Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 11, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | WECAST NETWORK, INC. | |
Entity Central Index Key | 837,852 | |
Trading Symbol | wcst | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 42,715,658 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
UNAUDITED CONSOLIDATED BALANCE
UNAUDITED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 2,839,286 | $ 3,768,897 |
Restricted cash | 2,994,364 | |
Accounts receivable, net | 4,102,124 | 1,689,415 |
Licensed content, current | 962,026 | 556,591 |
Prepaid expenses | 310,696 | 362,421 |
Deferred issuance cost | 551,218 | |
Other current assets | 152,766 | 157,594 |
Total current assets | 8,366,898 | 10,080,500 |
Property and equipment, net | 78,674 | 154,434 |
Licensed content, non-current | 17,946,839 | 21,085 |
Intangible assets, net | 2,327,378 | 2,412,591 |
Goodwill | 6,648,911 | 6,648,911 |
Long term investments | 6,698,160 | 450,115 |
Other non-current assets | 4,271,203 | 58,089 |
Total assets | 46,338,063 | 19,825,725 |
Current liabilities: | ||
Accounts payable (including accounts payable of consolidated variable interest entities ("VIEs") without recourse to the Company of $219,130 and $44,867 as of September 30, 2016 and December 31, 2015, respectively) | 219,130 | 45,788 |
Deferred revenue of VIEs | 4,466 | 15,080 |
Accrued expenses (including accrued expenses of VIEs without recourse to the Company of $225,819 and $280,038 as of September 30, 2016 and December 31, 2015, respectively) | 966,295 | 1,196,066 |
Accrued salaries (including accrued salaries of VIEs without recourse to the Company of nil and $10,861 as of September 30, 2016 and December 31, 2015, respectively) | 940,059 | 1,058,124 |
Other current liabilities (including other current liabilities of VIEs without recourse to the Company of $438,042 and $298,422 as of September 30, 2016 and December 31, 2015, respectively) | 643,753 | 312,170 |
Accrued license content fees of VIEs | 1,018,921 | 933,532 |
Convertible promissory notes | 3,000,000 | 3,000,000 |
Warrant liabilities | 193,391 | 395,217 |
Deposit payable | 2,994,364 | |
Total current liabilities | 6,986,015 | 9,950,341 |
Deferred income taxes | 304,288 | 330,124 |
Total liabilities | 7,290,303 | 10,280,465 |
Commitments and contingencies | ||
Convertible redeemable preferred stock: Series A - 7,000,000 shares issued and outstanding, liquidation and deemed liquidation preference of $3,500,000 as of September 30, 2016 and December 31, 2015, respectively | 1,261,995 | 1,261,995 |
Equity: | ||
Common stock - $0.001 par value; 1,500,000,000 shares authorized, 42,715,658 and 24,249,109 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 42,716 | 24,249 |
Additional paid-in capital | 133,299,521 | 97,512,542 |
Accumulated deficit | (92,229,603) | (86,457,840) |
Accumulated other comprehensive loss | (705,643) | (414,910) |
Total Wecast Network shareholders' equity | 40,414,146 | 10,671,296 |
Non-controlling interest | (2,628,381) | (2,388,031) |
Total equity | 37,785,765 | 8,283,265 |
Total liabilities, convertible redeemable preferred stock and equity | 46,338,063 | 19,825,725 |
Series E Preferred Stock | ||
Equity: | ||
Series E Preferred Stock - $0.001 par value; 16,500,000 shares authorized, 7,154,997 and 7,254,997 shares issued and outstanding, liquidation preference of $12,521,245 and $12,696,245 as of September 30, 2016 and December 31, 2015, respectively | $ 7,155 | $ 7,255 |
UNAUDITED CONSOLIDATED BALANCE3
UNAUDITED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accounts payable | $ 219,130 | $ 45,788 |
Accrued expenses | 966,295 | 1,196,066 |
Accrued salaries | 940,059 | 1,058,124 |
Other current liabilities | $ 643,753 | $ 312,170 |
Convertible redeemable preferred stock, shares issued | 7,000,000 | 7,000,000 |
Convertible redeemable preferred stock, shares outstanding | 7,000,000 | 7,000,000 |
Convertible redeemable preferred stock, liquidation and deemed liquidation preference | $ 3,500,000 | $ 3,500,000 |
Series E Preferred Stock, par value | $ 0.001 | $ 0.001 |
Series E Preferred Stock, shares authorized | 16,500,000 | 16,500,000 |
Series E Preferred Stock, shares issued | 7,154,997 | 7,254,997 |
Series E Preferred Stock, shares outstanding | 7,154,997 | 7,254,997 |
Series E Preferred Stock, liquidation preference | $ 12,521,245 | $ 12,696,245 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 1,500,000,000 | 1,500,000,000 |
Common stock, shares issued | 42,715,658 | 24,249,109 |
Common stock, shares outstanding | 42,715,658 | 24,249,109 |
VIE | ||
Accounts payable | $ 219,130 | $ 44,867 |
Accrued expenses | 225,819 | 280,038 |
Accrued salaries | 0 | 10,861 |
Other current liabilities | $ 438,042 | $ 298,422 |
UNAUDITED CONSOLIDATED STATEMEN
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenue | $ 1,626,844 | $ 476,165 | $ 4,377,034 | $ 2,983,741 |
Cost of revenue | 893,796 | 900,284 | 2,609,975 | 2,772,322 |
Gross profit/(loss) | 733,048 | (424,119) | 1,767,059 | 211,419 |
Operating expenses: | ||||
Selling, general and administrative expense | 2,320,247 | 1,832,443 | 6,294,206 | 5,939,559 |
Professional fees | 326,353 | 141,034 | 964,290 | 581,115 |
Depreciation and amortization | 123,502 | 98,643 | 344,308 | 283,468 |
Impairment of long-lived assets (Note 6) | 172,064 | 172,064 | ||
Total operating expense | 2,942,166 | 2,072,120 | 7,774,868 | 6,804,142 |
Loss from operations | (2,209,118) | (2,496,239) | (6,007,809) | (6,592,723) |
Interest and other income/(expense) | ||||
Interest expense, net | (24,971) | (30,613) | (225,154) | (89,168) |
Change in fair value of warrant liabilities | 58,220 | 91,315 | 201,826 | 125,364 |
Equity in earning (loss) of equity method investees | 17,487 | (50,642) | (19,862) | (143,666) |
Other | (3,313) | 142,280 | (8,409) | 95,937 |
Loss before income taxes and non-controlling interest | (2,161,695) | (2,343,899) | (6,059,408) | (6,604,256) |
Income tax benefit | 8,612 | 8,612 | 25,836 | 25,836 |
Net loss | (2,153,083) | (2,335,287) | (6,033,572) | (6,578,420) |
Net loss attributable to non-controlling interest | 105,879 | 249,369 | 261,809 | 376,893 |
Net loss attributable to Wecast Network shareholders | $ (2,047,204) | $ (2,085,918) | $ (5,771,763) | $ (6,201,527) |
Basic and diluted loss per share (in dollars per share) | $ (0.05) | $ (0.09) | $ (0.18) | $ (0.26) |
Weighted average shares outstanding: | ||||
Basic and diluted (in shares) | 41,184,037 | 24,003,403 | 31,640,230 | 23,890,929 |
UNAUDITED CONSOLIDATED STATEME5
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (2,153,083) | $ (2,335,287) | $ (6,033,572) | $ (6,578,420) |
Other comprehensive loss, net of nil tax | ||||
Foreign currency translation adjustments | (67,764) | (182,208) | (269,274) | (182,930) |
Comprehensive loss | (2,220,847) | (2,517,495) | (6,302,846) | (6,761,350) |
Comprehensive loss attributable to non-controlling interest | 100,982 | 230,472 | 240,350 | 359,113 |
Comprehensive loss attributable to Wecast Network shareholders | $ (2,119,865) | $ (2,287,023) | $ (6,062,496) | $ (6,402,237) |
UNAUDITED CONSOLIDATED STATEME6
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (6,033,572) | $ (6,578,420) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Share-based compensation expense | 286,577 | 517,903 |
Provision for doubtful accounts (Note 4) | 366,887 | 9,087 |
Depreciation and amortization | 344,308 | 283,468 |
Amortization of debt issuance costs | 122,696 | |
Income tax benefit | (25,836) | (25,836) |
Equity in losses of equity method investees | 19,862 | 143,666 |
Loss on disposal of assets | 2,421 | |
Change in fair value of warrant liabilities | (201,826) | (125,364) |
Impairment of long-lived assets | 172,064 | |
Foreign currency exchange losses | 3,431 | |
Change in assets and liabilities: | ||
Accounts receivable | (2,890,663) | (1,496,756) |
Licensed content | (639,225) | 80,889 |
Prepaid expenses and other assets | (799) | (338,814) |
Accounts payable | 177,354 | (88,440) |
Accrued expenses, salary and other current liabilities | 250,856 | 796,467 |
Deferred revenue | (10,359) | 204,560 |
Accrued license content fees | 112,896 | 398,064 |
Net cash used in operating activities | (7,945,349) | (6,217,105) |
Cash flows from investing activities: | ||
Acquisition of and deposit for property and equipment | (3,130,862) | (32,193) |
Acquisition of leasehold improvements | (455,723) | |
Deposit for investment (Note 10) | (650,000) | |
Investments in intangibles | (2,811,346) | (48,938) |
Investment in long term investments | (3,584,025) | |
Net cash used in investing activities | (10,631,956) | (81,131) |
Cash flows from financing activities | ||
Proceeds from issuance of shares and warrant (Note 8 and Note 11) | 18,000,000 | |
Costs associated with financing activities | (294,890) | |
Net cash provided by financing activities | 17,705,110 | |
Effect of exchange rate changes on cash | (57,416) | (157,374) |
Net decrease in cash | (929,611) | (6,455,610) |
Cash at beginning of period | 3,768,897 | 10,812,371 |
Cash at end of period | 2,839,286 | 4,356,761 |
Supplemental Cash Flow Information: | ||
Cash paid for income taxes | ||
Cash paid for interest | ||
Exchange of Series E Preferred Stock for common stock | 100 | $ 110 |
Issuance of convertible note for licensed content (Note 11) | 17,717,847 | |
Issuance of shares for the settlement of liability | 75,000 | |
Issuance of shares upon conversion of convertible note, including accrued interest and debt issuance cost (Note 11) | 17,733,297 | |
Acquisition of long term investment through transfer of Game IP rights (Note 7) | 2,714,441 | |
Payable for workforce acquired (Note 6) | 93,828 | |
Workforce intangible acquired for shares (Note 6) | $ 121,695 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) | Series E Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Wecast Network Shareholders' Equity | Non- controlling Interest | Total |
Balance at Dec. 31, 2014 | $ 7,365 | $ 23,794 | $ 96,347,272 | $ (78,356,567) | $ (66,032) | $ 17,955,832 | $ (1,982,119) | $ 15,973,713 |
Balance (in shares) at Dec. 31, 2014 | 7,365,283 | 23,793,702 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Share-based compensation | 300,797 | 300,797 | 300,797 | |||||
Common stock issued for services | $ 121 | 216,985 | 217,106 | 217,106 | ||||
Common stock issued for services (in shares) | 120,755 | |||||||
Conversion of Series E Preferred Stock into common stock | $ (110) | $ 110 | ||||||
Conversion of Series E Preferred Stock into common stock (in shares) | (110,286) | 110,286 | ||||||
Exercise of options | $ 3 | (3) | ||||||
Exercise of options (in shares) | 3,181 | |||||||
Net loss | (6,201,527) | (6,201,527) | (376,893) | (6,578,420) | ||||
Foreign currency translation adjustments, net of nil tax | (200,710) | (200,710) | 17,780 | (182,930) | ||||
Balance at Sep. 30, 2015 | $ 7,255 | $ 24,028 | 96,865,051 | (84,558,094) | (266,742) | 12,071,498 | (2,341,232) | 9,730,266 |
Balance (in shares) at Sep. 30, 2015 | 7,254,997 | 24,027,924 | ||||||
Balance at Dec. 31, 2015 | $ 7,255 | $ 24,249 | 97,512,542 | (86,457,840) | (414,910) | 10,671,296 | (2,388,031) | 8,283,265 |
Balance (in shares) at Dec. 31, 2015 | 7,254,997 | 24,249,109 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Share-based compensation | $ 25 | 286,552 | 286,577 | $ 286,577 | ||||
Share-based compensation (in shares) | 25,000 | |||||||
Exercise of options (in shares) | ||||||||
Common stock issuance | $ 9,091 | 17,268,483 | 17,277,574 | $ 17,277,574 | ||||
Common stock issuance (in shares) | 9,090,909 | |||||||
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 | (411,223) | (411,223) | (411,223) | |||||
Common stock issued from conversion of convertible note | $ 9,209 | 17,724,088 | 17,733,297 | 17,733,297 | ||||
Common stock issued from conversion of convertible note (in shares) | 9,208,860 | |||||||
Restricted Shares granted in connection with acquisition of intangible | 121,695 | 121,695 | 121,695 | |||||
Common stock issued for settlement of liability | $ 42 | 74,958 | 75,000 | 75,000 | ||||
Common stock issued for settlement of liability (in shares) | 41,780 | |||||||
Common stock issued from conversion of series E preferred stock | $ (100) | $ 100 | ||||||
Common stock issued from conversion of series E preferred stock (in shares) | (100,000) | 100,000 | ||||||
Net loss | (5,771,763) | (5,771,763) | (261,809) | (6,033,572) | ||||
Foreign currency translation adjustments, net of nil tax | (290,733) | (290,733) | 21,459 | (269,274) | ||||
Balance at Sep. 30, 2016 | $ 7,155 | $ 42,716 | $ 133,299,521 | $ (92,229,603) | $ (705,643) | $ 40,414,146 | $ (2,628,381) | $ 37,785,765 |
Balance (in shares) at Sep. 30, 2016 | 7,154,997 | 42,715,658 |
Organization and Principal Acti
Organization and Principal Activities | 9 Months Ended |
Sep. 30, 2016 | |
Organization And Principal Activities [Abstract] | |
Organization and Principal Activities | 1. Organization and Principal Activities Wecast Network, Inc. (the “Company”), formerly known as YOU On Demand Holdings, Inc., is a Nevada corporation that primarily operates in China (“PRC”) through its subsidiaries and consolidated variable interest entities (“VIEs”). The Company, its subsidiaries and consolidated VIEs are collectively referred to as Wecast Network provides premium content and integrated value-added service solutions for the delivery of Video-on-Demand (“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, all adjustments (which include normal recurring adjustments) necessary to present a fair statements of the financial position as of September 30, 2016, results of operations for the three and nine months ended September 30, 2016 and 2015, and cash flows for the nine months ended September 30, 2016 and 2015, have been made. All significant intercompany transactions and balances are eliminated on consolidation. 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 (“2015 Annual Report”). In 2016, the Company adopted the Accounting Standards Update ("ASU") No. 2015-03, Simplifying the Presentation of Debt Issuance Costs |
Going Concern and Management's
Going Concern and Management's Plans | 9 Months Ended |
Sep. 30, 2016 | |
Going Concern And Managements Plans [Abstract] | |
Going Concern and Management's Plans | 2. Going Concern and Management’s Plans For the nine months ended September 30, 2016 and 2015, the Company incurred net losses of approximately $6.0 million and $6.6 million, respectively, and cash used in operations was approximately $7.9 million and $6.2 million, respectively. Further, the Company had cash of $2.8 million and net current liabilities of $7.0 million as of September 30, 2016, including a $3.0 million convertible note due on demand with the maturity date of December 31, 2016 and accumulated deficit of approximately $92.2 million and $84.6 million as of September 30, 2016 and 2015, respectively, due to recurring losses since the inception of our business. 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 March 28, 2016, the Company completed a common stock financing for $10.0 million. In addition, the Company completed two common stock financing with Seven Star Works Co. Ltd. (“SSW”) for $4.0 million, and with Harvest Alternative Investment Opportunities SPC (“Harvest”) for $4.0 million on July 19, 2016 and August 12, 2016, respectively. Although the Company believes it has the ability to raise funds by issuing debt or equity instruments, additional financing may not be available to the Company on terms acceptable to the Company 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. |
VIE Structure and Arrangements
VIE Structure and Arrangements | 9 Months Ended |
Sep. 30, 2016 | |
Vie Structure And Arrangements [Abstract] | |
VIE Structure and Arrangements | 3. VIE Structure and Arrangements a) Sinotop VIE structure and arrangement To comply with PRC laws and regulations 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 Media, 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 Media 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, we entered into a series of contractual agreements to give us the ability to control Sinotop Beijing with Zhang Yan, the legal shareholder of Sinotop Bejing (the spouse of our then-CEO). 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 Beijing Sun Seven Stars Culture Development Limited (“SSS”), (2) the Company terminated the series of contractual arrangements 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 change in legal ownership of Sinotop Beijing did not 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, 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 as calculated on accounting policies generally accepted in the PRC. 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 are 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 as calculated on accounting policies generally accepted in the PRC 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 Media that can be used only to settle obligations of Sinotop Beijing or Zhong Hai Media, except for the registered capital of these two entities amounting to RMB17.0 million (approximately $2.6 million) as of September 30, 2016. As Sinotop Beijing and Zhong Hai Media 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. b) Tianjin Sevenstarflix Network Technology Limited (“SSF”) VIE structure and arrangements To comply with PRC laws and regulations that prohibit or restrict foreign ownership of companies that provides value-added telecommunication services, the Company plans to also provide its services through SSF, which is applying to hold the licenses and approvals to provide digital distribution and Internet content services in the PRC. The Company has the ability to control SSF through a series of contractual agreements, as described below, entered into among YOD WFOE, YOD Hong Kong, SSF and the legal shareholders of SSF. 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 11 (c)) (the “SSF VIE Agreements”). Lan Yang, holder of 99% equity ownership in SSF and a party to certain of the SSF VIE Agreements, is the spouse of Bruno Zheng Wu, the Company’s Chairman. Yun Zhu, holder of 1% equity ownership in SSF and a party to certain of the SSF VIE Agreements, is the Vice President of SSS. The terms of the SSF VIE Agreements are as follows: Equity Pledge Agreement Pursuant to the Equity Pledge Agreement among YOD WFOE, Lan Yang and Yun Zhu (the “Nominee Shareholders”), dated April 5, 2016, the Nominee Shareholders pledged all of their capital contribution rights in SSF to YOD WFOE as security for the performance of the obligations of SSF 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, SSF and the Nominee Shareholders, dated April 5, 2016, 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 SSF. 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 SSF held by the Nominee Shareholders is transferred to YOD WFOE, or its designee and may not be terminated by any party to the agreement without consent of the other parties. Power of Attorney Pursuant to the Power of Attorney agreements among YOD WFOE, SSF and each of the respective Nominee Shareholders, dated April 5, 2016, each of the Nominee Shareholders granted YOD WFOE the irrevocable right, for the maximum period permitted by law, to all of its voting rights as shareholders of SSF. The Nominee Shareholders may not transfer any of their equity interest in SSF to any party other than YOD WFOE. The Power of Attorney agreements may not be terminated except until all of the equity in SSF has been transferred to YOD WFOE or its designee. Technical Service Agreement Pursuant to the Technical Service Agreement, dated April 5, 2016, between YOD WFOE and SSF, YOD WFOE has the exclusive right to provide technical service, marketing and management consulting service, financial support service and human resource support services to SSF, and SSF 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 SSF equivalent to YOD WFOE’s cost plus 20-30% of such costs as calculated on accounting policies generally accepted in the PRC. YOD WFOE and SSF 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, dated April 5, 2016, undersigned by the respective spouse of the 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 SSF and to waive 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 SSF which are held by the Nominee Shareholders, the Spouses agreed to be bound by the SSF 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 SSF VIE Agreements. Letter of Indemnification Pursuant to the Letter of Indemnification among YOD WFOE and Lan Yang and YOD WFOE and Yun Zhu, both dated as of April 5, 2016, 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 the Nominee Shareholders from any claims arising from, or related to, their role as the legal shareholder of SSF, provided that their actions as a nominee shareholder are taken in good faith and are not opposed to YOD WFOE’s best interests. 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 the Nominee Shareholders or YOD WFOE terminates the agreement by giving the other party hereto sixty (60) days’ prior written notice. Loan Agreement Pursuant to the Loan Agreement among YOD WFOE and the Nominee Shareholders, dated April 5, 2016, YOD WFOE agrees to lend RMB 19.8 million and RMB 0.2 million, respectively, to the Nominee Shareholders for the purpose of establishing SSF and for development of its business. As of September 30, 2016, RMB 27.6 million (US $4.2 million) and RMB nil have been lent to Lan Yang and Yun Zhu, respectively. Lan Yang has contributed all of the RMB 27.6 million (US $4.2 million) in the form of capital contribution and accordingly the loan is eliminated with the capital of SSF upon consolidation. The loan can only be repaid by a transfer by the Nominee Shareholders of their equity interests in SSF to YOD WFOE or YOD WFOE’s designated persons, through (i) YOD WFOE having the right, but not the obligation to at any time purchase, or authorize a designated person to purchase, all or part of the Nominee Shareholders’ equity interests in SSF at such price as YOD WFOE shall determine (the “Transfer Price”), (ii) all monies received by the Nominee Shareholders through the payment of the Transfer Price being used solely to repay YOD WFOE for the loans, and (iii) if the Transfer Price exceeds the principal amount of the loans, the amount in excess of the principal amount of the loans being deemed as interest payable on the loans, and to be payable to YOD WFOE in cash. Otherwise, the loans shall be deemed to be interest-free. The term of the Loan Agreement is perpetual, and may only be terminated upon the Nominee Shareholders receiving repayment notice, or upon the occurrence of an event of default under the terms of the agreement. Management Services Agreement In addition to the SSF VIE Agreements, the Company’s subsidiary and the parent company of YOD WFOE, YOU On Demand (Asia) Limited, a company incorporated under the laws of Hong Kong (“YOD Hong Kong”) entered into a Management Services Agreement with SSF, dated as of April 6, 2016 (the “Management Services Agreement”). Pursuant to a Management Services Agreement, YOD Hong Kong has the exclusive right to provide to SSF management, financial and other services related to the operation of SSF’s business, and SSF 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 SSF, upon demand, equal to 100% of the annual net profits as calculated on accounting policies generally accepted in the PRC of SSF 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 SSF’s future payment obligations. In addition, at the sole discretion of YOD Hong Kong, SSF is obligated to transfer to YOD Hong Kong, or its designee, any part or all of the business, personnel, assets and operations of SSF which may be lawfully conducted, employed, owned or operated by YOD Hong Kong, including: (a) business opportunities presented to, or available to SSF may be pursued and contracted for in the name of YOD Hong Kong rather than SSF, and at its discretion, YOD Hong Kong may employ the resources of SSF to secure such opportunities; (b) any tangible or intangible property of SSF, any contractual rights, any personnel, and any other items or things of value held by SSF 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 SSF on terms to be determined by agreement between YOD Hong Kong and SSF; (d) contracts entered into in the name of SSF 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 SSF; 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 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 SSF. The term of the Management Services Agreement is 20 years, and may not be terminated by SSF, 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 SSF without any restrictions. Therefore, YOD WFOE considers that there is no asset of SSF that can be used only to settle obligation of YOD WFOE, except for the registered capital of SSF amounting to RMB 50.0 million (approximately $7.5 million), among which RMB 27.6 million (approximately $4.2 million) has been injected as of September 30, 2016. As SSF is incorporated as limited liability company 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 VIEs, as applicable for the periods presented, affected the Company's consolidated financial statements. September 30, December 31, 2016 2015 ASSETS Current assets: Cash $ 423,224 $ 1,001,094 Accounts receivable, net 4,102,124 1,689,415 Licensed content, current 962,026 556,591 Prepaid expenses 118,571 98,893 Other current assets 124,266 133,582 Intercompany receivables due from the Company's subsidiaries (i) 156,576 161,017 Total current assets 5,886,787 3,640,592 Property and equipment, net 64,386 149,880 Licensed content, non-current 228,992 21,085 Intangible assets, net 2,951 253,771 Long term investments 3,698,160 450,115 Other non-current assets 585,014 58,026 Total assets $ 10,466,290 $ 4,573,469 LIABILITIES Current liabilities: Accounts payable $ 219,130 $ 44,867 Deferred revenue 4,466 15,080 Accrued expenses 225,819 280,038 Other current liabilities 438,042 298,422 Accrued salaries - 10,861 Accrued license content fees 1,018,921 933,532 Intercompany payables due to the Company's subsidiaries (i) 14,852,719 12,512,954 Total current liabilities 16,759,097 14,095,754 Total liabilities $ 16,759,097 $ 14,095,754 Nine Months Ended September 30, September 30, 2016 2015 Revenue $ 4,377,034 $ 2,983,741 Net loss $ (1,182,884 ) $ (2,030,575 ) Nine Months Ended September 30, September 30, 2016 2015 Net cash used in operating activities $ (3,777,951 ) $ (352,169 ) Net cash used in investing activities $ (3,355,296 ) $ (79,815 ) Net cash provided by intercompany financing activities (i) $ 6,555,377 $ - (i) Intercompany receivables and payables are eliminated upon consolidation. The intercompany financing activities include the capital injection of $4.2 million to SSF in the nine months period ended September 30,2016. The revenue producing assets that are held by the VIEs and a VIE’s subsidiary primarily comprise of licensed content, network equipment, software and licenses and website. 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. |
Accounts Receivable
Accounts Receivable | 9 Months Ended |
Sep. 30, 2016 | |
Accounts Receivable [Abstract] | |
Accounts Receivable | 4. Accounts Receivable Accounts receivable is consisted of the following: September 30, December 31, 2016 2015 Accounts receivable, gross: $ 4,469,011 $ 1,689,415 Less: allowance for doubtful accounts (366,887 ) - Accounts receivable, net $ 4,102,124 $ 1,689,415 The movement of the allownace for doubtful accounts is as follows: September 30, September 30, Balance at the beginning of the period $ - $ - Additions charged to bad debt expense 366,887 9,087 Write-off of bad debt allowance - (9,087 ) Balance at the end of the period $ 366,887 $ - |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 5. Property and Equipment The following is a breakdown of our property and equipment: September 30, December 31, 2016 2015 Furniture and office equipment $ 914,723 $ 910,420 Leasehold improvements 177,207 190,722 Total property and equipment 1,091,930 1,101,142 Less: accumulated depreciation (1,013,256 ) (946,708 ) Property and Equipment, net $ 78,674 $ 154,434 We recorded depreciation expense of approximately $33,000 and $101,000 for the three and nine months ended September 30, 2016 and $47,000 and $147,000 for the three and nine months ended September 30, 2015 respectively. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | 6. Intangible Assets As of September 30, 2016 and December 31, 2015, the Company’s amortizing and indefinite lived intangible assets consisted of the following: September 30, 2016 December 31, 2015 Amortizing Intangible Gross Carrying Accumulated Impairment Net Gross Carrying Accumulated Impairment Net Assets Amount Amortization Loss Balance Amount Amortization Loss Balance Charter/Cooperation agreements $ 2,755,821 $ (849,716 ) $ - $ 1,906,105 $ 2,755,821 $ (746,372 ) $ - $ 2,009,449 Software and licenses 274,017 (241,778 ) - 32,239 253,930 (234,947 ) - 18,983 Website and mobile app development (ii) 616,218 (444,502 ) (171,716 ) - 653,830 (403,961 ) - 249,869 Workforce 305,693 (50,949 ) 254,744 - - - - Total amortizing intangible assets $ 3,951,749 $ (1,586,945 ) $ (171,716 ) $ 2,193,088 $ 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 $ 4,086,039 $ (1,586,945 ) $ (171,716 ) $ 2,327,378 $ 3,797,871 $ (1,385,280 ) $ - $ 2,412,591 (i ) Wecast Network has accounted for the transaction as an asset acquisition in which Wecast Network mainly acquired a workforce, which is recognized as an intangible asset at cost. Subsequently, the workforce intangible is amortized over the employment term of three years. We recorded amortization expense related to our amortizing intangible assets of approximately $90,000 and $243,000 for the three and nine months ended September 30, 2016 and $52,000 and $137,000 for the three and nine months ended September 30, 2015 respectively, which included the amortization expense of the workforce acquired as stated above. (ii) Intangibles – Goodwill and Other The following table outlines the amortization expense for the next five years and thereafter: Amortization to be Years ending December 31, Recognized 2016 (3 months) $ 65,090 2017 251,003 2018 250,665 2019 168,049 2020 137,792 2021 137,792 Thereafter 1,182,697 Total amortization to be recognized $ 2,193,088 |
Long Term Investments
Long Term Investments | 9 Months Ended |
Sep. 30, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Long Term Investments | 7. Long Term Investments (i) Long Term Investments under Cost Method (a) Investment in Topsgames On April 13, 2016, SSF entered into a Game Right Assignment Agreement with SSS for the acquisition of certain game IP rights (“Game IP Rights”) for approximately $2.7 million (RMB18 million) in cash. As of September 30, 2016, $2.7 million has been all paid to SSS. 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 acquired from SSS to Topsgame in exchange for 13% of Topsgame’s equity ownership. Topsgame is a 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 transformation and expansion strategy. The Company’s 13% ownership interest does not provide the Company with the right to nor does the Company have representation on the board of directors of Topsgame. The Company has recognized the cost of the investment in Topsgame, which is a private company with no readily determinable fair value, equal to the fair value of Game IP Rights of approximately $2.7 million and account for the investment by the cost method. In accordance with Topsgame’s board resolution made on July 1, 2016 for all its shareholders to proportionally increase their investments in Topsgame by RMB 30,000,000, SSF has increased its investment in Topsgame by RMB 3,900,000 (approximately $584,000) on September 14, 2016, which maintain 13% equity ownership of Topsgame. The investment was still accounted by the cost method and amounted to $3.3 million as of September 30, 2016. (b) Investment in Frequency In April 2016, the Company and Frequency Networks Inc. (“Frequency”) entered into a Series A Preferred Stock Purchase Agreement (the “SPA”) for the purchase of 8,566,271 shares of Series A Preferred Stock, Frequency (the “Frequency Preferred Stock”) for a total purchase price of $3.0 million. The 8,566,271 Series A Preferred Stock represent 13% ownership and voting interest on an as converted basis and does not provide the Company with the right to nor does the Company have representation on the board of directors of Frequency. 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. Each share of Frequency Preferred Stock also has a liquidation preference of $0.42467 per share, plus any declared but unpaid dividends. The Company has recognized the cost of the investment in Frequency, which is a private company with no readily determinable fair value, at its cost of $3 million and account for the investment by the cost method. As of September 30, 2016, investment in Frequency was $3 million. (ii) Long Term Investment under Equity Method (c) Investment in Shandong Media and Hua Cheng Investments in entities where the Company can exercise significant influence, but not control, is classified as a long-term equity investment and accounted for using the equity method. Under the equity method, the investment is initially recorded at cost and adjusted for the Company’s share of undistributed earnings or losses of the investee. Investment losses are recognized until the investment is written down to nil provided the Company does not guarantee the investee’s obligations nor it is committed to provide additional funding. As of and for the period ended September 30, 2016 and December 31, 2015, the Company’s long term equity investments are comprised of the Company’ investment in Shandong Lushi Media Co., Ltd. (“Shandong Media”) and Hua Cheng Hu Dong (Beijing) Film and Television Communication Co., Ltd. (“Hua Cheng”), which are 30% and 39%, respectively, owned by Sinotop Beijing. The long term investment in Shandong Media was nil and nil as of September 30, 2016 and December 31, 2015 respectively, and the long term investment in Hua Cheng was $0.4 million and $0.5 million as of September 30, 2016 and December 31, 2015 respectively. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | 8. Stockholders’ Equity On July 6, 2016, the Company entered into a Common Stock Purchase Agreement (the “SSW SPA”) with Seven Stars Works Co., Ltd., a Korea company (“SSW”) and an affiliate of SSS. Pursuant to the terms of the SSW SPA, the Company has agreed to sell and issue 2,272,727 shares of the Company’s common stock for $1.76 per share, or a total purchase price of $4.0 million to SSW. A total of $4.0 million was received and 2,272,727 shares were issued on July 19, 2016. On August 11, 2016, the Company entered into Common Stock Purchase Agreement (the “Harvest SPA”) with Harvest Alternative Investment Opportunities SPC (“Harvest”), a Cayman Islands company. Pursuant to the terms of the Harvest SPA, the Company has agreed to sell and issue 2,272,727 shares of the Company’s Common Stock, for $1.76 per share, or a total purchase price of $4.0 million to Harvest. A total of $4.0 million was received |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 9. 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 September 30, 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 September 30, December 31, 2016 2015 Risk-free interest rate 0.59 % 0.92 % Expected volatility 60 % 60 % Expected term 0.92 years 1.67 years 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 September 30, 2016 and December 31, 2015, respectively: September 30, 2016 Fair Value Measurements Level 1 Level 2 Level 3 Total Fair Value Liabilities Warrant liabilities (see Note 12) $ - $ - $ 193,391 $ 193,391 December 31, 2015 Fair Value Measurements Level 1 Level 2 Level 3 Total Fair Value Liabilities Warrant liabilities (see Note 12) $ - $ - $ 395,217 $ 395,217 The table below reflects the components effecting the change in fair value for the nine months ended September 30, 2016: Level 3 Assets and Liabilities For the Nine Months Ended September 30 , 2016 January 1, Change in September 30, 2016 Settlements Fair Value 2016 Liabilities: Warrant liabilities (see Note 12) $ 395,217 $ - $ (201,826 ) $ 193,391 On March 28, 2016, the Company issued common stock and warrant to SSS (see Note 11). 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 2 years 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, other payables and convertible note as of September 30, 2016 and December 31, 2015, approximate fair value because of the short maturity of these instruments. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 10. 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 “Note”) at a 4% interest rate computed on the basis of a 365 day year. Upon issuance, the conversion price of the 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 the Note pursuant to which the 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. As such, the Company recognized a beneficial conversion feature of approximately $2,126,000 which in 2014 was reflected 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 Note was extended to December 31, 2016. The 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 and nine months ended September 30, 2016, the Company recorded interest expense of $30,000 and $90,000, respectively, related to the Note; For the three and nine months ended September 30, 2015, the Company recorded interest expense of $30,000 and $90,000, respectively, related to the Note. As of September 30, 2016, total accrued and unpaid interest amounted to $497,425 and is recorded in accrued expenses in the the Consolidated Balance Sheet. (b) Revenue and Accounts Receivable In March 2015, Zhong Hai Media entered into an agreement with C Media Limited (“C Media”), a beneficial owner of more than 5% of our capital stock, 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 September 30, 2016 and September 30, 2015, total revenue recognized amounted to nil and nil, respectively. For the nine months ended September 30, 2016 and September 30, 2015, total revenue recognized amounted to nil and $182,000, respectively. As of September 30, 2016, total accounts receivable due from C Media amounted to approximately $90,000. The entire $90,000 accounts receivable due from C Media was collected on October 20, 2016. (c) Cost of Revenue Hua Cheng, the minority shareholder of Zhong Hai Media, charged us licensed content fees of approximately $55,000 and nil for the three months ended September 30, 2016 and 2015, and approximately $148,000 and $80,000 for the nine months ended September 30, 2016 and 2015, respectively. As of September 30 2016, total accrued license content fees due to Hua Cheng amounted to approximately $164,000. (d) Purchase of Game IP Rights On April 13, 2016, SSF entered into a Game Right Assignment Agreement with SSS for the acquisition of certain Game IP Rights for cash based on total fair value of the Game IP Rights, which was determined to be approximately $2.7 million (RMB 18 million), of which approximately $2.1 million (RMB 14 million) and $0.6 million (RMB 4 million) has been paid out in the quarter ended on June 30 and September 30 respectively. The Game IP Rights was recorded at cost and then subsequently transferred in exchange for the investment in Topsgame as disclosed in Note 7 above. (e) Deposit for Investment in MYP On September 19, 2016, the Company signed a non-binding term sheet with Sun Video Group HK Limited (“SVG”) in purchase for its 51% ownership of M.Y. Products, LLC (“MYP”), a video commerce and supply chain management operator, in exchange for $50 million worth of Wecast Network common stock and $800,000 cash. SVG guarantees MYP will achieve $200 million cumulative top line revenue, within 12 months of closing. If MYP fails to meet the guarantee, then SVG shall forfeit back to the Company the Wecast Network common stock it received, on a pro-rata basis of revenue achieved. The shares will be held in escrow until the guarantee is met. MYP is 51% owned by SVG, an affiliate of the Company’s Chairman, Bruno Wu, and SSS. In accordance with the term sheet, the Company shall wire $800,000 (or its RMB equivalent) to MYP upon signing the term sheet as Good Faith Deposit. If this above-stated transaction is not completed within 6 months (unless further extended by both parties), then the Good Faith Deposit shall be repaid within 15 business days. As of September 30, 2016, the transaction has not yet been closed, and $650,000 of the deposit has been paid to MYP. The rest of $150,000 of the deposit was paid on November 8, 2016. |
SSS Agreements
SSS Agreements | 9 Months Ended |
Sep. 30, 2016 | |
Sss Agreements [Abstract] | |
SSS Agreements | 11. 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 the Company’s Chairman, Bruno Zheng 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 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 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. On June 27, 2016, shareholder approval was obtained. 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 in any other circumstances, the SSS Warrant is considered an equity classified instrument. The 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 and Restated 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, was originally due to mature on May 21, 2016, and beard an 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, which was obtained on June 27, 2016, the SSS Note was automatically converted into 9,208,860 shares of the Company’s common stock. On June 27, 2016, shareholder approval was obtained. In connection with the issuance of the SSS Note, the Company recorded debt issuance costs of approximately $131,000 which was to be amortized over the period of the SSS Note’s maturity date, of which approximately nil and $122,000 was recognized during the three and nine months ended September 30, 2016 respectively. The Company measured the effective conversion price of the SSS Note using its carrying value 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 $1.91 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. In the Annual Meeting of Shareholders (the “Annual Meeting”) of the Company held on June 27, 2016, shareholders approved the issuance of 9,208,860 shares of the Company’s common stock upon the conversion of the SSS Note and it was automatically converted into 9,208,860 shares of the Company’s common stock on June 27, 2016. The carrying value of the SSS Note as of June 27, 2016, which included the unamortized issuance costs of $9,000 and, pursuant to the terms of SSS Note, accrued interest expense (as to the date of conversion) of $ 24,000 has been recorded into the common shares issued on June 27, 2016. (c) Amended Tianjin Agreement Pursuant to the Amended Tianjin Agreement dated December 21, 2015, Tianjin Enternet was to contribute 100% of the equity ownership of SSF, a newly-formed subsidiary of Tianjin Enternet to the Company. Contingent on the performance of SSF, Tianjin Enternet will receive shares of the Company’s common stock over three years, with the exact number not exceeding 5.0 million per year, 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. In the event that the Company has not obtained the required vote from shareholders to issue the earn-out shares to Tianjin Enternet, the Company shall issue a promissory note with a principal amount equal to the quotient by multiplying 5.0 million by the applicable stock price defined in the agreement. On April 5, 2016, in lieu of Tianjin Enternet contributing 100% of the equity ownership of SSF to the Company, 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 Wecast Network. By virtue of these VIE agreements; YOD WFOE obtained financial controlling interest in SSF, including the power to direct the activities of SSF, and therefore is 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. The earn-out provision is based on either the number of home/user pass or the net income of SSF. While the net income is measured based on the operations of SSF, the number of home/user pass is measured based on number of home/user pass of SSF’s distributors. Such earn-out provision is based on an index that is not calculated solely by reference to the operations of SSF, which is not considered indexed to the Company’s own shares. Also the earn-out provisions permit cash settlement if the Company cannot issue the earn-out shares. Therefore, the earn-out provision is classified as a liability and measured initially and subsequently at fair value with changes in fair value recognized in earnings at each reporting periods. On June 27, 2016, the Company held its 2016 annual meeting of stockholders and received approval from its stockholders to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock. Accordingly, the Earn-Out Share Award became issuable at the time when the earn-out provisions are considered to have been met pursuant to the Amended Tianjin Agreement. The Company obtained control of SSF on April 5, 2016. As of September 30, 2016, SSF had not been fully ready yet to conduct its new business, including any Internet, telecommunication or content related sales and operations. Accordingly, the liability recognized was nil as of September 30, 2016 because the conditions to trigger the issuance of the Earn-Out Share Award were not probable of being met. |
Warrant Liabilities
Warrant Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Warrant Liabilities [Abstract] | |
Warrant Liabilities | 12. 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, of which 440,813 shares were exercised prior to January 1, 2015. 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 September 30, 2016 and December 31, 2015, the warrant liability was re-valued as disclosed in Note 9, and recorded at its fair value of approximately $193,000 and $395,000, respectively, resulting in a gain of approximately $202,000 for the nine months ended September 30, 2016. There were no warrants exercised during nine months ended September 30, 2016 and 2015, respectively. |
Share-Based Payments
Share-Based Payments | 9 Months Ended |
Sep. 30, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Share-Based Payments | 13. Share-Based Payments As of September 30, 2016, the Company had 2,151,428 options and 3,783,002 warrants outstanding (including the 1,818,182 warrants issued to SSS as disclosed in Note 11 (a)) to purchase shares of our common stock. 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 Total share-based payments expense recorded by the Company during the three and nine months ended September 30, 2016 and 2015 is as follows: Three Months Ended Nine Months Ended September 30 September 30 September 30 September 30 2016 2015 2016 2015 Employees and directors share-based payments $ 75,000 $ 174,000 $ 287,000 $ 518,000 Effective as of December 3, 2010, our Board of Directors approved the Wecast Network, 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 September 30, 2016, options available for issuance are 1,239,467 shares. (a) Stock Options Stock option activity for the nine months ended September 30, 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 455,000 1.58 Exercised - - Expired (25,897 ) 1.65 Forfeited (12,104 ) 1.65 Outstanding at September 30, 2016 2,151,428 2.54 4.91 - Vested and expected to vest as of September 30, 2016 2,151,428 2.54 4.91 - Options exercisable at September 30, 2016 (vested) 2,113,615 2.55 4.84 - On July 6, 2016, 455,000 shares stock options were issued to certain employees for services provided to us. The fair value of the stock options granted were valued using the Black-Scholes Merton method on the grant date, amounting to $423,000. The following table summarizes the assumptions used to estimate the fair values of the share options granted in the years presented: Black Scholes July 6, 2016 Risk-free interest rate 1.06% Expected volatility 60%~70% Expected term 5.88 years Expected dividend yield 0% As of September 30, 2016, approximately $435,000 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of approximately 2.64 years. The total fair value of shares vested during the nine months ended September 30, 2016 and 2015 was approximately $12,000 and $301,000 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 common stock of the Company. As of September 30, 2016, the weighted average exercise price of the warrants was $1.68 and the weighted average remaining life was 1.87 years. The May 2011 Warner Brothers Warrants of 200,000 and 2011 Service Agreement Warrants of 26,667 expired as of September 30, 2016. The following table outlines the warrants outstanding and exercisable as of September 30, 2016 and December 31, 2015: September 30, December 31, 2016 2015 Number of Number of Warrants Warrants Warrants Outstanding Outstanding and Exercisable Outstanding and Exercisable Exercise Price Expiration Date May 2011 Warner Brothers Warrants - 200,000 $ 6.60 05/11/16 2011 Service Agreement Warrants - 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 1,964,820 2,191,487 (i) The warrants are classified as derivative liabilities as disclosed in Note 12. |
Net Loss Per Common Share
Net Loss Per Common Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Net Loss Per Common Share | 14. Net Loss Per Common Share Basic net loss per common share attributable to Wecast Network shareholders is calculated by dividing the net loss attributable to Wecast Network 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 nine months ended September 30, 2016 and 2015, the number of securities convertible into common shares not included in diluted loss per common share because the effect would have been anti-dilutive consists of the following: September 30, September 30, 2016 2015 Warrants - issued to SSS (Note 11(a)) 1,818,182 - Warrants - Others (Note 13) 1,964,820 2,191,487 Options 2,151,428 1,721,096 Series A Preferred Stock 933,333 933,333 Series E Preferred Stock 7,154,997 7,254,997 Convertible promissory notes 2,015,812 1,947,053 Total 16,038,572 14,047,966 The Company has reserved its authorized but unissued common stock for possible future issuance in connection with the following: September 30, September 30, 2016 2015 Exercise of stock warrants 3,783,002 2,191,487 Issuable shares for stock options and restricted shares 3,928,870 3,928,870 Conversion of preferred stock 8,088,330 8,188,330 Issuable shares from conversion of promissory notes payable 2,015,812 1,947,053 Total 17,816,014 16,255,740 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 15. Income Taxes As of September 30, 2016, the Company had approximately $27.7 million of the U.S domestic cumulative tax loss carryforwards and approximately $17.0 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 2016 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 $0.2 million and $1.8 million during the three and nine months ended September 30, 2016, respectively. As of September 30, 2016, there are no unrecorded tax benefits which would impact our financial position or our results of operations. |
Contingencies and Commitments
Contingencies and Commitments | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies and Commitments | 16. 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 September 30, 2016, the Company's potential minimum cash obligation to these employees was approximately $279,000. (b) Operating Lease Commitment The Company is committed to paying operating leases related to our offices in China through 2020 and thereafter as follows: Leased Property Years ending December 31, Costs 2016 (3 months) $ 125,000 2017 304,000 2018 309,000 2019 266,000 2020 205,000 Thereafter 87,000 Total $ 1,296,000 (c) Licensed Content Commitment The Company is committed to paying content costs through 2019 as follows: Years ending December 31, Content Costs 2016 (3 months) $ 2,294,000 2017 425,000 2018 225,000 2019 225,000 Total $ 3,169,000 (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 September 30, 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 property acquisition was approximately $4,239,000 (RMB 27 million), which the Company has paid $3,214,000 million (RMB 21 million) in the second and third quarters of 2016 and is committed to paying the following through 2016 as follows: Years ending December 31, Property 2016 (3 months) 1,025,000 Total $ 1,025,000 (f) Marketing Expense Commitment The Company is committed to paying marketing expense through 2016 as follows: Years ending December 31, Marketing expenses 2016 (3 months) 249,000 Total $ 249,000 (g) Investment commitment The Company entered into a Joint Venture Agreement (the “JV Agreement”) with Megtron Hong Kong Investment Group Co., Limited on May 30, 2016, pursuant to which the Company is committed to contribute RMB 5.0 million within one month after the Joint-Venture Company is formed. |
Concentration, Credit and Other
Concentration, Credit and Other Risks | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentration, Credit and Other Risks | 17. 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 Media, 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 Media, SSF and the respective legal shareholders of Sinotop Beijing and SSF. The Company believes that these contractual arrangements are in compliance with PRC law and are legally enforceable. If Sinotop Beijing, SSF or their respective 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 and SSF, it would be able to exercise its rights as a shareholder to effect changes in the board of directors of Sinotop Beijing or SSF, 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, SSF and their respective legal shareholders 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 nine months ended September 30, 2016, three customers individually accounted for 31%, 16% and 13% of the Company’s revenue. Three customers individually accounted for 33%, 14% and 12% of the Company’s net accounts receivables as of September 30, 2016. For the nine months ended September 30, 2015, three 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 September 30, 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 nine months ended September 30, 2016, four suppliers individually accounted for 30%, 24%, 20% and 13% of the Company’s cost of revenues. Two suppliers individually accounted for 85% and 15% of the Company’s accrued license content fees as of September 30, 2016. For the nine months ended September 30, 2015, four suppliers individually accounted for more than 10% of the Company’s cost of revenues. One supplier individually accounted for 10% of the Company’s accounts payable as of September 30, 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 September 30, 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: September 30, December 31, 2016 2015 RMB denominated bank deposits with financial institutions in the PRC $ 485,582 1,076,430 US dollar denominated bank deposits with financial institutions in the PRC $ 1,454,874 2,613,834 US dollar denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”) $ 765,611 23,460 US dollar denominated bank deposits with financial institutions in The United States of America (“USA”) $ 132,268 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 September 30, 2016 and December 31, 2015 deposits of $236,826 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. |
Defined Contribution Plan
Defined Contribution Plan | 9 Months Ended |
Sep. 30, 2016 | |
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract] | |
Defined Contribution Plan | 18. 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 $3,000 for the three and nine months ended September 30, 2016 respectively and $1,000 and $7,000 for the three and nine months ended September 30, 2015 respectively. |
VIE Structure and Arrangements
VIE Structure and Arrangements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Vie Structure And Arrangements [Abstract] | |
Schedule of consolidated financial statements | September 30, December 31, 2016 2015 ASSETS Current assets: Cash $ 423,224 $ 1,001,094 Accounts receivable, net 4,102,124 1,689,415 Licensed content, current 962,026 556,591 Prepaid expenses 118,571 98,893 Other current assets 124,266 133,582 Intercompany receivables due from the Company's subsidiaries (i) 156,576 161,017 Total current assets 5,886,787 3,640,592 Property and equipment, net 64,386 149,880 Licensed content, non-current 228,992 21,085 Intangible assets, net 2,951 253,771 Long term investments 3,698,160 450,115 Other non-current assets 585,014 58,026 Total assets $ 10,466,290 $ 4,573,469 LIABILITIES Current liabilities: Accounts payable $ 219,130 $ 44,867 Deferred revenue 4,466 15,080 Accrued expenses 225,819 280,038 Other current liabilities 438,042 298,422 Accrued salaries - 10,861 Accrued license content fees 1,018,921 933,532 Intercompany payables due to the Company's subsidiaries (i) 14,852,719 12,512,954 Total current liabilities 16,759,097 14,095,754 Total liabilities $ 16,759,097 $ 14,095,754 Nine Months Ended September 30, September 30, 2016 2015 Revenue $ 4,377,034 $ 2,983,741 Net loss $ (1,182,884 ) $ (2,030,575 ) Nine Months Ended September 30, September 30, 2016 2015 Net cash used in operating activities $ (3,777,951 ) $ (352,169 ) Net cash used in investing activities $ (3,355,296 ) $ (79,815 ) Net cash provided by intercompany financing activities (i) $ 6,555,377 $ - (i) Intercompany receivables and payables are eliminated upon consolidation. The intercompany financing activities include the capital injection of $4.2 million to SSF in the nine months period ended September 30,2016. |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounts Receivable [Abstract] | |
Schedule of accounts receivable | September 30, December 31, 2016 2015 Accounts receivable, gross: $ 4,469,011 $ 1,689,415 Less: allowance for doubtful accounts (366,887 ) - Accounts receivable, net $ 4,102,124 $ 1,689,415 |
Schedule of movement in allowance for doubtful accounts receivable | September 30, 2016 September 30, 2015 Balance at the beginning of the period $ - $ - Additions charged to bad debt expense 366,887 9,087 Write-off of bad debt allowance - (9,087 ) Balance at the end of the period $ 366,887 $ - |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | September 30, December 31, 2016 2015 Furniture and office equipment $ 914,723 $ 910,420 Leasehold improvements 177,207 190,722 Total property and equipment 1,091,930 1,101,142 Less: accumulated depreciation (1,013,256 ) (946,708 ) Property and Equipment, net $ 78,674 $ 154,434 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of amortizing and indefinite lived intangible assets | September 30, 2016 December 31, 2015 Amortizing Intangible Gross Carrying Accumulated Impairment Net Gross Carrying Accumulated Impairment Net Assets Amount Amortization Loss Balance Amount Amortization Loss Balance Charter/Cooperation agreements $ 2,755,821 $ (849,716 ) $ - $ 1,906,105 $ 2,755,821 $ (746,372 ) $ - $ 2,009,449 Software and licenses 274,017 (241,778 ) - 32,239 253,930 (234,947 ) - 18,983 Website and mobile app development (ii) 616,218 (444,502 ) (171,716 ) - 653,830 (403,961 ) - 249,869 Workforce 305,693 (50,949 ) 254,744 - - - - Total amortizing intangible assets $ 3,951,749 $ (1,586,945 ) $ (171,716 ) $ 2,193,088 $ 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 $ 4,086,039 $ (1,586,945 ) $ (171,716 ) $ 2,327,378 $ 3,797,871 $ (1,385,280 ) $ - $ 2,412,591 (i ) Wecast Network has accounted for the transaction as an asset acquisition in which Wecast Network mainly acquired a workforce, which is recognized as an intangible asset at cost. Subsequently, the workforce intangible is amortized over the employment term of three years. We recorded amortization expense related to our amortizing intangible assets of approximately $90,000 and $243,000 for the three and nine months ended September 30, 2016 and $52,000 and $137,000 for the three and nine months ended September 30, 2015 respectively, which included the amortization expense of the workforce acquired as stated above. (ii) Intangibles – Goodwill and Other |
Schedule of amortization expense for the next five years | Amortization to be Years ending December 31, Recognized 2016 (3 months) $ 65,090 2017 251,003 2018 250,665 2019 168,049 2020 137,792 2021 137,792 Thereafter 1,182,697 Total amortization to be recognized $ 2,193,088 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of assumptions for estimating fair value of warrant liabilities | Black Scholes Monte Carlo September 30, December 31, 2016 2015 Risk-free interest rate 0.59 % 0.92 % Expected volatility 60 % 60 % Expected term 0.92 years 1.67 years Expected dividend yield 0 % 0 % Monte Carlo March 28, 2016 Risk-free interest rate 0.89 % Expected volatility 60 % Expected term 2 years Expected dividend yield 0 % |
Schedule of assets and liabilities measured at fair value on a recurring basis | September 30, 2016 Fair Value Measurements Level 1 Level 2 Level 3 Total Fair Value Liabilities Warrant liabilities (see Note 12) $ - $ - $ 193,391 $ 193,391 December 31, 2015 Fair Value Measurements Level 1 Level 2 Level 3 Total Fair Value Liabilities Warrant liabilities (see Note 12) $ - $ - $ 395,217 $ 395,217 |
Schedule of components effecting the change in fair value | Level 3 Assets and Liabilities For the Nine Months Ended September 30 , 2016 January 1, Change in September 30, 2016 Settlements Fair Value 2016 Liabilities: Warrant liabilities (see Note 12) $ 395,217 $ - $ (201,826 ) $ 193,391 |
Share-Based Payments (Tables)
Share-Based Payments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Schedule of share-based payments expense | Three Months Ended Nine Months Ended September 30 September 30 September 30 September 30 2016 2015 2016 2015 Employees and directors share-based payments $ 75,000 $ 174,000 $ 287,000 $ 518,000 |
Schedule of stock option activity | 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 455,000 1.58 Exercised - - Expired (25,897 ) 1.65 Forfeited (12,104 ) 1.65 Outstanding at September 30, 2016 2,151,428 2.54 4.91 - Vested and expected to vest as of September 30, 2016 2,151,428 2.54 4.91 - Options exercisable at September 30, 2016 (vested) 2,113,615 2.55 4.84 - |
Schedule of assumptions used to estimate the fair values of the share options | Black Scholes July 6, 2016 Risk-free interest rate 1.06% Expected volatility 60%~70% Expected term 5.88 years Expected dividend yield 0% |
Schedule of warrants outstanding and exercisable | September 30, December 31, 2016 2015 Number of Number of Warrants Warrants Warrants Outstanding Outstanding and Exercisable Outstanding and Exercisable Exercise Price Expiration Date May 2011 Warner Brothers Warrants - 200,000 $ 6.60 05/11/16 2011 Service Agreement Warrants - 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 1,964,820 2,191,487 (i) The warrants are classified as derivative liabilities as disclosed in Note 12. |
Net Loss Per Common Share (Tabl
Net Loss Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of number of securities convertible into common shares | September 30, September 30, 2016 2015 Warrants - issued to SSS (Note 11(a)) 1,818,182 - Warrants - Others (Note 13) 1,964,820 2,191,487 Options 2,151,428 1,721,096 Series A Preferred Stock 933,333 933,333 Series E Preferred Stock 7,154,997 7,254,997 Convertible promissory notes 2,015,812 1,947,053 Total 16,038,572 14,047,966 |
Schedule of authorized but unissued common stock for possible future issuance | September 30, September 30, 2016 2015 Exercise of stock warrants 3,783,002 2,191,487 Issuable shares for stock options and restricted shares 3,928,870 3,928,870 Conversion of preferred stock 8,088,330 8,188,330 Issuable shares from conversion of promissory notes payable 2,015,812 1,947,053 Total 17,816,014 16,255,740 |
Contingencies and Commitments (
Contingencies and Commitments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating lease commitment | Leased Property Years ending December 31, Costs 2016 (3 months) $ 125,000 2017 304,000 2018 309,000 2019 266,000 2020 205,000 Thereafter 87,000 Total $ 1,296,000 |
Schedule of licensed content commitment | Years ending December 31, Content Costs 2016 (3 months) $ 2,294,000 2017 425,000 2018 225,000 2019 225,000 Total $ 3,169,000 |
Schedule of acquisition of property commitment | Years ending December 31, Property 2016 (3 months) 1,025,000 Total $ 1,025,000 |
Schedule of advertising and marketing expense commitment | Years ending December 31, Marketing expenses 2016 (3 months) 249,000 Total $ 249,000 |
Concentration, Credit and Oth34
Concentration, Credit and Other Risks (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Schedule of demand deposits | September 30, December 31, 2016 2015 RMB denominated bank deposits with financial institutions in the PRC $ 485,582 1,076,430 US dollar denominated bank deposits with financial institutions in the PRC $ 1,454,874 2,613,834 US dollar denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”) $ 765,611 23,460 US dollar denominated bank deposits with financial institutions in The United States of America (“USA”) $ 132,268 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 |
Going Concern and Management'35
Going Concern and Management's Plans (Detail Textuals) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Going Concern And Managements Plans [Abstract] | ||||||
Net loss | $ (2,153,083) | $ (2,335,287) | $ (6,033,572) | $ (6,578,420) | ||
Cash used in operations | (7,945,349) | (6,217,105) | ||||
Cash | 2,839,286 | 4,356,761 | 2,839,286 | 4,356,761 | $ 3,768,897 | $ 10,812,371 |
Total current liabilities | 6,986,015 | 6,986,015 | 9,950,341 | |||
Convertible note | 3,000,000 | 3,000,000 | 3,000,000 | |||
Accumulated deficit | $ (92,229,603) | $ 84,600,000 | $ (92,229,603) | $ 84,600,000 | $ (86,457,840) |
Going Concern and Management'36
Going Concern and Management's Plans (Detail Textuals 1) - USD ($) | Aug. 11, 2016 | Jul. 06, 2016 | Mar. 28, 2016 | Sep. 30, 2016 |
Going Concern And Managements Plans [Line Items] | ||||
Common stock financing | $ 10,000,000 | $ 17,277,574 | ||
Seven Stars Works Co., Ltd | ||||
Going Concern And Managements Plans [Line Items] | ||||
Common stock financing | $ 4,000,000 | |||
Harvest Alternative Investment Opportunities SPC | ||||
Going Concern And Managements Plans [Line Items] | ||||
Common stock financing | $ 4,000,000 | |||
Common Stock Purchase Agreement | Seven Stars Works Co., Ltd | ||||
Going Concern And Managements Plans [Line Items] | ||||
Common stock financing | $ 4,000,000 | |||
Common Stock Purchase Agreement | Harvest Alternative Investment Opportunities SPC | ||||
Going Concern And Managements Plans [Line Items] | ||||
Common stock financing | $ 4,000,000 |
VIE Structure and Arrangement37
VIE Structure and Arrangements (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | |
Current assets: | |||||
Cash | $ 2,839,286 | $ 3,768,897 | $ 4,356,761 | $ 10,812,371 | |
Accounts receivable, net | 4,102,124 | 1,689,415 | |||
Licensed content, current | 962,026 | 556,591 | |||
Prepaid expenses | 310,696 | 362,421 | |||
Other current assets | 152,766 | 157,594 | |||
Total current assets | 8,366,898 | 10,080,500 | |||
Property and equipment, net | 78,674 | 154,434 | |||
Licensed content, non-current | 17,946,839 | 21,085 | |||
Intangible assets, net | 2,327,378 | 2,412,591 | |||
Long term investments | 6,698,160 | 450,115 | |||
Other non-current assets | 4,271,203 | 58,089 | |||
Total assets | 46,338,063 | 19,825,725 | |||
Current liabilities: | |||||
Accounts payable | 219,130 | 45,788 | |||
Deferred revenue | 4,466 | 15,080 | |||
Accrued expenses | 966,295 | 1,196,066 | |||
Other current liabilities | 643,753 | 312,170 | |||
Accrued salaries | 940,059 | 1,058,124 | |||
Accrued license content fees | 1,018,921 | 933,532 | |||
Total current liabilities | 6,986,015 | 9,950,341 | |||
Total liabilities | 7,290,303 | 10,280,465 | |||
VIE | |||||
Current assets: | |||||
Cash | 423,224 | 1,001,094 | |||
Accounts receivable, net | 4,102,124 | 1,689,415 | |||
Licensed content, current | 962,026 | 556,591 | |||
Prepaid expenses | 118,571 | 98,893 | |||
Other current assets | 124,266 | 133,582 | |||
Intercompany receivables due from the Company's subsidiaries | [1] | 156,576 | 161,017 | ||
Total current assets | 5,886,787 | 3,640,592 | |||
Property and equipment, net | 64,386 | 149,880 | |||
Licensed content, non-current | 228,992 | 21,085 | |||
Intangible assets, net | 2,951 | 253,771 | |||
Long term investments | 3,698,160 | 450,115 | |||
Other non-current assets | 585,014 | 58,026 | |||
Total assets | 10,466,290 | 4,573,469 | |||
Current liabilities: | |||||
Accounts payable | 219,130 | 44,867 | |||
Deferred revenue | 4,466 | 15,080 | |||
Accrued expenses | 225,819 | 280,038 | |||
Other current liabilities | 438,042 | 298,422 | |||
Accrued salaries | 10,861 | ||||
Accrued license content fees | 1,018,921 | 933,532 | |||
Intercompany payables due to the Company's subsidiaries | [1] | 14,852,719 | 12,512,954 | ||
Total current liabilities | 16,759,097 | 14,095,754 | |||
Total liabilities | $ 16,759,097 | $ 14,095,754 | |||
[1] | Intercompany receivables and payables are eliminated upon consolidation |
VIE Structure and Arrangement38
VIE Structure and Arrangements (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Variable Interest Entity [Line Items] | ||||
Revenue | $ 1,626,844 | $ 476,165 | $ 4,377,034 | $ 2,983,741 |
Net loss | $ (2,047,204) | $ (2,085,918) | (5,771,763) | (6,201,527) |
VIE | ||||
Variable Interest Entity [Line Items] | ||||
Revenue | 4,377,034 | 2,983,741 | ||
Net loss | $ (1,182,884) | $ (2,030,575) |
VIE Structure and Arrangement39
VIE Structure and Arrangements (Details 2) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | ||
Variable Interest Entity [Line Items] | |||
Net cash used in operating activities | $ (7,945,349) | $ (6,217,105) | |
Net cash used in investing activities | (10,631,956) | (81,131) | |
Net cash provided by intercompany financing activities | 17,705,110 | ||
VIE | |||
Variable Interest Entity [Line Items] | |||
Net cash used in operating activities | (3,777,951) | (352,169) | |
Net cash used in investing activities | (3,355,296) | (79,815) | |
Net cash provided by intercompany financing activities | $ 6,555,377 | [1] | |
[1] | Intercompany receivables and payables are eliminated upon consolidation. The intercompany financing activities include the capital injection of $4.2 million to SSF in the nine months period ended September 30,2016. |
VIE Structure and Arrangement40
VIE Structure and Arrangements (Detail Textuals) ¥ in Millions, $ in Millions | Apr. 05, 2016CNY (¥) | Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Jan. 31, 2016USD ($) | Jan. 31, 2016CNY (¥) |
SSF | |||||
Variable Interest Entity [Line Items] | |||||
Capital injection to SSF | $ | $ 4.2 | ||||
SSF | Lan Yang | |||||
Variable Interest Entity [Line Items] | |||||
Percentage of variable interest entity | 99.00% | ||||
SSF | Yun Zhu | |||||
Variable Interest Entity [Line Items] | |||||
Percentage of variable interest entity | 1.00% | ||||
Contractual agreements | Sinotop Beijing | |||||
Variable Interest Entity [Line Items] | |||||
Contribution of equity ownership | 100.00% | 100.00% | |||
Contractual agreements | Sinotop Beijing | YOD WFOE | |||||
Variable Interest Entity [Line Items] | |||||
Registered capital | 2.6 | ¥ 17 | |||
Contractual agreements | SSF | YOD WFOE | |||||
Variable Interest Entity [Line Items] | |||||
Registered capital | $ 4.2 | ¥ 27.6 | $ 7.5 | ¥ 50 | |
Technical service agreement | Sinotop Beijing | YOD WFOE | |||||
Variable Interest Entity [Line Items] | |||||
Percentage of service fee received | 30.00% | 30.00% | |||
Management services agreement | Sinotop Beijing | YOD Hong Kong | |||||
Variable Interest Entity [Line Items] | |||||
Percentage of service fee received | 100.00% | 100.00% | |||
Term of agreement | 20 years | ||||
Loan Agreement | YOD WFOE | |||||
Variable Interest Entity [Line Items] | |||||
Loans payable | ¥ 19.8 | ||||
Loan Agreement | Lan Yang | |||||
Variable Interest Entity [Line Items] | |||||
Registered capital | $ 4.2 | ¥ 27.6 | |||
Loans payable | $ 4.2 | 27.6 | |||
Loan Agreement | Yun Zhu | |||||
Variable Interest Entity [Line Items] | |||||
Loans payable | |||||
Loan Agreement | Nominee Shareholders | |||||
Variable Interest Entity [Line Items] | |||||
Loans payable | ¥ 0.2 |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accounts Receivable [Abstract] | ||
Accounts receivable, gross: | $ 4,469,011 | $ 1,689,415 |
Less: allowance for doubtful accounts | (366,887) | |
Accounts receivable, net | $ 4,102,124 | $ 1,689,415 |
Accounts Receivable (Details 1)
Accounts Receivable (Details 1) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||
Balance at the beginning of the period | ||
Additions charged to bad debt expense | 366,887 | 9,087 |
Write-off of bad debt allowance | (9,087) | |
Balance at the end of the period | $ 366,887 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 1,091,930 | $ 1,101,142 |
Less: accumulated depreciation | (1,013,256) | (946,708) |
Property and Equipment, net | 78,674 | 154,434 |
Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 914,723 | 910,420 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 177,207 | $ 190,722 |
Property and Equipment (Detail
Property and Equipment (Detail Textuals) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 33,000 | $ 47,000 | $ 101,000 | $ 147,000 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | |
Intangible Assets [Line Items] | |||
Total amortizing intangible assets, gross carrying amount | $ 3,951,749 | $ 3,663,581 | |
Total amortizing intangible assets, accumulated amortization | (1,586,945) | (1,385,280) | |
Total amortizing intangible assets, impairment loss | (171,716) | ||
Total amortizing intangible assets, net balance | 2,193,088 | 2,278,301 | |
Total intangible assets, gross carrying amount | 4,086,039 | 3,797,871 | |
Total intangible assets, accumulated amortization | (1,586,945) | (1,385,280) | |
Total intangible assets, impairment loss | (171,716) | ||
Total intangible assets, net balance | 2,327,378 | 2,412,591 | |
Website name | |||
Intangible Assets [Line Items] | |||
Indefinite lived intangible assets, carrying amount | 134,290 | 134,290 | |
Charter/ Cooperation agreements | |||
Intangible Assets [Line Items] | |||
Total amortizing intangible assets, gross carrying amount | 2,755,821 | 2,755,821 | |
Total amortizing intangible assets, accumulated amortization | (849,716) | (746,372) | |
Total amortizing intangible assets, net balance | 1,906,105 | 2,009,449 | |
Software and licenses | |||
Intangible Assets [Line Items] | |||
Total amortizing intangible assets, gross carrying amount | 274,017 | 253,930 | |
Total amortizing intangible assets, accumulated amortization | (241,778) | (234,947) | |
Total amortizing intangible assets, net balance | 32,239 | 18,983 | |
Website and mobile app development | |||
Intangible Assets [Line Items] | |||
Total amortizing intangible assets, gross carrying amount | [1] | 616,218 | 653,830 |
Total amortizing intangible assets, accumulated amortization | [1] | (444,502) | (403,961) |
Total amortizing intangible assets, impairment loss | [1] | (171,716) | |
Total amortizing intangible assets, net balance | [1] | 249,869 | |
Workforce | |||
Intangible Assets [Line Items] | |||
Total amortizing intangible assets, gross carrying amount | [2] | 305,693 | |
Total amortizing intangible assets, accumulated amortization | [2] | (50,949) | |
Total amortizing intangible assets, net balance | [2] | $ 254,744 | |
[1] | Considering a new mobile app is being developed to be put into market in October, 2016, we determined that the future cash flows generated from the old mobile app was nil. In accordance with ASC 350, Intangibles - Goodwill and Other, 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. We estimated the fair value of this intangible asset to be nil as of September 30, 2016. Impairment loss recognized from this intangible asset for the three months ended September 30, 2016 and 2015 is $172,000 and nil, respectively. | ||
[2] | On April 1, 2016, Wecast Network entered into an agreement with Mr. Liu Changsheng, under which Wecast Network agreed to pay Mr. Liu Changsheng cash consideration of $187,653 and 66,500 shares of restricted shares with a six month restriction period and a fair value of $121,695 in exchange for a workforce of 10 personnel experienced in programing content mobile apps. All 10 personnel enter into three year employment contracts with Wecast Network effective from April 1, 2016. The Company also acquired certain laptop and desktop computers with fair value of $3,655. According to the agreement, 30% of the cash consideration is due upon the signing of the agreement, 20% is due 2 months after the signing of the agreement and 50% is due 6 months after the signing of the agreement. Cash consideration of $93,825 has been paid as of September 30, 2016, and $93,828 was paid on October 31, 2016. If any of three key staff, as defined, terminated their employment with Wecast Network during the first 12 months of employment, Wecast Network has right to forfeit the unpaid cash consideration. In addition, Mr. Liu Changsheng would be required to pay a default penalty at minimal of $129,180.Wecast Network has accounted for the transaction as an asset acquisition in which Wecast Network mainly acquired a workforce, which is recognized as an intangible asset at cost. Subsequently, the workforce intangible is amortized over the employment term of three years. We recorded amortization expense related to our amortizing intangible assets of approximately $90,000 and $243,000 for the three and nine months ended September 30, 2016 and $52,000 and $137,000 for the three and nine months ended September 30, 2015 respectively, which included the amortization expense of the workforce acquired as stated above. |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2016 (3 months) | $ 65,090 | |
2,017 | 251,003 | |
2,018 | 250,665 | |
2,019 | 168,049 | |
2,020 | 137,792 | |
2,021 | 137,792 | |
Thereafter | 1,182,697 | |
Total amortization to be recognized | $ 2,193,088 | $ 2,278,301 |
Intangible Assets (Detail Textu
Intangible Assets (Detail Textuals) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Oct. 31, 2016 | Apr. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Intangible Assets [Line Items] | |||||||
Cash consideration | $ 2,811,346 | $ 48,938 | |||||
Fair value of restricted shares granted | 121,695 | ||||||
Amortization expense of workforce acquired | 1,634,773 | $ 1,385,280 | |||||
Impairment loss recognized from intangible assets | $ 172,000 | ||||||
Mr. Liu Changsheng | Workforce | |||||||
Intangible Assets [Line Items] | |||||||
Cash consideration | $ 187,653 | 93,825 | |||||
Restricted shares | 66,500 | ||||||
Restriction period for restricted shares | 6 months | ||||||
Fair value of intangible assets | $ 3,655 | ||||||
Cash consideration due after signing of agreement, percentage | 30.00% | ||||||
Cash consideration due in 2 months, percentage | 20.00% | ||||||
Cash consideration due in 6 months, percentage | 50.00% | ||||||
Payment of default penalty | $ 129,180 | ||||||
Intangible assets amortized period | 3 years | ||||||
Amortization expense of workforce acquired | $ 90,000 | $ 52,000 | $ 243,000 | $ 137,000 | |||
Mr. Liu Changsheng | Workforce | Subsequent Event | |||||||
Intangible Assets [Line Items] | |||||||
Cash consideration | $ 93,828 |
Long Term Investments (Detail T
Long Term Investments (Detail Textuals) | Sep. 14, 2016USD ($) | Sep. 14, 2016CNY (¥) | Jul. 01, 2016CNY (¥) | Apr. 30, 2016USD ($)$ / sharesshares | Mar. 28, 2016USD ($) | Sep. 30, 2016USD ($) | Apr. 15, 2016USD ($) | Apr. 13, 2016USD ($) | Apr. 13, 2016CNY (¥) | Dec. 31, 2015USD ($) |
Debt Instrument [Line Items] | ||||||||||
Total purchase price | $ 10,000,000 | $ 17,277,574 | ||||||||
Fair value of investment | 3,300,000 | |||||||||
Long term investments | 6,698,160 | $ 450,115 | ||||||||
Topsgame | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Increase in investment | ¥ | ¥ 30,000,000 | |||||||||
Topsgame | SSF | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Percentage of equity ownership | 13.00% | 13.00% | ||||||||
Increase in investment | $ 584,000 | ¥ 3,900,000 | ||||||||
Frequency | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Cost of the investment in Frequency | $ 3,000,000 | |||||||||
Sinotop Beijing | Shandong Media | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Percentage of equity ownership | 30.00% | |||||||||
Long term investments | ||||||||||
Sinotop Beijing | Hua Cheng | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Percentage of equity ownership | 39.00% | |||||||||
Long term investments | $ 400,000 | $ 500,000 | ||||||||
Game IP Rights | SSS | SSF | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Acquisition of game IP rights in cash | $ 2,700,000 | ¥ 18,000,000 | ||||||||
Acquisition of game IP rights in cash paid | $ 2,700,000 | |||||||||
Game IP Rights | Topsgame | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Fair value of investment | $ 2,700,000 | |||||||||
Capital Increase Agreement | Topsgame | SSF | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Percentage of equity ownership | 13.00% | |||||||||
Series A Preferred Stock Purchase Agreement | Frequency | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Purchase of shares of Series A Preferred Stock | shares | 8,566,271 | |||||||||
Percentage of equity ownership | 13.00% | |||||||||
Total purchase price | $ 3,000,000 | |||||||||
Preferred stock non-cumulative dividends rate per share | $ / shares | $ 0.02548 | |||||||||
Preferred stock convertible into common stock basis | 1:1 | |||||||||
Preferred stock liquidation preference per share | $ / shares | $ 0.42467 |
Stockholder's Equity (Detail Te
Stockholder's Equity (Detail Textuals) - USD ($) | Aug. 12, 2016 | Aug. 11, 2016 | Jul. 06, 2016 | Jul. 19, 2016 | Mar. 28, 2016 | Sep. 30, 2016 |
Stockholders Equity [Line Items] | ||||||
Aggregate purchase price | $ 10,000,000 | $ 17,277,574 | ||||
Seven Stars Works Co., Ltd | ||||||
Stockholders Equity [Line Items] | ||||||
Number of common stock share purchased | 2,272,727 | |||||
Shares issued, price per share (in dollars per share) | $ 1.76 | |||||
Aggregate purchase price | $ 4,000,000 | |||||
Proceeds from issuance of common stock | $ 4,000,000 | |||||
Number of shares issued | 2,272,727 | |||||
Harvest Alternative Investment Opportunities SPC | ||||||
Stockholders Equity [Line Items] | ||||||
Number of common stock share purchased | 2,272,727 | |||||
Shares issued, price per share (in dollars per share) | $ 1.76 | |||||
Aggregate purchase price | $ 4,000,000 | |||||
Proceeds from issuance of common stock | $ 4,000,000 | |||||
Number of shares issued | 2,272,727 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Warrants | 1 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 28, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Risk-free interest rate | 0.59% | 0.92% | |
Expected volatility | 60.00% | 60.00% | |
Expected term | 11 months 1 day | 1 year 8 months 1 day | |
Expected dividend yield | 0.00% | 0.00% | |
SSS | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Risk-free interest rate | 0.89% | ||
Expected volatility | 60.00% | ||
Expected term | 2 years | ||
Expected dividend yield | 0.00% |
Fair Value Measurements (Deta51
Fair Value Measurements (Details 1) - Warrants - Fair value on recurring basis - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Level 1 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Warrant liabilities | ||
Level 2 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Warrant liabilities | ||
Level 3 | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Warrant liabilities | 193,391 | 395,217 |
Total Fair Value | ||
Liabilities, Fair Value Disclosure [Abstract] | ||
Warrant liabilities | $ 193,391 | $ 395,217 |
Fair Value Measurements (Deta52
Fair Value Measurements (Details 2) - Warrants - Fair value on recurring basis - Level 3 | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Warrant liabilities January 1, 2016 | $ 395,217 |
Settlements | |
Change in Fair Value | (201,826) |
Warrant liabilities september 30, 2016 | $ 193,391 |
Fair Value Measurements (Deta53
Fair Value Measurements (Detail Textuals) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 28, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Fair value of warrant | $ (58,220) | $ (91,315) | $ (201,826) | $ (125,364) | ||
Warrants | ||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Valuation techniques used | Black Scholes | Monte Carlo | ||||
SSS | Warrants | ||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Valuation techniques used | Monte Carlos | |||||
Fair value of warrants classified in shareholders equity | $ 672,727 |
Related Party Transactions (Det
Related Party Transactions (Detail Textuals) - Mr. Shane McMahon - $3.0 Million Convertible Note - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jan. 31, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | May 10, 2012 | |
Related Party Transaction [Line Items] | ||||||
Loan from related parties | $ 3,000,000 | |||||
Principal amount of convertible note | $ 3,000,000 | |||||
Interest rate of convertible note | 4.00% | |||||
Amount recognized as beneficial conversion feature | $ 2,126,000 | |||||
Maturity date of the note | Dec. 31, 2015 | Dec. 31, 2016 | ||||
Interest expenses related to note | $ 30,000 | $ 30,000 | $ 90,000 | $ 90,000 | ||
Interest payable | $ 497,425 | $ 497,425 | ||||
Series E Preferred Stock | ||||||
Related Party Transaction [Line Items] | ||||||
Conversion price of note convertible into preferred stock shares | $ 1.75 | $ 1.75 | $ 1.75 |
Related Party Transactions (D55
Related Party Transactions (Detail Textuals 1) - C Media Limited ("C Media") - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Oct. 20, 2016 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Related Party Transaction [Line Items] | ||||||
Minimum percentage of capital stock owned by related party | 5.00% | |||||
Total revenue recognized from related parties | $ 0 | $ 0 | $ 0 | $ 182,000 | ||
Accounts receivable due from C Media | $ 90,000 | $ 90,000 | ||||
Subsequent Event | ||||||
Related Party Transaction [Line Items] | ||||||
Collection from accounts receivable | $ 90,000 |
Related Party Transactions (D56
Related Party Transactions (Detail Textuals 2) ¥ in Millions | 3 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Jun. 30, 2016USD ($) | Jun. 30, 2016CNY (¥) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Apr. 13, 2016USD ($) | Apr. 13, 2016CNY (¥) | Dec. 31, 2015USD ($) | |
Related Party Transaction [Line Items] | ||||||||||
Total accrued license content fees due to Hua Cheng | $ 1,018,921 | $ 1,018,921 | $ 933,532 | |||||||
Hua Cheng | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Licensed content fees | 55,000 | $ 0 | 148,000 | $ 80,000 | ||||||
Total accrued license content fees due to Hua Cheng | 164,000 | $ 164,000 | ||||||||
SSS | SSF | Game Right Assignment Agreement | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Acquisition of game IP rights in cash | $ 2,700,000 | ¥ 18 | ||||||||
Payments made for acquisition | $ 600,000 | ¥ 4 | $ 2,100,000 | ¥ 14 |
Related Party Transactions (D57
Related Party Transactions (Detail Textuals 3) - Sun Video Group HK Limited - M.Y. Products LLC - USD ($) | 1 Months Ended | 9 Months Ended |
Sep. 19, 2016 | Sep. 30, 2016 | |
Related Party Transaction [Line Items] | ||
Percentage of ownership of shares to be purchase | 51.00% | |
Worth of common stock to exchange | $ 50,000,000 | |
Cash consideration for exchange | 800,000 | |
Expected revenue to generate | $ 200,000,000 | |
Percentage of equity ownership | 51.00% | |
Good faith deposit amount | $ 800,000 | |
Payment of deposit to acquiree | $ 650,000 | |
Remaining deposit to be paid | $ 150,000 |
SSS Agreements (Detail Textuals
SSS Agreements (Detail Textuals) - USD ($) | 1 Months Ended | 9 Months Ended | |
Jun. 27, 2016 | Mar. 28, 2016 | Sep. 30, 2016 | |
Agreement [Line Items] | |||
Aggregate purchase price | $ 10,000,000 | $ 17,277,574 | |
Exercise price of warrants | $ 1.68 | ||
Recorded additional paid-in capital for warrants | $ 722,426 | ||
Common Stock | |||
Agreement [Line Items] | |||
Number of common stock share purchased | 9,090,909 | ||
Aggregate purchase price | $ 9,091 | ||
Amended SSS Purchase Agreement | SSS | |||
Agreement [Line Items] | |||
Number of common stock share purchased | 4,545,455 | ||
Purchase price per share (in dollars per share) | $ 2.20 | ||
Aggregate purchase price | $ 10,000,000 | ||
Term of warrants | 2 years | ||
Acquire additional common stock | 1,818,182 | ||
Exercise price of warrants | $ 2.75 | ||
Percentage of outstanding common stock owned | 19.99% | 19.99% | |
Proceeds from issuance of shares | $ 10,000,000 | ||
Issuance cost, net | 443,000 | ||
Recorded additional paid-in capital for warrants | 722,000 | ||
Amended SSS Purchase Agreement | SSS | Common Stock | |||
Agreement [Line Items] | |||
Fair value of common stock/equity | 8,227,000 | ||
Amended SSS Purchase Agreement | SSS | Warrants | |||
Agreement [Line Items] | |||
Fair value of common stock/equity | $ 673,000 |
SSS Agreements (Detail Textua59
SSS Agreements (Detail Textuals 1) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jun. 27, 2016 | Mar. 28, 2016 | Sep. 30, 2016 | Sep. 30, 2016 | |
Agreement [Line Items] | ||||
Amortized SSS Notes | $ 122,696 | |||
Revised Content Agreement | SSS | Convertible promissory note | ||||
Agreement [Line Items] | ||||
Granted royalty-free distribution rights in exchange for SSS note | $ 29,100,000 | |||
Principal amount of SSS notes | $ 17,718,000 | |||
Interest bearing rate | 0.56% | |||
Percentage of outstanding common stock owned | 19.99% | |||
SSS Note converted to common stock shares | 9,208,860 | |||
Debt issuance costs | $ 131,000 | |||
Amortized SSS Notes | $ 122,000 | |||
Effective conversion price of the SSS Note | $ 1.91 | |||
Unamortized issuance costs | $ 9,000 | |||
Accrued interest expense | $ 24,000 |
SSS Agreements (Detail Textua60
SSS Agreements (Detail Textuals 2) - USD ($) shares in Millions | Apr. 05, 2016 | Jun. 27, 2016 | Dec. 21, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Agreement [Line Items] | |||||||
Net income | $ (2,047,204) | $ (2,085,918) | $ (5,771,763) | $ (6,201,527) | |||
SSF | Lan Yang | |||||||
Agreement [Line Items] | |||||||
Percentage of variable interest entity | 99.00% | ||||||
SSF | Yun Zhu | |||||||
Agreement [Line Items] | |||||||
Percentage of variable interest entity | 1.00% | ||||||
Amended Tianjin Agreement | SSS | |||||||
Agreement [Line Items] | |||||||
Percentage of outstanding common stock owned | 19.99% | ||||||
Amended Tianjin Agreement | SSF | Tianjin Enternet | |||||||
Agreement [Line Items] | |||||||
Contribution of equity ownership | 100.00% | ||||||
Receive shares of common stock, term | 3 years | ||||||
Per year receive shares of common stock | 5 | ||||||
Amended Tianjin Agreement | SSF | Earn-out provisions 2016 | Tianjin Enternet | |||||||
Agreement [Line Items] | |||||||
Earn-out provision homes/users passed | $ 50,000,000 | ||||||
Net income | 4,000,000 | ||||||
Amended Tianjin Agreement | SSF | Earn-out provisions 2017 | Tianjin Enternet | |||||||
Agreement [Line Items] | |||||||
Earn-out provision homes/users passed | 100,000,000 | ||||||
Net income | 6,000,000 | ||||||
Amended Tianjin Agreement | SSF | Earn-out provisions 2018 | Tianjin Enternet | |||||||
Agreement [Line Items] | |||||||
Earn-out provision homes/users passed | 150,000,000 | ||||||
Net income | $ 8,000,000 |
Warrant Liabilities (Detail Tex
Warrant Liabilities (Detail Textuals) - USD ($) | 1 Months Ended | 9 Months Ended | |
Aug. 30, 2012 | Sep. 30, 2016 | Dec. 31, 2015 | |
Warrant Liabilities [Abstract] | |||
Number of shares called by warrants | 977,063 | ||
Number of shares exercised prior to January 1, 2015 | 440,813 | ||
Warrant liabilities | $ 1,525,000 | $ 193,391 | $ 395,217 |
Gain on revaluation of warrants | $ 202,000 |
Share-Based Payments (Details)
Share-Based Payments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | ||||
Employees and directors share-based payments | $ 75,000 | $ 287,000 | $ 174,000 | $ 518,000 |
Share-Based Payments (Details 1
Share-Based Payments (Details 1) | 9 Months Ended |
Sep. 30, 2016USD ($)$ / sharesshares | |
Options Outstanding | |
Outstanding at January 1, 2016 | shares | 1,734,429 |
Granted | shares | 455,000 |
Exercised | shares | |
Expired | shares | (25,897) |
Forfeited | shares | (12,104) |
Outstanding at September 30, 2016 | shares | 2,151,428 |
Vested and expected to vest as of September 30, 2016 | shares | 2,151,428 |
Options exercisable at September 30, 2016 (vested) | shares | 2,113,615 |
Weighted Average Exercise Price | |
Outstanding at January 1, 2016 | $ / shares | $ 2.77 |
Granted | $ / shares | 1.58 |
Exercised | $ / shares | |
Expired | $ / shares | 1.65 |
Forfeited | $ / shares | 1.65 |
Outstanding at September 30, 2016 | $ / shares | 2.54 |
Vested and expected to vest as of September 30, 2016 | $ / shares | 2.54 |
Options exercisable at September 30, 2016 (vested) | $ / shares | $ 2.55 |
Weighted Average Remaining Contractual Life (Years) | |
Outstanding at September 30, 2016 | 4 years 10 months 28 days |
Vested and expected to vest as of September 30, 2016 | 4 years 10 months 28 days |
Options exercisable at September 30, 2016 (vested) | 4 years 10 months 2 days |
Aggregated Intrinsic Value | |
Outstanding at September 30, 2016 | $ | |
Vested and expected to vest as of September 30, 2016 | $ | |
Options exercisable at September 30, 2016 (vested) | $ |
Share-Based Payments (Details 2
Share-Based Payments (Details 2) | Jul. 06, 2016 |
Compensation and Retirement Disclosure [Abstract] | |
Method used | Black Scholes |
Risk-free interest rate | 1.06% |
Expected volatility, minimum | 60.00% |
Expected volatility, maximum | 70.00% |
Expected term | 5 years 10 months 17 days |
Expected dividend yield | 0.00% |
Share-Based Payments (Details 3
Share-Based Payments (Details 3) - $ / shares | 9 Months Ended | ||
Sep. 30, 2016 | Dec. 31, 2015 | ||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | 3,783,002 | 2,191,487 | |
Exercise price of warrants | $ 1.68 | ||
May 2011 Warner Brothers Warrants | |||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | 200,000 | ||
Exercise price of warrants | $ 6.6 | ||
Expiration Date | 05/11/2016 | ||
2011 Service Agreement Warrants | |||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | 26,667 | ||
Exercise price of warrants | $ 7.20 | ||
Expiration Date | 06/15/2016 | ||
2012 August Financing Warrants | |||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | [1] | 536,250 | 536,250 |
Exercise price of warrants | [1] | $ 1.50 | |
Expiration Date | [1] | 08/30/2017 | |
2013 Broker Warrants (Series D Financing) | |||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | 228,571 | 228,571 | |
Exercise price of warrants | $ 1.75 | ||
Expiration Date | 07/05/2018 | ||
2013 Broker Warrants (Convertible Note) | |||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | 114,285 | 114,285 | |
Exercise price of warrants | $ 1.75 | ||
Expiration Date | 11/04/2018 | ||
2014 Broker Warrants (Series E Financing) | |||
Class of Warrant or Right [Line Items] | |||
Number of Warrants Outstanding and Exercisable | 1,085,714 | 1,085,714 | |
Exercise price of warrants | $ 1.75 | ||
Expiration Date | 01/31/2019 | ||
[1] | Intercompany receivables and payables are eliminated upon consolidation. The intercompany financing activities include the capital injection of $4.2 million to SSF in the nine months period ended September 30,2016. |
Share-Based Payments (Detail Te
Share-Based Payments (Detail Textuals) - USD ($) | Jul. 06, 2016 | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 03, 2010 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options outstanding to purchase shares of common stock | 2,151,428 | 2,151,428 | 1,734,429 | |||
Warrants outstanding to purchase shares of common stock | 3,783,002 | 3,783,002 | 2,191,487 | |||
Unrecognized compensation expense related to non-vested share options | $ 435,000 | $ 435,000 | ||||
Weighted average period for recognition related to non-vested share options | 2 years 7 months 21 days | |||||
Total fair value of vested shares | $ 12,000 | $ 301,000 | ||||
Weighted average exercise price of warrants | $ 1.68 | $ 1.68 | ||||
Weighted average remaining life of warrants | 1 year 10 months 13 days | |||||
Stock options issued to employees | 455,000 | |||||
Stock options grant date fair value | $ 423,000 | |||||
Sun Seven Stars Culture Development Limited Member | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Warrants outstanding to purchase shares of common stock | 1,818,182 | 1,818,182 | ||||
Employees | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock options issued to employees | 455,000 | |||||
May 2011 Warner Brothers Warrants | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Warrants outstanding to purchase shares of common stock | 200,000 | |||||
Weighted average exercise price of warrants | $ 6.6 | $ 6.6 | ||||
Number of warrants expired | 200,000 | 200,000 | ||||
2011 Service Agreement Warrants | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Warrants outstanding to purchase shares of common stock | 26,667 | |||||
Weighted average exercise price of warrants | $ 7.20 | $ 7.20 | ||||
Number of warrants expired | 26,667 | 26,667 | ||||
2010 Stock Incentive Plan ("the Plan") | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares authorized for issuance | 4,000,000 | |||||
Number of options available for issuance | 1,239,467 |
Net Loss Per Common Share (Deta
Net Loss Per Common Share (Details) - shares | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 16,038,572 | 14,047,966 |
Warrants - issued to SSS (Note 11(a)) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 1,818,182 | |
Warrants - Others (Note 13) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 1,964,820 | 2,191,487 |
Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 2,151,428 | 1,721,096 |
Series A Preferred Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 933,333 | 933,333 |
Series E Preferred Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 7,154,997 | 7,254,997 |
Convertible promissory notes | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 2,015,812 | 1,947,053 |
Net Loss Per Common Share (De68
Net Loss Per Common Share (Details 1) - shares | Sep. 30, 2016 | Sep. 30, 2015 |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 17,816,014 | 16,255,740 |
Exercise of stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 3,783,002 | 2,191,487 |
Issuable shares for stock options and restricted shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 3,928,870 | 3,928,870 |
Conversion of preferred stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 8,088,330 | 8,188,330 |
Issuable shares from conversion of promissory notes payable | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 2,015,812 | 1,947,053 |
Income Taxes (Detail Textuals)
Income Taxes (Detail Textuals) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | |
Operating Loss Carryforwards [Line Items] | ||
Valuation allowance increased | $ 200,000 | $ 1,800,000 |
Deferred tax assets valuation allowance, percentage | 100.00% | |
Unrecorded tax benefits | $ 0 | 0 |
U.S domestic | ||
Operating Loss Carryforwards [Line Items] | ||
Cumulative tax loss carryforwards | 27,700,000 | 27,700,000 |
Foreign | ||
Operating Loss Carryforwards [Line Items] | ||
Cumulative tax loss carryforwards | $ 17,000,000 | $ 17,000,000 |
Contingencies and Commitments70
Contingencies and Commitments (Details) | Sep. 30, 2016USD ($) |
Years ending December 31, | |
2016 (3 months) | $ 125,000 |
2,017 | 304,000 |
2,018 | 309,000 |
2,019 | 266,000 |
2,020 | 205,000 |
Thereafter | 87,000 |
Total | $ 1,296,000 |
Contingencies and Commitments71
Contingencies and Commitments (Details 1) - Licensed Content Commitment | Sep. 30, 2016USD ($) |
Years ending December 31, | |
2016 (3 months) | $ 2,294,000 |
2,017 | 425,000 |
2,018 | 225,000 |
2,019 | 225,000 |
Total | $ 3,169,000 |
Contingencies and Commitments72
Contingencies and Commitments (Details 2) - Property Commitment | Sep. 30, 2016USD ($) |
Years ending December 31, | |
2016 (3 months) | $ 1,025,000 |
Total | $ 1,025,000 |
Contingencies and Commitments73
Contingencies and Commitments (Details 3) - Marketing Expense Commitment | Sep. 30, 2016USD ($) |
Years ending December 31, | |
2016 (3 months) | $ 249,000 |
Total | $ 249,000 |
Contingencies and Commitments74
Contingencies and Commitments (Detail Textuals) ¥ in Millions | 3 Months Ended | ||||
Sep. 30, 2016USD ($) | Sep. 30, 2016CNY (¥) | Jun. 30, 2016USD ($) | Jun. 30, 2016CNY (¥) | May 30, 2016CNY (¥) | |
Loss Contingencies [Line Items] | |||||
Cash obligation | $ | $ 279,000 | ||||
Beijing Kuntin Taiming Investment Management Co., Ltd | Building | |||||
Loss Contingencies [Line Items] | |||||
Total consideration for the property acquisition | $ 4,239,000 | ¥ 27 | |||
Payments to acquire buildings | $ 3,214,000 | ¥ 21 | |||
Joint Venture Agreement | Megtron Hong Kong Investment Group Co., Limited. | |||||
Loss Contingencies [Line Items] | |||||
Contribution to the joint-venture | ¥ | ¥ 5 |
Concentration, Credit and Oth75
Concentration, Credit and Other Risks (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
RMB | PRC | ||
Revenue, Major Customer [Line Items] | ||
Bank deposits with financial institutions | $ 485,582 | $ 1,076,430 |
Restricted cash denominated bank deposits with financial institutions | 2,994,364 | |
US | PRC | ||
Revenue, Major Customer [Line Items] | ||
Bank deposits with financial institutions | 1,454,874 | 2,613,834 |
US | Hong Kong Special Administrative Region (HK SAR) | ||
Revenue, Major Customer [Line Items] | ||
Bank deposits with financial institutions | 765,611 | 23,460 |
US | The United States of America (USA) | ||
Revenue, Major Customer [Line Items] | ||
Bank deposits with financial institutions | 132,268 | 53,231 |
US | Cayman Islands (Cayman) | ||
Revenue, Major Customer [Line Items] | ||
Bank deposits with financial institutions | $ 157 | $ 99 |
Concentration, Credit and Oth76
Concentration, Credit and Other Risks (Detail Textuals) - Major Customers - Customer | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue | ||
Revenue, Major Customer [Line Items] | ||
Description of percentage of revenue for major customer | more than 10 | |
Number of customers | 3 | 3 |
Revenue | Distribution partner | ||
Revenue, Major Customer [Line Items] | ||
Description of percentage of revenue for major customer | more than 10 | |
Revenue | Customer one | ||
Revenue, Major Customer [Line Items] | ||
Percentage of concentration risk | 31.00% | |
Revenue | Customer two | ||
Revenue, Major Customer [Line Items] | ||
Percentage of concentration risk | 16.00% | |
Revenue | Customer three | ||
Revenue, Major Customer [Line Items] | ||
Percentage of concentration risk | 13.00% | |
Accounts receivables | ||
Revenue, Major Customer [Line Items] | ||
Number of customers | 2 | 4 |
Percentage of concentration risk | 10.00% | |
Accounts receivables | Customer one | ||
Revenue, Major Customer [Line Items] | ||
Percentage of concentration risk | 33.00% | |
Accounts receivables | Customer two | ||
Revenue, Major Customer [Line Items] | ||
Percentage of concentration risk | 14.00% | |
Accounts receivables | Customer three | ||
Revenue, Major Customer [Line Items] | ||
Percentage of concentration risk | 12.00% |
Concentration, Credit and Oth77
Concentration, Credit and Other Risks (Detail Textuals 1) | 9 Months Ended | ||
Sep. 30, 2016USD ($)Supplier | Sep. 30, 2015Supplier | Dec. 31, 2015USD ($) | |
Revenue, Major Customer [Line Items] | |||
Insured deposit | $ | $ 236,826 | $ 241,807 | |
Major Suppliers | Cost of revenues | |||
Revenue, Major Customer [Line Items] | |||
Description of percentage of revenue for major supplier | more than 10 | ||
Number of suppliers | 4 | 4 | |
Major Suppliers | Cost of revenues | Content partner | |||
Revenue, Major Customer [Line Items] | |||
Description of percentage of revenue for major supplier | more than 10 | ||
Major Suppliers | Cost of revenues | Supplier one | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 30.00% | ||
Major Suppliers | Cost of revenues | Supplier two | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 24.00% | ||
Major Suppliers | Cost of revenues | Supplier three | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 20.00% | ||
Major Suppliers | Cost of revenues | Supplier four | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 13.00% | ||
Major Suppliers | Accrued license content fees | |||
Revenue, Major Customer [Line Items] | |||
Number of suppliers | 2 | ||
Major Suppliers | Accrued license content fees | Supplier one | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 85.00% | ||
Major Suppliers | Accrued license content fees | Supplier two | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 15.00% | ||
Major Suppliers | Accounts payable | |||
Revenue, Major Customer [Line Items] | |||
Number of suppliers | 1 | ||
Major Suppliers | Accounts payable | Supplier one | |||
Revenue, Major Customer [Line Items] | |||
Percentage of concentration risk | 10.00% |
Defined Contribution Plan (Deta
Defined Contribution Plan (Detail Textuals) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2011 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract] | |||||
Employer matching contribution, percent | 100.00% | ||||
Employer matching contribution, description | 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. | ||||
Employer matching contribution, amount | $ 1,000 | $ 1,000 | $ 3,000 | $ 7,000 |