Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Principles of Consolidation [Policy Text Block] | ' |
| Principles of Consolidation | | | | | | |
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| The audited consolidated financial statements include the accounts of YOU On Demand and (a) its wholly- owned subsidiary China Broadband, Ltd., ("CB Cayman"), (b) two wholly-owned subsidiaries of CB Cayman: Beijing China Broadband Network Technology Co., Ltd. (“WFOE”) and Sinotop Group Limited (“Sinotop Hong Kong”) and (c) five entities located in the PRC: Jinan Zhong Kuan, Jinan Broadband, Sinotop, Zhong Hai Shi Xun Information Technology Co., Ltd. (“Zhong Hai Video”), and YOU On Demand (Beijing) Technology Co., Ltd. (“YOD WFOE”), which are controlled by the Company through contractual arrangements, as if they are majority owned subsidiaries of the Company. As of July 1, 2012, the Company deconsolidated Shandong Media as discussed below in Note 9. All material intercompany transactions and balances are eliminated in consolidation. | | | | | | |
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| Effective July 31, 2013, the Company sold its 51% interest in Jinan Broadband and as such, Jinan Broadband’s assets and liabilities have been retroactively reclassified on our consolidated balance sheet as assets and liabilities of discontinued operations. The operating results of Jinan Broadband have been retroactively reclassified as discontinued operations in our consolidated statements of operations for all periods presented. Unless otherwise indicated, all disclosures and amounts in the Notes to the Consolidated Financial Statements relate to the Company’s continuing operations. | | | | | | |
Investment in Unconsolidated Entities [Policy Text Block] | ' |
| Investment in Unconsolidated Entities | | | | | | |
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| The Company has two investments in the PRC entities. The consolidated financial statements include our original investment in the entities plus our share of undistributed earnings or losses, in the account “Investment in unconsolidated entities.” | | | | | | |
Basis of Presentation [Policy Text Block] | ' |
| Basis of Presentation | | | | | | |
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| The Company's policy is to use the accrual method of accounting to prepare and present its consolidated financial statements, which conform to accounting principles generally accepted in the United States (“U.S. GAAP”). | | | | | | |
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| Reclassifications: | | | | | | |
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| Certain information has been retrospectively reclassified to present the results of the Company’s Jinan Broadband as discontinued operations. This reclassification has no effect on previously reported net loss. See Note 4 Discontinued Operations. Certain prior year information has been reclassified to be comparable with current year presentation. | | | | | | |
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In presenting the Company’s consolidated statement of operations for the year ended December 31, 2012, we recorded approximately $296,000 to professional fees. In presenting the Company’s consolidated statement of operations for the year ended December 31, 2013, we reclassified professional fees to selling, general and administrative expense to more properly reflect fees paid for recurring operating expenses in the ordinary course of business. This reclassification has no effect on previously reported net loss. |
Estimates [Policy Text Block] | ' |
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Estimates |
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The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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The most significant estimates relate to goodwill and intangible asset valuations and useful lives, contingent purchase consideration, warrant liabilities, depreciation and allowance for uncollectible accounts receivable. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. |
Cash and cash equivalents [Policy Text Block] | ' |
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Cash and cash equivalents |
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Cash and cash equivalents consist of cash on hand and marketable securities with original maturities as of the date of purchase of three months or less. The Company deposits its cash balances with a limited number of banks. Cash balances in these accounts generally exceed government insured amounts. |
Property and Equipment [Policy Text Block] | ' |
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Property and Equipment |
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Property and equipment are stated at cost less accumulated depreciation. Expenditures for major renewals and betterments, which extend the original estimated economic useful lives or applicable assets, are capitalized. Expenditures for normal repairs and maintenance are charged to expense as incurred. The costs and related accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss thereon is reflected in operations. Depreciation is provided for on a straight-line basis over the estimated useful lives of the respective assets. |
Accounts Receivable [Policy Text Block] | ' |
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Accounts Receivable |
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Accounts receivable are recognized and carried at original invoiced amount less an allowance for any uncollectible accounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews the collectability of its receivables on an ongoing basis. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. |
Licensed Content [Policy Text Block] | ' |
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Licensed Content |
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The Company obtains content through content license agreements and revenue sharing agreements with studios and distributors. The license agreement may or may not be recognized in licensed content. |
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When the license fee is not known or reasonably determinable for a specific title, the title does not meet the criteria for recognition in licensed content in accordance with Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) Topic 920, Entertainment – Broadcasters. In the event, the license fee is not known or reasonably determinable for a specific title in content license agreements that do not specify the license fee per title, we expense as costs of revenues the greater of revenue sharing costs incurred through the end of the reporting period or the proportionate value of total minimum license fees expensed on a straight-line basis over the term of each license agreement. As the Company expenses license fees on a straight-line basis, it may result in deferred or prepaid license fees. Prepaid license fees are classified as an asset on the consolidated balance sheets as licensed content and deferred license fees payable to licensors are classified as a liability on the consolidated balance sheets. Commitments for license agreements that do not meet the criteria for recognition in licensed content are included in Note 19 to the consolidated financial statements. |
Intangible Assets [Policy Text Block] | ' |
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Intangible Assets |
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Intangible assets are stated at acquisition fair value or cost less accumulated amortization. The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The Company is currently amortizing its intangible assets with definite lives over periods generally ranging between 2.5 to 20 years. The charter/cooperation agreements are amortized over 20 years. The non-compete agreement is amortized over 2.5 years. Software and licenses are amortized over 3 years and 5 years, respectively. |
Website development costs [Policy Text Block] | ' |
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Website development costs |
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Website development costs are stated at acquisition fair value or cost less accumulated amortization. The Company capitalizes website development costs associated with graphics design and development of the website application and infrastructure. Costs related to planning, content input, and website operations are expensed as incurred. The Company amortizes website development costs over three years. |
Goodwill [Policy Text Block] | ' |
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Goodwill |
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In accordance with ASC 350-20, Goodwill, the Company tests goodwill for impairment annually as of December 31, or more frequently if indicators of potential impairment exists, to determine if the carrying value of goodwill is impaired. The Company reviews goodwill for impairment based on its identified reporting units, which are defined as reportable segments or groupings of businesses one level below the reportable segment level. In September 2011, the FASB issued guidance on testing goodwill for impairment. The guidance provides entities with an option to perform a qualitative assessment to determine whether further quantitative impairment testing is necessary. |
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In determining if goodwill was impaired, we estimate the fair value of the Company, considered as one reporting unit, and compare it to the corresponding carrying value of the reporting unit’s assets and liabilities (including goodwill). The Company determines the fair value of its reporting unit using an income approach. Under the income approach, the Company calculates the fair value of the reporting unit based on the present value of estimated future cash flows. Cash flow projections are primarily predicated upon management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is derived from a weighted-average cost of capital, adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows. |
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For the annual goodwill impairment test performed in the fourth quarter of 2013, our reporting unit had fair value that substantially exceeded its carrying value. |
Impairment of Long-Lived Assets [Policy Text Block] | ' |
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Impairment of Long-Lived Assets |
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Long-lived assets, including property, equipment, intangible assets, website development costs and goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. |
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Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet. |
Warrant Liabilities [Policy Text Block] | ' |
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Warrant Liabilities |
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We account for derivative instruments and embedded derivative instruments in accordance with ASC 815 , |
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Accounting for Derivative Instruments and Hedging Activities , as amended. The amended standard requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. Fair value is estimated using the Monte Carlo simulation method. We also follow accounting standards for the Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock , which requires freestanding contracts that are settled in a company’s own stock, including common stock warrants, to be designated as an equity instrument, asset or a liability. Under these provisions a contract designated as an asset or a liability must be carried at fair value, with any changes in fair value recorded in the results of operations. A contract designated as an equity instrument can be included in equity, with no fair value adjustments required. The asset/liability derivatives are valued on a quarterly basis using the Monte Carlo simulation method. Significant assumptions used in the valuation included exercise dates, fair value for our common stock, volatility of our common stock and a risk-free interest rate. Gains (losses) on warrants are included in “Changes in fair value of warrant liabilities” in our consolidated statement of operations. |
Advertising & Marketing Expense [Policy Text Block] | ' |
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Advertising & Marketing Expense |
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The Company expenses advertising and marketing costs as incurred, which are included in selling expense. Advertising and marketing costs were approximately $533,000 and $1,022,000 for the years ended December 31, 2013 and 2012, respectively. |
Income Taxes [Policy Text Block] | ' |
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Income Taxes |
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The Company accounts for income taxes in accordance with the asset and liability method. Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A tax valuation allowance is established, as needed to reduce net deferred tax assets to the amount expected to be realized. The Company also follows applicable guidance for accounting for uncertainty in income taxes. |
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The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. |
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Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. |
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The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in our consolidated statements of operation. |
Revenue Recognition [Policy Text Block] | ' |
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Revenue Recognition |
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Revenue is recorded as services are provided. The Company generally recognizes all revenues in the period in which the service is rendered, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, and collection is reasonably assured. The Company records deferred revenue for payments received from customers for the performance of future services and recognizes the associated revenue in the period that the services are performed. |
Net Loss Per Share Attributable to YOU On Demand Shareholders [Policy Text Block] | ' |
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Net Loss Per Share Attributable to YOU On Demand Shareholders |
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Basic and Diluted net loss per share attributable to YOU On Demand shareholders have been computed by dividing the net loss by the weighted average number of common shares outstanding. The assumed exercise of dilutive warrants, less the number of treasury shares assumed to be purchased from the proceeds of such exercises using the average market price of the Company’s common stock during each respective period, have been excluded from the calculation of diluted net loss per share for all periods presented as their effect would be anti-dilutive. |
Foreign Currency Translation [Policy Text Block] | ' |
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Foreign Currency Translation |
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The Company’s subsidiaries and VIEs located in China use its local currency (RMB) as its functional currency. Translation adjustments are reported as gains or losses in other comprehensive income or loss on the statement of comprehensive loss and accumulated other comprehensive income (loss) in the equity section of the balance sheet. The exchange rates used to translate amounts in functional currencies into USD for the purpose of preparing the consolidated financial statements were as follows: |
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| Period end RMB:USD exchange rate | | 6.1104 | | | 6.3011 | |
| Average RMB:USD exchange rate | | 6.1931 | | | 6.3116 | |
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The RMB is not freely convertible into other foreign currencies, and all foreign exchange transactions must take place through authorized institutions. There is no assurance that the RMB amounts could have been, or could be, converted into USD at the rates used in translation. |
Economic and Political Risks [Policy Text Block] | ' |
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Economic and Political Risks |
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The Company’s current operations are conducted in the PRC. Accordingly, the Company’s consolidated financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC and by the general state of the PRC economy. |
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The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s consolidated results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad and rates and methods of taxation, among other things. |
Concentrations of Credit Risk [Policy Text Block] | ' |
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Concentrations of Credit Risk |
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Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. |
Fair value of Financial Instruments [Policy Text Block] | ' |
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Fair value of Financial Instruments |
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The fair values of accounts receivable, prepaid expenses and accounts payable and accrued expenses are estimated to approximate the carrying values at December 31, 2013 and 2012 due to the short maturities of such instruments. |
Stock-Based Compensation [Policy Text Block] | ' |
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Stock-Based Compensation |
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The Company awards stock options and other equity-based instruments to its employees, directors and consultants (collectively “share-based payments”). Compensation cost related to such awards is measured based on the fair value of the instrument on the grant date and is recognized on a straight-line basis over the requisite service period, which generally equals the vesting period. All of the Company’s stock-based compensation is based on grants of equity instruments and no liability awards have been granted. |
Reportable Segment [Policy Text Block] | ' |
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Reportable Segment |
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The Company operates under one reportable business segment, media, for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance. |
Recent Accounting Pronouncements [Policy Text Block] | ' |
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Recent Accounting Pronouncements |
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In July 2013, the FASB issued ASU No. 2013-11, which amends the guidance in ASC 740, Income Taxes. ASU No. 2013-11 requires that an unrecognized tax benefit, or portion of an unrecognized tax benefit, be presented as a reduction of a deferred tax asset for net operating loss carryforward, a similar tax loss, or a tax credit carryforward. If an applicable deferred tax asset is not available or a company does not expect to use the applicable deferred tax asset, the unrecognized tax benefit should be presented as a liability in the financial statements and should not be combined with an unrelated deferred tax asset. The amended guidance is to be applied prospectively and is effective for reporting periods (interim and annual) beginning after December 15, 2013. The implementation of the amended guidance is not expected to have a material impact on our consolidated financial position or results of operations. |
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Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |