x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
20-1778374
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
x
|
PART I
|
-
|
FINANCIAL INFORMATION
|
|
Item 1.
|
3
|
||
Item 2.
|
25
|
||
Item 3
|
31
|
||
Item 4.
|
31
|
||
PART II
|
-
|
OTHER INFORMATION
|
|
Item 1.
|
32
|
||
Item 1A.
|
32
|
||
Item 2.
|
32
|
||
Item 3.
|
32
|
||
Item 4.
|
32
|
||
Item 5.
|
32
|
||
Item 6.
|
32
|
||
33
|
Item 1.
|
Page
|
|
Consolidated Balance Sheets
|
4
|
Unaudited Consolidated Statements of Operations
|
5
|
Unaudited Consolidated Statements of Comprehensive Loss
|
6
|
Unaudited Consolidated Statement of Equity
|
7
|
Unaudited Consolidated Statements of Cash Flows
|
8
|
Notes to Unaudited Consolidated Financial Statements
|
9
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 2,102,811 | $ | 4,381,043 | ||||
Marketable equity securities, available for sale
|
2,229 | 2,229 | ||||||
Inventories, net
|
412,911 | 384,088 | ||||||
Licensed content, current
|
787,770 | 681,457 | ||||||
Prepaid expenses
|
393,670 | 423,779 | ||||||
Other current assets
|
129,474 | 135,988 | ||||||
Total current assets
|
3,828,865 | 6,008,584 | ||||||
Property and equipment, net
|
3,982,265 | 4,098,594 | ||||||
Licensed content, noncurrent
|
339,032 | 530,367 | ||||||
Intangible assets, net
|
4,818,581 | 5,059,188 | ||||||
Goodwill
|
6,105,478 | 6,105,478 | ||||||
Investment in unconsolidated entities
|
655,662 | 655,834 | ||||||
Total assets
|
$ | 19,729,883 | $ | 22,458,045 | ||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 2,627,919 | $ | 2,130,507 | ||||
Accrued expenses and liabilities
|
2,369,447 | 2,456,542 | ||||||
Deferred revenue
|
1,895,395 | 2,091,788 | ||||||
Payable to Jinan Parent
|
145,215 | 144,592 | ||||||
Deferred license fees, current
|
678,372 | - | ||||||
Other current liabilities
|
1,033,797 | 920,888 | ||||||
Contingent purchase price consideration liability, current
|
389,452 | 368,628 | ||||||
Convertible promissory note
|
3,000,000 | 3,000,000 | ||||||
Warrant liabilities
|
903,785 | 878,380 | ||||||
Total current liabilities
|
13,043,382 | 11,991,325 | ||||||
Deferred license fees, noncurrent
|
- | 460,547 | ||||||
Contingent purchase price consideration liability
|
389,452 | 368,628 | ||||||
Deferred tax and uncertain tax position liabilities
|
268,038 | 305,849 | ||||||
Total liabilities
|
13,700,872 | 13,126,349 | ||||||
Commitments and Contingencies
|
||||||||
Convertible reedeemable preferred stock, $.001 par value; 50,000,000 shares authorized
|
||||||||
Series A - 7,000,000 shares issued and outstanding, liquidation preference of $3,500,000 at March 31, 2013 and December 31, 2012, respectively
|
1,261,995 | 1,261,995 | ||||||
Series B - 0 and 7,866,800 shares issued and outstanding, liquidation preference of $0 and $3,933,400 at March 31, 2013 and December 31, 2012, respectively
|
- | 3,223,575 | ||||||
Series C - 250,000 shares issued and outstanding, liquidation preference of $1,000,000 at March 31, 2013 and December 31, 2012, respectively
|
627,868 | 627,868 | ||||||
Equity:
|
||||||||
Common stock, $.001 par value; 1,500,000,000 shares authorized, 14,819,691 and 13,742,394 shares issued at March 31, 2013 and December 31, 2012, respectively
|
14,820 | 13,742 | ||||||
Additional paid-in capital
|
65,962,090 | 62,388,502 | ||||||
Accumulated deficit
|
(62,186,429 | ) | (58,841,664 | ) | ||||
Accumulated other comprehensive income
|
623,693 | 604,632 | ||||||
Total YOU On Demand equity
|
4,414,174 | 4,165,212 | ||||||
Noncontrolling interests
|
(275,026 | ) | 53,046 | |||||
Total equity
|
4,139,148 | 4,218,258 | ||||||
Total liabilities and equity
|
$ | 19,729,883 | $ | 22,458,045 |
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenue
|
$ | 1,312,061 | $ | 2,037,579 | ||||
Cost of revenue
|
1,732,500 | 1,792,021 | ||||||
Gross (loss) profit
|
(420,439 | ) | 245,558 | |||||
Operating expense:
|
||||||||
Selling, general and administrative expenses
|
2,208,721 | 2,746,438 | ||||||
Professional fees
|
326,428 | 412,377 | ||||||
Depreciation and amortization
|
656,743 | 1,231,314 | ||||||
Total operating expense
|
3,191,892 | 4,390,129 | ||||||
Loss from operations
|
(3,612,331 | ) | (4,144,571 | ) | ||||
Interest & other income / (expense)
|
||||||||
Interest income
|
950 | 2,713 | ||||||
Interest expense
|
(30,369 | ) | (1,673 | ) | ||||
Change in fair value of warrant liabilities
|
(25,405 | ) | - | |||||
Change in fair value of contingent consideration
|
(41,648 | ) | (712,065 | ) | ||||
Loss on investment in unconsolidated entities
|
(2,994 | ) | (4,192 | ) | ||||
Other
|
(1,181 | ) | (179 | ) | ||||
Net loss before income taxes and noncontrolling interest
|
(3,712,978 | ) | (4,859,967 | ) | ||||
Income tax benefit
|
37,811 | 75,438 | ||||||
Net loss
|
(3,675,167 | ) | (4,784,529 | ) | ||||
Plus: Net loss attributable to noncontrolling interests
|
330,402 | 564,457 | ||||||
Net loss attributable to YOU On Demand shareholders
|
$ | (3,344,765 | ) | $ | (4,220,072 | ) | ||
Net income (loss) per share
|
||||||||
Basic
|
$ | (0.23 | ) | $ | (0.40 | ) | ||
Diluted
|
$ | (0.23 | ) | $ | (0.40 | ) | ||
Weighted average shares outstanding
|
||||||||
Basic
|
14,602,196 | 10,467,526 | ||||||
Diluted
|
14,602,196 | 10,467,526 |
Three Months Ended
|
||||||||
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Net loss
|
$ | (3,675,167 | ) | $ | (4,784,529 | ) | ||
Other comprehensive (loss) income:
|
||||||||
Foreign currency translation adjustments
|
19,061 | 51,068 | ||||||
Less: Comprehensive loss attributable to non-controlling interest
|
328,072 | 543,423 | ||||||
Comprehensive loss attributable to YOU On Demand shareholders
|
$ | (3,328,034 | ) | $ | (4,190,038 | ) |
Accumulated
|
YOU On
|
|||||||||||||||||||||||||||||||
Additional
|
Other
|
Demand
|
||||||||||||||||||||||||||||||
Common
|
Par
|
Paid-in
|
Accumulated
|
Comprehensive
|
Shareholders'
|
Noncontrolling
|
Total
|
|||||||||||||||||||||||||
Shares
|
Value
|
Capital
|
Deficit
|
Income
|
Equity
|
Interest
|
Equity
|
|||||||||||||||||||||||||
Balance January 1, 2013
|
13,742,394 | $ | 13,742 | $ | 62,388,502 | $ | (58,841,664 | ) | $ | 604,632 | $ | 4,165,212 | $ | 53,046 | $ | 4,218,258 | ||||||||||||||||
Warrants issued for services
|
- | - | 108,031 | - | - | 108,031 | - | 108,031 | ||||||||||||||||||||||||
Common shares issued for services
|
28,390 | 29 | 79,348 | - | - | 79,377 | - | 79,377 | ||||||||||||||||||||||||
Stock option compensation expense
|
- | - | 163,683 | - | - | 163,683 | - | 163,683 | ||||||||||||||||||||||||
Conversion of Series B preferred shares
|
||||||||||||||||||||||||||||||||
into common shares
|
1,048,907 | 1,049 | 3,222,526 | - | - | 3,223,575 | - | 3,223,575 | ||||||||||||||||||||||||
Net loss
|
- | - | - | $ | (3,344,765 | ) | - | (3,344,765 | ) | (330,402 | ) | (3,675,167 | ) | |||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | 19,061 | 19,061 | 2,330 | 21,391 | ||||||||||||||||||||||||
Balance, March 31, 2013
|
14,819,691 | $ | 14,820 | $ | 65,962,090 | $ | (62,186,429 | ) | $ | 623,693 | $ | 4,414,174 | $ | (275,026 | ) | $ | 4,139,148 |
Three Months Ended
|
||||||||
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (3,675,167 | ) | $ | (4,784,529 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities
|
||||||||
Equity securities compensation expense
|
351,091 | 175,104 | ||||||
Depreciation and amortization
|
656,743 | 1,231,314 | ||||||
Amortization of licensed content
|
37,581 | 37,581 | ||||||
Deferred income tax
|
(37,811 | ) | (75,438 | ) | ||||
Loss on investment in unconsolidated entities
|
2,994 | 4,191 | ||||||
Provision for bad debt expense
|
- | 144,877 | ||||||
Change in fair value of warrant liabilities
|
25,405 | - | ||||||
Change in fair value of contingent purchase price consideration liability
|
41,648 | 712,065 | ||||||
Change in assets and liabilities,
|
||||||||
Other current assets
|
- | (135,666 | ) | |||||
Inventory
|
(26,751 | ) | 8,028 | |||||
Licensed content
|
205,697 | (637,989 | ) | |||||
Prepaid expenses and other assets
|
37,678 | 129,068 | ||||||
Accounts payable
|
492,066 | 416,948 | ||||||
Accrued expenses and liabilities
|
(361,665 | ) | 208,857 | |||||
Deferred revenue
|
61,949 | 50,555 | ||||||
Deferred license fee
|
18,905 | 96,592 | ||||||
Other current liabilities
|
153,297 | 16,670 | ||||||
Net cash used in operating activities
|
(2,016,340 | ) | (2,401,772 | ) | ||||
Cash flows from investing activities:
|
||||||||
Acquisition of property and equipment
|
(242,243 | ) | (162,127 | ) | ||||
Investments in intangibles
|
(20,437 | ) | (103,550 | ) | ||||
Leasehold improvements
|
- | (26,479 | ) | |||||
Net cash used in investing activities
|
(262,680 | ) | (292,156 | ) | ||||
Net cash provided by financing activities
|
- | - | ||||||
Effect of exchange rate changes on cash
|
788 | 35,856 | ||||||
Net decrease in cash and cash equivalents
|
(2,278,232 | ) | (2,658,072 | ) | ||||
Cash and cash equivalents at beginning of period
|
4,381,043 | 7,519,574 | ||||||
Cash and cash equivalents at end of period
|
$ | 2,102,811 | $ | 4,861,502 | ||||
Supplemental Cash Flow Information:
|
||||||||
Cash paid for taxes
|
$ | - | $ | 325 | ||||
Cash paid for interest
|
$ | 765 | $ | 1,673 | ||||
Value of common stock issued from conversion of Preferred Series B shares
|
$ | 3,223,575 | $ | - |
1.
|
Basis of Presentation
|
2.
|
Going Concern and Management’s Plans
|
3.
|
VIE Structure and Arrangements
|
|
(a)
|
business opportunities presented to, or available to Sinotop Beijing may be pursued and contracted for in the name of Sinotop Hong Kong rather than Sinotop Beijing, and at its discretion Sinotop 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 Sinotop 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 Sinotop Hong Kong by acquisition, lease, license or otherwise, and made available to Sinotop Beijing on terms to be determined by agreement between Sinotop Hong Kong and Sinotop Beijing;
|
|
(d)
|
contracts entered into in the name of Sinotop Beijing may be transferred to Sinotop Hong Kong, or the work under such contracts may be subcontracted, in whole or in part, to Sinotop Hong Kong, on terms to be determined by agreement between Sinotop Hong Kong and Sinotop Beijing; 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 Sinotop Hong Kong, and in the name of and at the expense of, Sinotop Hong Kong;
|
|
●
|
a Cooperation Agreement, dated as of December 26, 2006, between CB Cayman and Jinan Parent (the “
December 2006 Cooperation Agreement
”);
|
|
●
|
a Cooperation Agreement dated as of January 2007, between Jinan Broadband and Networks Center (the “
January 2007 Cooperation Agreement
”); and
|
|
●
|
two Exclusive Service Agreements, dated December 2006 and March 2007, between Jinan Broadband, Jinan Parent and Networks Center (collectively, the “
Exclusive Service Agreements
”).
|
|
●
|
CB Cayman appointed 3 directors and Jinan Parent appointed 2 directors;
|
|
●
|
The general manager and financial manager are appointed by CB Cayman; and
|
|
●
|
CB Cayman is entitled to receive 51% of net profit/loss of Jinan Broadband.
|
4.
|
Content Accounting
|
5.
|
Property and Equipment
|
March 31,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Furniture and office equipment
|
$ | 3,247,000 | $ | 3,202,000 | ||||
Facilities and machinery
|
16,072,000 | 15,779,000 | ||||||
Leasehold improvements
|
179,000 | 178,000 | ||||||
Vehicles
|
55,000 | 54,000 | ||||||
Total property and equipment
|
19,553,000 | 19,213,000 | ||||||
Less: accumulated depreciation
|
(15,571,000 | ) | (15,114,000 | ) | ||||
Net carrying value
|
$ | 3,982,000 | $ | 4,099,000 |
6.
|
Goodwill and Intangible Assets
|
Balance at
|
Foreign
|
Balance at
|
||||||||||||||||||
December 31,
|
Amortization
|
Currency
|
March 31,
|
|||||||||||||||||
2012
|
Additions
|
Expense
|
Transl Adj
|
2013
|
||||||||||||||||
Amortized intangible assets:
|
||||||||||||||||||||
Service agreement
|
$ | 1,516,163 | $ | - | $ | (26,714 | ) | $ | 6,538 | $ | 1,495,987 | |||||||||
Charter / Cooperation agreements
|
2,422,824 | - | (34,448 | ) | - | 2,388,376 | ||||||||||||||
Noncompete agreement
|
121,252 | - | (121,252 | ) | - | - | ||||||||||||||
Software and licenses
|
630,681 | 15,907 | (54,669 | ) | 2,398 | 594,317 | ||||||||||||||
Website development
|
233,978 | - | (29,373 | ) | 1,006 | 205,611 | ||||||||||||||
Total amortized intangible assets
|
$ | 4,924,898 | $ | 15,907 | $ | (266,456 | ) | $ | 9,942 | $ | 4,684,291 | |||||||||
Unamortized intangible assets:
|
||||||||||||||||||||
Website name
|
134,290 | - | - | - | 134,290 | |||||||||||||||
Goodwill
|
6,105,478 | - | - | - | 6,105,478 | |||||||||||||||
Total unamortized intangible assets
|
$ | 6,239,768 | $ | - | $ | - | $ | - | $ | 6,239,768 |
Jinan
|
Sinotop
|
|||||||||||||||
Years ending December 31,
|
Broadband
|
Hong Kong
|
Sinotop
|
Total
|
||||||||||||
2013 (9 months)
|
$ | 117,432 | $ | 103,343 | $ | 208,543 | $ | 429,318 | ||||||||
2014
|
152,531 | 137,791 | 255,191 | 545,513 | ||||||||||||
2015
|
137,502 | 137,791 | 117,206 | 392,499 | ||||||||||||
2016
|
117,624 | 137,791 | 90,904 | 346,319 | ||||||||||||
2017
|
110,568 | 137,791 | - | 248,359 | ||||||||||||
Thereafter
|
988,414 | 1,733,869 | - | 2,722,283 | ||||||||||||
Total amortization to be recognized
|
$ | 1,624,071 | $ | 2,388,376 | $ | 671,844 | $ | 4,684,291 |
7.
|
Fair Value Measurements
|
|
●
|
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.
|
March 31, 2013
|
||||||||||||||||
Fair Value Measurements | ||||||||||||||||
(Unaudited)
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total Fair Value
|
|||||||||||||
Assets
|
||||||||||||||||
Available-for-sale securities
|
$ | 2,229 | $ | - | $ | - | $ | 2,229 | ||||||||
Investment in unconsolidated entities (Shandong Media)
|
- | - | - | - | ||||||||||||
Liabilities
|
||||||||||||||||
Warrant liabilities
|
$ | - | $ | - | $ | 903,785 | $ | 903,785 | ||||||||
Contingent purchase price consideration, current (see Note 8)
|
- | - | 389,452 | 389,452 | ||||||||||||
Contingent purchase price consideration, noncurrent (see Note 8)
|
- | - | 389,452 | 389,452 |
December 31, 2012
Fair Value Measurements
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total Fair Value
|
|||||||||||||
Assets
|
||||||||||||||||
Available-for-sale securities
|
$ | 2,229 | $ | - | $ | - | $ | 2,229 | ||||||||
Investment in unconsolidated entities (Shandong Media)
|
- | - | - | - | ||||||||||||
Liabilities
|
||||||||||||||||
Warrant liabilities
|
$ | - | $ | - | $ | 878,380 | $ | 878,380 | ||||||||
Contingent purchase price consideration, current (see Note 8)
|
- | - | 368,628 | 368,628 | ||||||||||||
Contingent purchase price consideration, noncurrent (see Note 8)
|
- | - | 368,628 | 368,628 |
Level 3 Assets and Liabilities
|
||||||||||||||||
For the Three Months Ended March 31, 2013
|
||||||||||||||||
1/1/2013
|
Purchases, sales
and issuances
and settlements
|
Unrealized
(gain) / loss
|
3/31/2013
|
|||||||||||||
Liabilities:
|
||||||||||||||||
Warrant liabilities
|
$ | 878,380 | $ | - | $ | 25,405 | $ | 903,785 | ||||||||
Contingent purchase price consideration
|
737,256 | - | 41,648 | $ | 778,904 |
Quantitative Information about Level 3 Fair Value Measurements
|
||||||||||
For the Three Months Ended March 31, 2013
|
||||||||||
Fair Value at
|
Valuation
|
Unobservable
|
||||||||
3/31/2013
|
Techniques
|
Inputs
|
Input
|
|||||||
Warrant liabilities
|
$ | 903,785 |
Monte Carlo Simulation Method
|
Risk-free rate of interest
|
0.638 | % | ||||
Expected volatility
|
75 | % | ||||||||
Expected life (years)
|
4.42 | |||||||||
Expected dividend yield
|
0 | % | ||||||||
Contingent consideration
|
$ | 778,904 |
Black-Scholes Merton Model
|
Risk-free rate of interest
|
0.570 | % | ||||
Expected volatility
|
75 | % | ||||||||
Expected life (years)
|
4.00 | |||||||||
Expected dividend yield
|
0 | % |
8.
|
Sinotop Contingent Consideration
|
January 1,
|
March 31,
|
|||||||||||||||
2013
|
Earned
|
Change in
|
2013
|
|||||||||||||
Class of consideration
|
Fair Value
|
Fair Value
|
Fair Value
|
Fair Value
|
||||||||||||
Common shares
|
$ | 711,294 | $ | - | $ | 39,244 | $ | 750,538 | ||||||||
Stock options
|
25,962 | - | 2,404 | 28,366 | ||||||||||||
Total earned and contingent consideration
|
$ | 737,256 | $ | - | $ | 41,648 | $ | 778,904 |
As of March 31, 2013
|
||||||||||||||||
Number of
|
Current
|
Noncurrent
|
Total
|
|||||||||||||
Instruments
|
Liability
|
Liability
|
Liability
|
|||||||||||||
Shares July 2013
|
245,274 | $ | 375,269 | $ | - | $ | 375,269 | |||||||||
Shares July 2014
|
245,274 | - | 375,269 | 375,269 | ||||||||||||
Total Common Shares
|
490,548 | $ | 375,269 | $ | 375,269 | $ | 750,538 | |||||||||
Options July 2013
|
26,667 | $ | 14,183 | $ | - | $ | 14,183 | |||||||||
Options July 2014
|
26,666 | - | 14,183 | 14,183 | ||||||||||||
Total Options
|
53,333 | $ | 14,183 | $ | 14,183 | $ | 28,366 | |||||||||
Total Shares and Options
|
543,881 | $ | 389,452 | $ | 389,452 | $ | 778,904 |
9.
|
Related Party Transactions
|
10.
|
Retail Financing, December 2012
|
11.
|
Private Financing, August 2012
|
12.
|
Net Loss Per Common Share
|
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Warrants
|
1,367,063 | 361,912 | ||||||
Stock purchase right
|
- | 75,000 | ||||||
Options
|
1,584,501 | 1,579,634 | ||||||
Series A Preferred Stock
|
933,333 | 933,333 | ||||||
Series B Preferred Stock
|
- | 1,368,907 | ||||||
Series C Preferred Stock
|
250,000 | - | ||||||
Convertible promissory note
|
2,030,835 | - | ||||||
Total
|
6,165,733 | 4,318,786 |
March 31,
|
||||
2013
|
||||
(unaudited)
|
||||
Exercise of stock warrants
|
1,367,063 | |||
Exercise and future grants of stock options
|
4,051,986 | |||
Exercise of preferred stock
|
1,333,333 | |||
Issuance of restricted stock grants
|
28,965 | |||
Contingent issuable shares in connection with Sinotop acquisition
|
490,548 | |||
Issuable shares from conversion of promissory note payable
|
2,030,835 | |||
Additional common stock due to reset provision
|
436,238 | |||
Total
|
9,738,968 |
13.
|
Share-Based Payments
|
March 31,
|
March 31,
|
||||||||
2013
|
2012
|
||||||||
(unaudited)
|
(unaudited)
|
||||||||
Stock option amortization
|
$ | 164,000 | $ | 163,000 |
(a)
|
||||
Stock issued for services
|
79,000 | - |
(b)
|
||||||
Stock warrants issued for services
|
108,000 | 12,000 |
(c)
|
||||||
$ | 351,000 | $ | 175,000 |
(a)
|
The Company accounts for its stock option awards 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. The Black-Scholes Merton model incorporated the following assumptions for the options granted in 2012: risk-free interest rate of 1.73% to 1.98%, expected volatility of 75%, expected life of 10.0 years and expected dividend yield of 0%. There have been no options granted in 2013.
|
(b)
|
During 2012, the Company appointed two new “independent” (as defined under the NASDAQ listing requirements) members to the Board of Directors. In connection with the appointment we granted each of our three “independent” directors 10,000 restricted shares to be vested quarterly over one year.
|
(c)
|
In 2013, we issued 166,677 consulting warrants and 3,333 warrants vested during the period. The fair value of the warrants was estimated on the date of grant using the Black-Scholes Merton valuation model. We expensed to marketing $44,000 during the three months ended March 31, 2013 and recorded $64,000 to prepaid expense to be recognized for services provided in the remainder of 2013. For the three months ended March 31, 2012, we recorded $12,000 for marketing services.
|
Options
|
Weighted Average
|
|||||||
Outstanding
|
Exercise Price
|
|||||||
Approved plan
|
4,000,000 | |||||||
Outstanding at January 1, 2013
|
1,585,401 | $ | 3.54 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Canceled
|
(900 | ) | 45.00 | |||||
Outstanding at March 31, 2013
|
1,584,501 | $ | 3.55 | |||||
Options exercisable at March 31, 2013 (vested)
|
1,131,160 | $ | 3.30 | |||||
Options available for issuance
|
2,415,499 |
Weighted Average
|
|||||||||||||||||||||
Remaining
|
|||||||||||||||||||||
Number
|
Contractual Life
|
Weighted Average
|
Number
|
Weighted Average
|
|||||||||||||||||
Range of Exercise Prices
|
Outstanding
|
(Years)
|
Exercise Price
|
Exerciseable
|
Exercise Price
|
||||||||||||||||
$3 - $4 | 1,338,000 | 7.92 | $ | 3.04 | 1,050,028 | $ | 3.04 | ||||||||||||||
$4 - $8 | 243,168 | 8.70 | 6.43 | 77,799 | 6.60 | ||||||||||||||||
$8 - $33 | 0 | 0 | 0.00 | 0 | 0 | ||||||||||||||||
$33 - $74 | 2,000 | 0.21 | 33.75 | 2,000 | 33.75 | ||||||||||||||||
$74 - $75 | 1,333 | 4.95 | 75.00 | 1,333 | 75.00 | ||||||||||||||||
1,584,501 | 7.85 | $ | 3.41 | 1,131,160 | $ | 3.30 |
Weighted
|
||||||||
Average
|
||||||||
Grant Date
|
||||||||
Options
|
Fair Value
|
|||||||
Non-vested at January 1, 2013
|
525,396 | $ | 3.67 | |||||
Granted
|
0 | 0.00 | ||||||
Vested
|
(64,656 | ) | 3.45 | |||||
Canceled
|
(900 | ) | 45.00 | |||||
Non-vested at March 31, 2013
|
459,840 | $ | 3.62 |
March 31,
|
December 31,
|
|||||||||||||
2013
|
2012
|
|||||||||||||
(unaudited)
|
||||||||||||||
Number of
|
Number of
|
|||||||||||||
Warrants
|
Warrants
|
Exercise
|
Expiration
|
|||||||||||
Warants Outstanding
|
Outstanding
|
Outstanding
|
Price
|
Date
|
||||||||||
Share Exchange Consulting Warrants ($45.00 exercise price)
|
- | 59,664 | $ | 45.00 |
1/11/2013
|
|||||||||
2007 Private Placement Broker Warrants ($45.00 exercise price)
|
- | 8,533 | $ | 45.00 |
1/11/2013
|
|||||||||
2007 Private Placement Investor Warrants ($150.00 exercise price)
|
- | 53,333 | $ | 150.00 |
1/11/2013
|
|||||||||
July 2010 Sinotop Acquisition Warrants ($45.00 exercise price)
|
- | 17,049 | $ | 45.00 |
1/11/2013
|
|||||||||
July 2010 Sinotop Acquisition Warrants ($150.00 exercise price)
|
- | 13,333 | $ | 150.00 |
1/11/2013
|
|||||||||
May 2011 Warner Brothers Warrants ($6.60 excercise price)
|
200,000 | 200,000 | $ | 6.60 |
5/11/2016
|
|||||||||
2011 Service Agreement Warrants ($7.20 exercise price)
|
23,333 | 20,000 | $ | 7.20 |
6/15/2016
|
|||||||||
2012 August Financing Warrants ($4.25 exercise price)
|
977,063 | 977,063 | $ | 4.25 |
8/30/2017
|
(1)
|
||||||||
2013 Service Agreement Warrants ($2.00 exercise price)
|
166,667 | - | $ | 2.00 |
2/26/2018
|
|||||||||
1,367,063 | 1,348,975 |
(1)
|
After receiving shareholder approval in the second quarter of 2013 and as a result of the negative clawback provisions included in our warrant agreements associated with our August 2012 private financings, the exercise price of $4.25 per share will be reset to $1.50 per share.
|
14.
|
Commitments and Contingencies
|
Leased
|
||||
Property
|
||||
Years ending December 31,
|
Costs
|
|||
2013 (9 months)
|
$ | 226,000 | ||
2014
|
17,000 | |||
Total
|
$ | 243,000 |
Content
|
||||
Years ending December 31,
|
Costs
|
|||
2013 (9 months)
|
$ | 1,972,000 | ||
2014
|
2,163,000 | |||
2015
|
2,297,000 | |||
2016
|
1,035,000 | |||
Total
|
$ | 7,467,000 |
15.
|
Subsequent Events
|
|
●
|
Growth in the Chinese Economy
. We operate in China and derive all of our revenues from sales to customers in China. Economic conditions in China, therefore, affect virtually all aspects of our operations, including the demand for our products, the availability and prices of our supplies and our other expenses. China has experienced significant economic growth, achieving an average annual growth rate of approximately 10% in gross domestic product from 1996 through 2011. China is expected to experience continued growth in all areas of investment and consumption, even in the face of a global economic recession. However, China has not been entirely immune to the global economic slowdown and is experiencing a slowing of its growth rate.
|
|
●
|
PRC Economic Stimulus Plans
.
The PRC government has issued a policy entitled “C
entral Government Policy
On Stimulating Domestic Consumption To Counter The Damage Result From Export Business Of The Country
,” pursuant to which the PRC Central Government is dedicating approximately $580 billion to stimulate domestic consumption. Companies that are either directly or indirectly related to construction, and to the manufacture and sale of building materials, electrical household appliances and telecommunication equipment, are expected to benefit. We could potentially benefit if the stimulus plan injects funds into cable infrastructure allowing access to our PPV network.
|
|
●
|
Deployment of Value-added Services
. To augment our product offerings and create other revenue sources, we work with strategic partners to deploy value-added services to our cable customers. Value-added services, including but not limited to the synergies created by the additions of our new assets, will become a focus of revenue generation for our company. No assurance can be made that we will add other value-added services, or if added, that they will succeed.
|
Pro Forma Comparisons
|
||||||||||||
Three Months Ended
|
||||||||||||
As Reported
|
Shandong Media
|
Pro Forma
|
||||||||||
March 31,
|
3 months
|
March 31,
|
||||||||||
2012
|
2012
|
|||||||||||
(excluding
Shandong Media)
|
||||||||||||
Revenue
|
$ | 2,038,000 | $ | 764,000 | $ | 1,274,000 | ||||||
Cost of revenue
|
1,792,000 | 646,000 | 1,146,000 | |||||||||
Gross profit
|
246,000 | 118,000 | 128,000 | |||||||||
Operating expense:
|
||||||||||||
Selling, general and administrative expenses
|
2,747,000 | 491,000 | 2,256,000 | |||||||||
Professional fees
|
412,000 | - | 412,000 | |||||||||
Depreciation and amortization
|
1,231,000 | 31,000 | 1,200,000 | |||||||||
Impairments of long-lived assets
|
- | - | ||||||||||
Total operating expense
|
4,390,000 | 522,000 | 3,868,000 | |||||||||
Loss from operations
|
(4,144,000 | ) | (404,000 | ) | (3,740,000 | ) | ||||||
Interest & other income / (expense)
|
||||||||||||
Interest income
|
3,000 | - | 3,000 | |||||||||
Interest expense
|
(2,000 | ) | - | (2,000 | ) | |||||||
Change in fair value of warrant liabilities
|
- | - | - | |||||||||
Change in fair value of contingent consideration
|
(712,000 | ) | - | (712,000 | ) | |||||||
Loss on investment in unconsolidated entities
|
(4,000 | ) | - | (4,000 | ) | |||||||
Other
|
- | - | ||||||||||
Loss before income taxes and noncontrolling interests
|
(4,859,000 | ) | (404,000 | ) | (4,455,000 | ) | ||||||
Income tax benefit
|
75,000 | 4,000 | 71,000 | |||||||||
Net loss
|
(4,784,000 | ) | (400,000 | ) | (4,384,000 | ) | ||||||
Net loss attributable to noncontrolling interests
|
564,000 | 200,000 | 364,000 | |||||||||
Net loss attributable to YOU On Demand shareholders
|
$ | (4,220,000 | ) | $ | (200,000 | ) | $ | (4,020,000 | ) |
Three Months Ended
|
||||||||||||||||
March 31,
|
March 31,
|
Amount
|
%
|
|||||||||||||
2013
|
2012
|
Change
|
Change
|
|||||||||||||
(Pro Forma)
|
||||||||||||||||
Revenue
|
$ | 1,312,000 | $ | 1,274,000 | $ | 38,000 | 3 | % | ||||||||
Cost of revenue
|
1,732,000 | 1,146,000 | 586,000 | 51 | % | |||||||||||
Gross (loss) profit
|
(420,000 | ) | 128,000 | (548,000 | ) | -428 | % | |||||||||
Operating expense:
|
||||||||||||||||
Selling, general and administrative expenses
|
2,209,000 | 2,256,000 | (47,000 | ) | -2 | % | ||||||||||
Professional fees
|
326,000 | 412,000 | (86,000 | ) | -21 | % | ||||||||||
Depreciation and amortization
|
657,000 | 1,200,000 | (543,000 | ) | -45 | % | ||||||||||
Total operating expense
|
3,192,000 | 3,868,000 | (676,000 | ) | -17 | % | ||||||||||
Loss from operations
|
(3,612,000 | ) | (3,740,000 | ) | 128,000 | -3 | % | |||||||||
Interest & other income / (expense)
|
||||||||||||||||
Interest income
|
1,000 | 3,000 | (2,000 | ) | -67 | % | ||||||||||
Interest expense
|
(30,000 | ) | (2,000 | ) | (28,000 | ) | 1400 | % | ||||||||
Change in fair value of warrant liabilities
|
(26,000 | ) | - | (26,000 | ) | - | ||||||||||
Change in fair value of contingent consideration
|
(42,000 | ) | (712,000 | ) | 670,000 | -94 | % | |||||||||
Loss on investment in unconsolidated entities
|
(3,000 | ) | (4,000 | ) | 1,000 | -25 | % | |||||||||
Other
|
(1,000 | ) | - | (1,000 | ) | - | ||||||||||
Loss before income taxes and noncontrolling interests
|
(3,713,000 | ) | (4,455,000 | ) | 742,000 | -17 | % | |||||||||
Income tax benefit
|
38,000 | 71,000 | (33,000 | ) | -46 | % | ||||||||||
Net loss
|
(3,675,000 | ) | (4,384,000 | ) | 709,000 | -16 | % | |||||||||
Net loss attributable to noncontrolling interests
|
330,000 | 364,000 | (34,000 | ) | -9 | % | ||||||||||
Net loss attributable to YOU On Demand shareholders
|
$ | (3,345,000 | ) | $ | (4,020,000 | ) | $ | 675,000 | -17 | % |
Three Months Ended
|
||||||||
March 31,
|
March 31,
|
|||||||
2013
|
2012
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Net cash used in operating activities
|
$ | (2,016,000 | ) | $ | (2,402,000 | ) | ||
Net cash used in investing activities
|
(263,000 | ) | (292,000 | ) | ||||
Net cash provided by financing activities
|
- | - | ||||||
Effect of exchange rate changes on cash
|
1,000 | 36,000 | ||||||
Net decrease in cash and cash equivalents
|
(2,278,000 | ) | (2,658,000 | ) | ||||
Cash and cash equivalents at beginning of period
|
4,381,000 | 7,520,000 | ||||||
Cash and cash equivalents at end of period
|
2,103,000 | 4,862,000 |
Item 4.
|
Item1.
|
Item1A.
|
Item 3.
|
Item 4.
|
Item 5.
|
Item 6.
|
10.1 |
Amendment No. 3 to Convertible Promissory Note in $3,000,000 principal amount issued to Shane McMahon.
|
31.1 |
Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302.
|
31.2 |
Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302.
|
32.1 |
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|
32.2 |
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
101.INS
|
Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
YOU ON DEMAND HOLDINGS, INC
|
||
By:
|
/s/ Marc Urbach
|
|
Name: Marc Urbach
|
||
Title: President and Chief Financial Officer (Principal
|
||
Accounting Officer and Principal Financial Officer)
|
Exhibit No.
|
Description
|
10.1 |
Amendment No. 3 to Convertible Promissory Note in $3,000,000 principal amount issued to Shane McMahon.
|
31.1 |
Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302.
|
31.2 |
Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302.
|
32.1 |
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
|
32.2 |
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
|
101.INS
|
Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
YOU ON DEMAND HOLDINGS, INC. | |||
By: |
/s/ Marc Urbach
|
||
Marc Urbach
|
|||
President and Chief Financial Officer
|
|||
/s/ Shane McMahon
|
|||
Shane McMahon
|
May 15, 2013
|
/s/ Shane McMahon
|
|
Shane McMahon
|
||
Chief Executive Officer
|
||
(Principal Executive Officer)
|
May 15, 2013
|
/s/ Marc Urbach
|
|
Marc Urbach
|
||
President and Chief Financial Officer
|
||
(Principal Accounting Officer and Principal Financial Officer)
|
May 15, 2013
|
/s/ Shane McMahon
|
|
Shane McMahon
|
||
Chief Executive Officer
|
||
(Principal Executive Officer)
|
May 15, 2013
|
/s/ Marc Urbach
|
|
Marc Urbach
|
||
President and Chief Financial Officer
|
||
(Principal Accounting Officer and Principal Financial Officer)
|