the advance written consent of Party B, which consent will not be unreasonably withheld or delayed.

10. Transition of Business to Party B; Future Expansion . At the sole discretion of Party B, during the Term of this Agreement, Party B may transfer or cause to be transferred from Party A to Party B or its designee (referred to collectively for purposes of this Section 10 as “Party B”) any part or all of the business, personnel, assets and operations of Party A which may be lawfully conducted, employed, owned or operated by Party B (the “Transition”), including any of the following:

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	(a)	business opportunities presented to, or available to Party A may be pursued and contracted for in the name of Party B rather than Party A, and at its discretion Party B may employ the resources of Party A to secure such opportunities;

	(b)	any tangible or intangible property of Party A, any contractual rights, any personnel, and any other items or things of value held by Party A may be transferred to Party B at book value;

	(c)	real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the Business may be obtained by Party B by acquisition, lease, license or otherwise, and made available to Party A on terms to be determined by agreement between Party B and Party A;

	(d)	contracts entered into in the name of Party A may be transferred to Party B, or the work under such contracts may be subcontracted, in whole or in part, to Party B, on terms to be determined by agreement between Party B and Party A; and

	(e)	any changes to, or any expansion or contraction of, the Business may be carried out in the exercise of the sole discretion of Party B, and in the name of and at the expense of, Party B;

provided, however , that none of the foregoing, and no other part of the Transition may cause or have the effect of terminating (without being substantially replaced under the name of Party B) or adversely affecting any license, permit or regulatory status of Party A. Any of the activity contemplated by this Section10 will be deemed part of the “Business.”

11. Ownership of Intellectual Property . All Intellectual Property created by Party B in the course of providing the Management Services will be the sole property of Party B and Party A will have no right to any ownership or use of such Intellectual Property except under separate written agreement with Party B.

12. Representations and Warranties of Party A . Party A hereby makes the following representations and warranties for the benefit of Party B:

	(a)	*Corporate Existence and Power* . Party A is a limited liability company duly organized and validly existing under the laws of the PRC, and has all legal or corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and as currently contemplated to be conducted. Party A has never approved, or commenced any proceeding or made any election contemplating, the dissolution or liquidation of Party A or the winding up or cessation of the business or affairs of Party A.

	(b)	*Authorization; No Consent* . Party A (i) has taken all necessary corporate and other actions to authorize its execution, delivery and performance of this Agreement and all related documents and has the corporate and other power and authorization to execute, deliver and perform this Agreement and the other related documents; (ii) has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the other related documents and to perform its obligations under this Agreement and the other related documents; (iii) is not required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions or actions contemplated by any of the Business Cooperation Agreements, except for any notices that have been duly given or Consents that have been duly obtained; and (iv) holds all the governmental authorizations necessary to permit it to lawfully conduct and operate its business in the manner it currently conducts and operates such business and to permit Party A to own and use its assets in the manner in which it currently owns and uses such assets. To the best knowledge of Party A, there is no basis for any governmental authority to withdraw, cancel or cease in any manner any of such governmental authorizations.

	(c)	*No Conflicts* . The execution and perform of this Agreement by Party A will not contravene, conflict with, or result in violation of (i) any provision of the organizational documents of Party A; (ii) resolution adopted by the board of directors or the equity holders of Party A; and (iii) any laws and regulations to which Party A or the transactions and relationships contemplated in this Agreement.

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13. Representations and Warranties of Party B . Party B hereby makes the following representations and warranties for the benefit of Party A:

	(a)	*Corporate Existence and Power* . Party B (i) is a limited liability company duly organized and validly existing under the laws of Hong Kong, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and as currently contemplated to be conducted; and (ii) has not ever approved, or commenced any proceeding or made any election contemplating, the dissolution or liquidation of Party B or the winding up or cessation of the business or affairs of Party B.

	(b)	*Authorization; No Consent* . Party B (i) has taken all necessary corporate actions to authorize its execution, delivery and performance of this Agreement and all related documents and has the corporate power and authorization to execute, deliver and perform this Agreement and the other related documents; (ii) has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the other related documents and to perform its obligations under this Agreement and the other related documents; (iii) is not required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Business Cooperation Agreements, except for any notices that have been duly given or Consents that have been duly obtained; and (iv) has all the governmental authorizations necessary to permit Party B to lawfully conduct and operate its business in the manner it currently conducts and operates such business and to permit Party B to own and use its assets in the manner in which it currently owns and uses such assets. To the best knowledge of Party B, there is no basis for any governmental authority to withdraw, cancel or cease in any manner any of such governmental authorizations.

	(c)	*No Conflicts* . The execution and perform of this Agreement by Party B will not contravene, conflict with, or result in violation of (i) any provision of the organizational documents of Party B; (ii) any resolution adopted by the board of directors or the equity holders of Party B; and (iii) any laws and regulations to which Party B or the transactions and relationships contemplated in this Agreement and the Business Cooperation Agreements are subject.

14. Liability for Breach; Indemnification and Hold Harmless . Each of the Parties will be liable to the other Party for any damage or loss caused by such Party’s breach of this Agreement. Party A will indemnify and hold harmless Party B from and against any claims, losses or damages unless caused by a breach by Party B of its obligations under this Agreement or by the willful, reckless or illegal conduct of Party B. Party B will indemnify and hold harmless Party A from and against any claims, losses or damages caused by any breach by Party A of its obligations under this Agreement or by the willful, reckless or illegal conduct of Party A.

15. Dispute Resolution .

	(a)	*Friendly Consultations* . Any and all disputes, controversies or claims arising out of or relating to the interpretation or implementation of this Agreement, or the breach hereof or relationships created hereby, will be settled through friendly consultations.

	(b)	*Arbitration* . If any such dispute is not resolved through friendly consultations within sixty (60) days from the date a Party gives the other Parties written notice of a dispute, then it will be resolved exclusively by arbitration under the auspices of and in accordance with the Arbitration Rules of China International Economic and Trade Arbitration Commission (“CIETAC”) and will be submitted to CIETAC Shanghai Branch. Any arbitration will be heard before three (3) arbitrators, one (1) of whom will be appointed by Party B, one (1) of whom will be appointed by Party A, and the remaining one (1) arbitrator (chairman of the arbitration tribunal) will be appointed by the Director of CIETAC. Any arbitration will be conducted in both the English and Chinese languages. The arbitration award will be final and binding on both Parties and will not be subject to any appeal, and the Parties agree to be bound thereby and to act accordingly.

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(c)

Continuation of Agreement . It is not necessary for any Party to declare a breach of this Agreement in order to proceed with the dispute resolution process set out in this Section 15 . Unless and until this Agreement is terminated pursuant to Section 16 , this Agreement will continue in effect during the pendency of any discussions or arbitration under this Section 15 .

16. Term . This Agreement is effective as of the date first set forth above, and will continue in effect for a period of twenty (20) years (the “ Initial Term ”), and for succeeding periods of the same duration (each, “ Subsequent Term ”), until terminated by one of the following means either during the Initial Term or thereafter. The period during which this Agreement is effective is referred to as the “ Term .”

	(a)	*Mutual Consent* . This Agreement may be terminated at any time by the mutual consent of the Parties, evidenced by an agreement in writing signed by both Parties.

	(b)	*Termination by Party B* . This Agreement may be terminated by Party B ((i) upon written notice delivered to Party A no later than ten (10) calendar days before the expiration of the Initial Term or any Subsequent Term; or (ii) at any time by upon ninety (90) calendar days’ written notice delivered to Party A.

	(c)	*Breach or Insolvency* . Either of Party A or Party B may terminate this Agreement immediately (a) upon the material breach by the other of its obligations hereunder and the failure of such Party to cure such breach within thirty (30) working days after written notice from the non-breaching Party; or (b) upon the filing of a voluntary or involuntary petition in bankruptcy by the other or of which the other is the subject, or the insolvency of the other, or the commencement of any proceedings placing the other in receivership, or of any assignment by the other for the benefit of creditors.

	(d)	*Consequences of Termination* . Upon any effective date of any termination of this Agreement: (i) Party B will instruct all management personnel identified or provided by it to Party A to cease working for Party A; (ii) Party B will deliver to Party A all chops and seals of Party A; (iii) Party B will deliver to Party A, or grant to Party A unrestricted access to and control of, all of the financial and other books and records of Party A, including any and all permits, licenses, certificates and other proprietary and operational documents and instruments; (iv) Party B will cooperate fully in the replacement of any signatories or persons authorized to act on behalf of Party A with persons appointed by Party A; and (v) any licenses granted by Party B to Party A during the Term will terminate unless otherwise agreed by the Parties.

	(e)	*Survival* . The provisions of Section 14 (Indemnification; Hold Harmless), Section 15 (Dispute Resolution), Section 16(d) (Consequences of Termination) and Section 17 (Miscellaneous) will survive any termination of this Agreement. Any amounts owing from any Party to any other Party on the effective date of any termination under the terms of this Agreement will continue to be due and owing despite such termination.

17. Miscellaneous .

	(a)	*Headings and Gender* . The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.

	(b)	*Usage* . The words “include” and “including” will be read to include “without limitation.”

	(c)	*Severability* . Whenever possible each provision and term of this Agreement will be interpreted in a manner to be effective and valid but if any provision or term of this Agreement is held to be prohibited by or invalid, then such provision or term will be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement. If any of the covenants set forth in this Agreement are held to be unreasonable, arbitrary, or against public policy, such covenants will be considered divisible with respect to scope, time and geographic area, and in such lesser scope, time and geographic area, will be effective, binding and enforceable against the Parties.

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	(d)	*Waiver* . No failure or delay by any Party to exercise any right, power or remedy under this Agreement will operate as a waiver of any such right, power or remedy.

	(e)	*Integration* . This Agreement supersede any and all prior discussions and agreements (written or oral) between the Parties with respect to cooperation arrangement and other matters contained herein.

	(f)	*Assignments, Successors, and No Third-Party Rights* . No Party may assign any of its rights under this Agreement without the prior consent of the other Parties, which will not be unreasonably withheld. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and assigns.

	(g)	*Notices* . All notices, requests, demands, claims, and other communications under this Agreement will be in writing. Any Party may send any notice, request, demand, claim, or other communication under this Agreement to the intended recipient at the address set forth on the signature page of this Agreement by any means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Refusal by a Party to accept notice that is validly given under this Agreement will be deemed to have been received by such Party upon receipt. Any Party may change the address to which notices, requests, demands, claims, and other communications under this Agreement are to be delivered by giving the other Parties notice in the manner herein set forth. Any notice, request, demand, claim, or other communication under this Agreement will be addressed to the intended recipient as set forth on the signature page hereto.

	(h)	*Further Assurances* . Each of the Parties will use its best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement.

	(i)	*Governing Law* . This Agreement will be construed, and the rights and obligations under this Agreement determined, in accordance with the laws of the PRC, without regard to the principles of conflict of laws thereunder.

	(j)	*Amendment* . This Agreement may not be amended, altered or modified except by a subsequent written document signed by all Parties.

	(k)	*Counterparts* . This Agreement may be executed in any number of counterparts. When each Party has signed and delivered to the other Party at least one such counterpart, each of the counterparts will constitute one and the same instrument.

[Signature Page Follows]

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IN WITNESS WHEROF, the Parties hereto have executed this Management Services Agreement as of the date first above written.

Tianjin Sevenstarflix Network Technology Limited
(Company Seal)

Signature:	/s/ Zhu Yun
Name:	Zhu Yun
Title:	Legal Representative

For and on behalf of
YOU On Demand (Asia) Limited

Signature:	/s/ Wang Pao Yun
Name:	Wang Pao Yun
Title:	Authorized Representative

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APPENDIX A

Management Services

For purposes of that certain Management Services Agreement to which this is Appendix A, “ Management Services ” means the following:

General Management Services

“Management Services” includes the following general management services relating to the operation of the Business, except for those compulsively limited or prohibited by PRC laws and regulations otherwise:

(a) All aspects of the day-to-day operations of Party A, including its relationships with its customers, its performance under agreements or other arrangements with any other parties, its compliance with applicable laws and regulations;

(b) The appointment, hiring, compensation (including any bonuses, non-monetary compensation, fringe and other benefits, and equity-based compensation), firing and discipline of all employees, consultants, agents and other representatives of Party A, including the Executive Director or the Board of Directors of Party A and all other executive officers or employees of Party A;

(c) Establishment, maintenance, termination or elimination of any plan or other arrangement for the benefit of any employees, consultants, agents, representatives or other personnel of Party A;

(d) Management, control and authority over all accounts receivable, accounts payable and all funds and investments of Party A;

(e) Management, control and authority over Party A Bank Accounts, in connection with which all seals and signatures will be those of personnel appointed and confirmed by Party B;

(f) Any expenditure, including any capital expenditure, of Party A;

(g) The entry into, amendment or modification, or termination of any contract, agreement and/or other arrangement to which Party A is, was, or would become a party;

(h) The acquisition, lease or license by Party A of any assets, supplies, real or per- sonal property, or intellectual or other intangible property;

(i) The acquisition of or entry into any joint venture or other arrangement by Party A with any other Person;

(j) Any borrowing or assumption by Party A of any liability or obligation of any nature, or the subjection of any asset of Party A to any Lien;

(k) Any sale, lease, license, retirement or other disposition of any asset owned, beneficially owned or controlled by Party A;

(l) Applying for, renewing, and taking any action to maintain in effect, any permits, licenses or other authorizations and approvals necessary for the operation of Party A’s business;

(m) The commencement, prosecution or settlement by Party A of any litigation or other dispute with any other Person, through mediation, arbitration, lawsuit or appeal;

(n) The declaration or payment of any dividend or other distribution of profits of

Execution Copy

(o) The preparation and filing of all Tax Returns, the payment or settlement of any and all Taxes, and the conduct of any proceedings with any Governmental Authority with respect to any Taxes; and

(p) The carrying out of the Transition, as defined in Section 10, and any business or corporate restructuring of Party A or its subsidiaries.

JOINT VENTURE AGREEMENT

PARTIES:

Frequency Networks, Inc.,
a Delaware corporation

Address (place of business, phone, fax, e-mail)
4526 Wilshire Blvd, Los Angeles, CA 90010
Phone +1 323 825 4500
b@frequency.com

Represented by (name, position, address)
Blair Harrison, CEO

Referred to as “FREQUENCY”

YOU On Demand Holdings, Inc.,
A Nevada corporation

Address (place of business, phone, fax, e-mail)
375 Greenwich Street, Suite 516, New York NY 10013
Phone +1 212 206 1216

Represented by (name, position, address)
Mingcheng Tao, CEO

Referred to as “YOD”

FREQUENCY and YOD are together referred to as “the Parties” and individually as a “Party”.

Background

A. FREQUENCY and YOD (the “Parties”) have agreed to form a new jointly owned company (the “JVC”), which shall be established and carry on business in the manner set out in this agreement (“Agreement”).

B. The Parties have agreed that their relations as shareholders in the JVC shall be governed by the terms of this Agreement.

1.	INTERPRETATION

1.1. In this Agreement the following terms shall have the following meanings:

1.1.1. “Board” means the Board of Directors of the JVC;

1.1.2. “Business” means the Business to be carried on by the JVC as defined in Article 2.1 and in accordance with the Business Plan as updated by the Board from time to time;

1.1.3. “Territory” means Singapore, Brunei, Malaysia, Thailand, Indonesia, Philippines, Vietnam, Laos, Cambodia, Myanmar and China, including Hong Kong, Macao and Taiwan;

1.1.4. “Closing” means completion of the establishment of the JVC in accordance with Article 4;

1.1.5. “Member of the YOD Group” means YOD and any direct or indirect subsidiary or parent company of YOD or any entity controlling, controlled by or under common control with YOD;

1.1.6. “Shares” means shares in the capital of the JVC;

1.2. Any reference in this Agreement to an amount in United States Dollars and Chinese Renminbi shall include its market rate equivalent at the relevant time in any other currency.

2.	BUSINESS OF JVC

2.1. The Parties wish to establish the JVC for the purpose of (the “Business”) as follows:

1) Launch FREQUENCY in Territory to deploy MCN, digital networks and OTT content in Territory, including but not limited to the following business models: a. Direct To Consumer in one or several branded mobile applications b. Business To Business integrated with cable and mobile operators

2) FREQUENCY shall undertake 3rd Party Integrations that will include but are not limited to:

a. ChatTV -- Integration with FREQUENCY platform to facilitate social video commerce services cross platforms

b. RSI -- Integration with FREQUENCY platform to dynamically source goods and facilitate billing and fulfillment

3) Creating OTT packages and digital networks that will aggregate both Parties’ licensed content into branded, genre-specific channels, which may include, but are not limited to, all genre referenced in the FREQUENCY mobile app channel offering, an example of which is Exhibit A, and as may be changed or updated from time to time at the discretion of YOD. Furthermore:

YOD and Frequency will be exclusive partners to create Direct to Consumer content channels or network of channels that incorporate the following business model:

		i.	integrates a major brand or anchor content partner; and
		ii.	integrates content licensed by the JV and / or its JV partners, where licenses permit; and
		iii.	integrates original programming; and
		iv.	integrates JV related 3 ^rd party applications

This will not limit Frequency’s ability to:

		i.	enable its Content or Distribution partners to create their own branded channels or networks of channels; or
		ii.	receive a carried interest in a channel for providing services to a content or distribution partner; or
		iii.	curate its own channels outside of the JV Territory that do not conflict with the business model referenced in section (a), above.

4) Distribution Rights:

	a.	JVC will have exclusive distribution rights for the use of both these channels and content within the Territory.

	b.	FREQUENCY will have exclusive distribution rights for these channels outside the Territory and will be obliged to provide such content to 3rd parties and other vendors outside the Territory, provided, however, that YOD acknowledges that Frequency can only make such content available to 3 ^rd parties on Frequency’s platform but Frequency cannot assure that such 3 ^rd parties will accept such content.

FREQUENCY will offer all JVC aggregated, created or otherwise developed content through its operations outside the Territory. When doing so, FREQUENCY will use commercially reasonable efforts to advance all 3 ^rd Party Integrations with the distribution of all JVC content

5) The JVC is intended to facilitate the aggregation and deployment of YOD and FREQUENCY technology and platform to maximize advertising revenue opportunities and any other revenue opportunities that may be applicable.

2.2 The Parties will create a three (3) year business plan (“Business Plan”), which shall be reviewed at least every twelve (12) months. The Business Plan shall define the business objectives of the Parties with respect to the JVC.

2.3 Each party shall act in good faith towards the other in order to promote the JVC’s success. The Parties confirm their intention to consult on matters materially affecting the development of the Business and the execution of the Business Plan.

3.	Establishment of JVC

	3.1.	The Parties shall form the JVC entity in Singapore or such other country as determined by the Parties. The JVC shall not trade or carry on Business in any manner prior to Closing.

	3.2.	Each party shall use commercially reasonable efforts to ensure that the formation of the JVC is accomplished as soon as possible and shall notify the other promptly of any difficulties encountered. If the formation of the JVC has not occurred by May 31, 2016, this Agreement (other than the provisions of Article 12 (confidentiality) and Article 24 (disputes resolution procedure)) shall, unless otherwise agreed, thereupon automatically cease and terminate and neither party shall have any claim of any nature whatsoever against the other party, provided, however, that in any event YOD shall have the exclusive right to enter into a joint venture with Frequency with respect to the Territory for a period of 2 years from the date hereof.

4.	Establishment of JVC: Closing

4.1.

Closing shall take place on May 31, 2016, when the following events and matters set out in this Article 4 shall take place. If not previously formed under Article 3.1, the Parties shall cause the JVC to be incorporated with the following characteristics:

4.1.1. The JVC shall be formed in Singapore or other country as is determined by YOD with the consent of Frequency which shall not be unreasonably withheld;

4.1.2. The Articles of Association and Bylaws of the JVC shall be in a form acceptable to YOD. with the consent of Frequency which shall not be unreasonably withheld;

4.1.3. The name of the JVC shall be “Frequency Asia”; [YOD to confirm]

4.1.4. The registered office of the JVC shall be determined by YOD with the consent of Frequency which shall not be unreasonably withheld;

5.	Capital and further finance

	5.1.	The JVC shall, in accordance with and following completion of the events and transactions referred to in Article 4, have an issued share capital of 49% Shares owned by FREQUENCY and 51% Shares owned by YOD.
	5.2.	The share capital of the JVC may from time to time be increased by such sum as shall be mutually agreed but so that in any event, unless otherwise agreed, the increased share capital of the JVC shall be held in the proportions of 49% by FREQUENCY and 51% by YOD (or member(s) of the YOD Group).
	5.3.	If the JVC shall in the opinion of the Board require further financial investment, the JVC shall first approach its own banking sources. Neither party shall be obliged to provide any further financial investment to the JVC. Any further financial investment that the Parties do agree to provide shall (unless otherwise agreed) be provided by the Parties in proportion to their shareholding (whether by way of subscription of share capital, loans or otherwise), unless otherwise mutually agreed; provided, however, that any such further financial investment must be paid back by the JVC to such parties prior to any distributions or dividends being made to the parties including pursuant to Section 10 contained herein.
	5.4.	The Parties shall not be obliged to provide financing or guarantees thereof in respect of any borrowings of the JVC.
	5.5.	Frequency hereby agrees that upon the execution of this Agreement and the closing of the Stock Purchase Agreement pursuant to which YOD will invest $3 million in Freqeuncy, the Warrant attached hereto as Exhibit B (the “Warrant”) shall be issued to YOD. The Warrant shall be fully vested and give YOD the immediate right to purchase up to 3,000,000 shares of Series A Preferred Stock (as adjusted for any stock dividends, combinations, splits or the like with respect to such shares) at an exercise price of $0.42467 per share (as adjusted for any stock dividends, combinations, splits or the like).

6.	Directors and Management

6.1.

The Business and affairs of the JVC shall (subject to the Reserved Matters referred to in Article 7) be managed by the Board of the JVC. The Board shall consist of five (5) persons of which:

6.1.1. FREQUENCY shall be entitled to appoint and maintain in office two (2) directors (“FREQUENCY Directors”) and to remove any director so appointed from office (and to appoint another in the place of any director so removed); and

6.1.2. YOD shall be entitled to appoint and maintain in office three (3) directors (“YOD Directors”) and to remove any director so appointed from office (and to appoint another in the place of any director so removed).

6.1.3. Should the JVC be domiciled in Singapore, YOD will appoint the required Singaporean Director.

	6.2.	Each appointment and removal by FREQUENCY or YOD of a director pursuant to its entitlement shall be notified in writing to the other party and the JVC. FREQUENCY and YOD shall each use their respective votes in the JVC to ensure that persons appointed in the manner set out in this Agreement constitute the Board of the JVC.
	6.3.	At least 14 days written notice shall be given to each member of the Board of any meeting of the Board, provided always that a shorter period of notice may be given with the written approval of at least one (1) FREQUENCY director and at least one (1) YOD director. Any such notice shall include an agenda identifying in reasonable detail the matters to be discussed at the meeting and shall be accompanied by copies of any relevant papers. The Board shall meet regularly (either telephonically, by video conference or in person) and, unless otherwise agreed, not less than quarterly.
	6.4.	The quorum for the transaction of Business at any meeting of the Board shall be at least one (1) FREQUENCY director and at least two (2) YOD director present at the time when the relevant Business is transacted.
	6.5.	The Chairman shall be appointed from among the YOD directors. At any meeting of the Board, each director and the Chairman shall be entitled to one vote. Any decision of the Board in favor of a resolution (“Board Resolution”), to be valid, shall require the positive vote of a majority of the directors present at such meeting. Any Board Resolution regarding a Reserved Matter, as defined in Section 7 (“Reserved Matter Resolution”), shall require at least one (1) FREQUENCY director and at least one (1) YOD director to be valid.

7.	Reserved Matters

7.1.

The following matters (“Reserved Matters”) shall require a Reserved Matter Resolution:

7.1.1. Any issue of Shares (or securities convertible into Shares) of the JVC;

7.1.2. Any material alteration to the Articles of Association and Bylaws of the JVC;

7.1.3. Any sale of the whole or any substantial part of the JVC;

7.1.4. Any borrowing by the JVC that would result in the aggregate borrowings of the JVC being in excess of $250,000 or such other amount as the Parties shall from time to time determine;

7.1.5. Approval of the annual budget and operating plan of the JVC;

7.1.6. Any expansion of the operating and marketing territory of the JVC beyond the Territory;

7.1.7. Any material reorganization affecting the JVC, including the formation of any subsidiary of the JVC;

7.1.8. Any agreement or commitment by the JVC having a value or likely to involve expenditure by the JVC in excess of $250,000 (or such other limit as the Parties shall from time to time agree);

7.1.9. The appointment (or removal) of the auditors of the JVC or any significant change in the accounting policies of the JVC;

7.1.10. Any change for a particular year in the dividend policy specified in Article 10;

7.1.11. The commencement, settlement or abandonment of litigation or admission of liability by the JVC involving a dispute in excess of $250,000;

7.1.12. Any payment by the JVC to FREQUENCY or Member of the YOD Group (whether by way of management or administrative charges, bonus, license fees, repayment of loan, dividends or otherwise) unless within permitted limits first approved via Board Resolution;

7.1.13. Filing by the JVC for receivership, reorganization, bankruptcy or liquidation under any insolvency laws or any similar action; and

7.1.14. Any fundamental change to the nature of the business of the JVC.

7.2.

The provisions of Article 7.1 shall apply equally to any matters undertaken by a subsidiary of the JVC as if references therein to “the JVC” included, where appropriate, any such subsidiary.

8.	General meetings

8.1.

General meetings of the Parties as shareholders in the JVC shall take place in accordance with the applicable provisions of the Articles of Association and Bylaws which shall include terms that:

8.1.1. The quorum for transaction of any Business shall require the presence of a duly authorized representative of Frequency and two authorized representatives of YOD; and

8.1.2. The notice of meeting shall set out an agenda identifying in reasonable detail the matters to be discussed (unless the Parties agree otherwise).

9.	Additional contributions of the Parties

9.1.

It is intended that each party will contribute particular knowledge, skills and services to assist the establishment and success of the JVC. The responsibilities of each party are set out in this Article 9. The responsibilities of the Parties shall include both “General Contributions”, which shall be provided to the JVC at no charge, and “Services” for which the Parties shall be compensated by the JVC.

9.2.

The General Contributions of FREQUENCY to the JVC shall initially be as given below, and as amended via Board Resolution from time to time:

9.2.1. Platform: Exclusive use of the FREQUENCY platform in the Territory

9.2.2. Content: Use of FREQUENCY licensed content as per the commercial agreements with licensors within the Territory

9.3.

The General Contributions of YOD to the JVC shall initially be as given below, and as amended via Board Resolution from time to time:

9.3.1. Content: Use of YOD Group content as per the commercial agreements with licensors

9.3.2. Sales and Marketing: sales and marketing within the Territory

9.3.3. Operating Capital as determined by YOD

	9.4.	The Services that the Parties will provide to the JVC will be determined by YOD as part of the Business Plan.
	9.5.	Each party will use commercially reasonable efforts to provide its contribution to promote the success of the JVC. Each party shall provide its contributions towards the JVC using such diligence and skill as is reasonable in the circumstances. It is understood that the JVC daily operations will be supported by JVC staff and staff from the Parties. The JVC will be responsible for costs associated with support from the Parties.

10.

Dividend policy

The Parties agree that (unless otherwise agreed under Article 7 in relation to a particular financial year) the JVC shall distribute by way of dividend not less than fifty (50)% of the audited after tax profit in relation to each financial year.

11.

Transfer of Shares

11.1. Unless it is a transfer made with the prior written consent of the other party, neither FREQUENCY nor YOD shall sell, transfer, pledge, charge, dispose of or otherwise deal with any right or interest in any of its Shares in the JVC (including the grant of any option over or in respect of any Shares).

11.2. Consent shall not unreasonably be withheld for a transfer by a party to a member of its own group. Each of FREQUENCY and YOD, respectively, undertakes to procure that, if any member of its group which holds Shares in the JVC ceases at any time to be a wholly owned subsidiary of that party, that subsidiary shall first transfer beneficially all its Shares in the JVC back to the relevant party (or another member of its group).

11.3. No transfer of Shares of the JVC shall in any event be registered or become effective unless the transferee shall first have entered into an agreement undertaking to be bound by this Agreement (including this Article 11) to the same extent as the transferor would have been bound had the transfer not been effected.

12.

Confidentiality

12.1. Each of the Parties shall at all times use all reasonable efforts to keep confidential (and to ensure that its employees and agents keep confidential) all commercial and technical information which it may acquire (i) in relation to the JVC or (ii) in relation to the clients, business or affairs of the other party (or any member of its respective group).

Neither party shall use or disclose any such information except with the consent of the other party or, in the case of information relating to the JVC, in the ordinary course of advancing the JVC’s Business. The restriction in this Article 12.1 shall not apply to any information that is:

12.1.1. Publicly available through no fault of that party;

12.1.2. Already in the possession of that party prior to its disclosure without any obligation of confidentiality; or

12.1.3. Required to be disclosed by that party pursuant to any law, stock exchange regulation or binding judgment, order or requirement of any court or other competent authority.

12.2. Each party shall cause its respective officers, employees and agents observe a similar obligation of confidence in favor of the Parties to this Article 12. The provisions of this Article 12 and Article 3.2 shall survive any termination of this Agreement.

13.

Supremacy of this Agreement

13.1. The Parties agree that the Articles of Association and Bylaws are consistent with the terms of this Agreement. If there is any conflict between this Agreement and the Articles of Association and Bylaws, the terms of this Agreement shall prevail and such changes to the Articles of Association and Bylaws shall be made to give effect to this Agreement.

14.

Force majeure

14.1. “Force majeure” means war, emergency, accident, fire, earthquake, flood, storm, industrial strike or other impediment which the affected party proves was beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of this Agreement or to have avoided or overcome it or its consequences.

14.2. A party affected by force majeure shall not be deemed to be in breach of this Agreement, or otherwise be liable to the other, by reason of any delay in performance, or the non-performance, of any of its obligations under this Agreement to the extent that the delay or non-performance is due to any force majeure of which it has notified the other party in accordance with Article 14.3. The time for performance of that obligation shall be extended accordingly, subject to Article 14.4.

14.3. If any force majeure occurs in relation to either party which affects or is likely to affect the performance of any of its obligations under this Agreement, it shall within a reasonable time notify the other party as to the nature of the circumstances in question and their effect on its ability to perform.

14.4. If the performance by either party of any of its obligations under this Agreement is prevented or delayed by force majeure for a continuous period in excess of six months, the Parties shall negotiate in good faith, and use their best endeavors to agree upon such amendments to this Agreement or alternative arrangements as may be fair and reasonable with a view to alleviating its effects, but if they do not agree upon such amendments or arrangements within a further period of 30 days, the other party shall be entitled to terminate this Agreement by giving written notice to the Party affected by the force majeure.

15.

Costs

The costs of, and incidental to, the incorporation of the JVC shall be borne and paid by the JVC. Each party shall (unless otherwise agreed) bear its own costs incurred in the preparation, execution and performance of this Agreement.

16.

No partnership or agency

Nothing in this Agreement shall (i) be deemed to constitute a partnership in law between the Parties, (ii) constitute either party the agent of the other for any purpose or (iii) entitle either party to commit or bind the other (or any member of its respective group) in any manner.

17.

Assignment and subcontracting

17.1. This Agreement is personal to the Parties and neither party shall without the prior written approval of the other:

17.1.1. Assign, mortgage, charge or otherwise transfer or deal in, or create any trust over, any of its rights; provided, however, that in the event a Closing does not occur and YOD is granted rights pursuant to Section 3.2 then it may assign, mortgage, charge or otherwise transfer or deal in, or create any trust over its rights; or

17.1.2. Subcontract or otherwise delegate the whole or any part of its rights or obligations under this Agreement to another person; provided, however, that in the event a Closing does not occur and YOD is granted rights pursuant to Section 3.2 then it may subcontract or otherwise delegate the whole or any part of its rights or obligations under this Agreement to another person.

17.2. Notwithstanding the above, any assignment, mortgage, charge, or other such disposition may be made by either Party without prior written consent if made to or for the benefit of affiliated companies, subsidiaries, or partner entities.

18.

Notices

18.1. Any notice under this Agreement shall be in writing (which may include e-mail) and may be served by leaving it or sending it to the address of the other party as specified in Article 18 below, in a manner that ensures receipt of the notice can be proved.

18.2. For the purposes of Article 18, notification details are the following, unless other details have been duly notified in accordance with this Article 18

18.2.1. FREQUENCY:

18.2.1.1. if via email to notices@frequency.com;

18.2.1.2. if via mail to Attn: CEO , Frequency Networks, Inc., 4526 Wilshire Blvd, Los Angeles, CA 90010

18.2.2. YOD: if via email to __________________;

18.2.3. If via mail to YOU on Demand Holdings, Inc., 375 Greenwich Street, Suite 516, New York, NY 10013; with a copy to
William N. Haddad, Cooley LLP, 1114 Avenue of the Americas, New York, NY 10036; whaddad@cooley.com; .

19.

Entire agreement/variations

19.1. This Agreement sets out the entire agreement between the Parties with respect to the JVC. Neither party has entered into this Agreement in reliance upon any representation, warranty or undertaking of the other party that is not expressly set out or referred to in this Agreement. This Article shall not exclude any liability for fraudulent misrepresentation.

19.2. This Agreement may not be varied except by agreement in writing between the Parties.

20.

Effect of invalid or unenforceable provisions

20.1. If any provision of this Agreement is held by any court or other competent authority to be invalid or unenforceable in whole or in part, this Agreement shall continue to be valid as to its other provisions and the remainder of the affected provision, unless it can be concluded from the circumstances that (in the absence of the provision found to be null and void) the Parties would not have concluded this Agreement. The Parties shall use all reasonable efforts to replace all provisions found to be null and void by provisions that are valid under the applicable law and come closest to their original intention.

21.

Dispute resolution procedure

21.1. If a dispute arises out of this Agreement, the Parties shall seek to resolve it on an amicable basis. They shall consider the appointment of a mediator to assist in that resolution. No party shall commence legal or arbitration proceedings unless 30 days’ notice has been given to the other party.

21.2. Any dispute, controversy or claim arising out of or relating to this Agreement, including its conclusion, interpretation, performance, breach, termination or invalidity, shall be finally settled by the courts of the State of Delaware in the United States which will have exclusive jurisdiction.

22.

Termination

22.1. In the event that the JVC does not achieve mutually agreed upon operating objectives, YOD and FREQUENCY will agree on necessary provisions to terminate the JVC including but not limited to the wind down of operations, servicing existing customers, and the distribution of assets; provided, that Section 3.2 herein shall survive.

23.

Applicable law

23.1. Delaware law shall apply to this Agreement, without regard to conflicts of law principles.

[ Signature pages follow. ]

SIGNATURES OF THE PARTIES

Signed for and on behalf of FREQUENCY

	FREQUENCY NETWORKS, INC.


	By:	/s/ Blair Harrison
		Blair Harrison
		Chief Executive Officer

	Address:	4526 Wilshire Blvd.
		Los Angeles, CA 90010

Signed for and on behalf of YOD

	YOU ON DEMAND HOLDINGS, INC.


	By:	/s/ Bruno Wu
		Bruno Wu
		Chairman

	Address:	375 Greenwich Street, Suite 516
		New York, NY 10013

Exhibit A

Animals

Animation

Apps

Arts

Automotive

Best of Web

Business

Celebrity

Comedy

Design

Education

Fashion

Food

Gaming

Health&Fitness

How Tos

Ideas

Kids

Lifestyle

Movies

Music

Nature

News

News–Local

Original Web Shows

Politics

Reseaux Francais

Science

Space

Sports

Sports–Extreme

Tech

Top Vlogs

Travel

Viral Video

Japanese

Exhibit B

Form of Warrant

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Date of Issuance: April __, 2016

FREQUENCY NETWORKS, INC.

Warrant to Purchase Series A Preferred Stock

Frequency Networks, Inc., a Delaware corporation (the “ Company ”), for value received, hereby certifies that YOU On Demand Holdings, Inc. or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 1 below) the Shares (as defined below) at the Exercise Price (as defined in Section 1 below).

1. Certain Definitions .

(a) The term “ Exercise Price ” shall mean $0.42467 per share (as adjusted from time to time pursuant to the provisions hereof).

(b) The term “ Expiration Date ” shall mean the six (6) year anniversary of the date of this Warrant.

(c) The term “ Shares ” shall mean up to 3,000,000 shares of the Company’s Series A Preferred Stock (the “ Series A Preferred Stock ”) issuable upon exercise of this Warrant.

2. Exercise .

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the Exercise Price payable in respect of the number of Shares purchased upon such exercise. The Exercise Price may be paid by cash, check or wire transfer.

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 2(a) above. At such time, the person or persons in whose name or names any certificates for Shares shall be issuable upon such exercise as provided in Section 2(d) below shall be deemed to have become the holder or holders of record of the Shares represented by such certificates.

(i) In lieu of exercising this Warrant in the manner provided above in Section 2(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of Shares computed using the following formula:

X = Y (A - B) A

Where X = The number of Shares to be issued to the Registered Holder.

Y = The number of Shares purchasable under this Warrant (at the date of such calculation).

A = The fair market value of one Share (at the date of such calculation).

B = The Exercise Price (as adjusted to the date of such calculation).

(ii) For purposes of this Section 2(c), the fair market value of a Share on the date of calculation shall mean:

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock (an “ IPO ”), and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value shall be the product of (x) the initial “price to public” per share specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each Share is convertible at the date of calculation;

(B) if this Warrant is exercised after, and not in connection with, an IPO, and if the Company’s Common Stock is traded on a national securities exchange or actively traded over-the-counter:

(1) if the Company’s Common Stock is traded on a national securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a thirty (30) day period ending three (3) days before date of calculation and (y) the number of shares of Common Stock into which each Share is convertible on such date;

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid or sales price (whichever is applicable) over the thirty (30) day period ending three (3) days before the date of calculation and (y) the number of shares of Common Stock into which each Share is convertible on such date; or

(C) if neither (A) nor (B) is applicable, the fair market value of a Share shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for a Share sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors.

(d) Delivery to Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within five (5) days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

(i) a certificate or certificates for the number of Shares to which such Registered Holder shall be entitled, and

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 2(a) or 2(c) above.

3. Adjustments .

(a) Redemption or Conversion of Preferred Stock . If all of the Series A Preferred Stock for which this Warrant is exercisable (the “ Warrant Stock ”) is redeemed or converted into shares of Common Stock, then this Warrant shall automatically become exercisable for that number of shares of Common Stock equal to the number of shares of Common Stock that would have been received if this Warrant had been exercised in full and the shares of Warrant Stock received thereupon had been simultaneously converted into shares of Common Stock immediately prior to such event, and the Exercise Price shall be automatically adjusted to equal the number obtained by dividing (i) the aggregate Exercise Price of the shares of Warrant Stock for which this Warrant was exercisable immediately prior to such redemption or conversion, by (ii) the number of shares of Common Stock for which this Warrant is exercisable immediately after such redemption or conversion.

(b) Stock Splits and Dividends . If the outstanding shares of the Warrant Stock (or Common Stock issued upon conversion thereof) shall be subdivided into a greater number of shares or a dividend in securities of the Company shall be paid in respect of shares of Warrant Stock (or Common Stock issued upon conversion thereof), the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If the outstanding shares of Warrant Stock (or Common Stock issued upon conversion thereof) shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price in accordance with this Section 3, the number of Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

(c) Replacement of Securities upon Reorganization, etc. In the event of any reorganization or reclassification of the securities of Company (other than a change in par value or from no par value to par value, or from par value to no par value, or as a result of a subdivision or combination), or in the event of any consolidation or merger of the Company with or into another entity, or in the event of a sale of all or substantially all of the Company’s assets to another person or entity, at any time prior to the expiration of this Warrant, upon subsequent exercise of this Warrant the Registered Holder shall have the right to receive the same kind and number of shares of common stock and other securities, cash or other property as would have been distributed to the Registered Holder upon such reorganization, reclassification, consolidation or merger had the Registered Holder exercised this Warrant immediately prior to such reorganization, reclassification, consolidation, merger, or asset sale appropriately adjusted for any subsequent event described in this Section 3. The Registered Holder shall pay upon such exercise the Exercise Price that otherwise would have been payable pursuant to the terms of this Warrant. If any such reorganization, reclassification, consolidation or merger results in a cash distribution in excess of the then applicable Exercise Price, the holder may, at the Registered Holder’s option, exercise this Warrant under Section 2(c) of this Warrant. If any such reorganization, reclassification, consolidation or merger results in a cash distribution equal to or less than the then applicable Exercise Price (an “ Out-of-the-Money Change of Control ”), the Warrant (and the right to purchase securities upon exercise hereof) shall automatically terminate upon the closing of such Out of the Money Change of Control. In the event of any such reorganization, merger or consolidation (other than an Out-of-the-Money Change of Control), the corporation formed by such consolidation or merger or the corporation which shall have acquired the assets of the Company shall execute and deliver a supplement hereto to the foregoing effect, which supplement shall also provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Warrant.

(d) Adjustment Certificate . When any adjustment is required to be made in the number of Shares or the Exercise Price pursuant to this Section 3, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

(e) Acknowledgement . In order to avoid doubt, it is acknowledged that, for so long as this Warrant is exercisable for Warrant Stock, the holder of this Warrant shall be entitled to the benefit of all adjustments in the number of shares of Common Stock of the Company issuable upon conversion of the Warrant Stock of the Company which occur prior to the exercise of this Warrant, including without limitation, any increase in the number of shares of Common Stock issuable upon conversion as a result of a dilutive issuance of capital stock.

4. Transfers .

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant, the Shares and the Common Stock of the Company have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant, any Shares issued upon its exercise or any Common Stock issued upon conversion of the Shares in the absence of (i) an effective registration statement under the Securities Act as to this Warrant, such Shares or such Common Stock and registration or qualification of this Warrant, such Shares or such Common Stock under any applicable U.S. federal or state securities law then in effect, or (ii) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Shares issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

(b) Transferability . Except as expressly provided in this Warrant, this Warrant shall not be transferred, assigned, pledged, encumbered, hypothecated, conveyed in trust, gifted, transferred by bequest, devise or descent, or otherwise disposed of (collectively, a “ Transfer ”); provided, however , that the Registered Holder may Transfer this Warrant to an Affiliate only upon prior written notice to the Company and upon a properly executed assignment (in the form of Exhibit B hereto) delivered to the principal office of the Company, and, provided further that the permitted transferee agrees in writing to be bound by the terms hereof in a manner reasonably acceptable to the Company. For purposes of this Warrant, “ Affiliate ” means, with respect to Registered Holder, any individual, corporation, partnership, trust, limited liability company, association or other entity (a “ Person ”) who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. Any purported Transfer by the Registered Holder of this Warrant in violation of this Section 4 hereof shall be voidable by the Company. The Company need not register a transfer of legended Warrant stock, and may also instruct its transfer agent not to register the transfer of the Warrant stock, unless the conditions specified in each of the foregoing legends are satisfied.

(c) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of the Warrants. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

5. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

6. Stock Fully Paid . The Company covenants and agrees to take all actions within its control to assure that all Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder and free of all taxes, liens and charges with respect to the issue thereof. The Company will take all such actions as may be reasonably necessary that are within its control to assure that such Shares may be issued as provided herein without violation of any applicable law or regulation; provided, however, that the Company shall not be required to effect a registration under Federal or State securities laws with respect to such exercise.

7. Early Termination . In the event of, at any time prior to the Expiration Date, an IPO, the Company shall provide to the registered Holder forty-five (45) days advance written notice of such IPO and this Warrant shall be deemed exercised pursuant to Section 2(c) immediately prior to the date such IPO is closed. The Warrant (and the right to purchase securities upon exercise hereof) shall automatically terminate upon the closing of an Out-of-the-Money Change of Control.

8. Notices of Certain Transactions . In case:

(a) the Company shall take a record of the holders of its Preferred Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

(b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company, or

(d) of any redemption of the Warrant Stock or mandatory conversion of the Preferred Stock into Common Stock of the Company,

then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation, winding-up, redemption or conversion is to take place, and the time, if any is to be fixed, as of which the holders of record of Warrant Stock (or such other stock or securities at the time deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation, winding-up, redemption or conversion) are to be determined. Such notice shall be mailed at least twenty (20) days prior to the record date or effective date for the event specified in such notice.

9. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such Shares and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

10. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 4 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of Shares called for on the face or faces of the Warrant or Warrants so surrendered.

11. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

12. Mailing of Notices . Any notice required or permitted pursuant hereto shall be made in accordance with the terms of the Purchase Agreement.

13. No Rights or Liabilities as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights, or be subject to any liability, by virtue hereof as a stockholder of the Company with respect to the Shares.

14. No Fractional Shares . No fractional Shares will be issued in connection with any exercise hereunder. In lieu of any fractional Shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one Share on the date of exercise, as determined in good faith by the Company’s Board of Directors.

15. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the Company and the Registered Holder. Any such amendment or waiver shall be enforceable against the Registered Holder, and the Company.

17. Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

18. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

[Signature Page Follows]

This Warrant was executed as of the date first set forth above.

	FREQUENCY NETWORKS, INC.


	By:

	Name: Blair Harrison

	Title: Chief Executive Officer

	Address:	4526 Wilshire Blvd.
		Los Angeles, CA 90010

SIGNATURE PAGE TO WARRANT

EXHIBIT A

PURCHASE/EXERCISE FORM

To: Frequency Networks, Inc.

Dated:

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects to (circle one) :

(a) purchase _____________ shares of the Series A Preferred Stock covered by such Warrant and herewith makes payment of $ _________ , representing the full purchase price for such shares at the price per share provided for in such Warrant, or

(b) exercise such Warrant for ___________ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 2(c) of such Warrant.

	YOU ON DEMAND HOLDINGS, INC.

	By:

	Name:

	Title:

EXHIBIT B

ASSIGNMENT FORM

FOR VALUE RECEIVED, YOU On Demand Holdings, Inc. hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Series A Preferred Stock covered thereby set forth below, unto:

Name of Assignee

Address/Facsimile Number

No. of Shares

Dated: ________________

	YOU On Demand Holdings, Inc.


	By:

	Name:

	Title:

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made on the 13th day of April, 2016, by and among Frequency Networks, Inc., a Delaware corporation (the “ Company ”), and the investors listed on Exhibit A hereto (each, an “ Investor ” and collectively, the “ Investors ”).

WITNESSETH:

WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase from the Company, shares of the Company’s Series A Preferred Stock (the “ Series A Preferred Stock ”) on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Purchase and Sale of Stock .

1.1 Sale and Issuance of Series A Preferred Stock .

(a) The Company shall adopt and file with the Secretary of State of Delaware on or before the Closing (as defined below) the Certificate of Amendment to the Amended and Restated Certificate of Incorporation in the form attached hereto as Exhibit C (the “ Certificate of Amendment ”).

(b) On or prior to the Closing (as defined below), the Company shall have authorized (i) the sale and issuance to the Investors of up to 30,627,957 shares of its Series A Preferred Stock (the “ Shares ”) and (ii) the issuance of the shares of Common Stock to be issued upon conversion of the Shares (the “ Conversion Shares ”). The Shares and the Conversion Shares shall have the rights, preferences, privileges and restrictions set forth in the Amended and Restated Certificate of Incorporation, as amended by the Certificate of Amendment (the “ Restated Certificate ”).

(c) Subject to the terms and conditions of this Agreement, each Investor agrees, severally and not jointly, to purchase at the Closing or pursuant to Section 1.2, and the Company agrees to sell and issue to each Investor at the Closing or pursuant to Section 1.2, that number of Shares set forth opposite each Investor’s name on Exhibit A hereto for $0.42467 per share or $0.141557 per share, as applicable (the “ Purchase Price ”).

1.2 Closing . The purchase, sale and issuance of the Shares shall take place at one or more closings as described below (each of which is referred to in this Agreement as a “ Closing ”).

(a) First Closing . The initial purchase and sale of the Shares shall take place remotely via the exchange of documents and signatures on the date hereof, or at such other time and place as the Company and Investors acquiring in the aggregate at least a majority of the Shares mutually agree upon orally or in writing (which time and place are designated as the “ First Closing ”). At the First Closing, the Company shall deliver to each Investor a certificate representing the Shares that such Investor is purchasing against payment of the purchase price therefor by check, wire transfer, cancellation of indebtedness or any combination thereof. If payment by an Investor is made, in whole or in part, by conversion of indebtedness, then such Investor shall surrender to the Company for cancellation at the Closing any evidence of such indebtedness or shall execute an instrument of cancellation in form and substance acceptable to the Company.

(b) Additional Closings .

(i) The Company may sell and issue up to the balance of the Shares not sold at the First Closing at additional subsequent Closings occurring within 90 days after the First Closing (the “ Additional Closings” ) to additional investors (the “ Additional Closing Investors ”) who are approved by the Company. At each Additional Closing, the Company shall deliver to each Additional Closing Investor, and to each of the Investors for each Additional Closing in which such Investors participate, a certificate representing the Shares that such Additional Closing Investor or Investor is purchasing against payment of the purchase price therefor by check, wire transfer, cancellation of indebtedness or a combination thereof.

(ii) Any such sale and issuance in an Additional Closing shall be on the same terms and conditions as those contained herein, and such persons or entities who are new investors shall, upon execution and delivery of the relevant signature pages, become parties to, and be bound by, this Agreement and the other Related Agreements (as defined in Section 2.4 hereof), without the need for an amendment to this Agreement or any of the Related Agreements except to add such new investor’s name, notice information, and if called for, its investment and/or stockholdings of the Shares, to the appropriate exhibit or schedule to such agreement (collectively, the “ Informational Amendments ”), and shall be deemed an “Investor” for all intents and purposes and shall have the rights and obligations hereunder and thereunder, in each case as of the date of the applicable Additional Closing.

(iii) Notwithstanding the foregoing, if either entities affiliated with Liberty Global (“ Liberty ”) or entities affiliated with Oakmont (“ Oakmont ”) purchase at least 7,000,000 Shares in an Additional Closing (as adjusted for any stock dividends, combinations, splits or the like with respect to such shares), the Company and each Investor that is a party to this Agreement at the time of such Additional Closing shall enter into and deliver to the Company an amendment to the Voting Agreement in a form mutually acceptable to the Company, Liberty and Oakmont providing for the right of Liberty and/or Oakmont (as applicable) to appoint a member of the Company’s board of directors.

1.3 Use of Proceeds . The Company shall use the proceeds from the issuance and sale of the Shares for (a) the purchase of the shares of Series A Preferred Stock held by Kingdom Capital Market LLC for an aggregate purchase price of not more than $1,000,000.00 and (b) general working capital purposes.

2. Representations and Warranties of the Company . The Company hereby represents and warrants to each Investor that, except as set forth on a Schedule of Exceptions (the “ Schedule of Exceptions ”) furnished to each Investor prior to execution hereof and attached hereto as Exhibit B , which exceptions shall be deemed to be representations and warranties as if made hereunder:

2.1 Organization, Good Standing and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business, properties or financial condition (a “ Material Adverse Effect ”). The Company has all required corporate power and authority to own its property and to carry on its business as presently conducted or contemplated to be conducted.

2.2 Capitalization and Voting Rights . The authorized capital of the Company consists of:

(a) Preferred Stock . Sixty-Six Million Seven Hundred Thousand (66,700,000) shares of Preferred Stock, par value $0.001, all of which have been designated Series A Preferred Stock, Thirty-Three Million Sixty-Nine Thousand One Hundred Seventy-Three (33,069,173) of which are issued and outstanding. The rights, privileges and preferences of the Series A Preferred Stock are as stated in the Restated Certificate.

(b) Common Stock . One Hundred Thirteen Million (113,000,000) shares of Common Stock, par value $0.001 (the “ Common Stock ”), of which Nineteen Million Seven Hundred Sixty-Three Thousand Sixty (19,763,060) shares are issued and outstanding. The outstanding shares of Common Stock are all duly and validly authorized and issued, fully paid and nonassessable, and were issued in accordance with the registration or qualification provisions of the Securities Act of 1933, as amended (the “ Act ”) and any relevant state securities laws, or pursuant to valid exemptions therefrom.

(c) Options to purchase an aggregate of 5,237,820 shares of Common Stock are outstanding under the Company’s Stock Incentive Plan (the “ Stock Plan ”), duly adopted by the Company’s Board of Directors and approved by the Company’s stockholders, and 500,000 shares of restricted Common Stock have been issued under the Stock Plan. Options to purchase an aggregate of 10,066,380 shares are available for grant under the Stock Plan.

(d) Except for (i) the conversion privileges of the Series A Preferred Stock; (ii) the rights provided in Section 2.4 of the Investors’ Rights Agreement; (iii) the currently outstanding warrants to purchase up to 8,028,533 shares of Common Stock; (iv) the currently outstanding warrant exercisable for the purchase of 3,000,000 shares of Series A Preferred Stock; and (v) the securities set forth in Section 2.2(c) above, there are no outstanding options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock. Other than in connection with the transactions contemplated hereby, the Company is not a party or subject to any agreement or understanding, and, to the Company’s knowledge, there is no agreement or understanding between any persons and/or entities, that affects or relates to the voting or giving of written consents with respect to any security or by a director of the Company.

(e) All outstanding securities of the Company, including, without limitation, all outstanding shares of the capital stock of the Company, all shares of the capital stock of the Company issuable upon the conversion or exercise of all convertible or exercisable securities and all other securities that the Company is obligated to issue, are subject to a “market stand-off” restriction for up to 180 days following an initial public offering of the Company’s securities pursuant to a registration statement filed with the Securities and Exchange Commission pursuant to the Act in a form substantially identical to Section 1.15 of the Investors’ Rights Agreement.

2.3 Subsidiaries . The Company does not presently own or control, directly or indirectly, any interest in any other corporation, association or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.

2.4 Authorization . All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Omnibus Amendment to Series A Financing Documents dated as of the date hereof (the “ Omnibus Amendment ”) amending the Investors’ Rights Agreement dated August 12, 2013, by and among the Company and the other parties thereto(the “ Investors’ Rights Agreement ”), the Right of First Refusal and Co-Sale Agreement dated August 12, 2013 by and among the Company and the other parties thereto (the “ Right of First Refusal and Co-Sale Agreement ”) and the Voting Agreement dated August 12, 2013, as amended by that certain Amendment to Voting Agreement, dated February 6, 2014, by and among the Company and the parties thereto (the “ Voting Agreement ” and collectively with the Investors’ Rights Agreement and the Right of First Refusal and Co-Sale Agreement, each as amended by the Omnibus Amendment, the “ Related Agreements ”), the performance of all obligations of the Company hereunder and thereunder and the authorization (or reservation for issuance), sale and issuance of the Shares being sold hereunder and the Conversion Shares has been taken or will be taken prior to the Closing. This Agreement and the Related Agreements constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained in the Investors’ Rights Agreement may be limited by applicable federal or state securities laws.

2.5 Valid Issuance of Preferred and Common Stock . The Shares that are being purchased by the Investors hereunder, when issued, sold and delivered in accordance with the terms of this Agreement and the Restated Certificate for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and will be free of restrictions on transfer, other than restrictions on transfer under this Agreement and under applicable state and federal securities laws. The Conversion Shares have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Restated Certificate and upon conversion of the Shares, will be duly and validly issued, fully paid and nonassessable and will be free of restrictions on transfer, other than restrictions on transfer under this Agreement and the Related Agreements and under applicable state and federal securities laws.

2.6 Governmental Consents . No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for: (i) the filing of a Notice of Transaction pursuant to Section 25102(f) of the California Corporate Securities Law of 1968, as amended, and the rules thereunder (the “ Law ”), which filing will be effected within the time prescribed by law, and (ii) such other filings required pursuant to applicable federal and state securities laws and blue sky laws, which filings will be effected within the required statutory period.

2.7 Offering . Subject in part to the truth and accuracy of each Investor’s representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Act, and the qualification or registration requirements of the Law or other applicable blue sky laws. Neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemptions.

2.8 Litigation . There is no action, suit, proceeding or investigation pending, or to the Company’s knowledge, currently threatened against the Company including any actions, suits, proceedings, or investigations, that question the validity of this Agreement or the Related Agreements or the right of the Company to enter into such agreements or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in any Material Adverse Effect or in any material change in the current equity ownership of the Company, nor is the Company aware of any reasonable basis for the foregoing. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.

2.9 Proprietary Information and Inventions Agreements . Each current employee, officer and consultant of the Company has executed a Proprietary Information and Inventions Agreement in substantially the form attached hereto as Exhibit D , or an agreement containing substantially similar terms. The Company is not aware that any of its employees, officers or consultants are in violation thereof.

2.10 Patents and Trademarks . To the Company’s knowledge, the Company owns patents, patent rights, trademarks and trademark rights, service marks, service mark rights, trade names, trade name rights, copyrights, trade secrets, information and other proprietary rights and processes necessary to conduct its business as now being conducted and as proposed to be conducted without conflict with or infringement upon any valid rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard generally commercially available products. The Company has not received any written communications alleging that the Company has violated or, by conducting its business as presently proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity and the Company is not aware of any basis for such an allegation. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his or her best efforts to promote the interests of the Company or that would conflict with the Company’s business as presently conducted or as proposed to be conducted. Neither the execution nor delivery of this Agreement or the Related Agreements, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as proposed, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. The Company does not believe it is or will be necessary to utilize any inventions of any of its employees made prior to or outside the scope of their employment by the Company.

2.11 Compliance with Other Instruments . The Company is not in violation of any provision of its Restated Certificate or Bylaws nor in any material respect of any instrument, judgment, order, writ, decree or contract, statute, rule or regulation to which the Company is subject. The execution, delivery and performance of this Agreement, the Related Agreements and the consummation of the transactions contemplated hereby or thereby will not result in any such violation, or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties.

2.12 Agreements; Action .

(a) Except for agreements explicitly contemplated hereby (including the Related Agreements), there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates or any affiliate thereof.

(b) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or by which it is bound that may involve (i) obligations (contingent or otherwise) of, or payments to the Company, in excess of $20,000, or (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company, other than licenses arising from the purchase of “off the shelf” or other standard products, (iii) provisions materially restricting the development, manufacture or distribution of the Company’s products or services or (iv) indemnification by the Company with respect to infringement of proprietary rights.

(c) The Company has not (i) declared or paid any dividends or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or any other liabilities individually in excess of $20,000 or, in the case of indebtedness and/or liabilities individually less than $50,000, in excess of $75,000 in the aggregate, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights.

(d) For the purposes of subsections (b) and (c) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

2.13 Related-Party Transactions . Except as set forth in the Schedule of Exceptions, no employee, officer or director of the Company (a “ Related Party ”) or member of such Related Party’s immediate family or any corporation, partnership or other entity in which such Related Party is an officer, director or partner, or in which such Related Party has significant ownership interest or otherwise controls is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them. To the Company’s knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that employees, officers or directors of the Company and members of their immediate families may own stock in publicly traded companies that may compete with the Company. No employee, officer or director of the Company nor any member of the immediate family of any employee, officer or director of the Company is directly or indirectly interested in any material contract with the Company.

2.14 Financial Statements . The Company has delivered or made available to each Investor its unaudited financial statements as of and for the twelve (12) months ended December 31, 2015, and its unaudited financial statements at and for the month ended January 31, 2016 (together, the “Financial Statements”). The Financial Statements fairly present, in all material respects, the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, and have been prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis, subject to year-end audit adjustments and except that the Financial Statements may not contain all footnotes required by U.S. generally accepted accounting principles. Except as set forth in the Financial Statements, the Company has no material liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business consistent with past practices subsequent to January 31, 2016 and (ii) obligations under contracts and commitments incurred in the ordinary course of business consistent with past practices and not required under U.S. generally accepted accounting principles to be reflected in the Financial Statements.

2.15 Changes . Since January 31, 2016, there has not been:

(a) any change in the assets, liabilities, financial condition or operating results of the Company, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect;

(b) any damage, destruction or loss, whether or not covered by insurance, that has resulted in a Material Adverse Effect;

(d) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(e) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;

(f) any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase or other acquisition of any of such stock by the Company;

(g) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable;

(h) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not result in a Material Adverse Effect; or

(i) any agreement or commitment by the Company to do any of the things described in this Section 2.15.

2.16 Permits . The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could materially and adversely affect the business, properties or financial condition of the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

2.17 Title to Property and Assets . The property and assets the Company owns are owned by the Company free and clear of all mortgages, liens, loans and encumbrances, except (i) for statutory liens for the payment of current taxes that are not yet delinquent, and (ii) for liens, encumbrances and security interests that arise in the ordinary course of business and minor defects in title, none of which, individually or in the aggregate, materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in material compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances, subject to clauses (i) and (ii) above.

2.18 Employee Benefit Plans . The Company does not have any Employee Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.

2.19 Employees . There is no labor union organizing activity pending, or to the Company’s knowledge, threatened with respect to the Company. To the Company’s knowledge: (a) no employee of the Company is in violation of any term of any employment contract, patent or other proprietary information disclosure agreement or any other contract or agreement relating to the right of any such employee to be employed by the Company because of the nature of the business conducted or proposed to be conducted by the Company or any other reason, and the continued employment by the Company of its present employees will not result in any such violation; (b) no officer or key employee of the Company has any present intention of terminating his or her employment therewith nor does the Company have any present intention of terminating any such employment; and (c) the Company is in material compliance with applicable state and federal laws and regulations respecting employment and employment practices, terms and conditions of employment, wages and hours and other laws related to employment, and there are no arrears in the payments of wages, withholding or social security taxes, unemployment insurance premiums or other similar obligations. The employment of each officer and employee of the Company is terminable at the will of the Company. The Company is not a party to or bound by any currently effective employment contract, deferred compensation agreement, bonus plan, incentive plan, profit sharing plan or retirement agreement.

2.20 Corporate Documents . Except for amendments necessary to satisfy the representations, warranties or conditions contained in this Agreement (the form of which amendments has been approved by the Investors), the Restated Certificate and Bylaws of the Company are in the form previously provided to special counsel for the Investors.

2.21 Registration Rights . Except as provided in the Investors’ Rights Agreement, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.

2.22 Section 83(b) Elections . To the Company’s knowledge, all individuals who have purchased unvested shares of the Company’s Common Stock have timely filed elections under Section 83(b) of the Internal Revenue Code of 1986, as amended, (the “ Code ”) and any analogous provisions of applicable state tax laws.

2.23 Qualified Small Business Stock . As of and immediately following the Closing, to the knowledge of the Company, the Shares being issued and sold to the Investors hereunder will meet each of the requirements for qualification as “qualified small business stock” within the meaning of Sections 1202 and 1045 of the Internal Revenue Code of 1986, as amended and Section 18152.5 and 18038.5 of the California Revenue and Taxation Code.

2.24 Foreign Corrupt Practices Act . Neither the Company nor any of the Company’s directors, officers, employees or agents has, directly or indirectly, made, offered, promised or authorized any payment or gift of any money or anything of value to or for the benefit of any “foreign official” (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA ”)), foreign political party or official thereof or candidate for foreign political office for the purpose of (i) influencing any official act or decision of such official, party or candidate, (ii) inducing such official, party or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, or (iii) securing any improper advantage, in the case of (i), (ii) and (iii) above in order to assist the Company or any of its affiliates in obtaining or retaining business for or with, or directing business to, any person. Neither the Company nor any of its directors, officers, employees or agents has made or authorized any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation. As of immediately prior to the Closing, neither the Company nor any of its officers, directors or employees were the subject of any allegation, voluntary disclosure, investigation, prosecution or other enforcement action related to the FCPA, UK Bribery Act or any other anti-corruption law (collectively, “ Enforcement Action ”).

2.25 Disclosure . The Company has fully provided each Investor with all the information that such Investor has requested for deciding whether to purchase the Shares. Neither this Agreement, the Related Agreements nor any certificate made or delivered to the Investors in connection with this Agreement or the Related Agreements contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

3. Representations and Warranties of the Investors . Each Investor, severally and not jointly, hereby represents, warrants and covenants that:

3.1 Authorization . Such Investor has full power and authority to enter into this Agreement and such agreement constitutes its valid and legally binding obligation, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification provisions contained in the Investors’ Rights Agreement may be limited by applicable federal or state securities laws.

3.2 Purchase Entirely for Own Account . This Agreement is made with such Investor in reliance in part upon such Investor’s representation to the Company, which by such Investor’s execution of this Agreement such Investor hereby confirms, that the Shares to be received by such Investor and the Conversion Shares (collectively, the “ Securities ”) will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in or otherwise distributing the same. By executing this Agreement, such Investor further represents that such Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.

3.3 Disclosure of Information . Such Investor believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Shares. Such Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Investors to rely thereon.

3.4 Investment Experience . Such Investor is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Shares. If other than an individual, such Investor also represents it has not been organized for the purpose of acquiring the Shares.

3.5 Accredited Investor . Such Investor is an “accredited investor” within the meaning of Securities and Exchange Commission (“ SEC ”) Rule 501 of Regulation D, as presently in effect.

3.6 Restricted Securities . Such Investor understands that the Securities it is purchasing are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Securities may be resold without registration under the Act only in certain limited circumstances. In the absence of an effective registration statement covering the Securities or an available exemption from registration under the Act, the Shares (and any Common Stock issued on conversion thereof) must be held indefinitely. In this connection, such Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act, including without limitation the Rule 144 condition that current information about the Company be available to the public. Such information is not now available and the Company has no present plans to make such information available.

3.7 Further Limitations on Disposition . Without in any way limiting the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until:

(a) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

(b) (i) Such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if requested by the Company, such Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances.

(c) Notwithstanding the provisions of subsections (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by an Investor that is (i) a partnership to an affiliate, a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her spouse; (ii) a corporation, to its stockholders in accordance with their interest in the corporation; (iii) a limited liability company, to its members or former members in accordance with their interest in the limited liability company; (iv) a venture fund to affiliated funds; or (v) to the Investor’s family member or trust for the benefit of the individual Investor, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if he or she were an original Investor hereunder.

3.8 Legends . It is understood that the certificates evidencing the Securities may bear one or all of the following legends:

(a) “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”

(b) Any legend required by the securities laws of any state or other governmental or regulatory agency having authority over the issuance of the Securities.

3.9 Tax Advisors . Such Investor has reviewed with such Investor’s own tax advisors the federal, state and local tax consequences of this investment, where applicable, and the transactions contemplated by this Agreement. Each such Investor is relying solely on such advisors and not on any statements or representations of the Company or any of its agents and understands that each such Investor (and not the Company) shall be responsible for such Investor’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

3.10 Exculpation Among Investors . Each Investor acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Investor agrees that no Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Securities.

4. California Commissioner of Corporations . THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

5. Conditions of Investor’s Obligations at Closing . The obligations of each Investor under subsection 1.2 of this Agreement are subject to the fulfillment of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent in writing thereto:

5.1 Representations and Warranties . The representations and warranties of the Company contained in Section 2 shall be true on and as of the First Closing with the same effect as though such representations and warranties had been made on and as of the date of such First Closing.

5.2 Performance . The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the First Closing.

5.3 Compliance Certificate . The Chief Executive Officer of the Company shall deliver to each Investor at the First Closing a certificate stating that the conditions specified in Sections 5.1 and 5.2 have been fulfilled.

5.4 Qualifications . All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing.

5.5 Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Investors, and they shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request.

5.6 Opinion of Company Counsel . The Investors shall have received an opinion from O’Melveny & Myers LLP, counsel for the Company, dated as of the First Closing, substantially in the form attached hereto as Exhibit E .

5.7 Omnibus Amendment . The Company shall have entered into the Omnibus Amendment attached as Exhibit F hereto with the other parties thereto.

5.8 Secretary’s Certificate . The Secretary or Assistant Secretary of the Company shall deliver to each Investor at the First Closing a certificate stating that the copies of the Company’s Restated Certificate and Bylaws and Board of Directors and stockholder resolutions relating to the sale of the Shares attached thereto are true and complete copies of such documents and resolutions.

5.9 Proprietary Information and Inventions Agreements . Each employee, officer and consultant of the Company shall have entered into a Proprietary Information and Inventions Agreement, or an agreement containing substantially similar terms.

6. Conditions of the Company’s Obligations at Closing . The obligations of the Company to each Investor under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions by that Investor:

6.1 Representations and Warranties . The representations and warranties of the Investors contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

6.2 Payment of Purchase Price . The Investors shall have delivered the purchase price specified in Section 1.

6.3 Qualifications . All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be duly obtained and effective as of the Closing.

7. Miscellaneous .

7.1 Survival . The warranties, representations and covenants of the Company and Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investors or the Company.

7.2 Successors and Assigns . Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

7.3 Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware, without regard to conflicts of laws principals.

7.4 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

7.5 Notices . All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (iii) two days after being sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the address as set forth on the signature page hereof or at such other address as such party may designate by ten days’ advance written notice to the other parties hereto.

7.6 Finder’s Fee . Each party represents that it neither is nor will be obligated for any finders’ fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending against such liability or asserted liability) for which such Investor or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

7.7 Expenses . Irrespective of whether the Closing is effected, each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement and the Related Agreements. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the Related Agreements, or the Restated Certificate, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

7.8 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Common Stock not previously sold to the public that is issuable or issued upon conversion of the Shares. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities and the Company.

7.9 Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

7.10 Entire Agreement . This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.

7.11 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument

7.12 Aggregation of Stock . All Shares held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

[ Signature Pages Follow ]

IN WITNESS WHEREOF, the parties have executed this Series A Preferred Stock Purchase Agreement as of the date first above written.

COMPANY:

FREQUENCY NETWORKS, INC.

By:	/s/ Blair Harrison
	Blair Harrison
	Chief Executive Officer

Address:	4526 Wilshire Blvd.
	Los Angeles, CA 90010

[S IGNATURE P AGE TO S TOCK P URCHASE A GREEMENT ]

IN WITNESS WHEREOF, the parties have executed this Series A Preferred Stock Purchase Agreement as of the date first above written.

INVESTORS:

YOU ON DEMAND HOLDINGS, INC.

By:	/s/ Bruno Wu
	Name: Bruno Wu
	Title: Chairman

Address:	375 Greenwich Street, Suite 516
	New York, NY 10013

[S IGNATURE P AGE TO S TOCK P URCHASE A GREEMENT ]

IN WITNESS WHEREOF, the parties have executed this Series A Preferred Stock Purchase Agreement as of the date first above written.

INVESTORS:

POINT BLANK CAPITAL, LLC

By:	/s/ Michael Gordon
Name:	Michael Gordon
Title:	Member / Manager

Address:

[S IGNATURE P AGE TO S TOCK P URCHASE A GREEMENT ]

IN WITNESS WHEREOF, the parties have executed this Series A Preferred Stock Purchase Agreement as of the date first above written.

INVESTORS:

FRENET HOLDINGS, LLC

By:	/s/ J.P. Nauseef
Name: J.P. Nauseef
Title: Manager

Address:

3025 Ridgeway Rd
Dayton, Ohio 45419

[S IGNATURE P AGE TO S TOCK P URCHASE A GREEMENT ]

EXHIBIT A

Schedule of Investors

First Closing, April 13, 2016

Investor	Shares at $0.42467 per share	Cash Consideration	Conversion of Indebtedness	Shares at $0.141557 per share	Cash Consideration	Conversion of Indebtedness	Total Shares	Total Consideration
You on Demand Holdings, Inc.	4,208,885	$1,787,387.34	$0	1,501,962	$212,612.73	$0	5,710,847	$2,000,000.07
FreNet Holdings, LLC [1].	856,033	$0	$363,531.51	305,480	$0	$43,242.69	1,161,513	$406,774.19
Point Blank Capital LLC	3,708,762	$0	$1,575,000.00	0	$0	$0	3,708,762	$1,575,000.00

[1] The conversion of interest accrued on the principal amount of the Promissory Note, by and between the Company and FreNet Holdings LLC, dated February 9, 2016, is calculated through April 11, 2016; FreNet Holdings LLC agrees that any interest accrued after such date will be paid in cash.

Subsequent Closing, April 2, 2016

Investor	Shares at $0.42467 per share	Cash Consideration	Shares at $0.141557 per share	Cash Consideration	Total Shares	Total Consideration
You on Demand Holdings, Inc.	2,104,443	$893,693.66	750,981	$106,306.36	2,855,424	$1,000,000.02

GAME RIGHTS ASSIGNMENT AGREEMENT

This Assignment Agreement (“Agreement”) is made and entered into as of April 13, 2016 (the “Effective Date”) by and between Beijing Sun Seven Stars Cultural Development Limited (the “ Assignor ”), a PRC entity located at Eastern Fangzheng Road, Southern Dongying Village, Hancunhe Town, Fangshan District, Beijing City, P.R.C and Tianjin Sevenstarflix Network Technology Limited (the “ Assignee ”), a PRC entity located at Suite 305-55, 3/F, Zonghe Service Building D, Nangang Industrial Zone of Tianjin Economic Development Zone, Tianjin, PRC in connection with the following facts. The parties shall hereinafter be referred to individually as a “Party”, or collectively as the “Parties”.

In consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

ASSET

Assignor represents and warrants that it is the sole, perpetual (except for the assignment made by Assignor to Assignee under Section 2), and worldwide owner of the Chinese-language game rights to the following to-be developed content:

	•	“Titanic Code”, which is based off of a to-be-developed animated film.
	•	“Special Forces Heroine” (otherwise known as Eastern Angels), which is based off of an animated film.
	•	“108 Heroes 1” (otherwise known as “Water Margin” or “Outlaws of the Marsh), which is based off of an animated film.
	•	“108 Heroes 2” (otherwise known as “Water Margin” or “Outlaws of the Marsh), which is based off of an animated film.
	•	“Knights in Paradise” (otherwise known as “Peak Time”) which is based off of an animated film.
	•	“The Dog Movie” (Chinese title: 福犬归家路 ) which is based off of an animated film.

The abovementioned contents are herein referred to collectively as the “Asset” or “Assets”.

ASSIGNMENT OF GAME RIGHTS

In consideration of certain payments discussed herein, the Parties agree that Assignor hereby grants to Assignee all of its rights in the Assets for purposes of developing, producing and distributing Chinese-language games and video games of all formats and types including, but not limited to, card-based video games, mobile and internet games, role playing games, action role playing games, and massively multiplayer online role playing games based on the Assets (the “Game Rights”). Without limiting the generality of the foregoing, the Parties acknowledge and agree that (a) Assignee may sub-license the Game Rights, in part or in whole, to any third-parties as designated by the Assignee, without the need to notify Assignor or obtain Assignor’s consent; and (b) Assignee owes no duty of accounting to Assignor when exercising the Game Rights. At Assignee’s request, Assignor will provide Assignee with access to the scripts, story lines, still frames and other mutually-agreed upon elements of the Assets to assist Assignee with the development, production and distribution of the games described in this Section 2. Assignor will be solely responsible for obtaining all rights, licenses and releases (including, but not limited to, right of publicity releases and music licenses) necessary for Assignee to use the Game Rights to develop, produce and distribute such games.

PAYMENT

As consideration for all rights assigned to Assignee, Assignee agrees to pay Assignor, and Assignor agrees to accept, a payment of Eighteen Million Chinese Yuan (RMB18,000,000) (the “Fee”). Assignor will invoice Assignee for the Fee on or after the Effective Date. Payment of such invoice will be due within thirty (30) days after the date that Assignee receives the invoice. If any of the six (6) films listed in Section 1 are not fully and finally developed and distributed to the public or if the name or description of any of the six (6) films listed in Section 1 are changed or altered, the Assignor shall compensate the Assignee for any direct losses incurred.

WARRANTY & INDEMNIFICATION

Assignor represents and warrants to Assignee that: (a) Assignor is the exclusive proprietor, throughout the world, of the Game Rights; (b) that Assignor has not assigned or nor in any manner encumbered, diminished, licensed or impaired these rights that would interfere with Assignee’s rights under this Agreement; (c) it has all rights necessary to grant the assignment under this Agreement; and (d) the Game Rights, when used as permitted under this Agreement, will not be unlawful or libelous and will not violate or infringe any common law or statutory right of any person or other entity. Assignor further represents and warrants that no attempt hereafter will be made to encumber, diminish or impair any of the rights herein assigned and that all appropriate protections of such rights will continue to be maintained by Assignor.

EXCEPT FOR THE FOREGOING REPRESENTATIONS AND WARRANTIES, THE PARTIES MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED.

Assignor shall indemnify, defend and hold harmless Assignee and its affiliates, and their respective directors, officers, employees, agents, successors, assigns, licensees and distributors, from and against any and all judgments, settlements, damages, penalties, costs and expenses (including, but not limited to, reasonable attorneys’ fees) arising out of any third party claim (i) relating to Assignor’s breach of its warranties, representations, covenants or agreements hereunder; and/or (ii) that any of the Game Rights, used as permitted under this Agreement, violates or infringes any copyright, privacy, publicity, trademark, service mark, patent, or any other right of any third party and/or is unlawful or libelous.

ASSIGNMENT

This Agreement may be assigned or transferred by either Party to any of its designees or affiliates, who would be bound by the same rights and obligations as the transferring party. This Agreement will be binding upon, and inure to the benefit of, the respective permitted assignees, transferees and successors of each of the parties.

CONFIDENTIALITY

“Confidential Information” means all non-public information about the disclosing party’s business or activities that is marked or designated by such party as “confidential” or “proprietary” at the time of disclosure or that reasonably would be understood to be confidential given the circumstances of disclosure. Notwithstanding the foregoing, Confidential Information does not include information that: (a) is in or enters the public domain without breach of this Agreement; (b) the receiving party lawfully receives from a third party without restriction on disclosure and without breach of a nondisclosure obligation; (c) the receiving party rightfully knew prior to receiving such information from the disclosing party; or (d) the receiving party develops entirely independently of, and without any access or reference to or use of, any Confidential Information communicated to the receiving party by the disclosing party. Each party agrees that (i) it will not disclose to any third party any Confidential Information disclosed to it by the other party except as expressly permitted in this Agreement; (ii) it will only permit access to Confidential Information of the disclosing party to those of its employees or authorized representatives or advisors (including, without limitation, the receiving party’s auditors, accountants, and attorneys) having a need to know and who, prior to obtaining such access, are legally bound to protect the disclosing party’s Confidential Information at least to the same extent as set forth herein; (iii) it will use any Confidential Information disclosed to it by the other party only for the purpose of performing its obligations or exercising its rights under this Agreement and not for any other purpose, whether for such party’s own benefit or the benefit of any third party; (iv) it will maintain the confidentiality of all Confidential Information of the other party in its possession or control; and (v) at any time the disclosing party may so request, it will deliver promptly to the disclosing party, or, at the disclosing party’s option, it will destroy, all Confidential Information of the disclosing party that it may then possess or have under its control. Notwithstanding the foregoing, each party may disclose Confidential Information of the other party to the extent required by a court of competent jurisdiction or other governmental authority or otherwise as required by law, provided that such party will, as soon as reasonably practicable, provide the disclosing party with written notice of such requirement so that the disclosing party may seek a protective order or other appropriate remedy. The receiving party and its representatives will cooperate fully with the disclosing party to obtain any such protective order or other remedy. If the disclosing party elects not to seek, or is unsuccessful in obtaining, any such protective order or similar remedy and if the receiving party receives advice from reputable legal counsel confirming that the disclosure of Confidential Information is required pursuant to applicable law, then the receiving party may disclose such Confidential Information to the extent required; provided, however, that the receiving party will use commercially reasonable efforts to ensure that such Confidential Information is treated confidentially by each party to which it is disclosed.

ARBITRATION AND JURISDICTION

This Agreement will be interpreted and governed by PRC laws. Any controversy or claim arising out of or in relation to this Agreement or the validity, construction or performance of this Agreement, or the breach thereof, shall be resolved by arbitration in accordance with the rules and procedures of the Beijing Arbitration Committee if it cannot be settled through the negotiation.

ENTIRE AGREEMENT

This Agreement is intended by the parties hereto as a final expression of their Agreement and understanding with respect to the subject matter hereof and as a complete and exclusive statement of the terms thereof, unless amended in writing by both parties, and supersedes any and all prior and contemporaneous agreements and understanding thereto. No modification of this Agreement will be valid or binding unless in writing and executed by both parties. No waiver under this Agreement will be effective unless in writing by the waiving party and no waiver with respect to any single event will be deemed a waiver of any other event theretofore or thereafter occurring. No delay or failure on the part of any party in exercising any right hereunder will impair any such right or remedy. This Agreement may be signed by facsimile or email transmission and in counterparts. This Agreement is drafted in English. If there are conflicts between the English version and subsequent translated versions of this Agreement, the English version of this Agreement will prevail.

NOTICE

Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows, with notice deemed given upon receipt or refusal: (i) by overnight courier service; (ii) hand delivery; or (iii) by certified or registered mail, return receipt requested. Notice shall be sent to the addresses set forth above or to such other address as either party may specify in a notice given under this Section 9.

10.

MISCELLANEOUS

Neither this Agreement nor the cooperation of the parties contemplated under this Agreement shall be deemed or construed to create any partnership, joint venture or agency relationship between the parties. Except as otherwise expressly permitted in this Agreement, neither party is, nor will either party hold itself out to be, vested with any power or right to bind the other party contractually or act on behalf of the other party as a broker, agent or otherwise. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. In the event that any provision of this Agreement is determined to be invalid, unenforceable or otherwise illegal, such provision shall be deemed restated, in accordance with applicable law, to reflect as nearly as possible the original intentions of the parties, and the remainder of the Agreement shall remain in full force and effect. Section headings are for convenience only, and will not be used to interpret this Agreement.

[ S IGNATURE PAGE FOLLOWS ]

IN WITNESS WHEREOF, the parties have caused this agreement to be signed by their duly authorized representatives as of the date first set forth above.

Beijing Sun Seven Stars Cultural Development Limited

By: /s/ Bruno Wu

Its: CEO & Chairman

Tianjin Sevenstarflix Network Technology Limited

By: /s/ Zhu Yun

Its: Legal Representative

Nanjing Tops Game Co., Ltd.

CAPITAL INCREASE AGREEMENT

THIS CAPITAL INCREASE AGREEMENT (this “ Agreement ”) is made and entered into as of 15 ^th of April 2016 by the following parties:

Party A: Nanjing Tops Game Co., Ltd. (“ Target ” or “ Company ”)
Address: 9F, 8# Building, No.57 Andemen Street, Yuhuatai District, Nanjing Legal Representative: Fu Haocheng

Party B: Tianjin Sevenstarflix Network Technology Limited
Address: Suite 305-55, 3/F, Zonghe Service Building D, Nangang Industrial Zone of Tianjin Economic Development Zone, Tianjin, PRC
Legal Representative: Zhu Yun

Party C: all the shareholders of Nanjing Tops Game Co., Ltd.

Party C1: Fu Haocheng
ID Card Number:
Domicile:

Party C2: Nanjing Chaofanrusheng Investment Partnership (LP)
Registered Address:
Key partner (authorized representative):

Party C3: Tuodong Investment (Shenzhen) Partnership (LP)
Registered Address:
Legal Representative:

Party C4: Jiang Zhiyuan
ID Card Number:
Domicile:

Party C5: Nanjing Lisuona Investment Management Co., Ltd.
Registered Address:
Legal Representative:

WHEREAS,

Party A is a fast-growing company specialized in the independent development and operation of online, stand-alone and other games as well as the distribution of domestic and overseas games, has an elite team both at home and abroad and has been awarded a number of industry prizes. It is preparing to get listed at China’s new third board. The Target hopes to introduce the Game Adaption Right (as defined below) of movie and TV works by means of the Capital Increase (as defined below) in order to enlarge product types and its shareholders’ meeting has adopted an effective resolution on the Capital Increase.

2.	Party B is a domestic company which is dedicated to develop itself into a new media enterprise covering global users, focusing on mobile terminals and integrating media, social media and e-commerce. It plans to invest the Target by means of the Game Adaption Right of movie and TV works and participate in operation and management of the Target and its shareholders’ meeting has adopted a resolution on investing in the Target.

3.	Party C, the original shareholders of the Target, agrees and confirms to waive the preemptive right to subscribe for capital contributions to the increased registered capital.

In accordance with the Company Law of the People’s Republic of China (“ Company Law ”) and other related laws and regulations, the Parties, after sufficient negotiations, hereby enter into the following agreement in respect of the Capital Increase of the Target, upon and subject to the terms and conditions as set forth below.

Article 1 Overview of the Target

Company name: Nanjing Tops Game Co., Ltd.

Domicile: 9F, 8# Building, No.57 Andemen Street, Yuhuatai District, Nanjing

Business scope: development of network, computer and multimedia technologies, technology transfer, technology consulting and technological service; design and selling of computer software and hardware; design, production, agency and release of various domestic advertisings; graphic design and production; computer network engineering, computer network software development, business information consulting, labor information consulting, investment information consulting and trademark agency (subject to the approvals from related authorities, if required by law).

Article 2 Registered Capital and Shareholding Structure of the Target before the Capital Increase

Registered capital: RMB10.9768mn

The shareholding structure of the Target before the Capital Increase is shown below:

S/N	Shareholder	Means of Investment	Subscribed capital contribution (RM10k)	Shareholding ratio
1	Fu Haocheng	Currency	670	61.04%
2	Tuodong Investment (Shenzhen) Partnership (LP)	Currency	100	9.11%
3	Jiang Zhiyuan	Currency	30	2.73%
4	Nanjing Chaofanrusheng Investment Partnership (LP)	Currency	200	18.22%
5	Nanjing Lisuona Investment Management Co., Ltd.	Currency	97.68	8.9%
	Total	/	1097.68	100%

Article 3 Approvals

The matters on the Capital Increase by Party B to the Target have been approved by the respective power authorities of Party A and Party C.

Article 4 Capital Increase of the Target

Party C agrees to waive the preemptive right and accept the investment of RMB18mn by Party B as a new shareholder to the Target by means of the Game Adaption Right of movie and TV works.

As used herein, the term “Game Adaption Right” means all the rights to develop and produce the full-style and full-type Chinese games and video games on the basis of Party B’s movie and TV works, including, but not limited to, card video games, mobile phone and online games, role playing games (RPG), action RPG and large multi-user online role playing games.

As used herein, the term “Capital Increase” means that new shareholder investors other than the existing shareholders of the Target are admitted to invest in the Target in order to increase its registered capital.

Party B agrees to invest RMB18mn (in words: eighteen million yuan, hereafter the “ Investment ”) in the Target in the form of the Game Adaption Right, in which RMB1.6402mn is included in the registered capital and the remaining is included in the capital reserve of the Target.

Party B’s property (the “ Assets ”) to be used for the Capital Increase includes:

•

The Game Adaption Rights of the animation movies Titanic Code, Special Forces Heroine (also known as Eastern Angels), 108 Heroes 1 (also known as Water Margin or Outlaws of the Marsh), 108 Heroes 2 (also known as Water Margin or Outlaws of the Marsh), Knights in Paradise (also known as Peak Time) and The Dog’s Way Home (Party B has the right to modify and adjust the titles of the said Assets according to business needs and market conditions upon notice to Party A. If any such change results in value reduction, Party B shall make up the deficit.)

Party B shall, within one (1) month following the completion of the production of the said animation movies, deliver to Party A the video files of such animation movies as well as related roles, figures, images, music, text, plots, etc. Party A has the right to make use of all the elements related to such animation movies for game adaption, unless otherwise agreed by Party A and Party B. Party B’s delay of delivery, if any, is subject to the negotiations between Party A and Party B.

Article 5 Representations, Warranties and Undertakings

Each Party hereby makes the following representations, warranties and undertakings and executes this Agreement by relying on them:

1.	It is a business entity organized and validly existing under laws or a natural person with the capacity for civil conduct and has obtained all the authorizations and permissions required for the Capital Increase.

2.	It has the capacity of right and capacity of conduct to execute this Agreement and once executed, this Agreement shall be legally binding on it.

3.	Its obligations hereunder are legal and valid and its performance thereof is neither in violation of any other agreement to which it is a party nor breaches any laws.

4.	It agrees to amend the Articles of Association of the Target according to this Agreement.

5.	It agrees to sign and submit the required documents for the AIC change registration related to the Capital Increase of the Target as soon as possible following the execution of this Agreement. Party A and Party C agree to complete the AIC and tax registration procedures related to the Capital Increase within 20 days following the execution of this Agreement. Party B shall cooperate with Party A to complete the assessment of the Game Adaption Right required hereunder on time.

Article 6 Special Representations, Warranties and Undertakings of Party B

Party B represents and warrants to Party A that Party B is the exclusive right owner of the Assets under this Agreement; and Party B has not assigned, granted nor in any manner encumbered, diminished or impaired the rights that will adversely affect Party A’s rights under this Agreement.

Party B represents and warrants that no attempt will be made to encumber, diminish or impair any of the rights herein granted and that all appropriate protections of such rights will continue to be maintained.

Party B undertakes and warrants to complete production, distribution and marketing of animation movies Titanic Code, Special Forces Heroine (also known as Eastern Angels), 108 Heroes 1 (also known as Water Margin or Outlaws of the Marsh), 108 Heroes 2 (also known as Water Margin or Outlaws of the Marsh), Knights in Paradise (also known as Peak Time) and The Dog’s Way Home.

Party B shall compensate Party A for any and all economic losses incurred by Party A as a result of any breach by Party B of the above representations or warranties.

Article 7 Registered Capital and Shareholding Structure of the Target after the Capital Increase

The registered capital of the Target will increase from RMB10.9768mn to RMB12.617mn after the Capital Increase.

The shareholding structure of the Target after the Capital Increase is shown below:

S/N	Shareholder	Means of Investment	Subscribed capital contribution (RM10k)	Shareholding ratio
1	Fu Haocheng	Currency	670	53.10%
2	Tuodong Investment (Shenzhen) Partnership (LP)	Currency	100	7.93%
3	Jiang Yuanzhi	Currency	30	2.38%
4 5	Nanjing Chaofanrusheng Investment Partnership (LP) Nanjing Lisuona Investment Management Co., Ltd.	Currency Currency	200 97.68	15.85% 7.74%
6	Tianjin	Intangible	164.02	13%
	Sevenstarflix Network Technology Limited	Asset
	Total	/	1261.7	100%

Article 8 Taxes

The expenses arising from evaluation and AIC registration of the Target (if any) in connection with the Capital Increase shall be undertaken by the Target.

Other taxes occurring in the Capital Increase shall be paid by the Parties respectively in accordance with the related national laws, regulation and rules.

Article 9 Basic Rights of New Shareholders

1.	Equal legal status with original shareholders;

2.	All rights of shareholders prescribed by law, including, but not limited to, rights of benefiting from assets, making major decisions and selecting the management.

Article 10 Obligations and Responsibilities of New Shareholders

1.	Perform movie & TV production and distribution, submit the right related materials in a timely manner and actively assist in protection of rights in accordance with the provisions of this Agreement;

2.	Bear the other obligations as shareholders of the Company.

Article 11 Termination of Agreement

Upon the occurrence of any of the following circumstances, this Agreement may be terminated with the mutual consent of the Parties:

This Agreement becomes inconsistent with the new laws and regulations that are enacted during the period between the execution of this Agreement and the completion of shareholder registration change, and the Parties have failed to reach consensus on amending or modifying this Agreement pursuant to such new laws and regulations.

Article 12 Confidentiality

Each Party agrees to respect and keep strictly confidential all confidential financial, proprietary and business information as well as information of any other nature belonging to the other Parties for which it may have knowledge during the negotiation and performance of this Agreement. Each Party shall not use such information for any purposes other than performance of this Agreement and shall only disclose such information to its employees on a strict need-to-know basis. Such employees shall keep such information strictly confidential as well. Otherwise, the disclosing Party shall compensate all losses resulting from divulging the business secrets of the other Parties. Confidential information includes, but is not limited to the following:

	(1)	The terms of this Agreement;

	(2)	The negotiations relating to this Agreement;

	(3)	The subject matter of this Agreement; and

	(4)	The business secrets of each Party.

Notwithstanding the above, any such information may be disclosed if it applies to Paragraph 2 below.

2.	Each Party hereto may disclose the information specified in Paragraph 1 in any of the following circumstances:

	(1)	Disclosure required by law;

	(2)	Disclosure required by any competent government authorities or supervision organizations;

	(3)	Disclosure to its professional advisers or lawyers (if any);

	(4)	Availability to the public domain not through its fault; or

	(5)	Disclosure with prior written consent of the Parties.

3.	This article shall survive the termination of this Agreement, without a time limit.

Article 13 Force Majeure

1.	No Party failing to fully or partially perform this Agreement due to any event of force majeure and without any fault on its part shall be deemed as having breached this Agreement, but such Party shall take all necessary remedial measures to minimize the losses caused by such event of force majeure if the conditions permit.

2.	Any Party claiming the occurrence of an event of force majeure shall promptly notify the other Parties in writing, and within fifteen (15) days thereafter, provide the other Parties with a report explaining the reasons for its failure to fully or partially perform this Agreement or its delay in performing this Agreement.

3.	Force majeure refers to any event that is unforeseeable, unavoidable and insurmountable, including, but not limited to the following events that have a direct impact on the Capital Increase:

	(1)	Declared or undeclared war, war condition, blockade, embargo or government decrees or general mobilization;

	(2)	Domestic chaos;

	(3)	Fire, flood, typhoon, hurricane, tsunami, landslide, earthquake, explosion, plague, epidemic and other natural disasters or events;

(4)

Other events of force majeure agreed by the Parties.

Article 14 Notices

Any notice required to be made or given hereunder shall be deemed duly given when delivered by person, mail, fax or email to the postal address, fax number or email address of the recipient as indicated in this Agreement.

Article 15 Defaulting Liability

If any Party violates the relevant provisions of this Agreement, thus rendering the purpose of this Agreement impossible to realize, then the defaulting Party shall pay [10]% of the investment to all non-defaulting Parties as a penalty. In case the penalty becomes insufficient to cover losses of the non-defaulting Parties, the defaulting Party shall compensate the non-defaulting Parties for further losses, if any.

Article 16 Dispute Resolution

This Agreement shall be governed by and construed in accordance with the laws of the People’s Republic of China.

Any dispute or claim arising out of or in relation to this Agreement or its validity, construction or performance or breach shall be resolved by the Nanjing Arbitration Commission by arbitration in accordance with its rules and procedures if efforts to negotiate have failed.

Article 17 Interpretation of Agreement

The interpretation of this Agreement shall rest with the Parties hereto.

Article 18 Miscellaneous

This Agreement sets forth the basic principles and contents as confirmed by the Parties in respect of the Capital Increase. The Parties may sign a supplemental agreement in respect of any specific matter or in case of any matter not covered herein, subject to the provisions hereof. Any such supplemental agreement shall have the same legal binding force as this Agreement.

No modification of this Agreement shall be valid or binding, unless reduced to writing and duly executed by the Parties. No waiver under this Agreement shall be effective, unless it is confirmed by the waiving Party in writing.

This Agreement shall come into force upon stamping by the Parties, signing by their respective legal representative, or signing by their authorized representatives.

This Agreement shall be made in nine (9) counterparts, being equally authentic. Each Party holds one (1) copy and the remaining copies are used for the Target’s AIC (administration for industry and commerce) change registration or submitted to the other competent authorities (if necessary).

(Remainder of this page is intentionally left blank)

(SIGNATURE PAGE)

Party A: Nanjing Tops Game Co., Ltd.
/s/ Nanjing Tops Game Co., Ltd. (company chop)

Party B: Tianjin Sevenstarflix Network Technology Limited
/s/ Tianjin Sevenstarflix Network Technology Limited (company chop)

Party C: all the shareholders of Nanjing Tops Game Co., Ltd.

Party C1: /s/Fu Haocheng

Party C2: Nanjing Chaofanrusheng Investment Partnership (LP)
/s/ Nanjing Chaofanrusheng Investment Partnership (LP) (company chop)

Party C3: Tuodong Investment (Shenzhen) Partnership (LP)
/s/ Tuodong Investment (Shenzhen) Partnership (LP) (company chop)

Party C4: /s/Jiang Zhiyuan

Party C5: Nanjing Lisuona Investment Management Co., Ltd.
/s/ Nanjing Lisuona Investment Management Co., Ltd. (company chop)

Date of signing: 15 ^th April 2016
Place of signing: Jiangsu Province, Nanjing City

YOU ON DEMAND HOLDINGS, INC.

AMENDMENT NO. 1 TO
CONVERTIBLE PROMISSORY NOTE

This AMENDMENT NO. 2 TO CONVERTIBLE PROMISSORY NOTE (the “ Amendment ”), effective as of May 12, 2016 (the “ Effective Date ”), is by and among YOU On Demand Holdings, Inc., a Nevada corporation (the “ Company ”) and Beijing Sun Seven Stars Culture Development Limited, a P.R.C. company (“ Purchaser ”):

WHEREAS, the Company and Purchaser are parties to that certain Convertible Promissory Note of the Company, dated as of December 21, 2015, in principal amount of Seventeen Million Seven Hundred Seventeen Thousand Eight Hundred Forty-six & 60/100 Dollars ($17,717,846.60) (the “ Note ”); and

WHEREAS, the Company and Purchaser desire to amend the Note as provided herein;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.	Effective as of the Effective Date, Section 1.1 of the Note shall be deleted in its entirety and, in lieu thereof, the following new Section 1.1 is inserted:

“ Maturity Date . The Principal and any other amounts payable to Purchaser hereunder, shall be due and payable to Purchaser on July 31, 2016 (the “ Maturity Date ”).”

2.	Except as expressly amended by this Amendment, the terms and conditions of the Note are hereby confirmed and shall remain in full force and effect without impairment or modification.

3.	This Amendment shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

4.	This Amendment may be executed electronically via email or facsimile and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[ Remainder of Page Intentionally Left Blank; Signature Page Follows ]

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first set forth above.

YOU ON DEMAND HOLDINGS, INC.

By: /s/ Mingcheng Tao
Name: Mingcheng Tao
Title: Chief Executive Officer

BEIJING SUN SEVEN STARS CULTURE
DEVELOPMENT LIMITED:

By: /s/ Bruno Wu
Name: Bruno Wu
Title: Chairman & CEO

[Signature Page – Amendment No. 1 to Convertible Promissory Note]

CERTIFICATIONS

I, Mingcheng Tao, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of YOU On Demand Holdings, 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 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 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: May 16, 2016

/s/ Mingcheng Tao
Mingcheng Tao
Chief Executive Officer
( Principal Executive Officer )

CERTIFICATIONS

I, Mei Chen, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of YOU On Demand Holdings, 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 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 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: May 16, 2016

/s/ Mei Chen
Mei Chen
Chief Financial Officer
( Principal Financial and Accounting Officer )

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Mingcheng Tao, Chief Executive Officer of YOU ON DEMAND HOLDINGS, INC. (the “Company”), DOES HEREBY CERTIFY that:

	1.	The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2016 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

	2.	Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 16 ^th day of May, 2016.

/s/ Mingcheng Tao
Mingcheng Tao
Chief Executive Officer
( Principal Executive Officer )

A signed original of this written statement required by Section 906 has been provided to YOU On Demand Holdings, Inc. and will be retained by YOU On Demand Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Mei Chen, Chief Financial Officer of YOU ON DEMAND HOLDINGS, INC. (the “Company”), DOES HEREBY CERTIFY that:

	1.	The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2016 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

	2.	Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 16 ^th day of May, 2016.

/s/ Mei Chen
Mei Chen
Chief Financial Officer
( Principal Financial and Accounting Officer )