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Changes in China’s political and economic policies could harm our business.

The economy of China has historically been a planned economy subject to governmental plans and quotas and has, in certain aspects, been transitioning to a more market-oriented economy. Although we believe that the economic reform and the macroeconomic measures adopted by the PRC government have had a positive effect on the economic development of China, we cannot predict the future direction of these economic reforms or the effects these measures may have on our business, financial position or results of operations. In addition, the PRC economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD. These differences include:

·                  economic structure;

·                  level of government involvement in the economy;

·                  level of development;

·                  level of capital reinvestment;

·                  control of foreign exchange;

·                  methods of allocating resources; and

·                  balance of payments position.

As a result of these differences, our business may not develop in the same way or at the same rate as might be expected if the PRC economy were similar to those of the OECD member countries.

Inflation in China and measures to contain inflation could negatively affect our profitability and growth.

While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our advertising services rise at a rate that is insufficient to compensate for the rise in our costs, our business may be materially and adversely affected. In order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. Such austerity measures can lead to a slowing of economic growth. A slowdown in the PRC economy could also materially and adversely affect our business and prospects.

The audit report included in this annual report was prepared by auditors who are not inspected by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspections.

Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because our auditors are located in the People’s Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditors are not currently inspected by the PCAOB. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditors operating in China, including our auditors. As a result, investors in our ADSs may be deprived of the benefits of PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditors’ audit procedures or quality control procedures as compared to other public company auditors outside of China that are subject to PCAOB inspections. As a result, investors in our ADSs may lose confidence in our reported financial information and procedures and the quality of our financial statements.

Any occurrence of pandemic avian influenza or other widespread public health problem, or any recurrence of severe acute respiratory syndrome, or SARS, could adversely affect our business and results of operations.

An outbreak of pandemic avian influenza or other widespread public health problem, or a renewed outbreak of SARS in China, where most of our revenues are derived, and in Beijing, where our operations are headquartered, could have a negative effect on our operations. There have been recent reports of outbreaks of an avian flu caused by the H7N9 virus, including confirmed human cases, in China. Our operations may be affected by a number of health-related factors, including the following:

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·                  quarantines or closures of some of our offices which would severely disrupt our operations,

·                  the sickness or death of our key officers and employees, and

·                  a general slowdown in the PRC economy caused by any public health problems.

Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our business and results of operations.

Risks Related to Our ADSs

The price of our ADSs has been volatile historically and may continue to be volatile, which may make it difficult for holders to resell the ADSs when desired or at attractive prices.

The trading price of our ADSs has been and may continue to be subject to wide fluctuations. The sale price of our ADSs on the NASDAQ Global Market ranged from $0.900.95 to $4.04$3.90 per ADS in 20122013 and the last reported sale price on April 18, 2013May 9, 2014 was $1.00.$1.51.

Our ADS price may fluctuate in response to a number of events and factors, including among other factors:

·                  announcements of technological or competitive developments;

·                  regulatory developments in our target markets affecting us, our customers or our competitors;

·                  announcements of share repurchase program;

·                  actual or anticipated fluctuations in our quarterly operating results;

·                  changes in financial estimates by securities research analysts;

·                  changes in the economic performance or market valuations of our website;

·                  addition or departure of our executive officers and key research personnel; and

·                  sales or perceived sales of additional ordinary shares or ADSs.

In addition, the financial markets in general, and the market prices for Internet-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our ADSs, regardless of our operating performance.

Future sales or perceived sales of substantial amounts of our ordinary shares or ADSs by our controlling shareholdermajor shareholders could adversely affect the price of our ADSs.

If any of our controlling shareholdermajor shareholders sells, or is perceived as intending to sell, substantial amounts of our ordinary shares or ADSs, including those issued upon the exercise of our outstanding stock options, the market price of our ADSs could fall. Such sales, or perceived potential sales, by any of our controlling shareholdermajor shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at a time and place we deem appropriate. If any of our controlling shareholdermajor shareholders sells a substantial amount of ordinary shares it currently holds, the prevailing market price for our ADSs could be adversely affected.

As a foreign private issuer with ADSs listed on the NASDAQ Global Market, we follow home country corporate governance practices instead of certain NASDAQ requirements.

As a foreign private issuer whose ADSs are listed on the NASDAQ Global Market, we are permitted to follow home country corporate governance practices instead of certain NASDAQ requirements. A foreign private issuer that elects to follow its home country practice must submit to the NASDAQ Stock Market LLC a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the SEC each NASDAQ requirement with which it does not comply followed by a description of its applicable home country practice.

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As a company incorporated in the Cayman Islands with ADSs listed on the NASDAQ Global Market, we intend to follow our home country practice instead of NASDAQ requirements that mandate that:

·                  our board of directors be comprised of a majority of independent directors;

·                  our directors be selected or nominated by a majority of the independent directors or a nomination committee comprised solely of independent directors;

·                  our board adopt a formal written charter or board resolution addressing the director nominations process and such related matters as may be required under the U.S. federal securities laws;

·                  the compensation of our executive officers be determined or recommended by a majority of the independent directors or a compensation committee comprised solely of independent directors; and

·                  issuances of securities in connection with equity-based compensation of officers, directors, employees or consultants be approved by shareholders.

As we are a Cayman Islands company, our shareholders may face difficulties in protecting their interests, and our ability to protect our rights through the U.S. federal courts may be limited.

Our corporate affairs are governed by our memorandum and articles of association, by the Cayman Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedents in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law in this area may not be as clearly established as they would be under statutes or judicial precedents in existence in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more developed and judicially interpreted bodies of corporate laws. Moreover, under the Cayman Companies Law, for mergers and consolidations involving two Cayman Islands companies or a Cayman Islands company and an overseas company, dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed to by the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions, and such rights may not be comparable to the appraisal rights that would ordinarily be available to dissenting shareholders of a U.S. company. Finally, Cayman Islands companies may not have standing to initiate shareholder derivative actions before any federal court of the United States. As a result, our shareholders may have more difficulties in protecting their interests in the face of actions by our management, directors or controllingmajor shareholders than would shareholders of a public company incorporated in a jurisdiction in the United States.

Our shareholders may have difficulties in enforcing judgments obtained against us.

We are a Cayman Islands company and substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted in China. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for our shareholders to effect service of process within the United States upon these persons. It may also be difficult for our shareholders to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States.

There is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state due to the lack of reciprocal treaty in the PRC providing statutory recognition of judgments obtained in the United States. Furthermore, it is uncertain whether such PRC courts would be competent to hear original actions brought in the PRC against us or such persons who reside outside the United States predicated upon the securities laws of the United States or any state.

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Moreover, under the PRC Individual Income Tax Law, or the IITL, if we are treated as a PRC resident enterprise, non-resident individual investors would be subject to PRC individual income tax on dividends paid to such investors and any capital gains realized from the transfer of our ordinary shares and ADSs, provided that such dividends and gains are deemed as China-sourced income. A non-resident individual is an individual who has no domicile in China and does not stay within China or has stayed within China for less than one year. Pursuant to the IITL and its implementation rules, for purposes of the PRC capital gains tax, the taxable income will be based on the total income obtained from the transfer of our ordinary shares or ADSs after deducting all the costs and expenses that are permitted under PRC tax laws to be deducted from the income. If we were considered a PRC resident enterprise and dividends paid with respect to our ordinary shares and ADSs and the gains realized from the transfer of our ordinary shares and ADSs were considered China-sourced income by relevant PRC tax authorities, such dividends and gains earned by non-resident individuals would generally be subject to PRC tax at a rate of 20%, unless a reduced tax rate is provided by any applicable tax treaty and the holders have completed the relevant procedures prescribed by the PRC tax authorities to prove their beneficial owner status.

The foregoing PRC taxes may reduce your investment return on our ordinary shares and ADSs and may also affect the price of our ordinary shares and ADSs.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. Thehe depositary may refuse to deliver, transfer, or register transfers of our ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law, any government, governmental body or commission or the NASDAQ Global Market, or under any provision of the deposit agreement, or because of a meeting of shareholders of our company, or for any other reason.

Your right as a holder of ADSs to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to our ADS holders in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement provides that the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective nor is it our current intention to do so. Moreover, we may not be able to rely on an exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to participate in future rights offerings, if any, and may experience dilution in their holdings. In addition, if the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case you will receive no value for these rights.

We may be adversely affected by the outcome of the administrative proceedings broughtProceedings instituted by the SEC against fivecertain accounting firms in China.China, including our independent registered public accounting firm, could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act.

TheIn December 2012, the SEC has broughtcommenced administrative proceedings against fivecertain accounting firms in China, recentlyincluding the Chinese affiliates of the “Big Four” global networks of accounting firms, alleging that theythese firms had refused to produce audit work papers and other documents related to certain China-basedother PRC-based companies under ongoing investigation by the SEC. The issues raised by the proceedings affect equally all audit firms based in China and all U.S.-listed companies with major operations in China. In January 2014, the SEC administrative judge reached an initial decision that these accounting firms, other than one that no longer provides services to China-based U.S. listed companies, should be censured and barred from practicing before the SEC for potential accounting fraud. We were not and are not subject to any SEC investigations, nor are we involved in the proceedings brought by the SEC against the accounting firms. However, the independent registered public accounting firm that issues the audit reports included ina period of six months. The principal auditor of our annual reports filed with the SECfinancial statements, PricewaterhouseCoopers Zhong Tian LLP, is one of the fiveChinese affiliates of the “Big Four” global networks of accounting firms named inand is subject to the SEC’s proceedings and wethe initial decision. We may therefore be adversely affected by the outcome of the proceedings, along with other U.S. listed companies auditedproceedings. The initial decision is neither final nor legally effective unless and until reviewed and approved by thesethe SEC. In February 2014, four accounting firms. Iffirms subject to the SEC prevails in the proceedings,decision, including our independent registered public accounting firm, filed appeal against the initial decision and such appeal will be heard by the commissioners of the SEC. The commissioners of the SEC will make a legally binding order. After such an order is made, the accounting firms still have the right to further appeal to the U.S. federal appellate courts, and the other four accounting firms in China that were named in the proceedings may be barred from practicing before the SEC and hence unable to continue to be the auditors for China-based companies listed in the United States like us. If noneeffect of the China-based auditors are able to continue toorder might be auditors for China-based companies listed infurther suspended pending the United States, we will not be able to meet the reporting requirements under the Exchange Act, which may ultimately result in our deregistration by the SEC and delisting from the NASDAQ Global Market.outcome of such appeal.

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Depending upon the final outcome, U.S.-listed companies with major operations in China, including us, may find it difficult or impossible to retain auditors in respect of their operations in China. In this case, our financial statements could be determined to not be in compliance with the requirements for financial statements of public companies registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such a determination could ultimately lead to the delisting of our ordinary shares (in the forms of ADSs) from the NASDAQ Global Select Market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ordinary shares (in the forms of ADSs) in the United States. Moreover, any negative news about the proceedings against these audit firms may erode investor confidence in U.S.-listed companies with major operations in China, including us, and the market price of our ADSs may be adversely affected.

Item 4.Information on the Company

A. History and Development of the Company

We became an independent company in September 1999 when we were spun-off from UT Starcom Inc., a NASDAQ-listed company that manufactures telecommunication equipment in China. At that time, we focused on developing billing software and providing system integration services for telecommunications network operators in their fixed-line Internet infrastructure build-outs.

In April 2002, we established a new holding company, Hurray! Holding Co., Ltd., in the Cayman Islands.

In 2007, we entered into an agreement to sell our software and systems integration, or SSI, business to Taiwan Mobile, which assumed control over the management and assumed the risks of our SSI business in August 2007. We completed the remaining closing procedures in April 2008. This divestment enabled us to focus on our strategy of becoming an entertainment content production and distribution house in China.

Before August 17, 2010, we primarily engaged in WVAS business in China and music development, production and distribution and artist development business in China and Taiwan. From 2007 to 2010, we expanded our WVAS and recorded music businesses both organically and through a series of acquisitions of controlling stakes in independent recorded music companies.

In June 2009, we entered into a tender offer agreement with Shanda Interactive under which Shanda Interactive commenced a tender offer to acquire 51% of our outstanding ordinary shares at the time. The tender offer was successfully completed in July 2009.

In January 2010, we entered into the online video business through the acquisition of Ku6 Holding pursuant to a definitive share purchase agreement.

OnIn May 28, 2010, we sold all of our 51% interest in Huayi Music to Huayi Brothers Media Corporation for an aggregate consideration of RMB34,450,000.

On In August 17, 2010, we sold our WVAS and recorded music businesses to Shanda Interactive for $37,243,904 in cash, pursuant to a master transaction agreement entered into between us and Shanda Interactive on June 1, 2010. Concurrently, we acquired a 75% interest in Yisheng, an online audio business, from Shanda Interactive in exchange for 415,384,615 newly issued ordinary shares and the remaining 25% interest from a non-controlling shareholder in exchange for 138,461,539 newly issued ordinary shares.

On In August 17, 2010, we changed our name from “Hurray! Holding Co., Ltd.” to “Ku6 Media Co., Ltd.”

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In August 11, 2011, we disposed of a significant interest in Yisheng as part of the strategic transition from online audio business to online video business. After the disposal, our company ceases to control Yisheng and only retains a 20% interest in Yisheng.

We currently operateOn March 31, 2014, Mr. Xu entered into a share purchase agreement with our then controlling shareholder, Shanda Media, a wholly owned subsidiary of Shanda Interactive, to purchase 1,938,360,784 of our ordinary shares, amounting to approximately 41% of our issued and focusoutstanding share capital. The Share Purchase Transaction was completed on our online video business as our principal business. We derive substantiallyApril 3, 2014, and the aggregate consideration for these ordinary shares was $47,350,831.05. Mr. Xu funded the purchase price through a loan from Shanda Media, which is secured by a charge of all of our revenues from online advertising services. As a result of management’s review and adjustment of our business strategies, beginning in April 2011, we have engaged Shengyue, an affiliate whollyordinary shares beneficially owned by Shanda Interactive, as our sole advertising agency using performance advertising under which advertisers pay only for measurable results. We have also shifted our focus from purchasing licensed video copyrights to relying on UGC.Mr. Xu. See Item 8.B. “Significant Changes—Share Purchase Transaction.”

Our principal executive offices are located at Building 6, Zhengtongchuangyi Centre, No. 18, Xibahe Xili, Chaoyang District, Beijing 100028,100028, People’s Republic of China. Our telephone number is +86 10 5758-6813. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Ave, Suite 204, Newark, DE 19711.

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