Document_and_Entity_Informatio
Document and Entity Information | 12 Months Ended |
Dec. 31, 2014 | |
Document and Entity Information [Abstract] | |
Document Type | 20-F |
Amendment Flag | FALSE |
Document Period End Date | 31-Dec-14 |
Document Fiscal Year Focus | 2014 |
Document Fiscal Period Focus | FY |
Entity Registrant Name | Ku6 Media Co., Ltd |
Entity Central Index Key | 1294435 |
Entity Current Reporting Status | Yes |
Current Fiscal Year End Date | -19 |
Entity Filer Category | Non-accelerated Filer |
Entity Well-known Seasoned Issuer | No |
Entity Common Stock, Shares Outstanding | 4,763,360,860 |
Trading Symbol | KUTV |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Assets | ||
Cash and cash equivalents | $4,380,328 | $1,671,230 |
Accounts receivable, net of allowance for doubtful accounts | 113,816 | 64,678 |
Accounts receivable due from related parties | 972 | 6,521,984 |
Prepaid expenses and other current assets | 490,355 | 385,967 |
Other receivables due from related parties | 2,924 | 1,787,505 |
Total current assets | 4,988,395 | 10,431,364 |
Property and equipment, net | 293,567 | 1,368,360 |
Deposits and other non-current assets | 347,963 | 338,682 |
Total assets | 5,629,925 | 12,138,406 |
Liabilities and shareholders' equity (deficit) | ||
Accounts payable | 3,075,591 | 3,975,946 |
Accounts payable due to related parties | 709,911 | 546,668 |
Accrued expenses and other current liabilities | 5,980,164 | 7,187,630 |
Other payables due to related parties | 0 | 375,000 |
Total current liabilities | 9,765,666 | 12,085,244 |
Total liabilities | 9,765,666 | 12,085,244 |
Commitments and contingencies | ||
Shareholders' equity (deficit): | ||
Ordinary shares ($0.00005 par value; 12,000,000,000 shares authorized; 4,730,648,360 and 4,763,360,860 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 238,120 | 236,485 |
Additional paid-in capital | 184,538,349 | 178,195,109 |
Accumulated deficit | -187,095,885 | -176,368,243 |
Accumulated other comprehensive loss | -1,816,325 | -2,010,189 |
Total shareholders' equity (deficit) | -4,135,741 | 53,162 |
Total liabilities and equity (deficit) | $5,629,925 | $12,138,406 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
CONSOLIDATED BALANCE SHEETS [Abstract] | ||||
Ordinary shares, par value | $0.00 | $0.00 | $0.00 | $0.00 |
Ordinary shares, authorized | 12,000,000,000 | 12,000,000,000 | ||
Ordinary shares, issued and outstanding | 4,763,360,860 | 4,730,648,360 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations and Comprehensive Loss (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Net revenues: | |||
Third parties | $4,266,544 | $737,874 | $1,632,876 |
Related parties | 4,317,098 | 12,404,031 | 12,481,927 |
Total net revenues | 8,583,642 | 13,141,905 | 14,114,803 |
Cost of revenues: | |||
Third parties | -11,231,164 | -15,649,173 | -14,602,208 |
Related parties | -909,775 | -335,504 | 0 |
Total cost of revenues | -12,140,939 | -15,984,677 | -14,602,208 |
Gross loss | -3,557,297 | -2,842,772 | -487,405 |
Operating expenses: | |||
Product development | -1,385,138 | -3,496,393 | -1,972,160 |
Selling and marketing | -941,760 | -1,796,980 | -1,688,740 |
General and administrative | -7,087,924 | -8,089,086 | -6,819,998 |
Impairment of goodwill and intangible assets | 0 | -27,225,907 | 0 |
Total operating expenses | -9,414,822 | -40,608,366 | -10,480,898 |
Operating loss | -12,972,119 | -43,451,138 | -10,968,303 |
Interest income: | |||
Third parties | 43,152 | 83,815 | 362,963 |
Related parties | 3,388 | 28,856 | 256,753 |
Total interest income | 46,540 | 112,671 | 619,716 |
Interest expense: | |||
Third parties | 0 | 0 | -170,493 |
Related parties | 0 | -16,365 | -448,011 |
Total interest expense | 0 | -16,365 | -618,504 |
Other income, net | 745,958 | 4,101,039 | 1,728,538 |
Gain from disposal of equity interest in affiliate | 1,451,979 | 0 | 0 |
Loss before income tax benefits | -10,727,642 | -39,253,793 | -9,238,553 |
Income tax benefits | 0 | 4,826,059 | 0 |
Equity in losses of affiliated company, net of tax | 0 | 0 | -252,585 |
Net loss | -10,727,642 | -34,427,734 | -9,491,138 |
Net loss | -10,727,642 | -34,427,734 | -9,491,138 |
Other comprehensive income (loss), net of tax: | |||
Currency translation adjustments of subsidiaries | 193,864 | -97,774 | -89,616 |
Comprehensive loss | ($10,533,778) | ($34,525,508) | ($9,580,754) |
Ordinary shares [Member] | |||
Loss per share - basic and diluted: | |||
Net loss per share | $0 | ($0.01) | $0 |
Weighted average shares used in per share calculation - basic and diluted | 4,746,324,022 | 4,728,185,434 | 4,901,279,176 |
ADS (1 ADS0 shares) [Member] | |||
Loss per share - basic and diluted: | |||
Net loss per share | ($0.23) | ($0.73) | ($0.19) |
Weighted average shares used in per share calculation - basic and diluted | 47,463,240 | 47,281,854 | 49,012,792 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Equity (USD $) | Total | Ordinary shares ($0.00005 par value) [Member] | Additional paid-in capital [Member] | Accumulated deficits [Member] | Accumulated other comprehensive income /(loss) [Member] |
Beginning balance at Dec. 31, 2011 | $50,853,028 | $250,939 | $184,874,259 | ($132,449,371) | ($1,822,799) |
Beginning balance, shares at Dec. 31, 2011 | 5,019,786,036 | ||||
Share repurchase, shares | -287,339,476 | ||||
Share repurchase | -8,169,481 | -14,364 | -8,155,117 | 0 | 0 |
Stock-based compensation expense | 463,753 | 0 | 463,753 | 0 | 0 |
Currency translation adjustments of subsidiaries | -89,616 | 0 | 0 | 0 | -89,616 |
Net loss | -9,491,138 | 0 | 0 | -9,491,138 | 0 |
Ending balance at Dec. 31, 2012 | 33,566,546 | 236,575 | 177,182,895 | -141,940,509 | -1,912,415 |
Ending balance, shares at Dec. 31, 2012 | 4,732,446,560 | ||||
Share repurchase, shares | -5,798,200 | ||||
Share repurchase | -58,147 | -290 | -57,857 | 0 | 0 |
Exercise of stock options, shares | 4,000,000 | ||||
Exercise of stock options | 46,400 | 200 | 46,200 | 0 | 0 |
Stock-based compensation expense | 1,023,871 | 0 | 1,023,871 | 0 | 0 |
Currency translation adjustments of subsidiaries | -97,774 | 0 | 0 | 0 | -97,774 |
Net loss | -34,427,734 | 0 | 0 | -34,427,734 | 0 |
Ending balance at Dec. 31, 2013 | 53,162 | 236,485 | 178,195,109 | -176,368,243 | -2,010,189 |
Ending balance, shares at Dec. 31, 2013 | 4,730,648,360 | 4,730,648,360 | |||
Exercise of stock options, shares | 32,712,500 | ||||
Exercise of stock options | 338,563 | 1,635 | 336,928 | 0 | 0 |
Stock-based compensation expense | 600,995 | 0 | 600,995 | 0 | 0 |
Equity contribution from Shanda | 5,405,317 | 0 | 5,405,317 | 0 | 0 |
Currency translation adjustments of subsidiaries | 193,864 | 0 | 0 | 0 | 193,864 |
Net loss | -10,727,642 | 0 | 0 | -10,727,642 | 0 |
Ending balance at Dec. 31, 2014 | ($4,135,741) | $238,120 | $184,538,349 | ($187,095,885) | ($1,816,325) |
Ending balance, shares at Dec. 31, 2014 | 4,763,360,860 | 4,763,360,860 |
Consolidated_Statements_of_Cha1
Consolidated Statements of Changes in Equity (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY [Abstract] | ||||
Ordinary shares, par value | $0.00 | $0.00 | $0.00 | $0.00 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS [Abstract] | ||||||
Net loss | ($10,727,642) | ($34,427,734) | ($9,491,138) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Share-based compensation | 600,995 | 1,023,871 | 463,753 | |||
Depreciation and amortization | 1,048,398 | 3,388,950 | 3,500,748 | |||
Impairment of intangible assets | 0 | 20,993,137 | 0 | |||
Impairment of goodwill | 0 | 6,232,770 | 0 | |||
Deferred taxes | 0 | -4,826,059 | 0 | |||
Provision for Seed Music receivable (related party) | 0 | 980,000 | 0 | |||
Bad debt provision (reversal credited to income) | 988,135 | -310,699 | -2,255,301 | |||
Gain on derecognition of aged operating liabilities | -206,533 | [1] | -2,938,250 | [1] | 0 | [1] |
Exchange losses (gains) | 226,641 | -133,064 | -224,332 | |||
Equity in losses of affiliated companies | 0 | 0 | 252,585 | |||
Gain from disposal of equity interest in affiliate | -1,451,979 | 0 | 0 | |||
Losses (gains) on disposal of property and equipment | -403 | -237,874 | 27,719 | |||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||||||
Accounts receivable | -1,037,273 | 260,100 | 2,954,041 | |||
Prepaid expenses and other current assets | -104,388 | 137,414 | 360,963 | |||
Amount due from related parties | 6,563,757 | -2,093,669 | -1,658,858 | |||
Deposits and other non-current assets | -9,281 | 0 | 0 | |||
Accounts payable | -676,200 | [1] | 1,295,525 | [1] | -1,485,189 | [1] |
Accrued expenses and other current liabilities | -1,207,465 | [1] | -1,123,760 | [1] | -663,166 | [1] |
Amount due to related parties | 783,970 | 255,094 | 132,037 | |||
Net cash used in operating activities | -5,209,268 | -11,524,248 | -8,086,138 | |||
Investing activities: | ||||||
Purchases of property and equipment | -209,539 | -29,566 | -1,277,455 | |||
Proceeds from disposal of property and equipment | 1,510 | 238,087 | 24,054 | |||
Payment for licensed video copyright | 0 | -67,999 | -236,360 | |||
Proceeds from disposal of equity interest in affiliate | 1,451,979 | 0 | 0 | |||
Change in restricted cash for pledge of bank loans | 0 | 0 | 3,600,000 | |||
Loan repayments from related parties under control of Shanda | 498,583 | 3,300,000 | 14,000,000 | |||
Loan to related parties under control of Shanda | 0 | 0 | -470,000 | |||
Net cash provided by investing activities | 1,742,533 | 3,440,522 | 15,640,239 | |||
Financing activities: | ||||||
Proceeds from exercise of stock options | 338,563 | 46,400 | 0 | |||
Repurchase of ordinary shares | 0 | -58,147 | -8,169,481 | |||
Repayment of bank borrowings | 0 | 0 | -3,148,120 | |||
Equity contribution from Shanda | 5,847,070 | 0 | 0 | |||
Repayment of borrowings from related parties under control of Shanda | 0 | -3,303,760 | -9,904,620 | |||
Net cash provided by (used in) financing activities | 6,185,633 | -3,315,507 | -21,222,221 | |||
Effect of exchange rate changes on cash and cash equivalents | -9,800 | -524 | -11,320 | |||
Net increase (decrease) in cash and cash equivalents | 2,709,098 | -11,399,757 | -13,679,440 | |||
Cash and cash equivalents, beginning of year | 1,671,230 | 13,070,987 | 26,750,427 | |||
Cash and cash equivalents, end of year | 4,380,328 | 1,671,230 | 13,070,987 | |||
Supplemental disclosure of cash flow information: | ||||||
Loan interest paid | 0 | 210,909 | 453,657 | |||
Supplemental disclosure of non-cash investing and financing activities: | ||||||
Accounts payable related to purchase of property and equipment | 2,157 | 19,779 | 3,195 | |||
Amount due to related parties related to purchase of property and equipment | 0 | 190,837 | 0 | |||
Net effect of borrowings from and receivables due from Shanda affiliates waived as to repayment and recharacterized as equity contribution | $5,405,317 | $0 | $0 | |||
[1] | Refer to Note 2(31). |
Organization_and_Principal_Act
Organization and Principal Activities | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES [Abstract] | ||||||
Organization and Principal Activities Disclosure | 1. ORGANIZATION AND PRINCIPAL ACTIVITIES | |||||
Ku6 Media Co., Ltd. (the “Company”), a Cayman Islands corporation, together with its subsidiaries and consolidated variable interest entities (“VIEs”) (collectively, the “Group”) provides online advertising services and promotional marketing services in China via its online video sharing platform, www.ku6.com. The Group’s business model focuses on the delivery of video content (principally user-generated content, or “UGC”) to end users; via the associated web traffic, the Group is able to create multiple opportunities for advertisers and business partners to market to the Group’s user base in exchange for fees received by the Group. | ||||||
Organization | ||||||
As of December 31, 2014, the Group’s ownership structure is summarized as follows. | ||||||
Name of Major Subsidiaries, Variable Interest Entities and Affiliate(s) | Date of | Percentage of | ||||
incorporation | ownership | |||||
Subsidiaries | ||||||
Ku6 (Beijing) Technology Co., Ltd. (“Beijing Technology”) | March 5, 2007 | 100 | % | |||
Wei Mo San Yi (Tianjin) Science and Technology Co., Ltd. (“Tianjin Technology”) | December 23, 2008 | 100 | % | |||
Kusheng (Tianjin) Technology Co., Ltd. (“Kusheng”) | August 26, 2011 | 100 | % | |||
Variable Interest Entities | ||||||
Ku6 (Beijing) Information Technology Co., Ltd. (“Ku6 Beijing Information”) | April 20, 2006 | N/A | ||||
Tianjin Ku6 Zheng Yuan Information Technology Co., Ltd. (“Tianjin Information”) | March 20, 2009 | N/A | ||||
Tianjin Ku6 Network Communication Technology Co., Ltd. (“Ku6 Network”) | December 14, 2011 | N/A | ||||
Beijing Ku6 Culture Media Co., Ltd. (“Ku6 Culture”) | June 22, 2010 | N/A | ||||
Affiliates | ||||||
Shanghai Yisheng Network Technology Co., Ltd. (“Yisheng”) | November 22, 2007 | 20 | % | |||
Bale Interactive (Beijing) Culture Media Co., Ltd. (“Bale”) | April 10, 2012 | 7 | % | |||
Business developments | ||||||
Historically, including through early 2014, Shanda Interactive Entertainment Limited (“Shanda”), a leading interactive entertainment media company in China, held a controlling ownership interest in the Group. As of December 31, 2013, Shanda’s equity interest in the Company was 70.5%. | ||||||
Pursuant to a strategic change in the Group’s business model in 2011, the Group (1) appointed Shanghai Shengyue Advertising Ltd. (“Shengyue”), a wholly owned subsidiary of Shanda at the time, as the Group’s primary agent for the sale of online advertising services, and (2) changed its business focus from purchasing long-form licensed video content to relying more on UGC and short-form video content. Shengyue operated an advertising system known as Application Advertisement (“AA”) and charged advertisement fees to its end customers based on the advertising effects, including but not limited to views, clicks, responses, etc. (“performance advertisement”). After the appointment of Shengyue as its primary sales agent, the Group relied on Shengyue to sell online advertising services for all but a small portion of its capacity and relied upon contract terms which provided for fixed minimum advertising revenue guarantees. This business strategy involving Shengyue continued through mid-2014. The Group generated advertising revenues of $12.5 million, $12.4 million, and $2.7 million from Shengyue for the years ended December 31, 2012, 2013, and 2014 respectively, representing 88.4%, 94.4%, and 31.5% of net revenues, respectively, for those periods. | ||||||
On March 31, 2014, Shanda Media, the affiliate of Shanda directly owning Shanda’s share of the Company’s equity, entered into an agreement with Mr. Xudong Xu (“Mr. Xu”) to transfer approximately 41% of the Company’s total outstanding ordinary shares, or 1,938,360,784 shares, to Mr. Xu in exchange for a contemporaneously dated promissory note with a maturity of three years pursuant to which Mr. Xu committed to repay, in cash, the purchase value of the shares approximating $47 million (based upon an average of share prices immediately preceding the share transfer) to Shanda Media (the “Share Purchase Transaction”). The promissory note which was used by Mr. Xu to finance the purchase of the shares was accompanied by a share pledge in favor of Shanda Media. Additionally, Mr. Xu has granted powers of attorney and voting proxy to Shanda Media, which may be exercised only upon occurrence of an event of default which is continuing, in order to more effectively secure the obligations under the promissory note. The share transfer was completed on April 3, 2014 and decreased Shanda’s ownership percentage to 29.5%, thus discontinuing Shanda’s controlling majority shareholder status. While Shanda is no longer the controlling shareholder of the Group, it continues to be a related party (Note 11). As of December 31, 2014, Mr. Xu’s equity interest in the Company was 41%, and Shanda’s equity interest in the Company was 29%. | ||||||
In connection with the Share Purchase Transaction, Shanda, through its affiliate, extended a loan of $3.2 million (RMB20.0 million) to the Group on April 3, 2014. This loan was interest-free and originally due on April 2, 2015. Shanda waived the Group’s obligation to repay this loan in order to satisfy one of the closing conditions under the share purchase agreement for the Share Purchase Transaction. Also, existing related party receivables due from an affiliate of Shanda, amounting to $1.2 million, were forgiven by the Group as part of the $3.2 million (RMB20.0 million) promised monies. The total net benefit, amounting to $2.0 million, from the aforementioned transactions was reflected as an equity contribution in the accompanying consolidated statement of shareholders’ deficit. On April 10, 2014, the Group received cash of RMB20.0 million from Shanda. | ||||||
On May 19, 2014, Shanda, through its affiliate, entered into an agreement to provide a loan of $3.4 million (RMB21.4 million) to the Group. This loan was interest-free and originally due within twelve months. Similar to the previous loan in early April, this loan was immediately waived as to repayment. As part of the loan transaction, existing related party payables to certain affiliates of Shanda, amounting to $0.8 million (RMB5.3 million), were waived as to repayment as part of the $3.4 million (RMB21.4 million) promised loan monies. The total benefit from the waived loans and payables of $3.4 million (RMB21.4 million) was reflected as an equity contribution in the accompanying consolidated statement of shareholders’ deficit. On May 30, 2014, the Group received cash of $2.6 million (RMB16.1 million) from Shanda, representing the promised monies of $3.4 million (RMB21.4 million) less the forgone existing related party payables of $0.8 million (RMB5.3 million). The $3.2 million received as described in the foregoing paragraph and the $2.6 million received in May were characterized as a financing cash inflow in the accompanying consolidated statement of cash flows. | ||||||
In connection with the Share Purchase Transaction, Mr. Xu committed to procure additional equity or debt financing of no less than $10.0 million by October 30, 2014. In light of improvements in operating cash flows in the fourth quarter of 2014, the Group opted to borrow RMB30.0 million ($4.8 million) instead from Mr. Xu. Therefore, on February 2, 2015, the Group entered into a loan agreement with Mr. Xu, pursuant to which Mr. Xu agreed to provide a loan of RMB30.0 million to the Group. The term of the loan is one year, with principal repayable at the maturity date of February 2, 2016. The loan bears interest at a rate of 6.5% per annum, which is payable at maturity. The Group received RMB30.0 million on March 4, 2015. | ||||||
The Share Purchase Transaction was undertaken in the context of adopting fundamental changes to the Group’s business strategy, with the following major changes having occurred since that time. | ||||||
(a) Advertising Agency Agreement with Shengyue | ||||||
· On April 30, 2014, the Group entered into a new advertising agency agreement with Shengyue, which was no longer owned by Shanda Interactive following Shanda Interactive’s sale of the business to an outside party (after the transfer of ownership, “New Shengyue”); accordingly, New Shengyue became an independent third party. Pursuant to the new agreement, the minimum guaranteed advertising revenue amount was substantially lower than that under the previous advertising agency agreement with Shengyue prior to March 31, 2014 (when Shengyue was a related party). This new advertising agency agreement was effective from April 25 and was to expire on December 31, 2014. | ||||||
· On August 14, 2014, the Group sent a written notice to New Shengyue terminating the new advertising agency agreement. According to the notice of termination, the advertising agency agreement was terminated on August 28, 2014. There were no financial penalties associated with the termination payable by the Group. Contemporaneous with the termination of the new advertising agency agreement with New Shengyue, the Group re-evaluated the collectability of the remaining receivables from Shengyue associated with both the old and new advertising agency agreements (pre-April 2014 and post-April 2014) and concluded that such receivables were likely not collectible. This evaluation excluded amounts received in cash during the second quarter of 2014. Accordingly, the remaining accounts receivable associated with the two advertising agency agreements are fully provided for. The Group recorded a provision of $0.92 million (RMB5.71 million) for all remaining receivables under the old advertising agency agreement with Shengyue (emanating from the time Shengyue was owned by Shanda Interactive) during the second quarter of 2014 given the subsequent termination in August. Following the termination, the Group further evaluated remaining receivables due pursuant to the new Shengyue advertising agreement and recorded a provision of $0.05 million (RMB0.35 million) in the third quarter of 2014 for all remaining receivables under the this advertising agency agreement with Shengyue that was terminated August 28, 2014. | ||||||
(b) Advertising Agency Agreement with Third Party Huzhong | ||||||
· On August 29, 2014, the Group entered into an advertising agency agreement with Huzhong Advertising (Shanghai) Ltd. (“Huzhong”), an unrelated third party, pursuant to which Huzhong has agreed to act as the Group’s exclusive advertising agent for standard media resources and as a non-exclusive advertising agent for highly interactive advertising resources. According to the agreement, the Group has agreed to guarantee a certain amount of web traffic per day. In return, Huzhong guarantees to the Group a minimum amount of advertising revenues per day. The minimum guarantee amount under this agreement is higher than that under the agency agreement with New Shengyue terminated on August 28, 2014. If the Group fails to meet the web traffic target, the minimum guarantee amount will be adjusted downward proportionally. Huzhong will prepay 50% of the minimum guaranteed amounts with the Group prior to the beginning of each month, and the balance will be settled monthly. The advertising agency agreement started on August 29, 2014 and will expire on December 31, 2017. | ||||||
(c) Revenue Sharing Cooperation with Related Party Qinhe | ||||||
· On April 30, 2014, the Group entered into an agreement with related party Shanghai Qinhe Internet Technology Software Development Co., Ltd., (“Qinhe”), a company controlled by Mr. Xu, which operates iSpeak, a social platform that allows users to engage in real-time online group activities through voice, text and video. This agreement stipulates that the Group will assist Qinhe by providing online game marketing services. Qinhe will share a portion of its profits that are generated from the Group’s video viewers who play Qinhe’s games after linking to them through advertisements on the Group’s websites. Profits are calculated as revenues from the games operated by Qinhe, net of licensing fees payable to game developers. The Group has provided these game marketing services to Qinhe from April 3, 2014 onward. This agreement expired on March 31, 2015 and was not renewed. | ||||||
· On May 4, 2014, the Group entered into a separate agreement with Qinhe to provide interactive entertainment marketing services under a similar arrangement to that described above. Pursuant to this agreement, the Group will share a certain percentage of Qinhe’s revenues generated from its video viewers who visit the iSpeak platform by linking thereto from advertisements on the Group’s website and spend monies with iSpeak. On May 4, 2014, the Group started to provide these marketing services to Qinhe. | ||||||
· On September 15, 2014, the Group signed a supplemental agreement to the interactive entertainment marketing services agreement mentioned in the preceding paragraph. The purpose of the supplemental agreement was to permit Qinhe greater operational capabilities to manage and operate the ishow.ku6.com subdomain of domain ku6.com on its own in order to drive further user referrals from Ku6 to Qinhe. Pursuant to this supplemental agreement, Qinhe agreed to pay additional guaranteed revenue amounts, stated in monthly terms, from July 2014 to December 2014. The guaranteed amounts, which are intended to compensate Ku6 for its resource costs in operating the relevant infrastructure, are in addition to the sharing amounts described in the preceding paragraph and do not result in any changes to the sharing terms in the original agreement. In addition, the original interactive entertainment marketing services agreement was extended to December 31, 2015. Under the extended agreement Qinhe will not be required to pay any guaranteed revenue amounts from January 1, 2015. | ||||||
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||
Summary of Significant Accounting Policies Disclosure | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
(1) Basis of presentation; liquidity and going concern | ||||||||
The accompanying consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of consolidated financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities at the dates of the financial statements. Significant accounting estimates reflected in the Company’s financial statements include allowances for doubtful accounts, the assessment of impairment for long-lived assets, useful lives for property and equipment, share-based compensation expense, and loss contingencies. Actual amounts may differ from these estimates under different assumptions or conditions. | ||||||||
The Group has incurred significant net losses and negative cash flows from operations in each of the three most recent years. As of December 31, 2014, the Group had cash and cash equivalents of $4.4 million, had an accumulated deficit of $187.1 million, reported a working capital deficit of $4.8 million, and had negative operating cash flows of $5.2 million for the year then ended. Despite suffering a gross loss for the full year of 2014, the Group achieved gross profit in the fourth quarter of 2014, following a protracted period of gross losses. The Group continues to generate operating losses and net losses. Despite recent improvements, substantial doubt exists as to the Group’s ability to continue as a going concern, primarily due to uncertainties regarding (1) the Group’s ability to generate improvements in operating cash inflows, which depend on growth in revenues from (i) Huzhong, the Group’s new third party advertising agency since late August 2014, and (ii) two cooperation agreements with related party Qinhe; (2) the Group’s ability to reduce its operating cash outflows, such as through further administrative and headcount-related cost control measures; and (3) the availability and timing of additional financing with terms acceptable to the Group. Growth in the Group’s operating cash inflows is principally dependent upon successful execution with Huzhong and Qinhe resulting in growth in revenues therefrom, and may also benefit from diversification to other sources of revenue. | ||||||||
The Group expects to derive its 2015 revenues from Huzhong and revenue sharing agreements with Qinhe described in the foregoing footnote. Cash collection from these sources depends on achievement of the guaranteed amounts of web traffic per day, the performance of the iSpeak platform, the performance of the games operated by Qinhe, and contractual terms agreed to with Qinhe and Huzhong. The Group will need to obtain further new revenue sources and additional near-term financing to fund its daily operations, as its current cash flow projections indicate that cash inflows from operating activities will be insufficient in the near term. | ||||||||
In order to reduce operating cash outflows, the Group reduced its headcount by approximately 40% in various departments in April 2014. The Group has also taken other cost reduction measures, including improving the efficiency of its network to reduce infrastructure costs, and has reduced its content acquisition costs. | ||||||||
Note 1 contains further descriptions of recent equity contributions from Shanda Interactive and a 2015 borrowing arranged with Mr. Xudong Xu. While these additional financing measures have assisted in alleviating pressure on the Group’s working capital and liquid resources, all the aforementioned factors raise substantial doubt about the Group’s ability to continue as a going concern. In order to continue its operations, the Group must generate sufficient revenues, raise more funds, and/or curtail its operational and capital expenditures to achieve profits and positive cash flows. | ||||||||
(2) Consolidation | ||||||||
The consolidated financial statements include the financial statements of the Company, its subsidiaries, and VIEs. All inter-company transactions and balances have been eliminated upon consolidation. Affiliated companies in which the Company has partial ownership and controls more than 20% but less than 50% of the investment are accounted for using the equity method of accounting. The Company’s share of earnings (losses) of such equity investments is included in the accompanying consolidated statements of operations and comprehensive loss; the carrying value of such investments was zero as of both December 31, 2013 and 2014. | ||||||||
The Company follows the guidance relating to the consolidation of VIEs in ASC 810-10, which requires certain VIEs to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. | ||||||||
To comply with PRC laws and regulations that prohibit or restrict foreign ownership of companies that provide advertising services and hold Internet Content Provider (“ICP”) licenses and/or Licenses for Transmission of Audio-Visual Programs through the Internet (“the Licenses”), the Group conducts substantially all of its advertising business through its VIEs. The paid-in capital balances of VIEs Ku6 Beijing Information and Ku6 Network were funded by the Company through loans extended to the authorized individuals (“nominee shareholders”); Tianjin Information was incorporated by Ku6 Beijing Information. | ||||||||
The Company has various agreements with its VIEs, through which the Company holds all the variable interests of the VIEs and has the power to direct the activities of the VIEs. Consequently the Company is the primary beneficiary of these VIEs. Details of certain key agreements with the VIEs are as follows: | ||||||||
Loan Agreements: Beijing Technology, Kusheng and Tianjin Technology (the “Subsidiaries”) have granted interest-free loans to the nominee shareholders with the sole purpose of providing funds necessary for the equity capital of Ku6 Beijing Information, Ku6 Network and Ku6 Culture. The portions of the loans for equity capital are eliminated with the capital of Ku6 Beijing Information, Ku6 Network, and Ku6 Culture in consolidation. The interest-free loans to the nominee shareholders of Beijing Information, Ku6 Network and Ku6 Culture as of December 31, 2014 were RMB20 million, RMB10 million and RMB1 million, respectively. Beijing Technology, Kusheng and Ku6 Culture are able to require the nominee shareholders to settle the loan amount through the entire equity interests of Ku6 Beijing Information, Ku6 Network and Ku6 Culture and nominate someone else to hold the shares on Beijing Technology, Kusheng and Ku6 Culture’s behalf. | ||||||||
Proxy Agreements: The nominee shareholders of the VIEs irrevocably appointed the Subsidiaries’ officers to vote on their behalf on all matters they are entitled to vote on, including matters relating to the transfer of any or all of their respective equity interests in the VIEs, making all the operational, financial decisions and the appointment of the directors, general managers and other senior management of the VIEs. | ||||||||
Equity Interest Pledge Agreements: The nominee shareholders of the VIEs have pledged their respective equity interests in the VIEs as collateral to secure the nominee shareholders’ obligations under other agreements and for the payment by the VIEs under the exclusive technical consulting and services agreements and the loan agreements. The Pledge Agreements have been registered with the applicable local branches of the State Administration for Industry and Commerce. The nominee shareholders of the VIEs cannot sell or pledge their equity interests to others without the approval from the Subsidiaries, and the nominee shareholders of the VIEs cannot receive any dividends without the approval of the Subsidiaries. | ||||||||
Exclusive Call Option Agreements: The nominee shareholders of the VIEs granted the Subsidiaries the exclusive and irrevocable right to purchase from the nominee shareholders, to the extent permitted under PRC laws and regulations or at the request of the Company, all of the equity interests in these entities for a purchase price equal to the amount of the registered capital or at the lowest price permitted by PRC laws and regulations. The Subsidiaries may exercise such options at any time. In addition, the VIEs and their nominee shareholders agreed that without the Subsidiaries’ prior written consent, they will not transfer or otherwise dispose of the equity interests or declare any dividends. | ||||||||
Exclusive Business Cooperation Agreements: The Subsidiaries are the exclusive provider of technical, consulting and related services and information to the VIEs. Under these arrangements, the Subsidiaries have the unilateral right to charge service fees to the VIEs to recover substantially all of the VIEs’ profits. | ||||||||
As a result of the above contractual agreements, the Company determined that it has the power to control the economic activities most significant to the VIEs and is the primary recipient of the economic rewards or risks, as the case may be. As such, the Company consolidates the VIEs as required by ASC 810-10. | ||||||||
As of December 31, 2013 and 2014, the assets of the VIEs were as follows: | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Cash and cash equivalents | 252,925 | 2,329,590 | ||||||
Accounts receivable | 36,117 | 105,762 | ||||||
Amounts due from related parties | 6,380,630 | 501 | ||||||
Property and equipment | 1,036 | 171 | ||||||
Deposits and other non-current assets | 311,773 | 321,709 | ||||||
Total assets | 6,982,481 | 2,757,733 | ||||||
These balances are reflected in the Group’s consolidated financial statements with intercompany transactions eliminated. Under the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs, and can have assets freely transferred out of the VIEs. Therefore, the Company considers that there is no asset in any of its consolidated VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC additional paid-in capital of the VIEs in the amount of $4.9 million as of December 31, 2014 (2013: $4.9 million). | ||||||||
As all the VIE subsidiaries are incorporated as limited liability companies under PRC Company Law, creditors thereof do not have recourse to the general credit of the Group for any of the liabilities of the VIE subsidiaries. As of December 31, 2013 and 2014, the liabilities of the VIEs were as follows: | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Accounts payable | 3,618,573 | 3,387,582 | ||||||
Amounts due to related parties | 20,740,356 | 20,235,986 | ||||||
Accrued expenses and other current liabilities | 6,443,737 | 6,289,169 | ||||||
Other payables due to related parties | 11,488,373 | 8,413,361 | ||||||
Total liabilities | 42,291,039 | 38,326,098 | ||||||
As of December 31, 2014, the total deficit of the VIE subsidiaries was $35.6 million (2013: $35.3 million). | ||||||||
For the years ended December 31, 2012, 2013 and 2014, the summarized operations of the VIEs were as follows: | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Net revenue | 13,956,477 | 14,483,007 | 8,850,824 | |||||
Net profit (loss) | (1,331,497 | ) | 4,746,859 | (910,807 | ) | |||
Currently there is no contractual arrangement that requires the Company to provide additional financial support to the VIEs. However, as the Company is conducting the online advertising business substantially through the VIEs, the Company has, in the past, provided and will continue to provide financial support to the VIEs considering the business requirements of the VIEs and the Company’s own business objectives in the future, which could expose the Company to a loss. For the year ended December 31, 2014, the net revenue of VIEs included charges from the VIEs to the wholly owned subsidiaries of the Company in the amount of $2.6 million for services provided by the VIEs as requested by the local authorities (2012 and 2013: nil and $2.3 million). The VIE revenue charge and derecognition of liabilities resulted in the net profit of the VIEs for the year ended December 31, 2013. | ||||||||
Please refer to “Contingencies” under Note 19 for the risks relating to the VIE arrangements. | ||||||||
(3) Significant risks and uncertainties | ||||||||
The Group participates in a dynamic high technology industry and believes that, in addition to the factors resulting our conclusions with respect to going concern, changes in any of the following areas could have a material adverse effect on the Group’s future financial position, results of operations or cash flows: i) changes in the overall demand for services and products; ii) changes in business offerings; iii) competitive pressures due to new entrants; iv) advances and new trends in new technologies and industry standards; v) changes in bandwidth suppliers; vi) reliance on Huzhong and Qinhe for the Group’s revenue; vii) regulatory considerations; viii) copyright regulations; and ix) risks associated with the ability to attract and retain employees necessary to support growth. | ||||||||
(4) Fair value | ||||||||
The Group follows ASC Topic 820, “Fair Value Measurements and Disclosures”. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under US GAAP, certain assets and liabilities must be measured at fair value, and the guidance details the disclosures that are required for items measured at fair value. | ||||||||
Financial assets and liabilities are to be measured and disclosed using inputs from the following three levels of the fair value hierarchy. The three levels are as follows: | ||||||||
Level 1 inputs are unadjusted quoted prices in active markets for identical assets that the management has the ability to access at the measurement date. | ||||||||
Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). | ||||||||
Level 3 includes unobservable inputs that reflect management’s judgments about the assumptions that market participants would use in pricing the assets or liabilities. Management develops these inputs based on the best information available, including their own data. | ||||||||
(5) Business combinations and non-controlling interests | ||||||||
The Group accounts for its business combinations using the purchase method of accounting. This method requires that the acquisition cost be allocated to the assets, including separately identifiable intangible assets, and liabilities the Company acquired based on their estimated fair values. | ||||||||
The Group follows ASC 805, “Business Combinations,” with respect to business combinations. Pursuant thereto, the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent consideration and all contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest(s) in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. | ||||||||
The Group follows guidance in ASC Topic 810 regarding non-controlling interests. Non-controlling interests are classified as a separate component within equity; however, such amounts were zero for all periods presented with respect to the accompanying consolidated balance sheet and consolidated statement of operations and comprehensive loss. Consolidated net income on a total enterprise basis is adjusted within the statement of operations and comprehensive loss for net income attributed to non-controlling interests and consolidated comprehensive income is adjusted for comprehensive income attributed to non-controlling interests. | ||||||||
(6) Foreign currency translation | ||||||||
The functional currency and reporting currency of the parent company is the United States dollar (“U.S. dollar”). The Group’s Subsidiaries and VIEs use Renminbi (“RMB”) as their functional currency. | ||||||||
Assets and liabilities of the Subsidiaries and VIEs are translated at the current exchange rates quoted by the Federal Reserve Bank of New York in effect at the balance sheet dates, equity accounts are translated at historical exchange rates, and revenues and expenses are translated at the average exchange rates in effect during the reporting period to the U.S. dollar. Translation adjustments resulting from foreign currency translation to reporting currency are reported as cumulative translation adjustments and recorded in accumulated other comprehensive income (loss) in the consolidated statements of changes in equity for the years presented. | ||||||||
Transactions denominated in currencies other than the Company’s or its Subsidiaries’ or VIEs’ functional currencies are remeasured into the functional currencies at the exchange rates quoted by the People’s Bank of China prevailing at the dates of the transactions. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations and comprehensive loss. Monetary assets and liabilities denominated in foreign currencies are remeasured into the applicable functional currencies using the applicable exchange rates quoted by the People’s Bank of China at the balance sheet dates. All such exchange gains and losses are included in the statements of operations and comprehensive loss. | ||||||||
Pursuant to the People’s Republic of China State Administration of Foreign Exchange (“SAFE”), the conversion of U.S. dollars to RMB is governed as to amount and a uniform exchange rate is set by the People’s Bank of China on a daily basis pegged to a basket of major currencies. Correspondingly, RMB to U.S. dollar conversion does not carry the same ease as conversion may with other major currencies. The rates of exchange for the U.S. dollar quoted by the Federal Reserve Bank of New York were RMB 6.0537 on December 31, 2013 and RMB 6.2046 on December 31, 2014. | ||||||||
(7) Cash and cash equivalents | ||||||||
Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid investments placed with bank or other financial institutions with no restriction to withdrawal or use, which have original maturities of three months or less. | ||||||||
Included in cash and cash equivalents are cash balances denominated in RMB of approximately RMB21,691,760 and RMB6,406,727 (equivalent to approximately $3,496,083 and $1,058,315) as of December 31, 2014 and 2013, respectively. | ||||||||
(8) Allowances for doubtful accounts | ||||||||
The Group determines allowances for doubtful accounts when facts and circumstances indicate that receivables are unlikely to be collected by taking into account an aging analysis of receivable balances, historical bad debt records, repayment patterns in the prior year, and other factors such as the policies of operators and financial conditions of customers. The Group’s accounts receivable are almost fully provided for by an allowance, and cash inflows related to accounts receivable principally consist of collections on fully reserved receivables. In 2014, the Group recorded a provison for all remaining receivables under the old and new advertising agency agreements with Shengyue based on the termination of a business relationship in August 2014 (Note 1). This allowance was charged to general and administrative expenses. | ||||||||
(9) Investments in affiliates | ||||||||
Affiliated companies are entities which the Group does not control. Investments in affiliated companies are accounted for by the equity method of accounting or the cost method of accounting. Under the equity method, when the Group has significant influence over an investee, the Group’s share of the post-acquisition profits or losses of affiliated companies is recognized in the consolidated statements of operations. Unrealized gains on transactions between the Group and its affiliated companies are eliminated to the extent of the Group’s interest in the affiliated companies; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an affiliated company equals or exceeds its interest in the affiliated company, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company (no such obligations or payments have been undertaken or made for the periods presented). With respect to the cost method, where the Group does not have significant influence and the underlying investment does not have a readily determinable fair value, the investment is originally recorded at cost. | ||||||||
The Group continually reviews its investments in affiliated companies to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors the Group considers in its determination are the length of time that the fair value of the investment is below the Group’s carrying value and the financial condition, operating performance and near term prospects of the investee. In addition, the Group considers the reason for the decline in fair value, including general market conditions, industry specific or investee specific reasons, changes in valuation subsequent to the balance sheet date, and the Group’s intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed to be other than temporary, the carrying value of the investment is written down to fair value. There were no impairments of such investments for the years ended December 31, 2012, 2013 and 2014 (the associated book values were zero as of both December 31, 2013 and 2014 (Note 6)). | ||||||||
(10) Property and equipment, net | ||||||||
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives: | ||||||||
Furniture and office equipment | 3 years | |||||||
Telecommunications equipment | 3 years | |||||||
Leasehold improvements | Lesser of original lease term or estimated useful life | |||||||
Expenditures for maintenance and repairs are expensed as incurred. Gain or loss on the disposal of property and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statements of operations. | ||||||||
(11) Acquired intangible assets, net | ||||||||
An intangible asset is required to be recognized separately from goodwill based on its estimated fair value if such asset arises from contractual or legal right or if it is separable as defined by ASC 805. Acquired intangible assets consisted of intangible assets with finite lives, as detailed in Note 5, acquired through direct purchases and various business acquisitions and were amortized on a straight-line basis over their estimated useful economic lives. As further described in Note 5, the Group provided a full impairment provision on its acquired intangibles in 2013; net book value was zero as of both December 31, 2013 and 2014. | ||||||||
The estimated useful economic lives by major intangible asset category used by the Company were as follows. | ||||||||
Trademark | 20 years | |||||||
Technology | 7 years | |||||||
(12) Video production and acquisition costs | ||||||||
The Company contracts third parties for the production of and self produces and self-generates video copyrights for content to exhibit on its website ku6.com. Following the guidance under ASC 926-20-25, video production (which mainly includes direct production costs and production overhead) and acquisition costs are capitalized, if the capitalization criteria are met, and are stated at the lower of unamortized cost or estimated fair value. | ||||||||
With respect to production and acquisition costs, until the Group can establish estimates of secondary market revenues, capitalized costs for each video produced are limited to the amount of revenues contracted for that video. The costs in excess of revenues contracted for that video are expensed as incurred on an actual basis, and are not restored as assets in subsequent periods. Once the Group can establish estimates of secondary market revenues in accordance with ASC 926-20-35-5(b), it capitalizes subsequent film costs. | ||||||||
Capitalized video production costs are amortized in accordance with the guidance in ASC 926-20-35-1 using the individual-film-forecast-computation method, based on the proportion of the revenues earned in a period to the estimated remaining unrecognized ultimate revenues as of the beginning of that period. The Group estimates total revenues to be earned (“ultimate revenues”) throughout the life of a video. Ultimate revenue estimates for the produced or acquired videos are periodically reviewed and adjustments, if any, will result in changes to amortization rates. Estimates used in calculating the fair value of the self produced content are based upon assumptions about future demand and market conditions. The capitalized costs are subject to assessment for impairment in accordance with ASC 926-20-35-12 to 35-18, if an event or change in circumstances indicates that the fair value is less than unamortized cost. | ||||||||
During each of the three years ended December 31, 2014, video production and acquisition costs did not meet the criteria for capitalization and as a result all the video production costs were expensed as incurred. | ||||||||
(13) Goodwill | ||||||||
Goodwill represents the excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed as a result of the Group’s acquisitions. The Group’s goodwill was subject to a full impairment charge in 2013. The Group’s goodwill was associated with the Group’s single reporting unit. | ||||||||
The Group tests goodwill for impairment by performing a two-step goodwill impairment test, which can be preceded by an optional qualitative assessment to determine if the two-step goodwill impairment test needs to be followed. The optional qualitative assessment relies upon qualitative factors to determine if it is “more likely than not” (more than 50% probable) that the fair value of a reporting unit is less than the carrying value of the reporting unit. The Group did not apply the qualitative assessment and proceeded directly to the two-step test. The first step compares the calculated fair value of a reporting unit to its carrying amount, including goodwill. If, and only if, the carrying amount of a reporting unit exceeds its fair value as per step one, the second step is executed to compare the implied fair value of the affected reporting unit’s goodwill to the carrying value of that goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. | ||||||||
Based upon application of the two step impairment evaluation approach at the Group’s annual evaluation dates, no impairment losses were recorded in the year ended December 31, 2012. In the quarter ended December 31, 2013, based upon the same approach at the Group’s annual evaluation date, considering the facts and circumstances regarding future revenues and cash flows described in Note 1 underpinning substantial doubt about the Group’s abilities to continue as a going concern, which had developed adversely by that time, the Group recorded an impairment charge to write off, in its entirety, the reporting unit’s (the entire Group)’s goodwill by $6.2 million. See Note 7 for additional information. | ||||||||
(14) Impairment of long-lived assets | ||||||||
The Group reviews its long-lived assets including property, plant and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets. The Group uses estimates and judgments in its impairment tests and if different estimates or judgments are utilized, the timing or the amount of the impairment charges could be different. | ||||||||
No impairment was recognized in the year ended December 31, 2012. In 2013, based upon substantial uncertainties surrounding future revenues and cash flows, and the concomitant uncertainty associated with recovering various assets regarding future net cash inflows and an assessment of reduced expectations for the Group’s future projected results of operations, the Group recognized a full impairment loss of $21.0 million for its acquired intangible assets. No impairment was provided on fixed assets as the carrying value of fixed assets was less than fair value. There was no impairment loss recorded in the year ended December 31, 2014. | ||||||||
(15) Financial instruments | ||||||||
Financial instruments include cash and cash equivalents, accounts receivable, prepayments and other current assets, amounts due from/to related parties, accounts payable, and accrued expenses and other current liabilities. As of December 31, 2013 and 2014, their carrying values approximated their fair values because of their generally short maturities. There were no financial assets or liabilities that were measured at fair value at December 31, 2013 or 2014. | ||||||||
(16) Revenue recognition and cost of revenues | ||||||||
In accordance with ASC Topic 605, “Revenue Recognition,” the Group recognizes revenues when the following criteria are met: persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery has occurred and collectability is reasonably assured. Revenues are recorded net of indirect taxes. | ||||||||
The Group makes credit assessments of customers to assess the collectability of contract amounts prior to entering into contracts. For those contracts for which the collectability is assessed as not reasonably assured, the Group recognizes revenue only when cash is received and all revenue recognition criteria are met. | ||||||||
Online advertising services | ||||||||
The Group derives part of its revenue from online advertising services, where advertisers (including third parties and related parties) pay to place their advertisements on the Company’s online video platform in different formats. Such formats include but are not limited to banners, buttons, links, and pre-roll or post-roll video advertisements. | ||||||||
Advertising contracts are signed to establish the price and advertising services to be provided. Advertisements are charged either based on the agreed measurement numbers, including but not limited to impressions and clicks, or fixed during a determined period of time. In the former case, the delivery of service occurs when those measurement numbers are achieved. In the latter case, the delivery is not linked to advertisement displays but occurs over the lapse of time. | ||||||||
The Group’s online advertising services revenue is principally generated under fixed-term contracts with specific advertising agent customers serving as intermediaries between the Group and ultimate advertisers; these fixed-term contracts were responsible for substantially all of the Group’s online advertising services revenue in 2012 and 2013 and all of its online advertising services revenue in 2014. Under two prior arrangements with Shengyue, the Group’s previous exclusive ad agent for standard advertising resources and non-exclusive ad agent for highly interactive advertising resources, which terminated by August 2014 (Note 1), and the Group’s current arrangement with ad agent Huzhong (exclusive for standard advertising resources and non-exclusive for highly interactive advertising resources), which started on August 29, 2014 and will expire on December 31, 2017 (Note 1), the arrangements included (include) guaranteed minimum advertising revenues and sharing of excess advertising revenues, as well as web traffic or video view targets to be met by the Group. | ||||||||
In the case of Shengyue, guaranteed minimum advertising revenues were not subject to downward adjustment under the old agreement which expired in early 2014 (Note 1). Under a new agreement with Shengyue consummated in April 2014 but terminated in August 2014 (Note 1), guaranteed minimum advertising revenues were proportionally adjusted downward if there was a shortfall relative to web traffic or video view targets. For the Shengyue arrangements, excess advertising revenues were calculated after deducting commission fees earned by Shengyue based upon increasing percentages for additional tiers (layers) of revenues in excess of the guaranteed amount. There were no commission fees incurred for any historical periods, as the Group earned only the minimum guaranteed revenues in 2012, 2013 and 2014. In the case of Huzhong, the guaranteed minimum daily advertising revenues are based upon daily web traffic targets agreed to by the Group and Huzhong, and revenues are proportionally adjusted downward or upward relative to the guaranteed minimums should web traffic fall short of or exceed the agreed upon targets. During 2014, the Group did exceed targets on certain occasions resulting in an insignificant additional amount of revenue. Unlike the Shengyue arrangements, which were settled in arrears, the Huzhong arrangement provides for payment of 50% of the guaranteed amounts prior to the beginning of the month, with final settlement determined between the parties at the end of the month. These prepayments are recorded as advances from customers until recognised as revenue. Guaranteed advertising revenues and any excess advertising revenues net of commission fees are recognized ratably over varying service periods as governed by the specific agreements, as the Group is able to timely obtain information to determine historical advertising revenues as a basis for preparing financial statements. | ||||||||
The Group reports the revenue earned from both related and third party ad agencies based on the net amount after considering the indicators to record revenue gross versus set forth in ASC 605-45, “Principal Agent Considerations.” A principal factor considered is the fact that the advertising agents establish prices with ultimate end customers wishing to place advertisements and the Group is not able to influence such pricing. | ||||||||
For revenue arrangements contracted with third-party advertising agencies (excluding the fixed arrangement with Huzhong), the Group provides cash incentives in the form of rebates based on volume and performance, and accounts for such incentives as a reduction of revenue in accordance with ASC 605-50-25. The cash incentives to third-party advertising agencies in the years ended December 31, 2012, 2013 and 2014 were, $72,464, nil and nil, respectively. | ||||||||
Promotional advertising services | ||||||||
The Group derives a portion of its revenue from related party Qinhe in exchange for interactive media and entertainment promotional advertising services provided by the Group to Qinhe. The Group provides online game marketing services to Qinhe; in exchange, Qinhe shares a portion of its profits that are generated from the Group’s video viewers who play Qinhe’s games after linking to them through advertisements on the Group’s websites. Profits are calculated as revenues from the games operated by Qinhe, net of licensing fees payable to game developers. The Group also provides interactive entertainment marketing services to Qinhe; in exchange, Qinhe shares a certain percentage of Qinhe’s revenues generated from its video viewers who visit its proprietary social media platform by linking thereto from advertisements on the Group’s website and spend monies with Qinhe. | ||||||||
Further to the interactive entertainment marketing services arrangement (but not the online game marketing arrangement), in September 2014 (Note 1) the Group signed a supplemental agreement providing Qinhe greater operational capabilities to manage and operate the ishow.ku6.com subdomain of domain ku6.com on its own in order to drive further user referrals. Pursuant to this supplemental agreement, Qinhe agreed to pay additional guaranteed revenue amounts, stated on a monthly basis and incremental to the revenue sharing determined on a percentage basis referenced in the foregoing paragraph. | ||||||||
Promotional advertising services revenues are recognized as services are delivered for online game and interactive entertainment marketing. Shortly after the end of each month, with frequency sufficient to enable timely preparation of financial statements, the Group timely receives a statement from Qinhe detailing the amount of shared revenue for each type of services. Once amounts are reconciled to the Group’s records and agreed to, shared revenues are to be paid within 30 days. With respect to the additional guaranteed revenue amounts mentioned in the foregoing paragraph, such amounts are recognized on a monthly basis as they are not dependent on underlying video viewer referrals.The Group reports the revenue earned from Qinhe based on the net amount after considering the indicators to record revenue gross versus set forth in ASC 605-45, “Principal Agent Considerations.” A principal factor considered is the fact that Qinhe establishes all pricing to end customers and the Group is not responsible for providing the content or services, only for driving video viewer referrals to Qinhe. | ||||||||
Costs of revenues (applicable to both online advertising revenues and promotional revenues) consist primarily of employee salaries and benefits associated with platform operations, related share-based compensation, depreciation expenses, internet bandwidth leasing costs, and video production costs. | ||||||||
Turnover taxes and related surcharges | ||||||||
The China subsidiaries and VIEs are subject to business tax or value added tax (“VAT”) and related surcharges on the revenues earned for services provided. | ||||||||
Relevant PRC authorities introduced a turnover tax reform pilot program (the “Pilot Program”) in selected pilot cities in China for selected industries in 2012, to gradually expand the scope of VAT. The turnover tax reform pilot program was first implemented in Shanghai effective 1 January 2012. According to Circular Caishui [2012] No.71 (“Circular 71”), the Pilot Program was expanded to Beijing (effective September 1, 2012) and Tianjin (effective December 1, 2012) where the Group’s online advertising revenues are generated. Prior to the implementation of the Pilot Program, the Group’s business tax rate for advertising sales was 5% based on the gross advertising revenue before deducting advertising agent rebates. After the implementation of the Pilot Program in Beijing and Tianjin, the advertising business is now subject to VAT at 6%. VAT payable on revenues generated by a general VAT taxpayer for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. If any of the Company’s subsidiaries is recognized as a small-scale VAT payer, the applicable VAT rate shall be 3%, and no creditable input VAT can be recognized. Business tax and related surcharges or VAT, as the case may be, are deducted from gross revenues to arrive at net revenues. | ||||||||
(17) Product development expenses | ||||||||
Product development expenses consist primarily of salaries and benefits for product development personnel, including share-based compensation costs, and are expensed as incurred. | ||||||||
(18) General and administrative expenses | ||||||||
General and administrative expenses consist primarily of salaries and benefits for general management, finance and administrative personnel, bad debt provision, litigation accruals, depreciation, amortization of intangible assets, professional service fees, share-based compensation, office rental fees, and other expenses. | ||||||||
(19) Selling and marketing | ||||||||
Selling and marketing expenses consist primarily of sales and marketing personnel payroll compensation and related employee costs, advertising and market promotion expenses, and other overhead expenses incurred by the Group’s sales and marketing personnel. | ||||||||
(20) Advertising costs | ||||||||
The Group expenses advertising costs as incurred. Total advertising expenses were $553,380, $287,070 and nil for the years ended December 31, 2012, 2013 and 2014, respectively, and were included in selling and marketing expenses. | ||||||||
(21) Share-based compensation | ||||||||
The Group applies ASC 718, which requires all share-based payments to employees and directors, including grants of employee stock options and restricted shares, to be recognized as compensation expense in the financial statements over the vesting periods of the awards based on the fair values of the awards determined at the grant date. The valuation provisions of ASC 718 apply to awards granted after the adoption of ASC 718, to awards granted to employees and directors before the adoption of ASC 718 whose related requisite services had not been provided, and to awards which were subsequently modified or cancelled. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent period(s) if actual forfeitures differ from initial estimates. | ||||||||
In accordance with ASC 718, the Group has recognized share-based compensation expenses, net of a forfeiture rate, using the straight-line method for awards with graded vesting features and service conditions only and using the graded-vesting attribution method for awards with graded vesting features and performance conditions. See Note 14 for further information on stock-based compensation. | ||||||||
(22) Leases | ||||||||
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Other leases, meaning those meeting the capitalization criteria in ASC 840, “Leases”, are accounted for as capital leases. Payments made under operating leases, net of any incentives received by the Group from the leasing company, are charged to the consolidated statement of operations and comprehensive loss on a straight-line basis over the lease periods, as specified in the lease agreements, with reference to the actual number of users of the leased assets, as appropriate. | ||||||||
(23) Taxation | ||||||||
Current income taxes are provided for on the taxable income of each subsidiary on the separate tax return basis in accordance with the relevant tax laws. Deferred income taxes are provided using the liability method in accordance with ASC 740, “Income Taxes”. Under this method, deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in income in the period of change. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. | ||||||||
ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Group does not have any liabilities for unrecognized tax benefits as of December 31, 2013 or 2014. Were the Group to have such liabilities, interest and penalties would be recognized in tax expenses. | ||||||||
(24) Statutory reserves | ||||||||
The Group’s subsidiaries incorporated in the PRC and the VIEs are required on an annual basis to make appropriations of retained earnings set at certain percentage of after-tax profit determined in accordance with PRC accounting standards and regulations (“PRC GAAP”). | ||||||||
The Group’s subsidiaries must make appropriations to (i) the general reserve and (ii) the enterprise expansion fund in accordance with the Law of the PRC on Enterprises Operated Exclusively with Foreign Capital. The general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP at each year-end) until such fund has reached 50% of the company’s registered capital; enterprise expansion fund appropriation is at the PRC subsidiaries’ directors’ discretion. The Company’s VIEs, in accordance with the China Company Laws, must make appropriations to a (i) statutory reserve fund and (ii) discretionary surplus fund. The statutory reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP at each year-end) until such fund has reached 50% of the company’s registered capital; other fund appropriation is at the VIEs’ directors’ discretion. | ||||||||
The general reserve fund and statutory reserve fund can only be used for specific purposes, such as setting off the accumulated losses, enterprise expansion or increasing the registered capital. The enterprise expansion fund can be used to expand production and operations; it also may be used for increasing registered capital. | ||||||||
Appropriations to these funds, if they occur, are classified in the consolidated balance sheets as statutory reserves; however, such reserves are zero. No appropriations were made during the years ended December 31, 2012, 2013 and 2014. There are no legal requirements in the PRC to fund these reserves by transfer of cash to restricted accounts, and the Group does not do so. | ||||||||
(25) Contingencies | ||||||||
In the normal course of business, the Group is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters. Liabilities for such contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. See Note 19. | ||||||||
(26) Earnings (loss) per share | ||||||||
Basic earnings (loss) per share is computed by dividing earnings (loss) by the weighted average number of ordinary shares outstanding during the year. Diluted earnings (loss) per share is computed using the weighted average number of ordinary shares and, if dilutive, potential ordinary shares outstanding during the year. Potential ordinary shares consist of shares issuable upon the exercise of stock options (using the “treasury stock method”). Potential ordinary shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive. | ||||||||
For each of the three years in the period ended December 31, 2014, the dilutive effect of potential ordinary shares was not factored into the calculation as a net loss was incurred in each period. | ||||||||
(27) Comprehensive loss | ||||||||
Comprehensive loss is defined as the change in equity of a company during the period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive loss, as presented on the accompanying consolidated balance sheets, consists of cumulative foreign currency translation adjustments included in other comprehensive income (loss), which are presented net of tax (zero tax effect). | ||||||||
(28) Recent accounting pronouncements | ||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 will eliminate transaction-specific and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective, for public companies, for reporting periods beginning after December 15, 2016, including interim periods within that reporting period and therefore would impact the Group starting January 1, 2017 (however, the FASB has recently voted in April 2015 to delay the effective date by one year, and a deferral is not absolutely certain). Early adoption is not permitted under ASU 2014-09. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. Management is currently assessing the impact of the adoption of ASU 2014-09 and the effect of the standard on the Group’s ongoing financial reporting. | ||||||||
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which will explicitly require management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The issued guidance will require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term “substantial doubt”, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated and (6) require the assessment cover a period of one year after the date that the financial statements are issued (or available to be issued). This guidance is effective for the first annual period ending after December 15, 2016 (hence, calendar 2016 for the Group), and for annual periods and interim periods thereafter. Early application is permitted. The Group anticipates that this guidance will result in expanded disclosures in its financial statements to provide further analysis regarding its existing going concern uncertainty (Note 1). | ||||||||
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” or ASU 2015-02. ASU 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. The ASU simplifies consolidation accounting by reducing the number of consolidation models from four to two. In addition, the new standard simplifies the FASB Accounting Standards Codification and improves current guidance by: (i) placing more emphasis on risk of loss when determining a controlling financial interest; (ii) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a VIE; and (iii) changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for periods beginning after December 15, 2015, for public companies, or calendar 2016 for the Group. Early adoption is permitted, including adoption in an interim period. The Group does not anticipate that the ASU will impact its consolidation conclusions and is in the process of finalizing its evaluation. | ||||||||
(29) Government Subsidies | ||||||||
Government subsidies represent discretionary cash subsidies granted by local governments to encourage the development of certain enterprises that are established in local special economic regions. The cash subsidies may be received in the form of (i) a fixed cash amount determined and provided by a municipal government to an operating subsidiary for product and service innovation, or (ii) an amount determined as a percentage of the income tax and business tax actually paid by an operating subsidiary. | ||||||||
Cash subsidies have no defined rules and regulations to govern the criteria necessary for companies to enjoy the benefits and are recognized as other income when received. | ||||||||
For the years ended December 31, 2012, 2013 and 2014, cash subsidies of $1,514,570, $1,484,789 and $135,265 were recognized as other income, respectively. | ||||||||
(30) Segment reporting | ||||||||
Based on the criteria established by ASC 280, the authoritative accounting guidance for segment reporting, the Group currently operates and manages its business as a single operating segment, “Advertising Services” (Note 15). | ||||||||
(31) Revisions to previously reported amounts | ||||||||
Certain amounts in the accompanying consolidated statement of cash flows for the year ended December 31, 2013 have been revised to reflect the corrections of errors. All corrected amounts are within the adjustments to reconcile net loss to net cash used in operating activities. Specifically, the line item “gain on derecognition of aged operating liabilities” was corrected from an inflow of $2,938,250, as previously reported, to an outflow of $2,938,250. The line item “change in accounts payable” was corrected from an outflow of $2,496,787, as previously reported, to an inflow of $1,295,525. Lastly, the line item “change in accrued expenses and other current liabilities” was revised from an outflow of $3,207,948, as previously reported, to an outflow of $1,123,760. These errors in previously reported 2013 amounts were the result of computational errors in the calculation of adjustments to arrive at net cash used in operating activities. These errors impacted only the respective line items within net cash used in operating activities and did not impact any other categories of cash flows, or any other financial statements, or any other reported amounts. | ||||||||
Management evaluated the impact of the identified errors, considering both quantitative and qualitative factors, and concluded that the errors did not result in a material misstatement of the previously issued financial statements for the year ended December 31, 2013 taken as whole, but are being corrected herein to appropriately reflect that comparative period. | ||||||||
Prepaid_Expenses_and_Other_Cur
Prepaid Expenses and Other Current Assets | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS [Abstract] | ||||||
Prepaid Expenses and Other Current Assets Disclosure | 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS | |||||
Prepaid expenses and other current assets consist of: | ||||||
December 31, 2013 | December 31, 2014 | |||||
Prepaid expenses | 218,420 | 192,379 | ||||
Staff advances and other receivables | 54,254 | 186,950 | ||||
Advances to suppliers | 113,293 | 111,026 | ||||
385,967 | 490,355 | |||||
Property_and_Equipment_Net
Property and Equipment, Net | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PROPERTY AND EQUIPMENT, NET [Abstract] | ||||||
Property and Equipment Disclosure | 4. PROPERTY AND EQUIPMENT, NET | |||||
Property and equipment, net, consists of: | ||||||
December 31, 2013 | December 31, 2014 | |||||
Furniture and office equipment | 866,517 | 844,028 | ||||
Telecommunications equipment | 4,835,937 | 4,715,398 | ||||
Leasehold improvements | 1,405,933 | 1,371,744 | ||||
7,108,387 | 6,931,170 | |||||
Less: Accumulated depreciation and amortization | (5,740,027 | ) | (6,637,603 | ) | ||
1,368,360 | 293,567 | |||||
Depreciation expense for the years ended December 31, 2012, 2013 and 2014 was $1,941,761, $1,829,963 and $1,048,398, respectively. | ||||||
Acquired_Intangible_Assets_Net
Acquired Intangible Assets, Net | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
ACQUIRED INTANGIBLE ASSETS, NET [Abstract] | ||||||||||
Acquired Intangible Assets Disclosure | 5. ACQUIRED INTANGIBLE ASSETS, NET | |||||||||
December 31, 2013 | ||||||||||
Gross carrying | Accumulated | Impairment | Net carrying | |||||||
amount | amortization | amount | ||||||||
Trademark | 24,901,940 | (4,876,630 | ) | (20,025,310 | ) | — | ||||
Technology | 2,197,230 | (1,229,403 | ) | (967,827 | ) | — | ||||
27,099,170 | (6,106,033 | ) | (20,993,137 | ) | — | |||||
At December 31, 2013 and 2014, net book value of intangible assets was zero. Amortization expenses for the years ended December 31, 2012, 2013 and 2014 were $1,558,987, $1,558,987 and nil, respectively. As of December 31, 2013, based upon the evolution by that time of the facts and circumstances described in Note 1 (related to the Group’s going concern uncertainty) which involve significant uncertainty regarding future net cash inflows and an assessment of reduced expectations for the Group’s future projected results of operations, the trademark and technology intangible assets were determined to be fully impaired. This assessment was reached after determining that the future undiscounted cash flows expected to be recovered from these the assets were significantly less than the carrying value thereof. In arriving at this conclusion, the Group considered the persuasive evidence of future discounted cash flows implied by the Group’s public share price and its market capitalization (a market based approach, as a per-share price can be interpreted as evidence of discounted future cash flows). However, management concluded, given the significant changes commenced with respect to the Group’s business model (changes to the Shengyue advertising arrangements and cost reductions) in early 2014, that an income approach was warranted as it related to the Group’s intangible assets and goodwill. The Group’s public share price and market capitalization at December 31, 2013 did not fully incorporate the reduced expectations and/or significant uncertainties regarding future revenues and cash flows associated with the strategic changes commenced in early 2014. Therefore, in management’s judgment, an income approach to valuation was necessary to adequately take into account the Group’s business challenges and associated liquidity concerns, regardless of the positive evidence supplied by a market capitalization view. | ||||||||||
Projections of future cash flows related to the asset group (the entire company, or the Group’s sole reporting unit, where the trademark intangible is the primary asset) were prepared; these projections took into account the uncertainties associated with future revenues and cash flows from advertising revenue and the then-recent collaboration with Qinhe described in Note 1. The analysis indicated that the future undiscounted cash flows were significantly less than the Group’s carrying value. Accordingly, further analysis, using a discount rate representing the Group’s cost of equity capital plus an appropriate risk premium calibrated to the significant uncertainties associated with future cash flows and unproven changes to the business model, was undertaken to compute the present value of the undiscounted cash flows. Based on this analysis, it was indicated that the entire amount of intangible assets was impaired. However, considering relevant U.S. GAAP provides that impairment charges are allocated amongst the assets comprising an asset group on the basis of relative carrying value, the Group did not provide any impairment on other long lived assets or fixed assets as available market evidence indicated that those assets had fair values which exceeded their carrying values and were therefore individually recoverable. The Group recorded a further significant impairment charge for goodwill (Note 7). | ||||||||||
Investments_in_Equity_Affiliat
Investments in Equity Affiliates | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
INVESTMENTS IN EQUITY AFFILIATES [Abstract] | ||||||||||
Investments in Equity Affiliates Disclosure | 6. INVESTMENTS IN AFFILIATES | |||||||||
December 31, 2011 | Share of loss | Foreign currency | December 31, 2012 | |||||||
translation | ||||||||||
Equity interest in Yisheng | 255,281 | (252,585 | ) | (2,696 | ) | — | ||||
The Group owns a 20% equity interest in Yisheng, an online audio business originally acquired from Shanda in a transaction which at the time was a common control transaction accounted for at carryover basis, and possesses significant influence thereover. Accordingly, the Group has accounted for this investment under the equity method. As of December 31, 2012, the investment in Yisheng had been reduced to zero as a result of the Group’s equity share of losses, therefore, the preceding table depicts only 2012 activity as there has been no equity share of income since then. The Group is not obligated to continue funding Yisheng or to provide for incurred losses. | ||||||||||
Disposal of Bale | ||||||||||
On April 10, 2012, Yisheng disposed of a portion of its equity interest in Bale, an underlying company in which Yisheng maintained an investment, to the Group, resulting in the Group receiving 20% of Bale and having significant influence thereover. This investment was originally classified as an equity method investment. The transfer was recorded at carrying value as, at the time, Yisheng and the Group were under the common control of Shanda. The original cost basis recorded was zero due to the presence of accumulated losses. Since the initial receipt of the investment, the carrying basis continued to be zero. On June 16, 2014, the Group entered into an agreement with YiYangLianDong (Beijing) Investment Consulting Co., Ltd (“YiYang”), owned by Mr. Yao Jianjiang, the founder and controlling shareholder of YiYang, to sell half of its interest (or 10% of the total equity interests) in Bale to YiYang at a price of RMB 9 million. The Group collected such amount on July 4, 2014 and the registration of this change with the local Administration for Industry & Commerce was completed on July 25, 2014. A net $1,451,979 (RMB 9,000,000) gain from the disposal of the Group’s equity interest in Bale to YiYang was realized. Subsequent to this transaction, Bale issued additional shares to other parties, resulting in further dilution of the Group’s equity interest to 7%. Following the sale of half of the Group’s interest and a reduction in the Group’s involvement with Bale, the investment was re-classified as a cost method investment; the carrying value is zero. | ||||||||||
Goodwill
Goodwill | 12 Months Ended | |||
Dec. 31, 2014 | ||||
GOODWILL [Abstract] | ||||
Goodwill Disclosure | 7. GOODWILL | |||
The changes in the carrying amount of goodwill are as follows. | ||||
December 31, 2011 | 6,232,770 | |||
Change | — | |||
December 31, 2012 | 6,232,770 | |||
Impairment | (6,232,770 | ) | ||
December 31, 2013 | — | |||
Impairment | — | |||
December 31, 2014 | — | |||
ASC Topic 350 requires that the goodwill impairment assessment be performed at the reporting unit level. The Group performed an impairment test at the reporting unit level and concluded that there was no impairment as to the carrying value of goodwill as of December 31, 2012. This impairment test principally considered the excess of the market capitalization of the Group’s equity as compared to the carrying value thereof, considering the Group’s business constitutes the entire reporting unit. | ||||
As of December 31, 2013, based upon the evolution by that time of the facts and circumstances described in Note 1 (related to the Group’s going concern uncertainty) which involved (and continue to involve) significant uncertainty regarding future net cash inflows and an assessment of reduced expectations for the Group’s future projected results of operations, management concluded that observable market data was of substantially reduced relevance in terms of indicating a fair value of the reporting unit. Regardless of the Group’s public share price at that time, the existence of liquidity difficulties and the necessity of adopting changes to the business model to enhance the Group’s prospects were more compelling than a pure market approach analysis. The Group’s public share price at December 31, 2013 did not incorporate the reduced expectations and uncertainties regarding the amount and timing of future revenues and cash flows associated with the early 2014 significant shifts in business strategy (such as changes to the Shengyue arrangements and cost reduction measures) described in Note 1. Given the substantial dependence of the Group’s future revenues and cash flows upon changes to its business model and new agreements with different parties providing for future revenues, an income approach was adopted as the basis for the evaluation. | ||||
In estimating the fair value of the reporting unit in the first step of the impairment test, significant management judgement was required. The underlying assumptions used in the first step of the impairment test considered the forecasted cash flows of the Group, which were subject to further significant reduction through a discount rate in excess of 20% which considered the Group’s cost of capital and a risk premium calibrated to the significant uncertainty associated with the Group’s future revenue generating plans and business model. The most significant computational factors were the future projected revenues and the discount rate. The Group determined that the fair value of the reporting unit was less than the carrying value, which required performance of the second step of the impairment test. In the performance of the second step of the impairment test, it was determined that the fair values of other assets subsumed the fair value of the reporting unit, implying the fair value of goodwill was zero. As a result, the Group impaired all of the goodwill and recorded $6,232,770 of impairment expense as of December 31, 2013. | ||||
Fair_Value_Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2014 | |
FAIR VALUE MEASUREMENTS [Abstract] | |
Fair Value Measurements Disclosure | 8. FAIR VALUE MEASUREMENTS |
As of December 31, 2013 and December 31, 2014, the carrying amounts of the Company’s cash and cash equivalents, accounts receivable, prepayments and other current assets, amounts due from/to related parties, accounts payable, and accrued expenses and other current liabilities approximated fair value due to their short maturities. Accounts receivable, prepayments and other current assets, amounts due from/to related parties, accounts payable, and accrued expenses and other current liabilities, which are measured at carrying value, would represent Level 3 fair value measurements if carried at fair value due to the presence of significant unobservable inputs. As of the same dates, the Company’s cash equivalents would have represented either Level 1 or Level 2 measurements depending on the presence of significant observable inputs such as interest rates. There are no financial assets or liabilities that are being measured at fair value on a recurring basis at December 31, 2013 or December 31, 2014. | |
On a non-recurring basis, the Group tested (tests) its long-lived assets and goodwill for impairment whenever events or changes in circumstances indicate the carrying amount of a long-lived asset may not be recoverable. The Group measures the fair value of long-lived assets using discounted cash flow modelling and unobservable inputs including assumptions of projected revenue, expenses, capital spending, and other costs, as well as appropriate discount rates which consider costs of capital and risk premia. During the years ended December 31, 2012, 2013 and 2014, the Group recognized impairment losses of nil, $21.0 million and nil for its intangible assets, respectively, and recognized a full impairment loss of $6.2 million for goodwill in 2013. | |
The Group has not presented tabular disclosures or further qualitative information regarding fair value for these long-lived Level 3-classified assets because the related assets were fully written off in 2013 and the related fair values are zero. See Notes 5 and 7 for additional information, including rollforward information pertaining to the assets. | |
Accrued_Expenses_and_Other_Cur
Accrued Expenses and Other Current Liabilities | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES [Abstract] | ||||||
Accrued Expenses and Other Current Liabilities Disclosure | 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||||
Accrued expenses and other current liabilities consist of: | ||||||
December 31, 2013 | December 31, 2014 | |||||
Accrued litigation provision | 2,079,671 | 1,653,032 | ||||
Accrued professional service fees | 1,720,454 | 1,604,240 | ||||
Accrued welfare benefits | 1,462,926 | 1,289,157 | ||||
Accrued payroll | 659,870 | 452,583 | ||||
Indirect taxes payable | 400,602 | 297,293 | ||||
Advances from customers | 26,920 | 191,022 | ||||
Other accrued expenses | 837,187 | 492,837 | ||||
7,187,630 | 5,980,164 | |||||
Other_Income_Net
Other Income, Net | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
OTHER INCOME, NET [Abstract] | ||||||||
Other Income, Net Disclosure | 10. OTHER INCOME, NET | |||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Sub-lease income | 249,123 | 317,915 | 276,895 | |||||
Gain on derecognition of long-aged operating liabilities | — | 2,938,250 | 206,533 | |||||
Government subsidies | 1,514,570 | 1,484,789 | 135,265 | |||||
Reimbursement from depository bank related to ADR program | — | 240,470 | 92,144 | |||||
Provision for Seed Music receivable (related party) | — | (980,000 | ) | — | ||||
Other | (35,155 | ) | 99,615 | 35,121 | ||||
Total | 1,728,538 | 4,101,039 | 745,958 | |||||
For the year ended December 31, 2014, gains arising from derecognition of long-aged operating liabilities of $206,533 were recognized related to write-offs of sales rebate payables included in accounts payable in 2014. For the year ended December 31, 2013, a gain arising from derecognition of long-aged operating liabilities of $2,938,250 was recognized. These amounts included $1,077,242, $818,914 and $1,042,094 in write-offs of sales rebate payables (included in accounts payable), third-party commissions (included in accounts payable), and other accrued expenses payable. The write-offs in 2014 and 2013 all related to the Group’s previous (pre-2011) advertising sales business model. These amounts were significantly aged and have been monitored through time; based upon no or very little further claims activity, payment was judged to be remote based upon the Group’s policies and past experience. | ||||||||
In 2013, based upon changed facts and a revised assessment indicating unlikely collection of a $980,000 loan receivable originated to Seed Music (a former subsidiary of the Group sold to Shanda Interactive in 2010) for which collection was being sought from a shareholder of Seed Music unrelated to the Group, the Group fully provided for the impaired loan and reduced its net value to zero. In light of the character of the original loan (which represented a cash outflow reported in investing activities) and the lack of relation to the Group’s ongoing operations, as well as the fact that Seed Music is a related party not under common control, the Group recorded the corresponding charge as other expense within “other income, net”. | ||||||||
Related_Party_Transactions_and
Related Party Transactions and Balances | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
RELATED PARTY TRANSACTIONS AND BALANCES [Abstract] | ||||||||
Related Party Transactions and Balances Disclosure | 11. RELATED PARTY TRANSACTIONS AND BALANCES | |||||||
Current Related Parties | ||||||||
Entity | Relationship to Ku6 Media Co., Ltd. | |||||||
Xu Xudong (“Mr. Xu”) | Largest shareholder | |||||||
Shanghai Qinhe Internet Technology Software Development Co., Ltd., (“Qinhe”) | Entity controlled by Mr. Xu | |||||||
Shanda Interactive Entertainment Limited (“Shanda”) | Second largest shareholder | |||||||
Shanda Computer (Shanghai) Co., Ltd. (“Shanda Computer”) | Wholly owned affiliate of Shanda | |||||||
Shanghai Shanda Network Development Co., Ltd. (“Shanda Network”) | Wholly owned affiliate of Shanda | |||||||
Shanda Media Group Ltd. | Wholly owned affiliate of Shanda | |||||||
Shanda Capital Ltd. | Wholly owned affiliate of Shanda | |||||||
Shanghai Shengle Information Technology Co., Ltd. (“Shengle”) | Wholly owned affiliate of Shanda | |||||||
Shanghai Shengjin Software Development Co., Ltd. (“Shengjin”) | Wholly owned affiliate of Shanda | |||||||
In the past (prior to Shanda’s cessation of majority ownership in April 2014 (Note 1)), the Group received advertising revenues from, and paid promotional service fees to, companies under common control by Shanda. Accordingly, certain advertising revenues and costs of revenue are separately classified in the consolidated statement of operations and comprehensive loss. From time to time in the past, the Group also lent cash resources to (or borrowed cash resources from) other companies under control of Shanda based upon its U.S. or RMB-denominated cash resource positions and the related resources and needs of other companies under control of Shanda. These lending (borrowing) transactions are reflected as investing (financing) activities, respectively, in the consolidated statement of cash flows and are reflected in the consolidated balance sheet (and below in this Note) as other receivables due from, or other payables due to, related parties. | ||||||||
Former Related Parties | ||||||||
Due to certain sale transactions conducted by Shanda in 2014 resulting in Shanda’s disposal of certain of its affiliates to third parties, the following entities were no longer related parties of the Group as of the dates hereby noted. | ||||||||
Entity | Relationship to Ku6 Media Co., Ltd. | |||||||
Shanghai Shengyue Advertising Co., Ltd. (“Shengyue”) | Wholly owned affiliate of Shanda until April 2014 | |||||||
Shanghai Shulong Technology Co., Ltd. (“Shanghai Shulong”) | Consolidated affiliate of Shanda Games Limited | |||||||
Shanghai Shulong Computer Technology Co., Ltd. (“Shanghai Shulong Computer”) | Consolidated affiliate of Shanda Games Limited | |||||||
Hurray! Media Co., Ltd. | Wholly owned affiliate of Shanda until May 2014 | |||||||
Shanda Games Ltd. (“Shanda Games”) | Majority owned affiliate of Shanda until September 2014 | |||||||
Seed Music Group Limited | Significant influence exercised by Shanda until May 2014 | |||||||
Annual Related Party Activities | ||||||||
During the years ended December 31, 2012, 2013 and 2014 significant related party transactions occurring during the annual periods were as follows. | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Online advertising revenue received from Shengyue (Note A) | 12,481,927 | 12,404,031 | 2,703,492 | |||||
Promotional advertising revenue received from Qinhe (Note A) | — | — | 1,613,606 | |||||
Technical service fees in cost of revenues paid to Shanda Network (Note B) | — | 335,504 | 673,899 | |||||
Technical service fees in cost of revenues payable but forgiven by Shanda Network (Notes B, C) | — | — | 235,876 | |||||
Rental fee payable but forgiven by Shanda Network (Note C) | — | — | 170,086 | |||||
Rental fee payable but forgiven by Shengjin (Note C) | — | — | 23,926 | |||||
Interest expense payable but forgiven by Shanda Media Group Ltd. (Note C) | — | — | 375,000 | |||||
Receivables due from Hurray! Media Co., Ltd. to the Company but forgiven as to repayment (Note C) | — | — | 1,246,641 | |||||
Purchase of equipment from companies under control of Shanda | — | 188,334 | — | |||||
Equity contribution from Shanda (Note C) | — | — | 5,847,070 | |||||
Loan repayment from Shanda Capital Limited (Note D) | — | — | 470,000 | |||||
Loan repayment from Shanda Games Limited | 13,900,000 | 3,300,000 | — | |||||
Loan repayment to Shanghai Shulong Computer | 6,769,544 | — | — | |||||
Loan repayment to Shanghai Shulong | 3,135,076 | 3,303,760 | — | |||||
Loan to Shanda Capital Limited | 470,000 | 13,865 | — | |||||
Interest income from Shanda Games Limited | 246,178 | 14,236 | — | |||||
Interest income from Shanda Capital Limited (Note D) | 10,575 | 14,620 | 3,388 | |||||
Interest expense for loans from Shanghai Shulong Computer and Shanghai Shulong | 448,011 | 16,365 | — | |||||
Note A. The Group entered into an original advertising agency agreement with Shengyue in 2011, when Shengyue was controlled by Shanda. Under this agreement, Shengyue was appointed as the Group’s primary agency to secure advertisements from various end advertisers. The Group provided advertising capacity/spots to Shengyue on its online video portal. The original agreement covered a period of 1 year and 9 months commencing April 1, 2011 and was extended thereafter through early 2014. In early 2014, following the disposition of Shengyue by Shanda to an independent third party, a new agreement was reached (Note 1). Amounts depicted in the foregoing table only relate to the period of time when Shengyue was a related party (under Shanda’s ownership). | ||||||||
During the second quarter of 2014, the Company entered into two agreements with related party Qinhe, a company controlled by Mr. Xu, stipulating the provision of promotional advertising services (Notes 1 and 2(16)). As the supplemental agreement (Note 1) related to marketing services expired on December 31, 2014, the Group will share the revenue with Qinhe under the original agreement (Note 1), without the benefit of the supplemental agreement, since the beginning of 2015. The actual revenue from Qinhe may decrease in 2015 given the cessation of the supplemental agreement. | ||||||||
Note B. In April 2013, the Group entered into a technical services agreement with Shanda Network, which continued in 2014. Pursuant to this agreement, Shanda Network provided technical support services including computer cabinet management, server maintainance, and other items. The service fees are settled on a monthly basis. | ||||||||
Note C. During April and May 2014, Shanda provided loans totaling $5.8 million (RMB 36.1 million) to the Group. The loan were interest-free and were immediately unconditionally forgiven as to repayment. Related thereto, certain existing related party payables, amounting to $0.8 million, and receivables, amounting to $1.2 million, involving certain companies controlled by Shanda were forgiven as to repayment. The net effect of the foregoing was a $5.4 million equity contribution reflected as an increase in the Group’s additional paid-in capital (Note 1). | ||||||||
Note D. In 2014, the Group’s remaining loan receivable from Shanda Capital Limited was repaid in full. | ||||||||
Year-End Related Party Balances | ||||||||
At December 31, 2013 and December 31, 2014, the amounts receivable from and payable to related parties included in the consolidated balance sheet mainly represent the outstanding amounts arising from the transactions described in the preceding section. Receivables from Shengyue relate to the pre-existing advertising revenue arrangement described in the preceding subsection of this note. Accounts receivable balances due from related parties are as follows. | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Accounts receivable due from related parties | ||||||||
Shanghai Shengyue Advertising Co., Ltd. | 6,313,489 | — | ||||||
Other companies under control of Shanda | 208,495 | 972 | ||||||
6,521,984 | 972 | |||||||
Accounts payable balances due to related parties are as follows. | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Accounts payable due to related parties | ||||||||
Shanghai Shanda Network Development Co.,Ltd | 355,820 | 709,911 | ||||||
Shanghai Shengle Information Technology Co., Ltd. | 190,837 | — | ||||||
Other companies under control of Shanda | 11 | — | ||||||
546,668 | 709,911 | |||||||
Payables to Shanghai Shanda Network Development Co., Ltd. for technical service fees in 2014 were partially forgiven by Shanda Network as to repayment, as described under Note C above. | ||||||||
Other balances with related parties are as follows. | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Other receivables due from related parties | ||||||||
Hurray! Media Co., Ltd. (Note 1) | 1,246,641 | — | ||||||
Seed Music Group Limited (Note 10) | — | — | ||||||
Shanda Capital Limited | 495,196 | — | ||||||
Other companies under control of Shanda | 45,668 | 2,924 | ||||||
1,787,505 | 2,924 | |||||||
All amounts due from related parties are non-interest bearing, unsecured and receivable on demand except for the receivable due from Shanda Capital Limited with an annual interest rate of 3%. In 2013, based upon changed facts and a revised assessment indicating unlikely collection of a $980,000 loan receivable originated to Seed Music (a former subsidiary of the Group sold to Shanda Interactive in 2010) for which collection was being sought from a shareholder of Seed Music unrelated to the Group, the Group fully provided for the impaired loan and reduced its net value to zero. In light of the character of the original loan (which represented an cash outflow reported in investing activities) and the lack of relation to the Group’s ongoing operations, as well as the fact that Seed Music is a related party not under common control, the Group recorded the corresponding charge as other expense within “other income, net”. In early 2014, the Group forgave as to repayment its receivable due from Hurray! Media Co., Ltd. in partial exchange for an RMB 20.0 million equity contribution (received in the form of a forgiven loan) from Shanda (Note 1). | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Other payables due to related parties | ||||||||
Shanda Media Group Limited | 375,000 | — | ||||||
375,000 | — | |||||||
Interest payable to Shanda Media Group Limited amounting to $375,000 was fully forgiven as to repayment in 2014 as stated in Note C above. | ||||||||
Income_Taxes
Income Taxes | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INCOME TAXES [Abstract] | ||||||||
Income Taxes Disclosure | 12. INCOME TAXES | |||||||
The Company is a tax exempted company incorporated in the Cayman Islands. The Subsidiaries or VIEs in the PRC are subject to PRC Enterprise Income Tax at a corporate income tax rate of 25%. There are no reduced tax rates afforded to the Group’s PRC entities. | ||||||||
Provision (benefit) for income taxes is as follows for each annual period. | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Current income tax expense (benefit) | — | — | — | |||||
Deferred income tax expense (benefit) | — | (4,826,059 | ) | — | ||||
— | (4,826,059 | ) | — | |||||
During the year ended December 31, 2013, the deferred tax benefit recognized related to the derecognition of remaining deferred tax liabilities associated with the Group’s full impairment of remaining intangible assets (Note 5). The principal components of deferred tax assets and liabilities are as follows: | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Current deferred tax assets (liabilities): | ||||||||
Cost and expense accruals | 847,197 | 1,352,773 | ||||||
Revenue recognition | 84,241 | 401,436 | ||||||
Less: valuation allowance | (931,438 | ) | (1,754,209 | ) | ||||
Current deferred tax assets, net | — | — | ||||||
Non-current deferred tax assets (liabilities): | ||||||||
Depreciation and amortization | 72,477 | 92,195 | ||||||
Net operating loss carry forwards | 25,247,628 | 22,017,057 | ||||||
Less: valuation allowance | (25,320,105 | ) | (22,109,252 | ) | ||||
Non-current deferred tax assets, net | — | — | ||||||
Intangible assets | — | — | ||||||
Non-current deferred tax liabilities | — | — | ||||||
A reconciliation between the PRC statutory income tax rate of 25% and the Company’s effective tax rate is as follows. The primary driver of the Company’s effective tax rate is the adjustments to the valuation allowance for deferred tax assets that are, as assessed under ASC 740, likely to not be realized in the foreseeable future. The primary drivers of the Company’s effective tax rate for 2013 are non-deductible impairment charges for intangible assets and goodwill (Notes 5 and 7), as well as the derecognition of deferred tax liabilities in relation thereto which is included in the preceding table containing the components of current and deferred tax expense (benefit). | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Statutory tax rate | 25 | % | 25 | % | 25 | % | ||
Differential statutory tax rates | (4.7 | )% | (5.0 | )% | (1.4 | )% | ||
Non-deductible expenses | (1.5 | )% | (14.8 | )% | (1.1 | )% | ||
Change in deferred tax liabilities | — | 12.3 | % | — | ||||
Change in valuation allowance | (18.8 | )% | (5.2 | )% | (22.5 | )% | ||
Effective tax rate | 0 | % | 12.3 | % | 0 | % | ||
The movement of valuation allowances were as follows: | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
At beginning of year | (22,836,709 | ) | (24,303,518 | ) | (26,251,543 | ) | ||
Current year additions | (1,415,765 | ) | (1,239,840 | ) | (71,991 | ) | ||
Current year reversals | 180,965 | — | 1,879,698 | |||||
Effect of exchange rate changes | (232,009 | ) | (708,185 | ) | 580,375 | |||
(24,303,518 | ) | (26,251,543 | ) | (23,863,461 | ) | |||
At December 31, 2013 and 2014, tax loss carry forwards (on a gross basis prior to measurement via the tax rate) amounted to approximately $101.0 million and $88.1 million, respectively, which will expire in various years through 2018. The Company’s tax loss carry forwards exist only in the PRC, where the carry forward period is limited to five years. The Company determines whether or not a valuation allowance is required at the level of each taxable entity within a tax jurisdiction. A valuation allowance of $26,251,543 and $23,863,461 has been established as of December 31, 2013 and 2014, respectively, in respect of all deferred tax assets as it is considered more likely than not that the relevant deferred tax assets will not be realized in the foreseeable future. At December 31, 2013 and 2014, all of the Company’s deferred tax assets were fully reserved through valuation allowances. | ||||||||
As noted in Note 2(23), the Company accounts for the financial statement effects of uncertain tax positions under the provisions of ASC 740-10. At December 31, 2013 and 2014, there were no liabilities for unrecognized tax benefits as the Company did not have any significant uncertain tax positions requiring recognition and measurement under ASC 740-10. | ||||||||
In accordance with the PRC EIT Law, dividends which arise from profits of foreign invested enterprises (“FIEs”) are subject to a 10% withholding income tax if and when remitted. Since there are no undistributed earnings of the Group’s subsidiaries located in the PRC that are available for distribution at December 31, 2013 and 2014 given the accumulated loss positions of the Group’s subsidiaries, no provision has been made for withholding taxes. Further, the Group does not have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future and intends to retain most of its available funds and any future earnings for use in the operation and expansion of its business in the PRC. | ||||||||
Repurchase_of_Shares
Repurchase of Shares | 12 Months Ended |
Dec. 31, 2014 | |
REPURCHASE OF SHARES [Abstract] | |
Repurchase of Shares Disclosure | 13. REPURCHASE OF SHARES |
Pursuant to a share repurchase program announced December 30, 2011, the Company’s Board of Directors authorized the Company to repurchase up to $3.2 million of its outstanding ADSs from time to time, based on market conditions. In 2013, the Company repurchased a total of 57,982 ADSs for aggregate consideration of $58,147 from unrelated third parties, at a weighted average price of $1.00 per ADS. The excess of the repurchase price above par value was charged to additional paid-in capital. In 2014, the Company did not repurchase any ADSs. | |
In a separate transaction distinct from the aforementioned ongoing share repurchase program, as authorized by the Company’s Board of Directors, the Company repurchased and immediately retired in July 2012 a total of 269,409,276 ordinary shares and 79,717 ADSs (each ADS representing 100 ordinary shares) formerly held by several former senior members of management and an investment entity controlled by one of those individuals, at a price of $0.0291 per share ($2.91 per ADS) for a total of $8,071,786. The Board of Directors had approved this transaction, taking into consideration a number of factors, including but not limited to the following: (i) the nature and timing of such share repurchase, (ii) the repurchase price of those ordinary shares and ADSs, (iii) the possible impact of such share repurchase on the ADS price, (iv) the price movements and liquidity of the Company’s ADSs and the stock market environment, (v) the Company’s financial condition, and (vi) the Company’s plans and alternative uses of its capital resources. The Board of Directors had received a fairness opinion from an independent financial advisor and concluded that the repurchase price of those ordinary shares and ADSs was within a reasonable indicative range of fair value. Given the high volatility of the Company’s ADS price, which ranged from $0.90 per ADS to $3.30 per ADS during 2012 (based upon quoted closing prices), coupled with the thinly traded volume, it was not possible to rely solely upon past or current quoted market prices at the time to establish an appropriate indicative range of fair value. Therefore, the fairness opinion considered a range of valuation techniques, coupled with the Company’s historical and projected financial results, to establish a reasonable indicative range of fair value, which, based upon the facts and circumstances that existed at the time, supported the repurchase price as was approved by the Board of Directors. This repurchase was approved by shareholders at the annual general meeting of shareholders on July 12, 2012 and consummated on July 13, 2012. All the repurchased shares were cancelled upon repurchase. | |
Equity_Compensation_Plans
Equity Compensation Plans | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
EQUITY COMPENSATION PLANS [Abstract] | ||||||||||
Equity Compensation Plans Disclosure | 14. EQUITY COMPENSATION PLANS | |||||||||
2004 Share Incentive Plan | ||||||||||
Ku6 Media’s 2004 Share Incentive Plan (“2004 Plan”) allows the Company to offer incentive awards to employees, directors, consultants or external service advisors of the Company. Under the terms of the Plan, options were generally granted at prices equal to or greater than the fair market value on the grant date, expire 10 years from the date of grant, and generally vest over 3-4 years. Stock options under these plans were all granted prior to 2006 and as of January 1, 2006 all granted stock options were vested. There were 15,720,000 and 1,620,000 options outstanding as of December 31, 2013 and 2014, respectively. Pursuant to the resolution of the Company’s Board on December 3, 2010, the 185,550,800 remaining ordinary shares available for future grants under the 2004 Plan were terminated and unavailable for future use. The remaining options as of December 31, 2014 expired in early 2015 unexercised. | ||||||||||
Options | Weighted | Weighted | Aggregate | |||||||
Outstanding | Average | Average | Intrinsic | |||||||
Exercise Price | Remaining | Value | ||||||||
Contractual Life | ||||||||||
$ | $ | |||||||||
Outstanding at January 1, 2012 | 43,746,700 | 0.079 | 1.62 | — | ||||||
Granted | — | — | — | — | ||||||
Exercised | — | — | — | — | ||||||
Cancelled or Expired | (9,077,328 | ) | 0.025 | — | — | |||||
Outstanding at December 31, 2012 | 34,669,372 | 0.094 | 0.89 | — | ||||||
Granted | — | — | — | — | ||||||
Exercised | — | — | — | — | ||||||
Forfeited | (18,949,372 | ) | 0.076 | — | — | |||||
Outstanding at December 31, 2013 | 15,720,000 | 0.116 | 0.11 | — | ||||||
Granted | — | — | — | — | ||||||
Exercised | — | — | — | — | ||||||
Forfeited | (14,100,000 | ) | 0.117 | — | — | |||||
Outstanding at December 31, 2014 | 1,620,000 | 0.103 | 0 | — | ||||||
Vested and expected to vest at December 31, 2014 | 1,620,000 | 0.103 | 0 | — | ||||||
Vested and exercisable at December 31, 2014 | 1,620,000 | 0.103 | 0 | — | ||||||
The aggregate intrinsic values are calculated as the differences between the market values of $0.0106, $0.0282 and $0.0100 of ordinary shares as of December 31, 2012, 2013 and 2014, respectively, and the exercise prices of the shares. The total intrinsic value of options exercised during the years ended December 31, 2012, 2013 and 2014 was nil. | ||||||||||
2010 Equity Compensation Plan | ||||||||||
In December 2010, the Company authorized an equity compensation plan (“2010 Equity Compensation Plan”) that provides for issuance of options to purchase up to 698,381,300 ordinary shares of the Company. Under the 2010 Equity Compensation Plan, the directors may, at their discretion, grant any officers (including directors) and employees of the Company and/or its subsidiaries, and individual consultant or advisor (i) options to subscribe for ordinary shares, (ii) share appreciation rights to receive payment, in cash and/or the Company’ ordinary shares, equal to the excess of the fair market value of the Company’ ordinary shares, or (iii) other types of compensation based on the performance of the Company’ ordinary shares. | ||||||||||
On August 28, 2012, the Company granted stock options to purchase up to 28,500,000 ordinary shares under the 2010 Equity Compensation Plan at an exercise price of $0.0116 per share to its employees. The contract term of the options is six years. | ||||||||||
On May 7, 2013, the Company granted stock options to purchase up to 254,100,000 ordinary shares under the 2010 Equity Compensation Plan at an exercise price of $0.0103 per share to its employees and senior management. Of all the stock options granted, 140,000,000 were granted to senior management of the Company, 50,600,000 were granted to employees of the Company, and 63,500,000 were granted to senior management and employees of Shanda. The contract term of the options is six years. | ||||||||||
On June 3, 2013, the Company granted stock options to purchase up to 69,800,000 ordinary shares under the 2010 Equity Compensation Plan at an exercise price of $0.0113 per share to its senior management. The contract term of the options is six years. | ||||||||||
There were no options granted in 2014. As of December 31, 2014, 440,962,300 ordinary shares were available for future grants under the 2010 Equity Compensation Plan. | ||||||||||
The options granted to directors and employees vest over a four year period, with 25% of the options to vest on each of the first, second, third and fourth anniversaries of the grant date as stipulated in the stock option agreements. | ||||||||||
Options which were granted to senior management prior to 2013 vest in 16 instalments. The first 2 of 16 instalments - options earned in the first two quarters after the grant date - shall vest and become exercisable at the first anniversary of the grant date. There are no performance conditions attached to the first 2 instalments. For each quarter during the four-year period after the grant date (the “Performance Period Start Date”), one 1/16th instalment of the total options have the opportunity to be earned for each quarter contingent on the achievement of positive quarterly operating income for the quarter, provided the aggregate number of options earned in the Performance Period shall not exceed 14 of the 16 instalments comprising the total options granted. On each of the first, fourth, eighth and twelfth quarter earnings release dates from the first quarter of the Performance Period, all of the earned options during the four quarters preceding such earnings release date shall vest and become exercisable, in each case, provided that the employment with the Company remains on such vesting date. | ||||||||||
The options granted to senior management in 2013 vest over a four year period, with 25% of the options to vest on each of the first, second, third and fourth anniversaries of the grant date as stipulated in the stock option agreements. | ||||||||||
Option Modification | ||||||||||
On December 11, 2013, the Board of Directors approved option modifications to modify the vesting conditions of certain outstanding options (granted to senior management) that were granted by the Company under the 2010 Equity Compensation Plan. The modifications waived the performance conditions attributable to the periods from the third quarter of 2011 to the third quarter of 2013, resulting in 60% of the options attributable to that period immediately vesting. Simultaneously, the performance condition was eliminated from the fourth quarter of 2013 prospectively. Other terms of the option grants remain unchanged. All eligible option grantees affected by such changes entered into amendments to their original share option agreements. The effect of the modification on the estimated fair value of the options was computed under relevant U.S. GAAP; the modifications resulted in total incremental compensation cost of $0.37 million, of which $0.18 million was recorded during the year ended December 31, 2013 for options that were fully vested. The remaining $0.19 million is being amortized over the remaining vesting periods of the respective options. | ||||||||||
In accordance with ASC Topic 718, the Company recognizes share-based compensation expense for the options granted to directors and employees as well as the options to senior management vested only based on passage of time and continued employment with the Company, net of a forfeiture rate, using the straight-line method. For the options granted to senior management earned contingent on the achievement of quarterly performance targets, the Company recognized share-based compensation expense for the options earned in each quarter during the Performance Period using the graded-vesting attribution method when the Company concluded that it was probable that the performance targets would be achieved, net of a forfeiture rate. | ||||||||||
Share-based compensation expense related to the stock options granted by the Company to its employees, senior management and directors under the 2010 Equity Compensation Plan amounted to $463,753, $1,023,871 and $600,995 for the years ended December 31, 2012, 2013 and 2014, respectively. Share-based compensation cost related to the option awards granted by the Company to senior management and employees of Shanda under the 2010 Equity Compensation Plan amounted to $350,761, $52,888 and $15,475 for the years ended December 31, 2012, 2013 and 2014, respectively, and was recognized as dividends distributed to Shanda up to the time of the cessation of majority ownership by Shanda on April 3, 2014; thereafter, it was recognized as expense. | ||||||||||
The movements in stock options under the 2010 Equity Compensation Plan as of and for the years ended December 31, 2012, 2013 and 2014 are set out below. | ||||||||||
Options | Weighted | Weighted | Aggregate | |||||||
Outstanding | Average | Average | Intrinsic | |||||||
Exercise Price | Remaining | Value | ||||||||
Contractual Life | ||||||||||
$ | $ | |||||||||
Outstanding at January 1, 2012 | 402,826,000 | 0.0352 | 5.47 | — | ||||||
Granted | 28,500,000 | 0.0116 | — | — | ||||||
Exercised | — | — | — | — | ||||||
Cancelled or expired | (126,070,000 | ) | 0.0367 | — | — | |||||
Outstanding at December 31, 2012 | 305,256,000 | 0.0324 | 4.57 | — | ||||||
Granted | 323,900,000 | 0.0105 | — | — | ||||||
Exercised | (4,000,000 | ) | 0.0116 | — | 55,213 | |||||
Forfeited | (113,862,000 | ) | 0.0317 | — | — | |||||
Outstanding at December 31, 2013 | 511,294,000 | 0.0189 | 4.7 | 6,514,815 | ||||||
Granted | — | — | — | — | ||||||
Exercised | (32,712,500 | ) | 0.0103 | — | 138,955 | |||||
Forfeited | (257,875,000 | ) | 0.0121 | — | — | |||||
Outstanding at December 31, 2014 | 220,706,500 | 0.028 | 2.97 | — | ||||||
Vested and expected to vest at December 31, 2014 | 200,348,900 | 0.0289 | 2.9 | — | ||||||
Vested and exercisable at December 31, 2014 | 119,243,125 | 0.0332 | 2.63 | — | ||||||
The intrinsic values as of December 31, 2012, 2013 and 2014 are calculated as the differences between the market values of $0.0106, $0.0282 and $0.0100 of ordinary shares as of December 31, 2012, 2013 and 2014 and the exercise prices of the options. | ||||||||||
The weighted average grant-date fair value of options granted during the years ended December 31, 2012, 2013 and 2014 were $0.0076, $0.0071 and nil, respectively. Options vested during the years ended December 31, 2013 and 2014 were 50,140,375 and 51,602,500, respectively. | ||||||||||
As of December 31, 2014, there was $0.35 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to stock options granted by the Company to its employees, senior management and directors under the 2010 Equity Compensation Plan. This cost is expected to be recognized over a weighted average period of 1.55 years. Total compensation cost may be adjusted for future changes in estimated forfeitures. As of December 31, 2014, there was $0.6 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to stock options granted by the Company to the employees of Shanda under the 2010 Equity Compensation Plan, which will be recognized as expense over a weighted average period of 2.36 years. | ||||||||||
The Black-Scholes option pricing model is used to determine the fair value of the stock options granted under the 2010 Equity Compensation Plan. The Black-Scholes model requires the input of highly subjective assumptions, including the expected stock price volatility and the sub-optimal early exercise factor. The risk-free rate for periods within the contractual lives of the options is based on the U.S. Treasury yield curve in effect at the time of grant. The fair values of stock options were estimated using the following weighted-average assumptions: | ||||||||||
Options Granted | Options Granted | Options Granted | ||||||||
in 2012 | in 2013 | in 2014 | ||||||||
Fair value of ordinary shares ($) | 0.0116 | 0.0106~0.0131 | — | |||||||
Exercise price ($) | 0.0116 | 0.0103~0.0113 | — | |||||||
Expected volatility (%) | 100 | % | 94% | — | ||||||
Expected dividend yield (%) | 0 | % | 0% | — | ||||||
Expected term (years) | 3.5 | 3.5 | — | |||||||
Risk-free interest rate (per annum) (%) | 1.2425 | % | 1.3445%~1.3843% | — | ||||||
(1) The risk-free interest rate for periods within the contractual life of the share option is based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent with the expected term of the awards. | ||||||||||
(2) The expected term of stock options granted is developed giving consideration to vesting period, contractual term and historical exercise pattern of options granted by the Company. | ||||||||||
(3) The Company has no history or expectation of paying dividends on its common stock. | ||||||||||
(4) Expected volatility is estimated based on the historical volatility of comparable companies’ stocks and of the Company’s common stock for a period equal to the expected term preceding the grant date. | ||||||||||
Segment_Information
Segment Information | 12 Months Ended |
Dec. 31, 2014 | |
SEGMENT INFORMATION [Abstract] | |
Segment Information Disclosure | 15. SEGMENT INFORMATION |
The Company follows the provisions of ASC 280, which establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Group has only one operating segment made up of Ku6’s advertising business (“Advertising Services”), which is presented in the consolidated statement of operations and comprehensive loss. | |
Geographic Information | |
The Company primarily operates in the PRC and derives all of its revenues (see Note 17 for revenue information) from the PRC; all of the Company’s long-lived assets are located in the PRC. | |
Net_Loss_Per_Share
Net Loss Per Share | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
NET LOSS PER SHARE [Abstract] | ||||||||
Net Loss Per Share Disclosure | 16. NET LOSS PER SHARE | |||||||
The following table sets forth the computation of basic and diluted net loss per share (1 ADS =00 Shares): | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Numerator: | ||||||||
Net loss | (9,491,138 | ) | (34,427,734 | ) | (10,727,642 | ) | ||
Denominator: | ||||||||
Weighted-average ordinary shares outstanding for basic calculation | 4,901,279,176 | 4,728,185,434 | 4,746,324,022 | |||||
Dilutive effect of potential ordinary shares | — | — | — | |||||
Weighted average ordinary shares outstanding for diluted calculation | 4,901,279,176 | 4,728,185,434 | 4,746,324,022 | |||||
Weighted-average ADS used in per basic ADS calculations | 49,012,792 | 47,281,854 | 47,463,240 | |||||
Dilutive effect of potential ADS | — | — | — | |||||
Weighted-average ADS used in per diluted ADS calculations | 49,012,792 | 47,281,854 | 47,463,240 | |||||
Loss per share — basic and diluted | ||||||||
Net loss per share — basic and diluted | (0.00 | ) | (0.01 | ) | (0.00 | ) | ||
Loss per ADS — basic and diluted | ||||||||
Net loss per ADS — basic and diluted | (0.19 | ) | (0.73 | ) | (0.23 | ) | ||
Incremental ordinary shares with dilutive effect are calculated using the treasury stock method for stock options. Under the treasury stock method, the proceeds from the assumed conversion of options are used to repurchase outstanding ordinary shares using the average fair value for the period. | ||||||||
For all periods presented, all potentially dilutive securities associated with the Company’s stock options (Note 14) have not been reflected in the dilutive calculations due to the presence of a net loss in each period as the inclusion of such potential common shares would be anti-dilutive. | ||||||||
Concentrations
Concentrations | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
CONCENTRATIONS [Abstract] | ||||||||
Concentrations Disclosure | 17. CONCENTRATIONS | |||||||
(1) Revenue concentrations, including related party revenues | ||||||||
In 2012, 2013, and 2014, revenues of $14.1 million, $13.1 million, and $7.0 million were derived from online advertising services (Note 2(16)). In 2014, revenues of $1.6 million were derived from promotional advertising revenue services (Note 2(16)). | ||||||||
Under agreements with Shengyue (Note 1), Shengyue was previously appointed as the Group’s primary agent to secure advertisement sales from various end advertisers. In 2012, 2013 and 2014, 88.4%, 94.4% and 31.5% of net revenues, respectively, were derived from Shengyue. Refer to Note 11 for discussion of receivables due from Shengyue at December 31, 2013 and 2014 (there were no net amounts due at December 31, 2014 following collections and a full provision on remaining amounts). | ||||||||
Under a new advertising agency agreement with Huzhong consummated on August 29, 2014, Huzhong was appointed as the Group’s primary agent to secure advertisement sales from various end advertisers. In 2014, 32.4% of net revenues were derived from Huzhong. | ||||||||
In early 2014, the Group entered into certain marketing services agreements with Qinhe, a related party (Note 1). In 2014, 18.8% of net revenues were derived from Qinhe. | ||||||||
(2) Credit risk | ||||||||
Accounts receivable are unsecured and are derived from revenue earned from customers and agencies in China. The risk with respect to accounts receivables is mitigated by credit evaluations the Company performs on its customers and its ongoing monitoring process of outstanding balances. | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Accounts receivable | 544,754 | 532,355 | ||||||
Allowance for doubtful accounts | (480,076 | ) | (418,539 | ) | ||||
Accounts receivable, net of allowance for doubtful accounts | 64,678 | 113,816 | ||||||
The movements of the allowance for doubtful accounts were as follows: | ||||||||
Movement of allowance for doubtful accounts | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, | December 31, | December 31, | ||||||
2012 | 2013 | 2014 | ||||||
Balance at beginning of the year | 4,416,706 | 2,172,972 | 480,076 | |||||
Provisions | — | — | 1,038,047 | |||||
Reversed | (2,255,301 | ) | (310,699 | ) | (49,912 | ) | ||
Accounts written off | — | (1,435,204 | ) | (1,038,047 | ) | |||
Translation difference | 11,567 | 53,007 | (11,625 | ) | ||||
Balance at the end of the year | 2,172,972 | 480,076 | 418,539 | |||||
The Group significantly reduced its sales force and appointed Shengyue as its primary advertising agent in 2011. As a result of this change, the relationships with some of the Group’s previous advertisement customers were terminated and the Group provided additional allowance for doubtful accounts to reflect the expected uncollectibility in 2011. In 2013 and 2014, based on continued collections efforts on the doubtful receivables, $0.3 million and $0.05 million of amounts previously written down were collected; accordingly, reversal adjustments were recorded. | ||||||||
Mainland_China_Contribution_Pl
Mainland China Contribution Plan | 12 Months Ended |
Dec. 31, 2014 | |
MAINLAND CHINA CONTRIBUTION PLAN [Abstract] | |
Mainland China Contribution Plan Disclosure | 18. MAINLAND CHINA CONTRIBUTION PLAN |
Full time employees of the Company in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees’ salaries. The total amounts charged to the statements of operations and comprehensive loss for such employee benefits were $1,609,711, $1,816,719 and $1,059,305 for the years ended December 31, 2012, 2013 and 2014, respectively. | |
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
COMMITMENTS AND CONTINGENCIES [Abstract] | ||||||||
Commitments and Contingencies Disclosure | 19. COMMITMENTS AND CONTINGENCIES | |||||||
Operating lease commitments | ||||||||
The Company entered into leasing arrangements relating to office area and internet bandwidth in 2012, 2013 and 2014. Leasing expenses for the years ended December 31, 2012, 2013 and 2014 were $9,095,530, $9,175,500 and $8,367,927, respectively. | ||||||||
Future minimum lease payments under non-cancellable operating lease agreements are as follows: | ||||||||
Within 1 year | 2,186,304 | |||||||
Between 1 and 2 years | — | |||||||
Between 2 and 3 years | — | |||||||
Between 3 and 4 years | — | |||||||
Total | 2,186,304 | |||||||
Litigation | ||||||||
The Group is subject to claims and litigation, which may arise in the normal course of business. The Group is involved in a number of cases pending in various courts and arbitration as of December 31, 2014. These cases are substantially related to alleged copyright infringement. Adverse results in these lawsuits may include awards of damages and may also result in, or even compel, a change in the Group’s business practices, which could impact the Group’s future financial results. | ||||||||
The Group has recorded an accrual balance of $1,653,032 in “Accrued expenses and other liabilities” in the consolidated balance sheet as of December 31, 2014 (Note 9). The accrual was based on judgments handed down by courts and out-of-court settlements and related to alleged copyright infringement arising before December 31, 2014. The accrual is based upon management’s best estimation according to the historical actual compensation amount per video of the Group for similar legal actions and advice from PRC counsel. The Group also considers the frequency and pattern of claims for infringement and the fact that claims are often submitted, and judgments rendered, long after the alleged underlying infringement activity occurred. Furthermore, while claims for alleged infringement may be term limited in certain cases, parties alleging infringement may be able to renew their claims by re-filing them upon expiry, leading to continuation of the claim resolution process. The Group is in the process of appealing certain judgments for which the loss has been accrued. During the year ended December 31, 2014, management of the Group re-evaluated the accrued litigation provision related to alleged copyright infringement and revised its estimates based upon favourable resolution experience and the pattern of incidence of new claims; this revision resulted in a de-recognition of a portion of $333,485 of amounts previously accrued, which was recorded as a reduction to general and administrative expenses. | ||||||||
A rollforward of the Group’s accrued litigation provision related to alleged copyright infringement is as follows. | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
At beginning of year | 2,683,968 | 2,077,753 | 2,079,671 | |||||
Current year additions (reversals) | (113,611 | ) | 141,912 | (333,485 | ) | |||
Payments during the year | (492,604 | ) | (139,994 | ) | (93,154 | ) | ||
Balance at end of year | 2,077,753 | 2,079,671 | 1,653,032 | |||||
There are no accruals for any additional losses related to unasserted claims or any other amounts. | ||||||||
Contingencies | ||||||||
The Group accounts for loss contingencies in accordance with ASC 450, “Contingencies”, and other related guidance. Set forth below is a description of certain loss contingencies as well as the opinion of management as to the likelihood of loss. | ||||||||
Current PRC laws and regulations place certain restrictions on foreign ownership of companies that engage in Internet business, including the provision of online video and online advertising services. Specifically, foreign ownership in an Internet content provider or other value-added telecommunication service providers may not exceed 50%. Since the Company is incorporated in the Cayman Islands, neither the Company nor its PRC subsidiary is eligible to engage in Internet business. To comply with PRC laws and regulations, the Company conducts its operations in China through a series of contractual arrangements entered into among its wholly owned PRC subsidiaries, Beijing Technology, Tianjin Technology and Kusheng (collectively “PRC subsidiaries”), and the consolidated affiliated entities in the PRC, namely Ku6 Beijing Information, Tianjin Information, Ku6 Cultural and Ku6 Network (collectively “VIEs”) and their respective shareholders. | ||||||||
Under the equity pledge agreements among the PRC subsidiaries, the VIEs and the shareholders of the VIEs, the shareholders have pledged all of their equity interests to the PRC subsidiaries by recording the pledges on the shareholders’ registers of the respective entities. However, according to the PRC Property Rights Law, a pledge is not valid unless it is registered with the relevant local administration for industry and commerce; such registration has been accomplished for all of the Group’s VIEs. | ||||||||
Ku6 Beijing Information, Tianjin Information, Ku6 Cultural and Ku6 Network hold the licenses and permits necessary to conduct the Group’s online video, online advertising and related businesses in China. In the opinion of management, (i) the ownership structure of the Group, its PRC subsidiaries and the VIEs in the PRC are in compliance with existing PRC laws and regulations; (ii) the contractual arrangements with the VIEs in the PRC are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Company’s business operations are in compliance with existing PRC laws and regulations in all material respects. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and its contractual arrangements with the consolidated affiliated entities in the PRC were found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changing and new PRC laws and regulations. | ||||||||
Under PRC Ministry of Commerce (“MOFCOM”) security review rules promulgated in September 2011, a national security review is required for certain mergers and acquisitions by foreign investors raising concerns regarding national defense and security. Foreign investors are prohibited from circumventing the national security review requirements by structuring transactions through proxies, trusts, indirect investment, leases, loans, control through contractual arrangements, or offshore transactions. Management has concluded there is no need to submit the existing contractual arrangements with the consolidated affiliated entities in the PRC and their shareholders to the MOFCOM for national security review based upon analysis of the rules. However, there are substantial uncertainties regarding the interpretation and application of the MOFCOM security review rules, and any new laws, rules, regulations or detailed implementation measures in any form relating to such rules. Therefore, the Company cannot be assured that the relevant PRC regulatory authorities, such as the MOFCOM, would not ultimately take a contrary view to the opinion of management and the Company’s PRC legal counsel. If the MOFCOM or other PRC regulatory authority determines that the Company needs to submit the existing contractual arrangements with the consolidated affiliated entities in the PRC and their shareholders for national security review, the Company may face sanctions by the MOFCOM or other PRC regulatory authority, which may include, among others, requiring the Company to restructure its ownership structure, discontinuation or restriction of operations in the PRC, or invalidation of the agreements that the wholly owned PRC subsidiaries have entered into with the consolidated affiliated entities in the PRC and their shareholders. | ||||||||
MOFCOM published a discussion draft of a proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. MOFCOM is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of the Group’s current corporate structure, corporate governance and business operations in many aspects. | ||||||||
Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by the Ministry of Commerce, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “foreign investors” refers to the following subjects making investments within the PRC: (i) natural persons without PRC nationality; (ii) enterprises incorporated under the laws of countries or regions other than China; (iii) the governments of countries or regions other than the PRC and the departments or agencies thereunder; and (iv) international organizations. Domestic enterprises under the control of the subjects as mentioned in the preceding sentence are deemed foreign investors, and “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding, directly or indirectly, not less than 50% of shares, equities, share of voting rights or other similar rights of the subject entity; (ii) holding, directly or indirectly, less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to materially influence the board, the shareholders’ meetings, or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a catalogue of “special administrative measures,” which is classified into the “catalogue of prohibitions” and “the catalogue of restrictions”, to be separately issued by the State Council later. Foreign investors are not allowed to invest in any sector set forth in the catalogue of prohibitions. However, unless the underlying business of the FIE falls within the catalogue of restrictions, which calls for market entry clearance by MOFCOM, prior approval from the government authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the FIE. | ||||||||
The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including the Group, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangements would also be deemed FIEs if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the “catalogue of restrictions,” the VIE structure may be deemed a domestic investment only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the “catalogue of restrictions” without market entry clearance may be considered illegal. | ||||||||
The draft Foreign Investment Law has not taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties, and MOFCOM is soliciting comments from the public on this point. Moreover, it is uncertain whether the industry in which our variable interest entities operate will be subject to the foreign investment restrictions or prohibitions set forth in the “catalogue of special administrative measures” to be issued. If the enacted version of the Foreign Investment Law and the final “catalogue of special administrative measures” mandate further actions, such as MOFCOM providing market entry clearance, to be completed by companies with an existing VIE structure like the Group, the Group faces uncertainties as to whether such clearance can be timely obtained, or at all. | ||||||||
The draft Foreign Investment Law, if enacted as proposed, may also materially impact the Group’s corporate governance practices and increase compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from an investment information report required at each investment, and investment amendment reports, which shall be submitted upon changes to investments, it is mandatory for entities established by foreign investors to submit an annual report, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities. | ||||||||
With respect to the aforementioned security review rules and draft Foreign Investment Law, and any other matters creating uncertainty regarding VIEs, the Group may not be able to operate or control its business in the same manner as it currently does, and therefore, may not be able to consolidate the affiliated entities in the PRC. In addition, the relevant regulatory authorities would have broad discretion in dealing with such violations which may adversely impact the financial statements, operations and cash flows of the Group (including restrictions on carrying out business). | ||||||||
If the VIEs in the PRC and their shareholders fail to perform their respective obligations under the current contractual arrangements, the Group may have to incur substantial costs and expend significant resources to enforce those arrangements and rely on legal remedies under PRC laws. The PRC laws, rules and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve substantial uncertainties. These uncertainties may impede the ability of the Group to enforce these contractual arrangements, or suffer significant delay or other obstacles in the process of enforcing these contractual arrangements and may materially and adversely affect the results of operations and the financial position of the Group. | ||||||||
In the opinion of management, the likelihood of loss in respect of the Group’s current ownership structure or the contractual arrangements with the VIEs in the PRC is remote. | ||||||||
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
SUBSEQUENT EVENTS [Abstract] | |
Subsequent Events | 20. SUBSEQUENT EVENTS |
On February 2, 2015, the Group entered into a related party loan agreement with Mr. Xu, pursuant to which Mr. Xu agreed to provide a loan of RMB30.0 million ($4.8 million) to the Group within 20 business days from the date thereof. The term of the loan is one year, with a maturity date of February 2, 2016, with principal repayable at maturity, and the loan bears interest at a rate of 6.5% per annum (with interest payable at maturity). The Group received the loan principal from Mr. Xu on March 4, 2015. This amount will be reported as a related party loan payable in future periods. | |
Restricted_Net_Assets
Restricted Net Assets | 12 Months Ended |
Dec. 31, 2014 | |
RESTRICTED NET ASSETS [Abstract] | |
Restricted Net Assets Disclosure | 21. RESTRICTED NET ASSETS |
Relevant PRC laws and regulations permit PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, the Company’s VIE subsidiaries can only distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to statutory reserves. The statutory general reserve fund requires annual appropriations of 10% of net after-tax income to be set aside prior to payment of any dividends. As a result of these and other restrictions under PRC laws and regulations, the PRC subsidiaries and affiliates are restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances, which restricted portion amounted to approximately $30.9 million, which was in excess of the Group’s total consolidated net assets and shareholders’ deficit as of December 31, 2014. Even though the Company currently does not require any such dividends, loans or advances from the PRC subsidiaries and affiliates for working capital and other funding purposes as all business is principally conducted inside the PRC, the Company may in the future require additional cash resources from its PRC subsidiaries and affiliates due to changes in business conditions, to fund future acquisitions and developments, or to declare and pay dividends to or distributions to the Company’s ordinary shareholders. Accordingly, the Company has included Schedule I in accordance with Regulation S-X promulgated by the United States Securities and Exchange Commission. | |
Additional_Information_Condens
Additional Information - Condensed Financial Statements | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
ADDITIONAL INFORMATION - CONDENSED FINANCIAL STATEMENTS [Abstract] | ||||||||
Condensed Financial Statements Disclosure | 22. ADDITIONAL INFORMATION - CONDENSED FINANCIAL STATEMENTS | |||||||
The following condensed financial statements have been prepared in accordance with SEC Regulation S-X Rules 5-04 and 12-04. The financial information of the parent company, Ku6 Media Company Limited, has been prepared using the same accounting policies as set out in the preceding footnotes to the consolidated financial statements except that the Company records its investment in subsidiaries under the equity method of accounting. Such investment and long-term loans to subsidiaries are presented on the balance sheet as “Investment in subsidiaries” and the profit of the subsidiaries is presented as “Equity in losses of subsidiaries” on the statement of operations. | ||||||||
These statements should be read in conjunction with the preceding notes to the consolidated financial statements of the Group. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. | ||||||||
As of December 31, 2013 and 2014, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements of the Group, if any. | ||||||||
FINANCIAL INFORMATION OF KU6 MEDIA CO., LTD. | ||||||||
CONDENSED BALANCE SHEETS | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
(in U.S. dollars, except number of shares) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | 56,999 | 341,320 | ||||||
Prepaid expenses and other current assets | 250,091 | 195,049 | ||||||
Amount due from subsidiaries and variable interest entities | 15,709,401 | — | ||||||
Amount due from related parties | 1,741,836 | 627 | ||||||
Total current assets | 17,758,327 | 536,996 | ||||||
Investments in subsidiaries | 8,082,866 | 19,690,895 | ||||||
Total assets | 25,841,193 | 20,227,891 | ||||||
Liabilities and shareholders’ equity (deficit) | ||||||||
Accrued expenses and other current liabilities | 701,375 | 541,961 | ||||||
Amounts due to subsidiaries and variable interest entities | 24,711,656 | 23,821,671 | ||||||
Amounts due to related parties | 375,000 | — | ||||||
Total current liabilities | 25,788,031 | 24,363,632 | ||||||
Shareholders’ equity (deficit): | ||||||||
Ordinary shares ($0.00005 par value; 12,000,000,000 shares authorized; 4,730,648,360 and 4,763,360,860 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 236,485 | 238,120 | ||||||
Additional paid-in capital | 178,195,109 | 184,538,349 | ||||||
Accumulated deficit | (176,368,243 | ) | (187,095,885 | ) | ||||
Accumulated other comprehensive loss | (2,010,189 | ) | (1,816,325 | ) | ||||
Total shareholders’ equity (deficit) | 53,162 | (4,135,741 | ) | |||||
Total liabilities and shareholders’ equity (deficit) | 25,841,193 | 20,227,891 | ||||||
FINANCIAL INFORMATION OF KU6 MEDIA CO., LTD. | ||||||||
CONDENSED STATEMENTS OF OPERATIONS | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
(in U.S. dollars, except number of shares) | ||||||||
Operating expenses: | ||||||||
Product development | 278,168 | 269,876 | 208,656 | |||||
Selling and marketing | 30,773 | 54,503 | 3,802 | |||||
General and administrative | 1,119,757 | 1,403,657 | 928,506 | |||||
Total operating expenses | 1,428,698 | 1,728,036 | 1,140,964 | |||||
Loss from operations | (1,428,698 | ) | (1,728,036 | ) | (1,140,964 | ) | ||
Interest income | 349,525 | 30,483 | 3,463 | |||||
Interest expense | — | — | — | |||||
Other (expense) / income | — | (739,530 | ) | 92,144 | ||||
Foreign exchange (loss) / gain | (15,589 | ) | 355,337 | (76 | ) | |||
Equity in losses of subsidiaries | (8,396,376 | ) | (32,345,988 | ) | (9,682,209 | ) | ||
Net loss | (9,491,138 | ) | (34,427,734 | ) | (10,727,642 | ) | ||
FINANCIAL INFORMATION OF KU6 MEDIA CO., LTD. | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
(in U.S. dollars, except number of shares) | ||||||||
Operating activities: | ||||||||
Net loss | (9,491,138 | ) | (34,427,734 | ) | (10,727,642 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Share-based compensation | 463,753 | 1,023,871 | 600,995 | |||||
Provision for Seed Music receivable (related party) | — | 980,000 | — | |||||
Exchange gains | — | (355,337 | ) | — | ||||
Equity in losses of subsidiaries | 8,396,376 | 32,345,988 | 9,682,209 | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 122,056 | 62,083 | 55,042 | |||||
Amounts due from subsidiaries and variable interest entities | (1,645 | ) | — | — | ||||
Amount due from related parties | (92,159 | ) | 74,964 | (4,015 | ) | |||
Accrued expenses and other current liabilities | (277,527 | ) | 36,479 | (159,414 | ) | |||
Amounts due to subsidiaries and variable interest entities | (4,013,840 | ) | 4,160,000 | — | ||||
Net cash provided by (used in) operating activities | (4,894,124 | ) | 3,900,314 | (552,825 | ) | |||
Investing activities: | ||||||||
Loan to subsidiaries | (3,001,557 | ) | (12,350,863 | ) | — | |||
Loan to Shanda Capital Limited | (470,000 | ) | — | — | ||||
Repayment of loans from related parties under control of Shanda | 14,000,000 | 3,300,000 | 498,583 | |||||
Net cash provided by (used in) investing activities | 10,528,443 | (9,050,863 | ) | 498,583 | ||||
Financing activities: | ||||||||
Proceeds from exercise of options | — | 46,400 | 338,563 | |||||
Repurchase of ordinary shares | (8,169,481 | ) | (58,147 | ) | — | |||
Net cash provided by (used in) financing activities | (8,169,481 | ) | (11,747 | ) | 338,563 | |||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | |||||
Net increase (decrease) in cash and cash equivalents | (2,535,162 | ) | (5,162,296 | ) | 284,321 | |||
Cash and cash equivalents, beginning of year | 7,754,457 | 5,219,295 | 56,999 | |||||
Cash and cash equivalents, end of year | 5,219,295 | 56,999 | 341,320 |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||
Basis of presentation; liquidity and going concern | (1) Basis of presentation; liquidity and going concern | |||||||
The accompanying consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of consolidated financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities at the dates of the financial statements. Significant accounting estimates reflected in the Company’s financial statements include allowances for doubtful accounts, the assessment of impairment for long-lived assets, useful lives for property and equipment, share-based compensation expense, and loss contingencies. Actual amounts may differ from these estimates under different assumptions or conditions. | ||||||||
The Group has incurred significant net losses and negative cash flows from operations in each of the three most recent years. As of December 31, 2014, the Group had cash and cash equivalents of $4.4 million, had an accumulated deficit of $187.1 million, reported a working capital deficit of $4.8 million, and had negative operating cash flows of $5.2 million for the year then ended. Despite suffering a gross loss for the full year of 2014, the Group achieved gross profit in the fourth quarter of 2014, following a protracted period of gross losses. The Group continues to generate operating losses and net losses. Despite recent improvements, substantial doubt exists as to the Group’s ability to continue as a going concern, primarily due to uncertainties regarding (1) the Group’s ability to generate improvements in operating cash inflows, which depend on growth in revenues from (i) Huzhong, the Group’s new third party advertising agency since late August 2014, and (ii) two cooperation agreements with related party Qinhe; (2) the Group’s ability to reduce its operating cash outflows, such as through further administrative and headcount-related cost control measures; and (3) the availability and timing of additional financing with terms acceptable to the Group. Growth in the Group’s operating cash inflows is principally dependent upon successful execution with Huzhong and Qinhe resulting in growth in revenues therefrom, and may also benefit from diversification to other sources of revenue. | ||||||||
The Group expects to derive its 2015 revenues from Huzhong and revenue sharing agreements with Qinhe described in the foregoing footnote. Cash collection from these sources depends on achievement of the guaranteed amounts of web traffic per day, the performance of the iSpeak platform, the performance of the games operated by Qinhe, and contractual terms agreed to with Qinhe and Huzhong. The Group will need to obtain further new revenue sources and additional near-term financing to fund its daily operations, as its current cash flow projections indicate that cash inflows from operating activities will be insufficient in the near term. | ||||||||
In order to reduce operating cash outflows, the Group reduced its headcount by approximately 40% in various departments in April 2014. The Group has also taken other cost reduction measures, including improving the efficiency of its network to reduce infrastructure costs, and has reduced its content acquisition costs. | ||||||||
Note 1 contains further descriptions of recent equity contributions from Shanda Interactive and a 2015 borrowing arranged with Mr. Xudong Xu. While these additional financing measures have assisted in alleviating pressure on the Group’s working capital and liquid resources, all the aforementioned factors raise substantial doubt about the Group’s ability to continue as a going concern. In order to continue its operations, the Group must generate sufficient revenues, raise more funds, and/or curtail its operational and capital expenditures to achieve profits and positive cash flows. | ||||||||
Consolidation | (2) Consolidation | |||||||
The consolidated financial statements include the financial statements of the Company, its subsidiaries, and VIEs. All inter-company transactions and balances have been eliminated upon consolidation. Affiliated companies in which the Company has partial ownership and controls more than 20% but less than 50% of the investment are accounted for using the equity method of accounting. The Company’s share of earnings (losses) of such equity investments is included in the accompanying consolidated statements of operations and comprehensive loss; the carrying value of such investments was zero as of both December 31, 2013 and 2014. | ||||||||
The Company follows the guidance relating to the consolidation of VIEs in ASC 810-10, which requires certain VIEs to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. | ||||||||
To comply with PRC laws and regulations that prohibit or restrict foreign ownership of companies that provide advertising services and hold Internet Content Provider (“ICP”) licenses and/or Licenses for Transmission of Audio-Visual Programs through the Internet (“the Licenses”), the Group conducts substantially all of its advertising business through its VIEs. The paid-in capital balances of VIEs Ku6 Beijing Information and Ku6 Network were funded by the Company through loans extended to the authorized individuals (“nominee shareholders”); Tianjin Information was incorporated by Ku6 Beijing Information. | ||||||||
The Company has various agreements with its VIEs, through which the Company holds all the variable interests of the VIEs and has the power to direct the activities of the VIEs. Consequently the Company is the primary beneficiary of these VIEs. Details of certain key agreements with the VIEs are as follows: | ||||||||
Loan Agreements: Beijing Technology, Kusheng and Tianjin Technology (the “Subsidiaries”) have granted interest-free loans to the nominee shareholders with the sole purpose of providing funds necessary for the equity capital of Ku6 Beijing Information, Ku6 Network and Ku6 Culture. The portions of the loans for equity capital are eliminated with the capital of Ku6 Beijing Information, Ku6 Network, and Ku6 Culture in consolidation. The interest-free loans to the nominee shareholders of Beijing Information, Ku6 Network and Ku6 Culture as of December 31, 2014 were RMB20 million, RMB10 million and RMB1 million, respectively. Beijing Technology, Kusheng and Ku6 Culture are able to require the nominee shareholders to settle the loan amount through the entire equity interests of Ku6 Beijing Information, Ku6 Network and Ku6 Culture and nominate someone else to hold the shares on Beijing Technology, Kusheng and Ku6 Culture’s behalf. | ||||||||
Proxy Agreements: The nominee shareholders of the VIEs irrevocably appointed the Subsidiaries’ officers to vote on their behalf on all matters they are entitled to vote on, including matters relating to the transfer of any or all of their respective equity interests in the VIEs, making all the operational, financial decisions and the appointment of the directors, general managers and other senior management of the VIEs. | ||||||||
Equity Interest Pledge Agreements: The nominee shareholders of the VIEs have pledged their respective equity interests in the VIEs as collateral to secure the nominee shareholders’ obligations under other agreements and for the payment by the VIEs under the exclusive technical consulting and services agreements and the loan agreements. The Pledge Agreements have been registered with the applicable local branches of the State Administration for Industry and Commerce. The nominee shareholders of the VIEs cannot sell or pledge their equity interests to others without the approval from the Subsidiaries, and the nominee shareholders of the VIEs cannot receive any dividends without the approval of the Subsidiaries. | ||||||||
Exclusive Call Option Agreements: The nominee shareholders of the VIEs granted the Subsidiaries the exclusive and irrevocable right to purchase from the nominee shareholders, to the extent permitted under PRC laws and regulations or at the request of the Company, all of the equity interests in these entities for a purchase price equal to the amount of the registered capital or at the lowest price permitted by PRC laws and regulations. The Subsidiaries may exercise such options at any time. In addition, the VIEs and their nominee shareholders agreed that without the Subsidiaries’ prior written consent, they will not transfer or otherwise dispose of the equity interests or declare any dividends. | ||||||||
Exclusive Business Cooperation Agreements: The Subsidiaries are the exclusive provider of technical, consulting and related services and information to the VIEs. Under these arrangements, the Subsidiaries have the unilateral right to charge service fees to the VIEs to recover substantially all of the VIEs’ profits. | ||||||||
As a result of the above contractual agreements, the Company determined that it has the power to control the economic activities most significant to the VIEs and is the primary recipient of the economic rewards or risks, as the case may be. As such, the Company consolidates the VIEs as required by ASC 810-10. | ||||||||
As of December 31, 2013 and 2014, the assets of the VIEs were as follows: | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Cash and cash equivalents | 252,925 | 2,329,590 | ||||||
Accounts receivable | 36,117 | 105,762 | ||||||
Amounts due from related parties | 6,380,630 | 501 | ||||||
Property and equipment | 1,036 | 171 | ||||||
Deposits and other non-current assets | 311,773 | 321,709 | ||||||
Total assets | 6,982,481 | 2,757,733 | ||||||
These balances are reflected in the Group’s consolidated financial statements with intercompany transactions eliminated. Under the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs, and can have assets freely transferred out of the VIEs. Therefore, the Company considers that there is no asset in any of its consolidated VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC additional paid-in capital of the VIEs in the amount of $4.9 million as of December 31, 2014 (2013: $4.9 million). | ||||||||
As all the VIE subsidiaries are incorporated as limited liability companies under PRC Company Law, creditors thereof do not have recourse to the general credit of the Group for any of the liabilities of the VIE subsidiaries. As of December 31, 2013 and 2014, the liabilities of the VIEs were as follows: | ||||||||
December 31, 2013 | December 31, 2014 | |||||||
Accounts payable | 3,618,573 | 3,387,582 | ||||||
Amounts due to related parties | 20,740,356 | 20,235,986 | ||||||
Accrued expenses and other current liabilities | 6,443,737 | 6,289,169 | ||||||
Other payables due to related parties | 11,488,373 | 8,413,361 | ||||||
Total liabilities | 42,291,039 | 38,326,098 | ||||||
As of December 31, 2014, the total deficit of the VIE subsidiaries was $35.6 million (2013: $35.3 million). | ||||||||
For the years ended December 31, 2012, 2013 and 2014, the summarized operations of the VIEs were as follows: | ||||||||
Year ended | Year ended | Year ended | ||||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Net revenue | 13,956,477 | 14,483,007 | 8,850,824 | |||||
Net profit (loss) | (1,331,497 | ) | 4,746,859 | (910,807 | ) | |||
Currently there is no contractual arrangement that requires the Company to provide additional financial support to the VIEs. However, as the Company is conducting the online advertising business substantially through the VIEs, the Company has, in the past, provided and will continue to provide financial support to the VIEs considering the business requirements of the VIEs and the Company’s own business objectives in the future, which could expose the Company to a loss. For the year ended December 31, 2014, the net revenue of VIEs included charges from the VIEs to the wholly owned subsidiaries of the Company in the amount of $2.6 million for services provided by the VIEs as requested by the local authorities (2012 and 2013: nil and $2.3 million). The VIE revenue charge and derecognition of liabilities resulted in the net profit of the VIEs for the year ended December 31, 2013. | ||||||||
Please refer to “Contingencies” under Note 19 for the risks relating to the VIE arrangements. | ||||||||
Significant risks and uncertainties | (3) Significant risks and uncertainties | |||||||
The Group participates in a dynamic high technology industry and believes that, in addition to the factors resulting our conclusions with respect to going concern, changes in any of the following areas could have a material adverse effect on the Group’s future financial position, results of operations or cash flows: i) changes in the overall demand for services and products; ii) changes in business offerings; iii) competitive pressures due to new entrants; iv) advances and new trends in new technologies and industry standards; v) changes in bandwidth suppliers; vi) reliance on Huzhong and Qinhe for the Group’s revenue; vii) regulatory considerations; viii) copyright regulations; and ix) risks associated with the ability to attract and retain employees necessary to support growth. | ||||||||
Fair value | (4) Fair value | |||||||
The Group follows ASC Topic 820, “Fair Value Measurements and Disclosures”. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under US GAAP, certain assets and liabilities must be measured at fair value, and the guidance details the disclosures that are required for items measured at fair value. | ||||||||
Financial assets and liabilities are to be measured and disclosed using inputs from the following three levels of the fair value hierarchy. The three levels are as follows: | ||||||||
Level 1 inputs are unadjusted quoted prices in active markets for identical assets that the management has the ability to access at the measurement date. | ||||||||
Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). | ||||||||
Level 3 includes unobservable inputs that reflect management’s judgments about the assumptions that market participants would use in pricing the assets or liabilities. Management develops these inputs based on the best information available, including their own data. | ||||||||
Business combinations and non-controlling interests | (5) Business combinations and non-controlling interests | |||||||
The Group accounts for its business combinations using the purchase method of accounting. This method requires that the acquisition cost be allocated to the assets, including separately identifiable intangible assets, and liabilities the Company acquired based on their estimated fair values. | ||||||||
The Group follows ASC 805, “Business Combinations,” with respect to business combinations. Pursuant thereto, the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent consideration and all contractual contingencies as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest(s) in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. | ||||||||
The Group follows guidance in ASC Topic 810 regarding non-controlling interests. Non-controlling interests are classified as a separate component within equity; however, such amounts were zero for all periods presented with respect to the accompanying consolidated balance sheet and consolidated statement of operations and comprehensive loss. Consolidated net income on a total enterprise basis is adjusted within the statement of operations and comprehensive loss for net income attributed to non-controlling interests and consolidated comprehensive income is adjusted for comprehensive income attributed to non-controlling interests. | ||||||||
Foreign currency translation | (6) Foreign currency translation | |||||||
The functional currency and reporting currency of the parent company is the United States dollar (“U.S. dollar”). The Group’s Subsidiaries and VIEs use Renminbi (“RMB”) as their functional currency. | ||||||||
Assets and liabilities of the Subsidiaries and VIEs are translated at the current exchange rates quoted by the Federal Reserve Bank of New York in effect at the balance sheet dates, equity accounts are translated at historical exchange rates, and revenues and expenses are translated at the average exchange rates in effect during the reporting period to the U.S. dollar. Translation adjustments resulting from foreign currency translation to reporting currency are reported as cumulative translation adjustments and recorded in accumulated other comprehensive income (loss) in the consolidated statements of changes in equity for the years presented. | ||||||||
Transactions denominated in currencies other than the Company’s or its Subsidiaries’ or VIEs’ functional currencies are remeasured into the functional currencies at the exchange rates quoted by the People’s Bank of China prevailing at the dates of the transactions. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations and comprehensive loss. Monetary assets and liabilities denominated in foreign currencies are remeasured into the applicable functional currencies using the applicable exchange rates quoted by the People’s Bank of China at the balance sheet dates. All such exchange gains and losses are included in the statements of operations and comprehensive loss. | ||||||||
Pursuant to the People’s Republic of China State Administration of Foreign Exchange (“SAFE”), the conversion of U.S. dollars to RMB is governed as to amount and a uniform exchange rate is set by the People’s Bank of China on a daily basis pegged to a basket of major currencies. Correspondingly, RMB to U.S. dollar conversion does not carry the same ease as conversion may with other major currencies. The rates of exchange for the U.S. dollar quoted by the Federal Reserve Bank of New York were RMB 6.0537 on December 31, 2013 and RMB 6.2046 on December 31, 2014. | ||||||||
Cash and cash equivalents | (7) Cash and cash equivalents | |||||||
Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid investments placed with bank or other financial institutions with no restriction to withdrawal or use, which have original maturities of three months or less. | ||||||||
Included in cash and cash equivalents are cash balances denominated in RMB of approximately RMB21,691,760 and RMB6,406,727 (equivalent to approximately $3,496,083 and $1,058,315) as of December 31, 2014 and 2013, respectively. | ||||||||
Allowances for doubtful accounts | (8) Allowances for doubtful accounts | |||||||
The Group determines allowances for doubtful accounts when facts and circumstances indicate that receivables are unlikely to be collected by taking into account an aging analysis of receivable balances, historical bad debt records, repayment patterns in the prior year, and other factors such as the policies of operators and financial conditions of customers. The Group’s accounts receivable are almost fully provided for by an allowance, and cash inflows related to accounts receivable principally consist of collections on fully reserved receivables. In 2014, the Group recorded a provison for all remaining receivables under the old and new advertising agency agreements with Shengyue based on the termination of a business relationship in August 2014 (Note 1). This allowance was charged to general and administrative expenses. | ||||||||
Investments in affiliates | (9) Investments in affiliates | |||||||
Affiliated companies are entities which the Group does not control. Investments in affiliated companies are accounted for by the equity method of accounting or the cost method of accounting. Under the equity method, when the Group has significant influence over an investee, the Group’s share of the post-acquisition profits or losses of affiliated companies is recognized in the consolidated statements of operations. Unrealized gains on transactions between the Group and its affiliated companies are eliminated to the extent of the Group’s interest in the affiliated companies; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an affiliated company equals or exceeds its interest in the affiliated company, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company (no such obligations or payments have been undertaken or made for the periods presented). With respect to the cost method, where the Group does not have significant influence and the underlying investment does not have a readily determinable fair value, the investment is originally recorded at cost. | ||||||||
The Group continually reviews its investments in affiliated companies to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors the Group considers in its determination are the length of time that the fair value of the investment is below the Group’s carrying value and the financial condition, operating performance and near term prospects of the investee. In addition, the Group considers the reason for the decline in fair value, including general market conditions, industry specific or investee specific reasons, changes in valuation subsequent to the balance sheet date, and the Group’s intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed to be other than temporary, the carrying value of the investment is written down to fair value. There were no impairments of such investments for the years ended December 31, 2012, 2013 and 2014 (the associated book values were zero as of both December 31, 2013 and 2014 (Note 6)). | ||||||||
Property and equipment, net | (10) Property and equipment, net | |||||||
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives: | ||||||||
Furniture and office equipment | 3 years | |||||||
Telecommunications equipment | 3 years | |||||||
Leasehold improvements | Lesser of original lease term or estimated useful life | |||||||
Expenditures for maintenance and repairs are expensed as incurred. Gain or loss on the disposal of property and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statements of operations. | ||||||||
Acquired intangible assets, net | (11) Acquired intangible assets, net | |||||||
An intangible asset is required to be recognized separately from goodwill based on its estimated fair value if such asset arises from contractual or legal right or if it is separable as defined by ASC 805. Acquired intangible assets consisted of intangible assets with finite lives, as detailed in Note 5, acquired through direct purchases and various business acquisitions and were amortized on a straight-line basis over their estimated useful economic lives. As further described in Note 5, the Group provided a full impairment provision on its acquired intangibles in 2013; net book value was zero as of both December 31, 2013 and 2014. | ||||||||
The estimated useful economic lives by major intangible asset category used by the Company were as follows. | ||||||||
Trademark | 20 years | |||||||
Technology | 7 years | |||||||
Video production and acquisition costs | (12) Video production and acquisition costs | |||||||
The Company contracts third parties for the production of and self produces and self-generates video copyrights for content to exhibit on its website ku6.com. Following the guidance under ASC 926-20-25, video production (which mainly includes direct production costs and production overhead) and acquisition costs are capitalized, if the capitalization criteria are met, and are stated at the lower of unamortized cost or estimated fair value. | ||||||||
With respect to production and acquisition costs, until the Group can establish estimates of secondary market revenues, capitalized costs for each video produced are limited to the amount of revenues contracted for that video. The costs in excess of revenues contracted for that video are expensed as incurred on an actual basis, and are not restored as assets in subsequent periods. Once the Group can establish estimates of secondary market revenues in accordance with ASC 926-20-35-5(b), it capitalizes subsequent film costs. | ||||||||
Capitalized video production costs are amortized in accordance with the guidance in ASC 926-20-35-1 using the individual-film-forecast-computation method, based on the proportion of the revenues earned in a period to the estimated remaining unrecognized ultimate revenues as of the beginning of that period. The Group estimates total revenues to be earned (“ultimate revenues”) throughout the life of a video. Ultimate revenue estimates for the produced or acquired videos are periodically reviewed and adjustments, if any, will result in changes to amortization rates. Estimates used in calculating the fair value of the self produced content are based upon assumptions about future demand and market conditions. The capitalized costs are subject to assessment for impairment in accordance with ASC 926-20-35-12 to 35-18, if an event or change in circumstances indicates that the fair value is less than unamortized cost. | ||||||||
During each of the three years ended December 31, 2014, video production and acquisition costs did not meet the criteria for capitalization and as a result all the video production costs were expensed as incurred. | ||||||||
Goodwill | (13) Goodwill | |||||||
Goodwill represents the excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed as a result of the Group’s acquisitions. The Group’s goodwill was subject to a full impairment charge in 2013. The Group’s goodwill was associated with the Group’s single reporting unit. | ||||||||
The Group tests goodwill for impairment by performing a two-step goodwill impairment test, which can be preceded by an optional qualitative assessment to determine if the two-step goodwill impairment test needs to be followed. The optional qualitative assessment relies upon qualitative factors to determine if it is “more likely than not” (more than 50% probable) that the fair value of a reporting unit is less than the carrying value of the reporting unit. The Group did not apply the qualitative assessment and proceeded directly to the two-step test. The first step compares the calculated fair value of a reporting unit to its carrying amount, including goodwill. If, and only if, the carrying amount of a reporting unit exceeds its fair value as per step one, the second step is executed to compare the implied fair value of the affected reporting unit’s goodwill to the carrying value of that goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. | ||||||||
Based upon application of the two step impairment evaluation approach at the Group’s annual evaluation dates, no impairment losses were recorded in the year ended December 31, 2012. In the quarter ended December 31, 2013, based upon the same approach at the Group’s annual evaluation date, considering the facts and circumstances regarding future revenues and cash flows described in Note 1 underpinning substantial doubt about the Group’s abilities to continue as a going concern, which had developed adversely by that time, the Group recorded an impairment charge to write off, in its entirety, the reporting unit’s (the entire Group)’s goodwill by $6.2 million. See Note 7 for additional information. | ||||||||
Impairment of long-lived assets | (14) Impairment of long-lived assets | |||||||
The Group reviews its long-lived assets including property, plant and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets. The Group uses estimates and judgments in its impairment tests and if different estimates or judgments are utilized, the timing or the amount of the impairment charges could be different. | ||||||||
No impairment was recognized in the year ended December 31, 2012. In 2013, based upon substantial uncertainties surrounding future revenues and cash flows, and the concomitant uncertainty associated with recovering various assets regarding future net cash inflows and an assessment of reduced expectations for the Group’s future projected results of operations, the Group recognized a full impairment loss of $21.0 million for its acquired intangible assets. No impairment was provided on fixed assets as the carrying value of fixed assets was less than fair value. There was no impairment loss recorded in the year ended December 31, 2014. | ||||||||
Financial instruments | (15) Financial instruments | |||||||
Financial instruments include cash and cash equivalents, accounts receivable, prepayments and other current assets, amounts due from/to related parties, accounts payable, and accrued expenses and other current liabilities. As of December 31, 2013 and 2014, their carrying values approximated their fair values because of their generally short maturities. There were no financial assets or liabilities that were measured at fair value at December 31, 2013 or 2014. | ||||||||
Revenue recognition and cost of revenues | (16) Revenue recognition and cost of revenues | |||||||
In accordance with ASC Topic 605, “Revenue Recognition,” the Group recognizes revenues when the following criteria are met: persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery has occurred and collectability is reasonably assured. Revenues are recorded net of indirect taxes. | ||||||||
The Group makes credit assessments of customers to assess the collectability of contract amounts prior to entering into contracts. For those contracts for which the collectability is assessed as not reasonably assured, the Group recognizes revenue only when cash is received and all revenue recognition criteria are met. | ||||||||
Online advertising services | ||||||||
The Group derives part of its revenue from online advertising services, where advertisers (including third parties and related parties) pay to place their advertisements on the Company’s online video platform in different formats. Such formats include but are not limited to banners, buttons, links, and pre-roll or post-roll video advertisements. | ||||||||
Advertising contracts are signed to establish the price and advertising services to be provided. Advertisements are charged either based on the agreed measurement numbers, including but not limited to impressions and clicks, or fixed during a determined period of time. In the former case, the delivery of service occurs when those measurement numbers are achieved. In the latter case, the delivery is not linked to advertisement displays but occurs over the lapse of time. | ||||||||
The Group’s online advertising services revenue is principally generated under fixed-term contracts with specific advertising agent customers serving as intermediaries between the Group and ultimate advertisers; these fixed-term contracts were responsible for substantially all of the Group’s online advertising services revenue in 2012 and 2013 and all of its online advertising services revenue in 2014. Under two prior arrangements with Shengyue, the Group’s previous exclusive ad agent for standard advertising resources and non-exclusive ad agent for highly interactive advertising resources, which terminated by August 2014 (Note 1), and the Group’s current arrangement with ad agent Huzhong (exclusive for standard advertising resources and non-exclusive for highly interactive advertising resources), which started on August 29, 2014 and will expire on December 31, 2017 (Note 1), the arrangements included (include) guaranteed minimum advertising revenues and sharing of excess advertising revenues, as well as web traffic or video view targets to be met by the Group. | ||||||||
In the case of Shengyue, guaranteed minimum advertising revenues were not subject to downward adjustment under the old agreement which expired in early 2014 (Note 1). Under a new agreement with Shengyue consummated in April 2014 but terminated in August 2014 (Note 1), guaranteed minimum advertising revenues were proportionally adjusted downward if there was a shortfall relative to web traffic or video view targets. For the Shengyue arrangements, excess advertising revenues were calculated after deducting commission fees earned by Shengyue based upon increasing percentages for additional tiers (layers) of revenues in excess of the guaranteed amount. There were no commission fees incurred for any historical periods, as the Group earned only the minimum guaranteed revenues in 2012, 2013 and 2014. In the case of Huzhong, the guaranteed minimum daily advertising revenues are based upon daily web traffic targets agreed to by the Group and Huzhong, and revenues are proportionally adjusted downward or upward relative to the guaranteed minimums should web traffic fall short of or exceed the agreed upon targets. During 2014, the Group did exceed targets on certain occasions resulting in an insignificant additional amount of revenue. Unlike the Shengyue arrangements, which were settled in arrears, the Huzhong arrangement provides for payment of 50% of the guaranteed amounts prior to the beginning of the month, with final settlement determined between the parties at the end of the month. These prepayments are recorded as advances from customers until recognised as revenue. Guaranteed advertising revenues and any excess advertising revenues net of commission fees are recognized ratably over varying service periods as governed by the specific agreements, as the Group is able to timely obtain information to determine historical advertising revenues as a basis for preparing financial statements. | ||||||||
The Group reports the revenue earned from both related and third party ad agencies based on the net amount after considering the indicators to record revenue gross versus set forth in ASC 605-45, “Principal Agent Considerations.” A principal factor considered is the fact that the advertising agents establish prices with ultimate end customers wishing to place advertisements and the Group is not able to influence such pricing. | ||||||||
For revenue arrangements contracted with third-party advertising agencies (excluding the fixed arrangement with Huzhong), the Group provides cash incentives in the form of rebates based on volume and performance, and accounts for such incentives as a reduction of revenue in accordance with ASC 605-50-25. The cash incentives to third-party advertising agencies in the years ended December 31, 2012, 2013 and 2014 were, $72,464, nil and nil, respectively. | ||||||||
Promotional advertising services | ||||||||
The Group derives a portion of its revenue from related party Qinhe in exchange for interactive media and entertainment promotional advertising services provided by the Group to Qinhe. The Group provides online game marketing services to Qinhe; in exchange, Qinhe shares a portion of its profits that are generated from the Group’s video viewers who play Qinhe’s games after linking to them through advertisements on the Group’s websites. Profits are calculated as revenues from the games operated by Qinhe, net of licensing fees payable to game developers. The Group also provides interactive entertainment marketing services to Qinhe; in exchange, Qinhe shares a certain percentage of Qinhe’s revenues generated from its video viewers who visit its proprietary social media platform by linking thereto from advertisements on the Group’s website and spend monies with Qinhe. | ||||||||
Further to the interactive entertainment marketing services arrangement (but not the online game marketing arrangement), in September 2014 (Note 1) the Group signed a supplemental agreement providing Qinhe greater operational capabilities to manage and operate the ishow.ku6.com subdomain of domain ku6.com on its own in order to drive further user referrals. Pursuant to this supplemental agreement, Qinhe agreed to pay additional guaranteed revenue amounts, stated on a monthly basis and incremental to the revenue sharing determined on a percentage basis referenced in the foregoing paragraph. | ||||||||
Promotional advertising services revenues are recognized as services are delivered for online game and interactive entertainment marketing. Shortly after the end of each month, with frequency sufficient to enable timely preparation of financial statements, the Group timely receives a statement from Qinhe detailing the amount of shared revenue for each type of services. Once amounts are reconciled to the Group’s records and agreed to, shared revenues are to be paid within 30 days. With respect to the additional guaranteed revenue amounts mentioned in the foregoing paragraph, such amounts are recognized on a monthly basis as they are not dependent on underlying video viewer referrals.The Group reports the revenue earned from Qinhe based on the net amount after considering the indicators to record revenue gross versus set forth in ASC 605-45, “Principal Agent Considerations.” A principal factor considered is the fact that Qinhe establishes all pricing to end customers and the Group is not responsible for providing the content or services, only for driving video viewer referrals to Qinhe. | ||||||||
Costs of revenues (applicable to both online advertising revenues and promotional revenues) consist primarily of employee salaries and benefits associated with platform operations, related share-based compensation, depreciation expenses, internet bandwidth leasing costs, and video production costs. | ||||||||
Turnover taxes and related surcharges | ||||||||
The China subsidiaries and VIEs are subject to business tax or value added tax (“VAT”) and related surcharges on the revenues earned for services provided. | ||||||||
Relevant PRC authorities introduced a turnover tax reform pilot program (the “Pilot Program”) in selected pilot cities in China for selected industries in 2012, to gradually expand the scope of VAT. The turnover tax reform pilot program was first implemented in Shanghai effective 1 January 2012. According to Circular Caishui [2012] No.71 (“Circular 71”), the Pilot Program was expanded to Beijing (effective September 1, 2012) and Tianjin (effective December 1, 2012) where the Group’s online advertising revenues are generated. Prior to the implementation of the Pilot Program, the Group’s business tax rate for advertising sales was 5% based on the gross advertising revenue before deducting advertising agent rebates. After the implementation of the Pilot Program in Beijing and Tianjin, the advertising business is now subject to VAT at 6%. VAT payable on revenues generated by a general VAT taxpayer for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. If any of the Company’s subsidiaries is recognized as a small-scale VAT payer, the applicable VAT rate shall be 3%, and no creditable input VAT can be recognized. Business tax and related surcharges or VAT, as the case may be, are deducted from gross revenues to arrive at net revenues. | ||||||||
Product development expenses | (17) Product development expenses | |||||||
Product development expenses consist primarily of salaries and benefits for product development personnel, including share-based compensation costs, and are expensed as incurred. | ||||||||
General and administrative expenses | (18) General and administrative expenses | |||||||
General and administrative expenses consist primarily of salaries and benefits for general management, finance and administrative personnel, bad debt provision, litigation accruals, depreciation, amortization of intangible assets, professional service fees, share-based compensation, office rental fees, and other expenses. | ||||||||
Selling and marketing | (19) Selling and marketing | |||||||
Selling and marketing expenses consist primarily of sales and marketing personnel payroll compensation and related employee costs, advertising and market promotion expenses, and other overhead expenses incurred by the Group’s sales and marketing personnel. | ||||||||
Advertising costs | (20) Advertising costs | |||||||
The Group expenses advertising costs as incurred. Total advertising expenses were $553,380, $287,070 and nil for the years ended December 31, 2012, 2013 and 2014, respectively, and were included in selling and marketing expenses. | ||||||||
Share-based compensation | (21) Share-based compensation | |||||||
The Group applies ASC 718, which requires all share-based payments to employees and directors, including grants of employee stock options and restricted shares, to be recognized as compensation expense in the financial statements over the vesting periods of the awards based on the fair values of the awards determined at the grant date. The valuation provisions of ASC 718 apply to awards granted after the adoption of ASC 718, to awards granted to employees and directors before the adoption of ASC 718 whose related requisite services had not been provided, and to awards which were subsequently modified or cancelled. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent period(s) if actual forfeitures differ from initial estimates. | ||||||||
In accordance with ASC 718, the Group has recognized share-based compensation expenses, net of a forfeiture rate, using the straight-line method for awards with graded vesting features and service conditions only and using the graded-vesting attribution method for awards with graded vesting features and performance conditions. See Note 14 for further information on stock-based compensation. | ||||||||
Leases | (22) Leases | |||||||
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Other leases, meaning those meeting the capitalization criteria in ASC 840, “Leases”, are accounted for as capital leases. Payments made under operating leases, net of any incentives received by the Group from the leasing company, are charged to the consolidated statement of operations and comprehensive loss on a straight-line basis over the lease periods, as specified in the lease agreements, with reference to the actual number of users of the leased assets, as appropriate. | ||||||||
Taxation | (23) Taxation | |||||||
Current income taxes are provided for on the taxable income of each subsidiary on the separate tax return basis in accordance with the relevant tax laws. Deferred income taxes are provided using the liability method in accordance with ASC 740, “Income Taxes”. Under this method, deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in income in the period of change. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. | ||||||||
ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Group does not have any liabilities for unrecognized tax benefits as of December 31, 2013 or 2014. Were the Group to have such liabilities, interest and penalties would be recognized in tax expenses. | ||||||||
Statutory reserves | (24) Statutory reserves | |||||||
The Group’s subsidiaries incorporated in the PRC and the VIEs are required on an annual basis to make appropriations of retained earnings set at certain percentage of after-tax profit determined in accordance with PRC accounting standards and regulations (“PRC GAAP”). | ||||||||
The Group’s subsidiaries must make appropriations to (i) the general reserve and (ii) the enterprise expansion fund in accordance with the Law of the PRC on Enterprises Operated Exclusively with Foreign Capital. The general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP at each year-end) until such fund has reached 50% of the company’s registered capital; enterprise expansion fund appropriation is at the PRC subsidiaries’ directors’ discretion. The Company’s VIEs, in accordance with the China Company Laws, must make appropriations to a (i) statutory reserve fund and (ii) discretionary surplus fund. The statutory reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP at each year-end) until such fund has reached 50% of the company’s registered capital; other fund appropriation is at the VIEs’ directors’ discretion. | ||||||||
The general reserve fund and statutory reserve fund can only be used for specific purposes, such as setting off the accumulated losses, enterprise expansion or increasing the registered capital. The enterprise expansion fund can be used to expand production and operations; it also may be used for increasing registered capital. | ||||||||
Appropriations to these funds, if they occur, are classified in the consolidated balance sheets as statutory reserves; however, such reserves are zero. No appropriations were made during the years ended December 31, 2012, 2013 and 2014. There are no legal requirements in the PRC to fund these reserves by transfer of cash to restricted accounts, and the Group does not do so. | ||||||||
Contingencies | (25) Contingencies | |||||||
In the normal course of business, the Group is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters. Liabilities for such contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. See Note 19. | ||||||||
Earnings (loss) per share | (26) Earnings (loss) per share | |||||||
Basic earnings (loss) per share is computed by dividing earnings (loss) by the weighted average number of ordinary shares outstanding during the year. Diluted earnings (loss) per share is computed using the weighted average number of ordinary shares and, if dilutive, potential ordinary shares outstanding during the year. Potential ordinary shares consist of shares issuable upon the exercise of stock options (using the “treasury stock method”). Potential ordinary shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive. | ||||||||
For each of the three years in the period ended December 31, 2014, the dilutive effect of potential ordinary shares was not factored into the calculation as a net loss was incurred in each period. | ||||||||
Comprehensive loss | (27) Comprehensive loss | |||||||
Comprehensive loss is defined as the change in equity of a company during the period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive loss, as presented on the accompanying consolidated balance sheets, consists of cumulative foreign currency translation adjustments included in other comprehensive income (loss), which are presented net of tax (zero tax effect). | ||||||||
Recent accounting pronouncements | (28) Recent accounting pronouncements | |||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 will eliminate transaction-specific and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective, for public companies, for reporting periods beginning after December 15, 2016, including interim periods within that reporting period and therefore would impact the Group starting January 1, 2017 (however, the FASB has recently voted in April 2015 to delay the effective date by one year, and a deferral is not absolutely certain). Early adoption is not permitted under ASU 2014-09. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. Management is currently assessing the impact of the adoption of ASU 2014-09 and the effect of the standard on the Group’s ongoing financial reporting. | ||||||||
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, which will explicitly require management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The issued guidance will require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term “substantial doubt”, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated and (6) require the assessment cover a period of one year after the date that the financial statements are issued (or available to be issued). This guidance is effective for the first annual period ending after December 15, 2016 (hence, calendar 2016 for the Group), and for annual periods and interim periods thereafter. Early application is permitted. The Group anticipates that this guidance will result in expanded disclosures in its financial statements to provide further analysis regarding its existing going concern uncertainty (Note 1). | ||||||||
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” or ASU 2015-02. ASU 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. The ASU simplifies consolidation accounting by reducing the number of consolidation models from four to two. In addition, the new standard simplifies the FASB Accounting Standards Codification and improves current guidance by: (i) placing more emphasis on risk of loss when determining a controlling financial interest; (ii) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a VIE; and (iii) changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for periods beginning after December 15, 2015, for public companies, or calendar 2016 for the Group. Early adoption is permitted, including adoption in an interim period. The Group does not anticipate that the ASU will impact its consolidation conclusions and is in the process of finalizing its evaluation. | ||||||||
Government subsidies | (29) Government Subsidies | |||||||
Government subsidies represent discretionary cash subsidies granted by local governments to encourage the development of certain enterprises that are established in local special economic regions. The cash subsidies may be received in the form of (i) a fixed cash amount determined and provided by a municipal government to an operating subsidiary for product and service innovation, or (ii) an amount determined as a percentage of the income tax and business tax actually paid by an operating subsidiary. | ||||||||
Cash subsidies have no defined rules and regulations to govern the criteria necessary for companies to enjoy the benefits and are recognized as other income when received. | ||||||||
For the years ended December 31, 2012, 2013 and 2014, cash subsidies of $1,514,570, $1,484,789 and $135,265 were recognized as other income, respectively. | ||||||||
Segment reporting | (30) Segment reporting | |||||||
Based on the criteria established by ASC 280, the authoritative accounting guidance for segment reporting, the Group currently operates and manages its business as a single operating segment, “Advertising Services” (Note 15). | ||||||||
Revisions to previously reported amounts | (31) Revisions to previously reported amounts | |||||||
Certain amounts in the accompanying consolidated statement of cash flows for the year ended December 31, 2013 have been revised to reflect the corrections of errors. All corrected amounts are within the adjustments to reconcile net loss to net cash used in operating activities. Specifically, the line item “gain on derecognition of aged operating liabilities” was corrected from an inflow of $2,938,250, as previously reported, to an outflow of $2,938,250. The line item “change in accounts payable” was corrected from an outflow of $2,496,787, as previously reported, to an inflow of $1,295,525. Lastly, the line item “change in accrued expenses and other current liabilities” was revised from an outflow of $3,207,948, as previously reported, to an outflow of $1,123,760. These errors in previously reported 2013 amounts were the result of computational errors in the calculation of adjustments to arrive at net cash used in operating activities. These errors impacted only the respective line items within net cash used in operating activities and did not impact any other categories of cash flows, or any other financial statements, or any other reported amounts. | ||||||||
Management evaluated the impact of the identified errors, considering both quantitative and qualitative factors, and concluded that the errors did not result in a material misstatement of the previously issued financial statements for the year ended December 31, 2013 taken as whole, but are being corrected herein to appropriately reflect that comparative period. | ||||||||
Organization_and_Principal_Act1
Organization and Principal Activities (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES [Abstract] | ||||||
Schedule of Ownership Structure | Name of Major Subsidiaries, Variable Interest Entities and Affiliate(s) | Date of | Percentage of | |||
incorporation | ownership | |||||
Subsidiaries | ||||||
Ku6 (Beijing) Technology Co., Ltd. (“Beijing Technology”) | March 5, 2007 | 100 | % | |||
Wei Mo San Yi (Tianjin) Science and Technology Co., Ltd. (“Tianjin Technology”) | December 23, 2008 | 100 | % | |||
Kusheng (Tianjin) Technology Co., Ltd. (“Kusheng”) | August 26, 2011 | 100 | % | |||
Variable Interest Entities | ||||||
Ku6 (Beijing) Information Technology Co., Ltd. (“Ku6 Beijing Information”) | April 20, 2006 | N/A | ||||
Tianjin Ku6 Zheng Yuan Information Technology Co., Ltd. (“Tianjin Information”) | March 20, 2009 | N/A | ||||
Tianjin Ku6 Network Communication Technology Co., Ltd. (“Ku6 Network”) | December 14, 2011 | N/A | ||||
Beijing Ku6 Culture Media Co., Ltd. (“Ku6 Culture”) | June 22, 2010 | N/A | ||||
Affiliates | ||||||
Shanghai Yisheng Network Technology Co., Ltd. (“Yisheng”) | November 22, 2007 | 20 | % | |||
Bale Interactive (Beijing) Culture Media Co., Ltd. (“Bale”) | April 10, 2012 | 7 | % |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||
Schedule of Assets of VIEs | December 31, 2013 | December 31, 2014 | ||||||
Cash and cash equivalents | 252,925 | 2,329,590 | ||||||
Accounts receivable | 36,117 | 105,762 | ||||||
Amounts due from related parties | 6,380,630 | 501 | ||||||
Property and equipment | 1,036 | 171 | ||||||
Deposits and other non-current assets | 311,773 | 321,709 | ||||||
Total assets | 6,982,481 | 2,757,733 | ||||||
Schedule of Liabilities of VIEs | December 31, 2013 | December 31, 2014 | ||||||
Accounts payable | 3,618,573 | 3,387,582 | ||||||
Amounts due to related parties | 20,740,356 | 20,235,986 | ||||||
Accrued expenses and other current liabilities | 6,443,737 | 6,289,169 | ||||||
Other payables due to related parties | 11,488,373 | 8,413,361 | ||||||
Total liabilities | 42,291,039 | 38,326,098 | ||||||
Schedule of Summarized Operations of VIEs | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Net revenue | 13,956,477 | 14,483,007 | 8,850,824 | |||||
Net profit (loss) | (1,331,497 | ) | 4,746,859 | (910,807 | ) | |||
Schedule of Summary of Estimated Useful Life of Property and Equipment | Furniture and office equipment | 3 years | ||||||
Telecommunications equipment | 3 years | |||||||
Leasehold improvements | Lesser of original lease term or estimated useful life | |||||||
Schedule of Summary of Estimated Useful Economic Lives of Acquired Intangible Assets | Trademark | 20 years | ||||||
Technology | 7 years |
Prepaid_Expenses_and_Other_Cur1
Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS [Abstract] | ||||||
Schedule of Prepaid Expenses and Other Current Assets | December 31, 2013 | December 31, 2014 | ||||
Prepaid expenses | 218,420 | 192,379 | ||||
Staff advances and other receivables | 54,254 | 186,950 | ||||
Advances to suppliers | 113,293 | 111,026 | ||||
385,967 | 490,355 |
Property_and_Equipment_Net_Tab
Property and Equipment, Net (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PROPERTY AND EQUIPMENT, NET [Abstract] | ||||||
Schedule of Property and Equipment, Net | December 31, 2013 | December 31, 2014 | ||||
Furniture and office equipment | 866,517 | 844,028 | ||||
Telecommunications equipment | 4,835,937 | 4,715,398 | ||||
Leasehold improvements | 1,405,933 | 1,371,744 | ||||
7,108,387 | 6,931,170 | |||||
Less: Accumulated depreciation and amortization | (5,740,027 | ) | (6,637,603 | ) | ||
1,368,360 | 293,567 |
Acquired_Intangible_Assets_Net1
Acquired Intangible Assets, Net (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
ACQUIRED INTANGIBLE ASSETS, NET [Abstract] | ||||||||||
Schedule of Acquired Intangible Assets, Net | December 31, 2013 | |||||||||
Gross carrying | Accumulated | Impairment | Net carrying | |||||||
amount | amortization | amount | ||||||||
Trademark | 24,901,940 | (4,876,630 | ) | (20,025,310 | ) | — | ||||
Technology | 2,197,230 | (1,229,403 | ) | (967,827 | ) | — | ||||
27,099,170 | (6,106,033 | ) | (20,993,137 | ) | — |
Investments_in_Equity_Affiliat1
Investments in Equity Affiliates (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
INVESTMENTS IN EQUITY AFFILIATES [Abstract] | ||||||||||
Schedule of Equity Method Investments | December 31, 2011 | Share of loss | Foreign currency | December 31, 2012 | ||||||
translation | ||||||||||
Equity interest in Yisheng | 255,281 | (252,585 | ) | (2,696 | ) | — |
Goodwill_Tables
Goodwill (Tables) | 12 Months Ended | |||
Dec. 31, 2014 | ||||
GOODWILL [Abstract] | ||||
Schedule of Changes in the Carrying Amount of Goodwill | December 31, 2011 | 6,232,770 | ||
Change | — | |||
December 31, 2012 | 6,232,770 | |||
Impairment | (6,232,770 | ) | ||
December 31, 2013 | — | |||
Impairment | — | |||
December 31, 2014 | — |
Accrued_Expenses_and_Other_Cur1
Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES [Abstract] | ||||||
Schedule of Accrued Expenses and Other Current Liabilities | December 31, 2013 | December 31, 2014 | ||||
Accrued litigation provision | 2,079,671 | 1,653,032 | ||||
Accrued professional service fees | 1,720,454 | 1,604,240 | ||||
Accrued welfare benefits | 1,462,926 | 1,289,157 | ||||
Accrued payroll | 659,870 | 452,583 | ||||
Indirect taxes payable | 400,602 | 297,293 | ||||
Advances from customers | 26,920 | 191,022 | ||||
Other accrued expenses | 837,187 | 492,837 | ||||
7,187,630 | 5,980,164 |
Other_Income_Net_Tables
Other Income, Net (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
OTHER INCOME, NET [Abstract] | ||||||||
Schedule of Other Income, Net | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Sub-lease income | 249,123 | 317,915 | 276,895 | |||||
Gain on derecognition of long-aged operating liabilities | — | 2,938,250 | 206,533 | |||||
Government subsidies | 1,514,570 | 1,484,789 | 135,265 | |||||
Reimbursement from depository bank related to ADR program | — | 240,470 | 92,144 | |||||
Provision for Seed Music receivable (related party) | — | (980,000 | ) | — | ||||
Other | (35,155 | ) | 99,615 | 35,121 | ||||
Total | 1,728,538 | 4,101,039 | 745,958 |
Related_Party_Transactions_and1
Related Party Transactions and Balances (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
RELATED PARTY TRANSACTIONS AND BALANCES [Abstract] | ||||||||
Schedule of Relationship between Related Parties and Ku6 Media Co., Ltd. | Entity | Relationship to Ku6 Media Co., Ltd. | ||||||
Xu Xudong (“Mr. Xu”) | Largest shareholder | |||||||
Shanghai Qinhe Internet Technology Software Development Co., Ltd., (“Qinhe”) | Entity controlled by Mr. Xu | |||||||
Shanda Interactive Entertainment Limited (“Shanda”) | Second largest shareholder | |||||||
Shanda Computer (Shanghai) Co., Ltd. (“Shanda Computer”) | Wholly owned affiliate of Shanda | |||||||
Shanghai Shanda Network Development Co., Ltd. (“Shanda Network”) | Wholly owned affiliate of Shanda | |||||||
Shanda Media Group Ltd. | Wholly owned affiliate of Shanda | |||||||
Shanda Capital Ltd. | Wholly owned affiliate of Shanda | |||||||
Shanghai Shengle Information Technology Co., Ltd. (“Shengle”) | Wholly owned affiliate of Shanda | |||||||
Shanghai Shengjin Software Development Co., Ltd. (“Shengjin”) | Wholly owned affiliate of Shanda | |||||||
Schedule of Relationship between Entities No Longer Consolidated Affiliates by Shanda and Ku6 Media Co., Ltd. | Entity | Relationship to Ku6 Media Co., Ltd. | ||||||
Shanghai Shengyue Advertising Co., Ltd. (“Shengyue”) | Wholly owned affiliate of Shanda until April 2014 | |||||||
Shanghai Shulong Technology Co., Ltd. (“Shanghai Shulong”) | Consolidated affiliate of Shanda Games Limited | |||||||
Shanghai Shulong Computer Technology Co., Ltd. (“Shanghai Shulong Computer”) | Consolidated affiliate of Shanda Games Limited | |||||||
Hurray! Media Co., Ltd. | Wholly owned affiliate of Shanda until May 2014 | |||||||
Shanda Games Ltd. (“Shanda Games”) | Majority owned affiliate of Shanda until September 2014 | |||||||
Seed Music Group Limited | Significant influence exercised by Shanda until May 2014 | |||||||
Schedule of Significant Related Party Transactions | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Online advertising revenue received from Shengyue (Note A) | 12,481,927 | 12,404,031 | 2,703,492 | |||||
Promotional advertising revenue received from Qinhe (Note A) | — | — | 1,613,606 | |||||
Technical service fees in cost of revenues paid to Shanda Network (Note B) | — | 335,504 | 673,899 | |||||
Technical service fees in cost of revenues payable but forgiven by Shanda Network (Notes B, C) | — | — | 235,876 | |||||
Rental fee payable but forgiven by Shanda Network (Note C) | — | — | 170,086 | |||||
Rental fee payable but forgiven by Shengjin (Note C) | — | — | 23,926 | |||||
Interest expense payable but forgiven by Shanda Media Group Ltd. (Note C) | — | — | 375,000 | |||||
Receivables due from Hurray! Media Co., Ltd. to the Company but forgiven as to repayment (Note C) | — | — | 1,246,641 | |||||
Purchase of equipment from companies under control of Shanda | — | 188,334 | — | |||||
Equity contribution from Shanda (Note C) | — | — | 5,847,070 | |||||
Loan repayment from Shanda Capital Limited (Note D) | — | — | 470,000 | |||||
Loan repayment from Shanda Games Limited | 13,900,000 | 3,300,000 | — | |||||
Loan repayment to Shanghai Shulong Computer | 6,769,544 | — | — | |||||
Loan repayment to Shanghai Shulong | 3,135,076 | 3,303,760 | — | |||||
Loan to Shanda Capital Limited | 470,000 | 13,865 | — | |||||
Interest income from Shanda Games Limited | 246,178 | 14,236 | — | |||||
Interest income from Shanda Capital Limited (Note D) | 10,575 | 14,620 | 3,388 | |||||
Interest expense for loans from Shanghai Shulong Computer and Shanghai Shulong | 448,011 | 16,365 | — | |||||
Schedule of Accounts Receivable Balances Due from Related Parties | December 31, 2013 | December 31, 2014 | ||||||
Accounts receivable due from related parties | ||||||||
Shanghai Shengyue Advertising Co., Ltd. | 6,313,489 | — | ||||||
Other companies under control of Shanda | 208,495 | 972 | ||||||
6,521,984 | 972 | |||||||
Schedule of Accounts Payable Balances Due to Related Parties | December 31, 2013 | December 31, 2014 | ||||||
Accounts payable due to related parties | ||||||||
Shanghai Shanda Network Development Co.,Ltd | 355,820 | 709,911 | ||||||
Shanghai Shengle Information Technology Co., Ltd. | 190,837 | — | ||||||
Other companies under control of Shanda | 11 | — | ||||||
546,668 | 709,911 | |||||||
Schedule of Other Receivables Balances Due from Related Parties | December 31, 2013 | December 31, 2014 | ||||||
Other receivables due from related parties | ||||||||
Hurray! Media Co., Ltd. (Note 1) | 1,246,641 | — | ||||||
Seed Music Group Limited (Note 10) | — | — | ||||||
Shanda Capital Limited | 495,196 | — | ||||||
Other companies under control of Shanda | 45,668 | 2,924 | ||||||
1,787,505 | 2,924 | |||||||
Schedule of Other Payables Balances Due to Related Parties | December 31, 2013 | December 31, 2014 | ||||||
Other payables due to related parties | ||||||||
Shanda Media Group Limited | 375,000 | — | ||||||
375,000 | — |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INCOME TAXES [Abstract] | ||||||||
Schedule of Provision (Benefit) for Income Taxes | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Current income tax expense (benefit) | — | — | — | |||||
Deferred income tax expense (benefit) | — | (4,826,059 | ) | — | ||||
— | (4,826,059 | ) | — | |||||
Schedule of Principal Components of Deferred Tax Assets and Liabilities | December 31, 2013 | December 31, 2014 | ||||||
Current deferred tax assets (liabilities): | ||||||||
Cost and expense accruals | 847,197 | 1,352,773 | ||||||
Revenue recognition | 84,241 | 401,436 | ||||||
Less: valuation allowance | (931,438 | ) | (1,754,209 | ) | ||||
Current deferred tax assets, net | — | — | ||||||
Non-current deferred tax assets (liabilities): | ||||||||
Depreciation and amortization | 72,477 | 92,195 | ||||||
Net operating loss carry forwards | 25,247,628 | 22,017,057 | ||||||
Less: valuation allowance | (25,320,105 | ) | (22,109,252 | ) | ||||
Non-current deferred tax assets, net | — | — | ||||||
Intangible assets | — | — | ||||||
Non-current deferred tax liabilities | — | — | ||||||
Schedule of Reconciliation between Statutory Tax Rate and Effective Tax Rate | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Statutory tax rate | 25 | % | 25 | % | 25 | % | ||
Differential statutory tax rates | (4.7 | )% | (5.0 | )% | (1.4 | )% | ||
Non-deductible expenses | (1.5 | )% | (14.8 | )% | (1.1 | )% | ||
Change in deferred tax liabilities | — | 12.3 | % | — | ||||
Change in valuation allowance | (18.8 | )% | (5.2 | )% | (22.5 | )% | ||
Effective tax rate | 0 | % | 12.3 | % | 0 | % | ||
Schedule of Movement of Valuation Allowances | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
At beginning of year | (22,836,709 | ) | (24,303,518 | ) | (26,251,543 | ) | ||
Current year additions | (1,415,765 | ) | (1,239,840 | ) | (71,991 | ) | ||
Current year reversals | 180,965 | — | 1,879,698 | |||||
Effect of exchange rate changes | (232,009 | ) | (708,185 | ) | 580,375 | |||
(24,303,518 | ) | (26,251,543 | ) | (23,863,461 | ) |
Equity_Compensation_Plans_Tabl
Equity Compensation Plans (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
2004 Share Incentive Plan [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Schedule of Movements in Stock Options | Options | Weighted | Weighted | Aggregate | ||||||
Outstanding | Average | Average | Intrinsic | |||||||
Exercise Price | Remaining | Value | ||||||||
Contractual Life | ||||||||||
$ | $ | |||||||||
Outstanding at January 1, 2012 | 43,746,700 | 0.079 | 1.62 | — | ||||||
Granted | — | — | — | — | ||||||
Exercised | — | — | — | — | ||||||
Cancelled or Expired | (9,077,328 | ) | 0.025 | — | — | |||||
Outstanding at December 31, 2012 | 34,669,372 | 0.094 | 0.89 | — | ||||||
Granted | — | — | — | — | ||||||
Exercised | — | — | — | — | ||||||
Forfeited | (18,949,372 | ) | 0.076 | — | — | |||||
Outstanding at December 31, 2013 | 15,720,000 | 0.116 | 0.11 | — | ||||||
Granted | — | — | — | — | ||||||
Exercised | — | — | — | — | ||||||
Forfeited | (14,100,000 | ) | 0.117 | — | — | |||||
Outstanding at December 31, 2014 | 1,620,000 | 0.103 | 0 | — | ||||||
Vested and expected to vest at December 31, 2014 | 1,620,000 | 0.103 | 0 | — | ||||||
Vested and exercisable at December 31, 2014 | 1,620,000 | 0.103 | 0 | — | ||||||
2010 Equity Compensation Plan [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Schedule of Movements in Stock Options | Options | Weighted | Weighted | Aggregate | ||||||
Outstanding | Average | Average | Intrinsic | |||||||
Exercise Price | Remaining | Value | ||||||||
Contractual Life | ||||||||||
$ | $ | |||||||||
Outstanding at January 1, 2012 | 402,826,000 | 0.0352 | 5.47 | — | ||||||
Granted | 28,500,000 | 0.0116 | — | — | ||||||
Exercised | — | — | — | — | ||||||
Cancelled or expired | (126,070,000 | ) | 0.0367 | — | — | |||||
Outstanding at December 31, 2012 | 305,256,000 | 0.0324 | 4.57 | — | ||||||
Granted | 323,900,000 | 0.0105 | — | — | ||||||
Exercised | (4,000,000 | ) | 0.0116 | — | 55,213 | |||||
Forfeited | (113,862,000 | ) | 0.0317 | — | — | |||||
Outstanding at December 31, 2013 | 511,294,000 | 0.0189 | 4.7 | 6,514,815 | ||||||
Granted | — | — | — | — | ||||||
Exercised | (32,712,500 | ) | 0.0103 | — | 138,955 | |||||
Forfeited | (257,875,000 | ) | 0.0121 | — | — | |||||
Outstanding at December 31, 2014 | 220,706,500 | 0.028 | 2.97 | — | ||||||
Vested and expected to vest at December 31, 2014 | 200,348,900 | 0.0289 | 2.9 | — | ||||||
Vested and exercisable at December 31, 2014 | 119,243,125 | 0.0332 | 2.63 | — | ||||||
Schedule of Estimated Fair Values of Stock Options | Options Granted | Options Granted | Options Granted | |||||||
in 2012 | in 2013 | in 2014 | ||||||||
Fair value of ordinary shares ($) | 0.0116 | 0.0106~0.0131 | — | |||||||
Exercise price ($) | 0.0116 | 0.0103~0.0113 | — | |||||||
Expected volatility (%) | 100 | % | 94% | — | ||||||
Expected dividend yield (%) | 0 | % | 0% | — | ||||||
Expected term (years) | 3.5 | 3.5 | — | |||||||
Risk-free interest rate (per annum) (%) | 1.2425 | % | 1.3445%~1.3843% | — |
Net_Loss_Per_Share_Tables
Net Loss Per Share (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
NET LOSS PER SHARE [Abstract] | ||||||||
Schedule of Computation of Basic and Diluted Net Loss Per Share | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
Numerator: | ||||||||
Net loss | (9,491,138 | ) | (34,427,734 | ) | (10,727,642 | ) | ||
Denominator: | ||||||||
Weighted-average ordinary shares outstanding for basic calculation | 4,901,279,176 | 4,728,185,434 | 4,746,324,022 | |||||
Dilutive effect of potential ordinary shares | — | — | — | |||||
Weighted average ordinary shares outstanding for diluted calculation | 4,901,279,176 | 4,728,185,434 | 4,746,324,022 | |||||
Weighted-average ADS used in per basic ADS calculations | 49,012,792 | 47,281,854 | 47,463,240 | |||||
Dilutive effect of potential ADS | — | — | — | |||||
Weighted-average ADS used in per diluted ADS calculations | 49,012,792 | 47,281,854 | 47,463,240 | |||||
Loss per share — basic and diluted | ||||||||
Net loss per share — basic and diluted | (0.00 | ) | (0.01 | ) | (0.00 | ) | ||
Loss per ADS — basic and diluted | ||||||||
Net loss per ADS — basic and diluted | (0.19 | ) | (0.73 | ) | (0.23 | ) |
Concentrations_Tables
Concentrations (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
CONCENTRATIONS [Abstract] | ||||||||
Schedule of Accounts Receivable | December 31, 2013 | December 31, 2014 | ||||||
Accounts receivable | 544,754 | 532,355 | ||||||
Allowance for doubtful accounts | (480,076 | ) | (418,539 | ) | ||||
Accounts receivable, net of allowance for doubtful accounts | 64,678 | 113,816 | ||||||
Schedule of Movement of Allowance for Doubtful Accounts | Year ended | Year ended | Year ended | |||||
December 31, | December 31, | December 31, | ||||||
2012 | 2013 | 2014 | ||||||
Balance at beginning of the year | 4,416,706 | 2,172,972 | 480,076 | |||||
Provisions | — | — | 1,038,047 | |||||
Reversed | (2,255,301 | ) | (310,699 | ) | (49,912 | ) | ||
Accounts written off | — | (1,435,204 | ) | (1,038,047 | ) | |||
Translation difference | 11,567 | 53,007 | (11,625 | ) | ||||
Balance at the end of the year | 2,172,972 | 480,076 | 418,539 |
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
COMMITMENTS AND CONTINGENCIES [Abstract] | ||||||||
Schedule of Future Minimum Lease Payments under Non-cancellable Operating Lease Agreements | Within 1 year | 2,186,304 | ||||||
Between 1 and 2 years | — | |||||||
Between 2 and 3 years | — | |||||||
Between 3 and 4 years | — | |||||||
Total | 2,186,304 | |||||||
Schedule of Rollforward of Accrued Litigation Provision | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
At beginning of year | 2,683,968 | 2,077,753 | 2,079,671 | |||||
Current year additions (reversals) | (113,611 | ) | 141,912 | (333,485 | ) | |||
Payments during the year | (492,604 | ) | (139,994 | ) | (93,154 | ) | ||
Balance at end of year | 2,077,753 | 2,079,671 | 1,653,032 |
Additional_Information_Condens1
Additional Information - Condensed Financial Statements (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
ADDITIONAL INFORMATION - CONDENSED FINANCIAL STATEMENTS [Abstract] | ||||||||
Schedule of Balance Sheets | December 31, 2013 | December 31, 2014 | ||||||
(in U.S. dollars, except number of shares) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | 56,999 | 341,320 | ||||||
Prepaid expenses and other current assets | 250,091 | 195,049 | ||||||
Amount due from subsidiaries and variable interest entities | 15,709,401 | — | ||||||
Amount due from related parties | 1,741,836 | 627 | ||||||
Total current assets | 17,758,327 | 536,996 | ||||||
Investments in subsidiaries | 8,082,866 | 19,690,895 | ||||||
Total assets | 25,841,193 | 20,227,891 | ||||||
Liabilities and shareholders’ equity (deficit) | ||||||||
Accrued expenses and other current liabilities | 701,375 | 541,961 | ||||||
Amounts due to subsidiaries and variable interest entities | 24,711,656 | 23,821,671 | ||||||
Amounts due to related parties | 375,000 | — | ||||||
Total current liabilities | 25,788,031 | 24,363,632 | ||||||
Shareholders’ equity (deficit): | ||||||||
Ordinary shares ($0.00005 par value; 12,000,000,000 shares authorized; 4,730,648,360 and 4,763,360,860 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 236,485 | 238,120 | ||||||
Additional paid-in capital | 178,195,109 | 184,538,349 | ||||||
Accumulated deficit | (176,368,243 | ) | (187,095,885 | ) | ||||
Accumulated other comprehensive loss | (2,010,189 | ) | (1,816,325 | ) | ||||
Total shareholders’ equity (deficit) | 53,162 | (4,135,741 | ) | |||||
Total liabilities and shareholders’ equity (deficit) | 25,841,193 | 20,227,891 | ||||||
Schedule of Statements of Operations | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
(in U.S. dollars, except number of shares) | ||||||||
Operating expenses: | ||||||||
Product development | 278,168 | 269,876 | 208,656 | |||||
Selling and marketing | 30,773 | 54,503 | 3,802 | |||||
General and administrative | 1,119,757 | 1,403,657 | 928,506 | |||||
Total operating expenses | 1,428,698 | 1,728,036 | 1,140,964 | |||||
Loss from operations | (1,428,698 | ) | (1,728,036 | ) | (1,140,964 | ) | ||
Interest income | 349,525 | 30,483 | 3,463 | |||||
Interest expense | — | — | — | |||||
Other (expense) / income | — | (739,530 | ) | 92,144 | ||||
Foreign exchange (loss) / gain | (15,589 | ) | 355,337 | (76 | ) | |||
Equity in losses of subsidiaries | (8,396,376 | ) | (32,345,988 | ) | (9,682,209 | ) | ||
Net loss | (9,491,138 | ) | (34,427,734 | ) | (10,727,642 | ) | ||
Schedule of Statements of Cash Flows | Year ended | Year ended | Year ended | |||||
December 31, 2012 | December 31, 2013 | December 31, 2014 | ||||||
(in U.S. dollars, except number of shares) | ||||||||
Operating activities: | ||||||||
Net loss | (9,491,138 | ) | (34,427,734 | ) | (10,727,642 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Share-based compensation | 463,753 | 1,023,871 | 600,995 | |||||
Provision for Seed Music receivable (related party) | — | 980,000 | — | |||||
Exchange gains | — | (355,337 | ) | — | ||||
Equity in losses of subsidiaries | 8,396,376 | 32,345,988 | 9,682,209 | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 122,056 | 62,083 | 55,042 | |||||
Amounts due from subsidiaries and variable interest entities | (1,645 | ) | — | — | ||||
Amount due from related parties | (92,159 | ) | 74,964 | (4,015 | ) | |||
Accrued expenses and other current liabilities | (277,527 | ) | 36,479 | (159,414 | ) | |||
Amounts due to subsidiaries and variable interest entities | (4,013,840 | ) | 4,160,000 | — | ||||
Net cash provided by (used in) operating activities | (4,894,124 | ) | 3,900,314 | (552,825 | ) | |||
Investing activities: | ||||||||
Loan to subsidiaries | (3,001,557 | ) | (12,350,863 | ) | — | |||
Loan to Shanda Capital Limited | (470,000 | ) | — | — | ||||
Repayment of loans from related parties under control of Shanda | 14,000,000 | 3,300,000 | 498,583 | |||||
Net cash provided by (used in) investing activities | 10,528,443 | (9,050,863 | ) | 498,583 | ||||
Financing activities: | ||||||||
Proceeds from exercise of options | — | 46,400 | 338,563 | |||||
Repurchase of ordinary shares | (8,169,481 | ) | (58,147 | ) | — | |||
Net cash provided by (used in) financing activities | (8,169,481 | ) | (11,747 | ) | 338,563 | |||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | |||||
Net increase (decrease) in cash and cash equivalents | (2,535,162 | ) | (5,162,296 | ) | 284,321 | |||
Cash and cash equivalents, beginning of year | 7,754,457 | 5,219,295 | 56,999 | |||||
Cash and cash equivalents, end of year | 5,219,295 | 56,999 | 341,320 |
Organization_and_Principal_Act2
Organization and Principal Activities (Organization and Principal Activities) (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Ku6 (Beijing) Technology Co., Ltd. ("Beijing Technology") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 5-Mar-07 |
Percentage of ownership | 100.00% |
Wei Mo San Yi (Tianjin) Science and Technology Co., Ltd. ("Tianjin Technology") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 23-Dec-08 |
Percentage of ownership | 100.00% |
Kusheng (Tianjin) Technology Co., Ltd. ("Kusheng") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 26-Aug-11 |
Percentage of ownership | 100.00% |
Ku6 (Beijing) Information Technology Co., Ltd. ("Ku6 Beijing Information") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 20-Apr-06 |
Tianjin Ku6 Zheng Yuan Information Technology Co., Ltd. ("Tianjin Information") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 20-Mar-09 |
Tianjin Ku6 Network Communication Technology Co., Ltd. ("Ku6 Network") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 14-Dec-11 |
Beijing Ku6 Culture Media Co., Ltd. ("Ku6 Culture") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 22-Jun-10 |
Shanghai Yisheng Network Technology Co., Ltd. ("Yisheng") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 22-Nov-07 |
Percentage of ownership | 20.00% |
Bale Interactive (Beijing) Culture Media Co., Ltd. ("Bale") [Member] | |
Organization and Principal Activities [Line Items] | |
Date of incorporation | 10-Apr-12 |
Percentage of ownership | 7.00% |
Organization_and_Principal_Act3
Organization and Principal Activities (Business Developments, Shanda Acquired the Company) (Narrative) (Details) (USD $) | 12 Months Ended | |||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 03, 2014 |
Shengyue [Member] | ||||
Organization and Principal Activities [Line Items] | ||||
Advertising revenue from Shengyue | $2.70 | $12.40 | $12.50 | |
Shengyue [Member] | Net revenues [Member] | Revenue concentration risk [Member] | ||||
Organization and Principal Activities [Line Items] | ||||
Percentage of net revenue derived from Shengyue | 31.50% | 94.40% | 88.40% | |
Shanda [Member] | ||||
Organization and Principal Activities [Line Items] | ||||
Percentage of Shanda's equity interest in the company | 29.00% | 70.50% | 29.50% |
Organization_and_Principal_Act4
Organization and Principal Activities (Business Developments, Mr. Xu Acquired the Company) (Narrative) (Details) | 12 Months Ended | 0 Months Ended | 2 Months Ended | 12 Months Ended | 7 Months Ended | 0 Months Ended | 4 Months Ended | 3 Months Ended | ||||||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Mar. 31, 2014 | 30-May-14 | 30-May-14 | 19-May-14 | 19-May-14 | Apr. 10, 2014 | Apr. 10, 2014 | Apr. 03, 2014 | Apr. 03, 2014 | 31-May-14 | 31-May-14 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Oct. 30, 2014 | Dec. 31, 2014 | Mar. 04, 2015 | Feb. 02, 2015 | Feb. 02, 2015 | Aug. 28, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
USD ($) | USD ($) | USD ($) | New advertising agency agreement with New Shengyue [Member] | Shanda Media [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Mr. Xu [Member] | Mr. Xu [Member] | Mr. Xu [Member] | Mr. Xu [Member] | Mr. Xu [Member] | Shengyue [Member] | Shengyue [Member] | Shengyue [Member] | Shengyue [Member] | Shengyue [Member] | |
USD ($) | USD ($) | USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | USD ($) | USD ($) | USD ($) | USD ($) | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | agreements | New advertising agency agreement with New Shengyue [Member] | New advertising agency agreement with New Shengyue [Member] | Old advertising agency agreement with Shengyue [Member] | Old advertising agency agreement with Shengyue [Member] | |||||
CNY | USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | ||||||||||||||||||||||
Organization and Principal Activities [Line Items] | ||||||||||||||||||||||||||||
Percentage of outstanding ordinary shares transferred out by controlling shareholders | 41.00% | |||||||||||||||||||||||||||
Ordinary shares sold by controlling shareholders | 1,938,360,784 | |||||||||||||||||||||||||||
Maturity of promissory note | 3 years | |||||||||||||||||||||||||||
Aggregate consideration of ordinary shares | $47,000,000 | |||||||||||||||||||||||||||
Percentage of shareholders' interest in the company | 29.50% | 29.50% | 29.00% | 70.50% | 41.00% | |||||||||||||||||||||||
Loan from related party | 3,200,000 | 20,000,000 | 5,800,000 | 36,100,000 | 4,800,000 | 30,000,000 | ||||||||||||||||||||||
Related party receivables forgiven | 1,200,000 | |||||||||||||||||||||||||||
Equity contribution of the forgiven loans | 5,405,317 | 3,400,000 | 21,400,000 | 2,000,000 | ||||||||||||||||||||||||
Cash Received from Loans Provided by Related Party | 5,847,070 | 0 | 0 | 2,600,000 | 16,100,000 | 3,200,000 | 20,000,000 | 5,847,070 | 0 | 0 | 30,000,000 | |||||||||||||||||
Promised amount of loan related party provided | 3,400,000 | 21,400,000 | ||||||||||||||||||||||||||
Term of the loan | 12 months | 12 months | 1 year | 1 year | ||||||||||||||||||||||||
Related party payables forgiven | 800,000 | 5,300,000 | ||||||||||||||||||||||||||
Minimum additional equity or debt financing shareholder committed to procure | 10,000,000 | |||||||||||||||||||||||||||
Interest rate, per annum | 6.50% | 6.50% | ||||||||||||||||||||||||||
Financial penalties associate with termination agreement payable | 0 | |||||||||||||||||||||||||||
Number of agreements | 2 | |||||||||||||||||||||||||||
Provision for all remaining receivables under the advertising agency agreement | $50,000 | 350,000 | $920,000 | 5,710,000 | ||||||||||||||||||||||||
Percentage of minimum guaranteed amounts will prepay by Huzhong prior to the beginning of the month | 50.00% |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Basis of Presentation; Liquidity and Going Concern) (Narrative) (Details) (USD $) | 1 Months Ended | 12 Months Ended | 3 Months Ended | |||
Apr. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2011 | |
agreements | ||||||
Organization and Principal Activities [Line Items] | ||||||
Cash and cash equivalents | $4,380,328 | $1,671,230 | $13,070,987 | $26,750,427 | ||
Accumulated deficit | 187,095,885 | 176,368,243 | ||||
Working capital deficit | 4,800,000 | |||||
Operating cash flows | ($5,209,268) | ($11,524,248) | ($8,086,138) | |||
Percentage of headcount reduced | 40.00% | |||||
Qinhe [Member] | ||||||
Organization and Principal Activities [Line Items] | ||||||
Number of cooperation agreements with related party | 2 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Consolidation) (Narrative) (Details) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 |
USD ($) | USD ($) | Consolidated VIEs [Member] | Consolidated VIEs [Member] | Consolidated VIEs [Member] | Beijing Technology [Member] | Kusheng [Member] | Tianjin Technology [Member] | |
USD ($) | USD ($) | USD ($) | Ku6 Beijing Information [Member] | Ku6 Network [Member] | Ku6 Culture [Member] | |||
CNY | CNY | CNY | ||||||
Variable Interest Entity [Line Items] | ||||||||
Carrying value of equity method investments | $0 | $0 | ||||||
Interest-free loans to the nominee shareholders of VIEs | 20,000,000 | 10,000,000 | 1,000,000 | |||||
Registered capital and PRC additional paid-in-capital of VIEs | 4,900,000 | 4,900,000 | ||||||
Total deficit | 187,095,885 | 176,368,243 | 35,600,000 | 35,300,000 | ||||
Net revenue of services provided by VIEs as requested by the local authorities | $2,600,000 | $2,300,000 | $0 |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Assets of VIEs) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Variable Interest Entity [Line Items] | ||||
Cash and cash equivalents | $4,380,328 | $1,671,230 | $13,070,987 | $26,750,427 |
Accounts receivable | 113,816 | 64,678 | ||
Amounts due from related parties | 972 | 6,521,984 | ||
Property and equipment | 293,567 | 1,368,360 | ||
Deposits and other non-current assets | 347,963 | 338,682 | ||
Variable Interest Entities [Member] | ||||
Variable Interest Entity [Line Items] | ||||
Cash and cash equivalents | 2,329,590 | 252,925 | ||
Accounts receivable | 105,762 | 36,117 | ||
Amounts due from related parties | 501 | 6,380,630 | ||
Property and equipment | 171 | 1,036 | ||
Deposits and other non-current assets | 321,709 | 311,773 | ||
Total assets | $2,757,733 | $6,982,481 |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Liabilities of VIEs) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Variable Interest Entity [Line Items] | ||
Accounts payable | $3,075,591 | $3,975,946 |
Amounts due to related parties | 709,911 | 546,668 |
Accrued expenses and other current liabilities | 5,980,164 | 7,187,630 |
Other payables due to related parties | 0 | 375,000 |
Variable Interest Entities [Member] | ||
Variable Interest Entity [Line Items] | ||
Accounts payable | 3,387,582 | 3,618,573 |
Amounts due to related parties | 20,235,986 | 20,740,356 |
Accrued expenses and other current liabilities | 6,289,169 | 6,443,737 |
Other payables due to related parties | 8,413,361 | 11,488,373 |
Total liabilities | $38,326,098 | $42,291,039 |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Summarized Operations of VIEs) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Variable Interest Entity [Line Items] | |||
Net revenue | $8,583,642 | $13,141,905 | $14,114,803 |
Net profit (loss) | -10,727,642 | -34,427,734 | -9,491,138 |
Consolidated VIEs [Member] | |||
Variable Interest Entity [Line Items] | |||
Net revenue | 8,850,824 | 14,483,007 | 13,956,477 |
Net profit (loss) | ($910,807) | $4,746,859 | ($1,331,497) |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Business Combinations and Non-controlling Interests, Foreign Currency Translation, Cash and Cash Equivalents, Investments in Affiliates) (Narrative) (Details) | 12 Months Ended | ||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | |
USD ($) | USD ($) | USD ($) | RMB | RMB | RMB | RMB | |
USD ($) | CNY | USD ($) | CNY | ||||
Schedule of Significant Accounting Policies [Line Items] | |||||||
Non-controlling interests | $0 | $0 | $0 | ||||
Rate of exchange RMB for U.S. dollar | 6.2046 | 6.0537 | |||||
Cash balances denominated in RMB | 3,496,083 | 21,691,760 | 1,058,315 | 6,406,727 | |||
Impairment of investments in affiliated companies | 0 | 0 | 0 | ||||
Book values of investment in affiliated companies | $0 | $0 |
Summary_of_Significant_Account9
Summary of Significant Accounting Policies (Summary of Estimated Useful Life of Property and Equipment) (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Furniture and office equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of property and equipment | 3 years |
Telecommunications equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of property and equipment | 3 years |
Leasehold improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives of property and equipment | Lesser of original lease term or estimated useful life |
Recovered_Sheet1
Summary of Significant Accounting Policies (Summary of Estimated Useful Economic Life of Acquired Intangible Assets) (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Trademark [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated useful economic lives of acquired intangible assets | 20 years |
Technology [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated useful economic lives of acquired intangible assets | 7 years |
Recovered_Sheet2
Summary of Significant Accounting Policies (Acquired Intangible Assets, Net and Goodwill) (Narrative) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||
Book value of acquired intangible assets | $0 | $0 | |
Impairment of goodwill | $0 | $6,232,770 | $0 |
Recovered_Sheet3
Summary of Significant Accounting Policies (Impairment of Long-lived Assets and Financial Instruments) (Narrative) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||
Impairment of long-lived assets | $0 | $0 | |
Impairment of intangible assets | 0 | 20,993,137 | 0 |
Impairment on fixed assets | 0 | ||
Financial assets measured at fair value | 0 | 0 | |
Financial liabilities measured at fair value | $0 | $0 |
Recovered_Sheet4
Summary of Significant Accounting Policies (Revenue Recognition and Cost of Revenues) (Narrative) (Details) (USD $) | 12 Months Ended | 4 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 28, 2014 | |
agreements | ||||
Schedule of Significant Accounting Policies [Line Items] | ||||
Commission fees | $0 | $0 | $0 | |
Percentage of guaranteed amounts will prepay by Huzhong prior to the beginning of the month | 50.00% | |||
Cash incentives to third-party advertising agencies | 0 | 0 | 72,464 | |
Maximum period shared revenues are to be paid by Qinhe | 30 days | |||
Applicable VAT rate for small-scale taxpayer in Pilot Program | 3.00% | |||
Creditable input VAT recognized for small-scale taxpayer in Pilot Program | $0 | |||
Shengyue [Member] | ||||
Schedule of Significant Accounting Policies [Line Items] | ||||
Number of agreements | 2 | |||
Advertising Sales [Member] | ||||
Schedule of Significant Accounting Policies [Line Items] | ||||
Applicable business tax rate | 5.00% | |||
VAT rate | 6.00% |
Recovered_Sheet5
Summary of Significant Accounting Policies (Advertising Costs, Taxation, Statutory Reserves, Government Subsidies) (Narrative) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Schedule of Significant Accounting Policies [Line Items] | |||
Advertising expenses | $0 | $287,070 | $553,380 |
Liabilities for unrecognized tax benefits | 0 | 0 | |
Portion of after-tax profit to be allocated to general reserve under PRC Law | 10.00% | ||
Statutory reserves | 0 | ||
Appropriations to general reserve or statutory reserve | 0 | 0 | 0 |
Cash subsidies | $135,265 | $1,484,789 | $1,514,570 |
Law of the PRC on Enterprises Operated Exclusively with Foreign Capital [Member] | Subsidiaries [Member] | |||
Schedule of Significant Accounting Policies [Line Items] | |||
Portion of after-tax profit to be allocated to general reserve under PRC Law | 10.00% | ||
Percentage rate of registered capital, general reserve reached, appropriation not required | 50.00% | ||
China Company Law [Member] | Variable Interest Entities [Member] | |||
Schedule of Significant Accounting Policies [Line Items] | |||
Portion of after-tax profit to be allocated to statutory reserve under PRC Law | 10.00% | ||
Percentage rate of registered capital, statutory reserve reached, appropriation not required | 50.00% |
Recovered_Sheet6
Summary of Significant Accounting Policies (Revisions to Previously Reported Amounts) (Narrative) (Details) (USD $) | 12 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||||
Schedule of Significant Accounting Policies [Line Items] | ||||||
Gain on derecognition of aged operating liabilities | ($206,533) | [1] | ($2,938,250) | [1] | $0 | [1] |
Change in accounts payable | -676,200 | [1] | 1,295,525 | [1] | -1,485,189 | [1] |
Change in accrued expenses and other current liabilities | -1,207,465 | [1] | -1,123,760 | [1] | -663,166 | [1] |
Scenario, Previously Reported [Member] | ||||||
Schedule of Significant Accounting Policies [Line Items] | ||||||
Gain on derecognition of aged operating liabilities | 2,938,250 | |||||
Change in accounts payable | -2,496,787 | |||||
Change in accrued expenses and other current liabilities | ($3,207,948) | |||||
[1] | Refer to Note 2(31). |
Prepaid_Expenses_and_Other_Cur2
Prepaid Expenses and Other Current Assets (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS [Abstract] | ||
Prepaid expenses | $192,379 | $218,420 |
Staff advances and other receivables | 186,950 | 54,254 |
Advances to suppliers | 111,026 | 113,293 |
Prepaid expenses and other current assets | $490,355 | $385,967 |
Property_and_Equipment_Net_Det
Property and Equipment, Net (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $6,931,170 | $7,108,387 | |
Less: Accumulated depreciation and amortization | -6,637,603 | -5,740,027 | |
Property and equipment, net | 293,567 | 1,368,360 | |
Depreciation expense | 1,048,398 | 1,829,963 | 1,941,761 |
Furniture and office equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 844,028 | 866,517 | |
Telecommunications equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 4,715,398 | 4,835,937 | |
Leasehold improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $1,371,744 | $1,405,933 |
Acquired_Intangible_Assets_Net2
Acquired Intangible Assets, Net (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | $27,099,170 | ||
Accumulated amortization | -6,106,033 | ||
Impairment | -20,993,137 | ||
Net carrying amount | 0 | 0 | |
Amortization expenses | 0 | 1,558,987 | 1,558,987 |
Trademark [Member] | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 24,901,940 | ||
Accumulated amortization | -4,876,630 | ||
Impairment | -20,025,310 | ||
Net carrying amount | 0 | ||
Technology [Member] | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying amount | 2,197,230 | ||
Accumulated amortization | -1,229,403 | ||
Impairment | -967,827 | ||
Net carrying amount | $0 |
Investments_in_Equity_Affiliat2
Investments in Equity Affiliates (Narrative) (Details) | 12 Months Ended | 0 Months Ended | ||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Jul. 25, 2014 | Jul. 25, 2014 | Jun. 16, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 10, 2012 | |
USD ($) | USD ($) | USD ($) | Yisheng [Member] | Yisheng [Member] | Yisheng [Member] | Yisheng [Member] | Bale [Member] | Bale [Member] | Bale [Member] | Bale [Member] | Bale [Member] | Bale [Member] | Bale [Member] | |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | CNY | CNY | USD ($) | USD ($) | USD ($) | USD ($) | ||||
Schedule of Equity Method Investments [Line Items] | ||||||||||||||
Equity interest of equity method investment | 20.00% | 20.00% | ||||||||||||
Carrying value of equity method investments | $0 | $0 | $0 | $255,281 | $0 | $0 | ||||||||
Share of loss | 0 | 0 | -252,585 | 0 | 0 | -252,585 | ||||||||
Original cost basis | 0 | |||||||||||||
Percentage of equity interest disposed | 10.00% | |||||||||||||
Sale price of equity interest in affiliates | 9,000,000 | |||||||||||||
Gain from disposal of equity interest in affiliate | 1,451,979 | 0 | 0 | 1,451,979 | 9,000,000 | |||||||||
Equity interest of cost method investment | 7.00% | |||||||||||||
Carry value of cost method investment | $0 |
Investments_in_Equity_Affiliat3
Investments in Equity Affiliates (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Schedule of Equity Method Investments [Line Items] | |||
Investment in affiliates, beginning balance | $0 | ||
Share of loss | 0 | 0 | -252,585 |
Investment in affiliates, ending balance | 0 | 0 | |
Yisheng [Member] | |||
Schedule of Equity Method Investments [Line Items] | |||
Investment in affiliates, beginning balance | 0 | 255,281 | |
Share of loss | 0 | 0 | -252,585 |
Foreign currency translation | -2,696 | ||
Investment in affiliates, ending balance | $0 |
Goodwill_Details
Goodwill (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
GOODWILL [Abstract] | |||
Goodwill, beginning balance | $0 | $6,232,770 | $6,232,770 |
Change | 0 | ||
Impairment | 0 | -6,232,770 | 0 |
Goodwill, ending balance | 0 | 0 | 6,232,770 |
Impairment as to the carrying value of goodwill | 0 | ||
Discount rate in excess which considered cost of capital and risk premium | 20.00% | ||
Fair value of goodwill | $0 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
FAIR VALUE MEASUREMENTS [Abstract] | |||
Financial assets measured at fair value on a recurring basis | $0 | $0 | |
Financial liabilities measured at fair value on a recurring basis | 0 | 0 | |
Impairment loss for intangible assets | 0 | 20,993,137 | 0 |
Impairment loss for goodwill | 0 | 6,232,770 | 0 |
Fair values of assets on Level 3-classified assets | $0 |
Accrued_Expenses_and_Other_Cur2
Accrued Expenses and Other Current Liabilities (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES [Abstract] | ||||
Accrued litigation provision | $1,653,032 | $2,079,671 | $2,077,753 | $2,683,968 |
Accrued professional service fees | 1,604,240 | 1,720,454 | ||
Accrued welfare benefits | 1,289,157 | 1,462,926 | ||
Accrued payroll | 452,583 | 659,870 | ||
Indirect taxes payable | 297,293 | 400,602 | ||
Advances from customers | 191,022 | 26,920 | ||
Other accrued expenses | 492,837 | 837,187 | ||
Accrued expenses and other current liabilities | $5,980,164 | $7,187,630 |
Other_Income_Net_Details
Other Income, Net (Details) (USD $) | 12 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||||
OTHER INCOME, NET [Abstract] | ||||||
Sub-lease income | $276,895 | $317,915 | $249,123 | |||
Gain on derecognition of long-aged operating liabilities | 206,533 | [1] | 2,938,250 | [1] | 0 | [1] |
Government subsidies | 135,265 | 1,484,789 | 1,514,570 | |||
Reimbursement from depository bank related to ADR program | 92,144 | 240,470 | 0 | |||
Provision for Seed Music receivable (related party) | 0 | -980,000 | 0 | |||
Other | 35,121 | 99,615 | -35,155 | |||
Total | $745,958 | $4,101,039 | $1,728,538 | |||
[1] | Refer to Note 2(31). |
Other_Income_Net_Narrative_Det
Other Income, Net (Narrative) (Details) (USD $) | 12 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||||
Other Income Net [Line Items] | ||||||
Gain from derecognition of long-aged operating liabilities | $206,533 | [1] | $2,938,250 | [1] | $0 | [1] |
Write-off of sales rebate payables | 1,077,242 | |||||
Write-off of third-party commissions | 818,914 | |||||
Write-off of other accrued expenses payable | 1,042,094 | |||||
Seed Music [Member] | ||||||
Other Income Net [Line Items] | ||||||
Loan to related party | 980,000 | |||||
Net value of loan to related party | $0 | |||||
[1] | Refer to Note 2(31). |
Related_Party_Transactions_and2
Related Party Transactions and Balances (Current Related Parties) (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Xu Xudong ("Mr. Xu") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Largest shareholder |
Shanghai Qinhe Internet Technology Software Development Co., Ltd., ("Qinhe") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Entity controlled by Mr. Xu |
Shanda Interactive Entertainment Limited ("Shanda") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Second largest shareholder |
Shanda Computer (Shanghai) Co., Ltd. ("Shanda Computer") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda |
Shanghai Shanda Network Development Co., Ltd ("Shanda Network") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda |
Shanda Media Group Ltd. [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda |
Shanda Capital Ltd. [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda |
Shanghai Shengle Information Technology Co., Ltd. ("Shengle") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda |
Shanghai Shengjin Software Development Co., Ltd. ("Shengjin") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda |
Related_Party_Transactions_and3
Related Party Transactions and Balances (Former Related Parties) (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Shanghai Shengyue Advertising Co., Ltd. ("Shengyue") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda until April 2014 |
Shanghai Shulong Technology Co., Ltd. ("Shanghai Shulong") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Consolidated affiliate of Shanda Games Limited |
Shanghai Shulong Computer Technology Co., Ltd. ("Shanghai Shulong Computer") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Consolidated affiliate of Shanda Games Limited |
Hurray! Media Co., Ltd. [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Wholly owned affiliate of Shanda until May 2014 |
Shanda Games Ltd. ("Shanda Games") [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Majority owned affiliate of Shanda until September 2014 |
Seed Music Group Limited [Member] | |
Related Party Transaction [Line Items] | |
Relationship to Ku6 Media Co., Ltd. | Significant influence exercised by Shanda until May 2014 |
Related_Party_Transactions_and4
Related Party Transactions and Balances (Significant Related Parties Transactions) (Details) | 12 Months Ended | 0 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | 30-May-14 | 30-May-14 | Apr. 10, 2014 | Apr. 10, 2014 | Apr. 03, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
USD ($) | USD ($) | USD ($) | Shengyue [Member] | Shengyue [Member] | Shengyue [Member] | Qinhe [Member] | Qinhe [Member] | Qinhe [Member] | Shanda Network [Member] | Shanda Network [Member] | Shanda Network [Member] | Shengjin [Member] | Shengjin [Member] | Shengjin [Member] | Shanda Media Group Ltd. [Member] | Shanda Media Group Ltd. [Member] | Shanda Media Group Ltd. [Member] | Hurray! Media Co., Ltd. [Member] | Hurray! Media Co., Ltd. [Member] | Hurray! Media Co., Ltd. [Member] | Companies under control of Shanda [Member] | Companies under control of Shanda [Member] | Companies under control of Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda Capital Limited [Member] | Shanda Capital Limited [Member] | Shanda Capital Limited [Member] | Shanda Games Limited [Member] | Shanda Games Limited [Member] | Shanda Games Limited [Member] | Shanghai Shulong Computer Technology Co., Ltd. [Member] | Shanghai Shulong Computer Technology Co., Ltd. [Member] | Shanghai Shulong Computer Technology Co., Ltd. [Member] | Shanghai Shulong Technology Co., Ltd. [Member] | Shanghai Shulong Technology Co., Ltd. [Member] | Shanghai Shulong Technology Co., Ltd. [Member] | Shanghai Shulong Computer and Shanghai Shulong [Member] | Shanghai Shulong Computer and Shanghai Shulong [Member] | Shanghai Shulong Computer and Shanghai Shulong [Member] | |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | CNY | USD ($) | CNY | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | ||||
Related Party Transaction [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||
Online advertising revenue received from related parties | $2,703,492 | $12,404,031 | $12,481,927 | ||||||||||||||||||||||||||||||||||||||||||||
Promotional advertising revenue received from related parties | 1,600,000 | 1,613,606 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||
Technical service fees in cost of revenues paid to related parties | 673,899 | 335,504 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Technical service fees in cost of revenues payable but forgiven by related parties | 235,876 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Rental fee payable but forgiven by related parties | 170,086 | 0 | 0 | 23,926 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||
Interest expense payable but forgiven by related parties | 375,000 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
Receivables due from related parties to the Company but forgiven as to repayment | 1,246,641 | 0 | 0 | 1,200,000 | |||||||||||||||||||||||||||||||||||||||||||
Purchase of equipment from related parties | 209,539 | 29,566 | 1,277,455 | 0 | 188,334 | 0 | |||||||||||||||||||||||||||||||||||||||||
Equity contribution from related parties | 5,847,070 | 0 | 0 | 2,600,000 | 16,100,000 | 3,200,000 | 20,000,000 | 5,847,070 | 0 | 0 | |||||||||||||||||||||||||||||||||||||
Loan repayment from related parties | 470,000 | 0 | 0 | 0 | 3,300,000 | 13,900,000 | |||||||||||||||||||||||||||||||||||||||||
Loan repayment to related parties | 0 | 0 | 6,769,544 | 0 | 3,303,760 | 3,135,076 | |||||||||||||||||||||||||||||||||||||||||
Loan to related parties | 0 | 13,865 | 470,000 | ||||||||||||||||||||||||||||||||||||||||||||
Interest income from related parties | 3,388 | 28,856 | 256,753 | 3,388 | 14,620 | 10,575 | 0 | 14,236 | 246,178 | ||||||||||||||||||||||||||||||||||||||
Interest expenses for loans from related parties | $0 | $16,365 | $448,011 | $0 | $16,365 | $448,011 |
Related_Party_Transactions_and5
Related Party Transactions and Balances (Narrative) (Details) | 12 Months Ended | 4 Months Ended | 21 Months Ended | 3 Months Ended | 0 Months Ended | 2 Months Ended | 12 Months Ended | 12 Months Ended | |||||||
Dec. 31, 2014 | Aug. 28, 2014 | Dec. 31, 2012 | Jun. 30, 2014 | 19-May-14 | 19-May-14 | Apr. 03, 2014 | Apr. 03, 2014 | 31-May-14 | 31-May-14 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
USD ($) | Shengyue [Member] | Shengyue [Member] | Qinhe [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda [Member] | Shanda Capital Limited [Member] | Seed Music [Member] | Shanda Media Group Limited [Member] | Shanda Media Group Limited [Member] | Shanda Media Group Limited [Member] | |
agreements | Original agreement with Shengyue [Member] | agreements | USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | USD ($) | USD ($) | USD ($) | USD ($) | |||
Related Party Transaction [Line Items] | |||||||||||||||
Term of cooperative agreement with related party | 1 year 9 months | ||||||||||||||
Number of agreements | 2 | 2 | |||||||||||||
Loan from related party | $3,200,000 | 20,000,000 | $5,800,000 | 36,100,000 | |||||||||||
Related party payables forgiven | 800,000 | 5,300,000 | |||||||||||||
Related party receivables forgiven | 1,200,000 | ||||||||||||||
Equity contribution of the forgiven loans | 5,405,317 | 3,400,000 | 21,400,000 | 2,000,000 | |||||||||||
Annual interest rate | 3.00% | ||||||||||||||
Loan to related party | 980,000 | ||||||||||||||
Net value of loan to related party | 0 | ||||||||||||||
Loan forgiven by Shanda | 20,000,000 | ||||||||||||||
Interest payable to related parties forgiven as to repayment | $375,000 | $0 | $0 |
Related_Party_Transactions_and6
Related Party Transactions and Balances (Accounts Receivable Balances Due from Related Parties) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transaction [Line Items] | ||
Accounts receivable due from related parties | $972 | $6,521,984 |
Shanghai Shengyue Advertising Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
Accounts receivable due from related parties | 0 | 6,313,489 |
Other companies under control of Shanda [Member] | ||
Related Party Transaction [Line Items] | ||
Accounts receivable due from related parties | $972 | $208,495 |
Related_Party_Transactions_and7
Related Party Transactions and Balances (Accounts Payable Balances Due to Related Parties) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transaction [Line Items] | ||
Accounts payable due to related parties | $709,911 | $546,668 |
Shanghai Shanda Network Development Co., Ltd [Member] | ||
Related Party Transaction [Line Items] | ||
Accounts payable due to related parties | 709,911 | 355,820 |
Shanghai Shengle Information Technology Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
Accounts payable due to related parties | 0 | 190,837 |
Other companies under control of Shanda [Member] | ||
Related Party Transaction [Line Items] | ||
Accounts payable due to related parties | $0 | $11 |
Related_Party_Transactions_and8
Related Party Transactions and Balances (Other Receivables Due from Related Parties) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transaction [Line Items] | ||
Other receivables due from related parties | $2,924 | $1,787,505 |
Hurray! Media Co., Ltd. [Member] | ||
Related Party Transaction [Line Items] | ||
Other receivables due from related parties | 0 | 1,246,641 |
Seed Music Group Limited [Member] | ||
Related Party Transaction [Line Items] | ||
Other receivables due from related parties | 0 | 0 |
Shanda Capital Limited [Member] | ||
Related Party Transaction [Line Items] | ||
Other receivables due from related parties | 0 | 495,196 |
Other companies under control of Shanda [Member] | ||
Related Party Transaction [Line Items] | ||
Other receivables due from related parties | $2,924 | $45,668 |
Related_Party_Transactions_and9
Related Party Transactions and Balances (Other Payables Due to Related Parties) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transaction [Line Items] | ||
Other payables due to related parties | $0 | $375,000 |
Shanda Media Group Limited [Member] | ||
Related Party Transaction [Line Items] | ||
Other payables due to related parties | $0 | $375,000 |
Income_Taxes_Narrative_Details
Income Taxes (Narrative) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Income Tax [Line Items] | ||||
Corporate income tax rate | 25.00% | 25.00% | 25.00% | |
Reduced tax rates afforded to the Group's PRC entities | 0.00% | |||
Tax loss carry forwards | $88,100,000 | $101,000,000 | ||
Limited period for tax loss carry forwards | 5 years | |||
Liabilities for unrecognized tax benefits | 0 | 0 | ||
Withholding income tax rate on dividends arising from profits of foreign invested enterprises under PRC EIT Law | 10.00% | |||
Undistributed earnings of the Group's subsidiaries located in the PRC | 0 | 0 | ||
Provision made for withholding taxes | 0 | 0 | ||
Valuation Allowance of Deferred Tax Assets [Member] | ||||
Income Tax [Line Items] | ||||
Valuation allowance | $23,863,461 | $26,251,543 | 24,303,518 | $22,836,709 |
Subsidiaries and VIEs in PRC [Member] | ||||
Income Tax [Line Items] | ||||
Corporate income tax rate | 25.00% |
Income_Taxes_Provision_benefit
Income Taxes (Provision (benefit) for Income Taxes) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
INCOME TAXES [Abstract] | |||
Current income tax expense (benefit) | $0 | $0 | $0 |
Deferred income tax expense (benefit) | 0 | -4,826,059 | 0 |
Total | $0 | ($4,826,059) | $0 |
Income_Taxes_Principal_Compone
Income Taxes (Principal Components of Deferred Tax Assets and Liabilities) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current deferred tax assets (liabilities): | ||
Cost and expense accruals | $1,352,773 | $847,197 |
Revenue recognition | 401,436 | 84,241 |
Less: valuation allowance | -1,754,209 | -931,438 |
Current deferred tax assets, net | 0 | 0 |
Non-current deferred tax assets (liabilities): | ||
Depreciation and amortization | 92,195 | 72,477 |
Net operating loss carry forwards | 22,017,057 | 25,247,628 |
Less: valuation allowance | -22,109,252 | -25,320,105 |
Non-current deferred tax assets, net | 0 | 0 |
Intangible assets | 0 | 0 |
Non-current deferred tax liabilities | $0 | $0 |
Income_Taxes_Reconciliation_be
Income Taxes (Reconciliation between Statutory Tax Rate and Effective Tax Rate) (Details) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
INCOME TAXES [Abstract] | |||
Statutory tax rate | 25.00% | 25.00% | 25.00% |
Differential statutory tax rates | -1.40% | -5.00% | -4.70% |
Non-deductible expenses | -1.10% | -14.80% | -1.50% |
Change in deferred tax liabilities | 0.00% | 12.30% | 0.00% |
Change in valuation allowance | -22.50% | -5.20% | -18.80% |
Effective tax rate | 0.00% | 12.30% | 0.00% |
Income_Taxes_Movement_of_Valua
Income Taxes (Movement of Valuation Allowances) (Details) (Valuation Allowance of Deferred Tax Assets [Member], USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Valuation Allowance of Deferred Tax Assets [Member] | |||
Valuation and Qualifying Accounts Disclosure [Line Items] | |||
At beginning of year | ($26,251,543) | ($24,303,518) | ($22,836,709) |
Current year additions | -71,991 | -1,239,840 | -1,415,765 |
Current year reversals | 1,879,698 | 0 | 180,965 |
Effect of exchange rate changes | 580,375 | -708,185 | -232,009 |
At end of year | ($23,863,461) | ($26,251,543) | ($24,303,518) |
Repurchase_of_Shares_Details
Repurchase of Shares (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | |||
Jul. 13, 2012 | Jul. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2011 | Dec. 31, 2012 | |
Former senior members of management and investment entity [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Aggregate consideration of repurchased shares | $8,071,786 | |||||
Repurchase agreement, approved date | 12-Jul-12 | |||||
Repurchase agreement, consummated date | 13-Jul-12 | |||||
ADS [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Authorized amount to repurchase | 3,200,000 | |||||
Stock repurchased | 0 | |||||
ADS [Member] | Maximum [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Share price | $3.30 | |||||
ADS [Member] | Minimum [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Share price | $0.90 | |||||
ADS [Member] | Unrelated third parties [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Stock repurchased | 57,982 | |||||
Aggregate consideration of repurchased shares | $58,147 | |||||
Weighted average price per share | $1 | |||||
ADS [Member] | Former senior members of management and investment entity [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Stock repurchased | 79,717 | |||||
Weighted average price per share | $2.91 | |||||
Ordinary shares [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Share price | 0.01 | $0.03 | $0.01 | |||
Ordinary shares [Member] | Former senior members of management and investment entity [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Stock repurchased | 269,409,276 | |||||
Weighted average price per share | $0.03 |
Equity_Compensation_Plans_2004
Equity Compensation Plans (2004 Share Incentive Plan) (Narrative) (Details) (USD $) | 12 Months Ended | ||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 04, 2010 | |
Ordinary shares [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share price | $0.01 | $0.03 | $0.01 | ||
2004 Share Incentive Plan [Member] | Stock Options [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Expire term from the date of grant | 10 years | ||||
Options outstanding | 1,620,000 | 15,720,000 | 34,669,372 | 43,746,700 | |
Total intrinsic value of options exercised in period | $0 | $0 | $0 | ||
2004 Share Incentive Plan [Member] | Stock Options [Member] | Minimum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 3 years | ||||
2004 Share Incentive Plan [Member] | Stock Options [Member] | Maximum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 4 years | ||||
2004 Share Incentive Plan [Member] | Stock Options [Member] | Ordinary shares [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of ordinary shares terminated and unavailable for future grant | 185,550,800 |
Equity_Compensation_Plans_20041
Equity Compensation Plans (2004 Share Incentive Plan, Movements in Stock Options) (Details) (2004 Share Incentive Plan [Member], Stock Options [Member], USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
years | years | years | |
2004 Share Incentive Plan [Member] | Stock Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options Outstanding, Beginning Balance | 15,720,000 | 34,669,372 | 43,746,700 |
Options Outstanding, Granted | 0 | 0 | 0 |
Options Outstanding, Exercised | 0 | 0 | 0 |
Options Outstanding, Cancelled or Expired | -9,077,328 | ||
Options Outstanding, Forfeited | -14,100,000 | -18,949,372 | |
Options Outstanding, Ending Balance | 1,620,000 | 15,720,000 | 34,669,372 |
Options Outstanding, Vested and expected to vest | 1,620,000 | ||
Options Outstanding, Vested and exercisable | 1,620,000 | ||
Weighted Average Exercise Price, Outstanding, Beginning balance | $0.12 | $0.09 | $0.08 |
Weighted Average Exercise Price, Granted | $0 | $0 | $0 |
Weighted Average Exercise Price, Exercised | $0 | $0 | $0 |
Weighted Average Exercise Price, Cancelled or Expired | $0.03 | ||
Weighted Average Exercise Price, Forfeited | $0.12 | $0.08 | |
Weighted Average Exercise Price, Outstanding, Ending balance | $0.10 | $0.12 | $0.09 |
Weighted Average Exercise Price, Vested and expected to vest | $0.10 | ||
Weighted Average Exercise Price, Vested and exercisable | $0.10 | ||
Weighted Average Remaining Contractual Life, Outstanding, Beginning balance | 0.11 | 0.89 | 1.62 |
Weighted Average Remaining Contractual Life, Outstanding, Ending balance | 0 | 0.11 | 0.89 |
Weighted Average Remaining Contractual Life, Vested and expected to vest | 0 | ||
Weighted Average Remaining Contractual Life, Vested and exercisable | 0 | ||
Aggregate Intrinsic Value, Outstanding, Beginning balance | $0 | $0 | $0 |
Aggregate Intrinsic Value, Outstanding, Ending balance | 0 | 0 | 0 |
Aggregate Intrinsic Value, Vested and expected to vest | 0 | ||
Aggregate Intrinsic Value, Vested and exercisable | $0 |
Equity_Compensation_Plans_2010
Equity Compensation Plans (2010 Equity Compensation Plan) (Narrative) (Details) (USD $) | 0 Months Ended | 12 Months Ended | 27 Months Ended | 0 Months Ended | |||||
Dec. 11, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | 7-May-13 | Aug. 28, 2012 | Jun. 03, 2013 | Dec. 31, 2010 | |
Ordinary shares [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Share price | $0.01 | $0.03 | $0.01 | ||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Granted stock options | 0 | 323,900,000 | 28,500,000 | ||||||
Options, exercise price | $0 | $0.01 | $0.01 | ||||||
Percentage of shares of options attributable to vest | 60.00% | ||||||||
Total incremental compensation cost | $370,000 | ||||||||
Incremental compensation cost, recorded in current period | 180,000 | ||||||||
Incremental compensation cost, amortized over remaining vesting period of options | 190,000 | ||||||||
Share price | $0 | $0.01 | |||||||
Weighted average grant-date fair value of options granted in period | $0 | $0.01 | $0.01 | ||||||
Number of options vested in period | 51,602,500 | 50,140,375 | |||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Ordinary shares [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of ordinary shares authorized for issuance of options | 698,381,300 | ||||||||
Number of ordinary shares available for future grant | 440,962,300 | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Employees [Member] | Ordinary shares [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Granted stock options | 50,600,000 | 28,500,000 | |||||||
Options, exercise price | $0.01 | ||||||||
Contractual term | 6 years | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Employees and senior management [Member] | Ordinary shares [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Granted stock options | 254,100,000 | ||||||||
Options, exercise price | 0.0103 | ||||||||
Contractual term | 6 years | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Senior management [Member] | Prior to 2013 [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Vesting rights | Vest in 16 instalments. The first 2 of 16 instalments - options earned in the first two quarters after the grant date - shall vest and become exercisable at the first anniversary of the grant date. There are no performance conditions attached to the first 2 instalments. For each quarter during the four-year period after the grant date (the "Performance Period Start Date"), one 1/16th instalment of the total options have the opportunity to be earned for each quarter contingent on the achievement of positive quarterly operating income for the quarter, provided the aggregate number of options earned in the Performance Period shall not exceed 14 of the 16 instalments comprising the total options granted. On each of the first, fourth, eighth and twelfth quarter earnings release dates from the first quarter of the Performance Period, all of the earned options during the four quarters preceding such earnings release date shall vest and become exercisable, in each case, provided that the employment with the Company remains on such vesting date. | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Senior management [Member] | 2013 [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award vesting period | 4 years | ||||||||
Vesting rights | With 25% of the options to vest on each of the first, second, third and fourth anniversaries of the grant date as stipulated in the stock option agreements. | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Senior management [Member] | Ordinary shares [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Granted stock options | 140,000,000 | 69,800,000 | |||||||
Options, exercise price | $0.01 | ||||||||
Contractual term | 6 years | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Senior management and employees of Shanda [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Share-based compensation expense | 15,475 | 52,888 | 350,761 | ||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Senior management and employees of Shanda [Member] | Ordinary shares [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Granted stock options | 63,500,000 | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Directors and employees [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award vesting period | 4 years | ||||||||
Vesting rights | With 25% of the options to vest on each of the first, second, third and fourth anniversaries of the grant date as stipulated in the stock option agreements | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Employees, senior management and directors [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Share-based compensation expense | 600,995 | 1,023,871 | 463,753 | ||||||
Unrecognized compensation cost | 350,000 | ||||||||
Weighted average period, unrecognized compensation cost to be recognized | 1 year 6 months 18 days | ||||||||
2010 Equity Compensation Plan [Member] | Stock Options [Member] | Employees of Shanda [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Unrecognized compensation cost | $600,000 | ||||||||
Weighted average period, unrecognized compensation cost to be recognized | 2 years 4 months 10 days |
Equity_Compensation_Plans_20101
Equity Compensation Plans (2010 Equity Compensation Plan, Movements in Stock Options) (Details) (2010 Equity Compensation Plan [Member], Stock Options [Member], USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
years | years | years | |
2010 Equity Compensation Plan [Member] | Stock Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options Outstanding, Beginning Balance | 511,294,000 | 305,256,000 | 402,826,000 |
Options Outstanding, Granted | 0 | 323,900,000 | 28,500,000 |
Options Outstanding, Exercised | -32,712,500 | -4,000,000 | 0 |
Options Outstanding, Cancelled or expired | -126,070,000 | ||
Options Outstanding, Forfeited | -257,875,000 | -113,862,000 | |
Options Outstanding, Ending Balance | 220,706,500 | 511,294,000 | 305,256,000 |
Options Outstanding, Vested and expected to vest | 200,348,900 | ||
Options Outstanding, Vested and exercisable | 119,243,125 | ||
Weighted Average Exercise Price, Outstanding, Beginning balance | $0.02 | $0.03 | $0.04 |
Weighted Average Exercise Price, Granted | $0 | $0.01 | $0.01 |
Weighted Average Exercise Price, Exercised | $0.01 | $0.01 | $0 |
Weighted Average Exercise Price, Cancelled or expired | $0.04 | ||
Weighted Average Exercise Price, Forfeited | $0.01 | $0.03 | |
Weighted Average Exercise Price, Outstanding, Ending balance | $0.03 | $0.02 | $0.03 |
Weighted Average Exercise Price, Vested and expected to vest | $0.03 | ||
Weighted Average Exercise Price, Vested and exercisable | $0.03 | ||
Weighted Average Remaining Contractual Life, Outstanding, Beginning balance | 4.7 | 4.57 | 5.47 |
Weighted Average Remaining Contractual Life, Outstanding, Ending balance | 2.97 | 4.7 | 4.57 |
Weighted Average Remaining Contractual Life, Vested and expected to vest | 2.9 | ||
Weighted Average Remaining Contractual Life, Vested and exercisable | 2.63 | ||
Aggregate Intrinsic Value, Outstanding, Beginning balance | $6,514,815 | $0 | $0 |
Aggregate intrinsic value, exercised | 138,955 | 55,213 | 0 |
Aggregate Intrinsic Value, Outstanding, Ending balance | 0 | 6,514,815 | 0 |
Aggregate Intrinsic Value, Vested and expected to vest | 0 | ||
Aggregate Intrinsic Value, Vested and exercisable | $0 |
Equity_Compensation_Plans_20102
Equity Compensation Plans (2010 Equity Compensation Plan, Fair Value Assumptions) (Details) (2010 Equity Compensation Plan [Member], Stock Options [Member], USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Fair value of ordinary shares ($) | $0 | $0.01 | |
Exercise price ($) | $0 | $0.01 | |
Expected volatility (%) | 0.00% | 94.00% | 100.00% |
Expected dividend yield (%) | 0.00% | 0.00% | 0.00% |
Expected term (years) | 0 years | 3 years 6 months | 3 years 6 months |
Risk-free interest rate (per annum) (%) | 0.00% | 1.24% | |
Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Fair value of ordinary shares ($) | $0.01 | ||
Exercise price ($) | $0.01 | ||
Risk-free interest rate (per annum) (%) | 1.34% | ||
Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Fair value of ordinary shares ($) | $0.01 | ||
Exercise price ($) | $0.01 | ||
Risk-free interest rate (per annum) (%) | 1.38% |
Segment_Information_Narrative_
Segment Information (Narrative) (Details) | 12 Months Ended |
Dec. 31, 2014 | |
segments | |
SEGMENT INFORMATION [Abstract] | |
Number of operating segments | 1 |
Net_Loss_Per_Share_Details
Net Loss Per Share (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Numerator: | |||
Net loss | ($10,727,642) | ($34,427,734) | ($9,491,138) |
Ordinary shares [Member] | |||
Denominator: | |||
Weighted-average shares outstanding for basic calculation | 4,746,324,022 | 4,728,185,434 | 4,901,279,176 |
Dilutive effect of potential shares | 0 | 0 | 0 |
Weighted-average shares outstanding for diluted calculation | 4,746,324,022 | 4,728,185,434 | 4,901,279,176 |
Loss per share-basic and diluted | |||
Net loss per share - basic and diluted | $0 | ($0.01) | $0 |
ADS [Member] | |||
Denominator: | |||
Weighted-average shares outstanding for basic calculation | 47,463,240 | 47,281,854 | 49,012,792 |
Dilutive effect of potential shares | 0 | 0 | 0 |
Weighted-average shares outstanding for diluted calculation | 47,463,240 | 47,281,854 | 49,012,792 |
Loss per share-basic and diluted | |||
Net loss per share - basic and diluted | ($0.23) | ($0.73) | ($0.19) |
Concentrations_Narrative_Detai
Concentrations (Narrative) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Concentration Risk [Line Items] | |||
Revenues derived from online advertising services | $7,000,000 | $13,100,000 | $14,100,000 |
Revenues derived from promotional advertising services | 1,600,000 | ||
Previously written down doubtful receivables collected | $49,912 | $310,699 | $2,255,301 |
Shengyue [Member] | Net revenues [Member] | Revenue concentration risk [Member] | |||
Concentration Risk [Line Items] | |||
Percentage of concentration risk | 31.50% | 94.40% | 88.40% |
Huzhong [Member] | Net revenues [Member] | Revenue concentration risk [Member] | |||
Concentration Risk [Line Items] | |||
Percentage of concentration risk | 32.40% | ||
Qinhe [Member] | Net revenues [Member] | Revenue concentration risk [Member] | |||
Concentration Risk [Line Items] | |||
Percentage of concentration risk | 18.80% |
Concentrations_Schedule_of_Acc
Concentrations (Schedule of Accounts Receivable) (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Accounts Receivable, Net, Current [Abstract] | ||||
Accounts receivable | $532,355 | $544,754 | ||
Allowance for doubtful accounts | -418,539 | -480,076 | -2,172,972 | -4,416,706 |
Accounts receivable, net of allowance for doubtful accounts | $113,816 | $64,678 |
Concentrations_Movement_of_All
Concentrations (Movement of Allowance for Doubtful Accounts) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Movement of allowance for doubtful accounts [Abstract] | |||
Balance at beginning of the year | $480,076 | $2,172,972 | $4,416,706 |
Provisions | 1,038,047 | 0 | 0 |
Reversed | -49,912 | -310,699 | -2,255,301 |
Accounts written off | -1,038,047 | -1,435,204 | 0 |
Translation difference | -11,625 | 53,007 | 11,567 |
Balance at end of the year | $418,539 | $480,076 | $2,172,972 |
Mainland_China_Contribution_Pl1
Mainland China Contribution Plan (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
MAINLAND CHINA CONTRIBUTION PLAN [Abstract] | |||
Employee benefits of mainland China contribution plan | $1,059,305 | $1,816,719 | $1,609,711 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Narrative) (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Commitments and Contingencies [Line Items] | ||||
Leasing expenses | $8,367,927 | $9,175,500 | $9,095,530 | |
Accrued litigation provision | 1,653,032 | 2,079,671 | 2,077,753 | 2,683,968 |
De-recognition of previously accrued litigation provision | 333,485 | |||
Restriction on foreign ownership in internet content and other value-added telecommunication service, maximum percentage | 50.00% | |||
Unasserted Claim [Member] | ||||
Commitments and Contingencies [Line Items] | ||||
Accruals for any additional losses | $0 |
Commitments_and_Contingencies_2
Commitments and Contingencies (Future Minimum Lease Payments under Non-cancellable Operating Lease Agreements) (Details) (USD $) | Dec. 31, 2014 |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Within 1 year | $2,186,304 |
Between 1 and 2 years | 0 |
Between 2 and 3 years | 0 |
Between 3 and 4 years | 0 |
Total | $2,186,304 |
Commitments_and_Contingencies_3
Commitments and Contingencies (Rollforward of Accrued Litigation Provision Related to Alleged Copyright Infringement) (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Accrued Litigation Provision [Roll Forward] | |||
At beginning of year | $2,079,671 | $2,077,753 | $2,683,968 |
Current year additions (reversals) | -333,485 | 141,912 | -113,611 |
Payments during the year | -93,154 | -139,994 | -492,604 |
Balance at end of year | $1,653,032 | $2,079,671 | $2,077,753 |
Subsequent_Events_Details
Subsequent Events (Details) (Subsequent Event [Member], Mr. Xu [Member]) | 0 Months Ended | |
In Millions, unless otherwise specified | Feb. 02, 2015 | Feb. 02, 2015 |
USD ($) | CNY | |
Subsequent Event [Line Items] | ||
Loan from related party | $4.80 | 30 |
Maximum business days between agreement date and loan provided date | 20 days | 20 days |
Term of the loan | 1 year | 1 year |
Interest rate, per annum | 6.50% | 6.50% |
Restricted_Net_Assets_Details
Restricted Net Assets (Details) (USD $) | 12 Months Ended |
In Millions, unless otherwise specified | Dec. 31, 2014 |
RESTRICTED NET ASSETS [Abstract] | |
Portion of after-tax profit to be allocated to general reserve under PRC Law | 10.00% |
Restricted portion of net assets, amount | $30.90 |
Additional_Information_Condens2
Additional Information - Condensed Financial Statements (Condensed Balance Sheet) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Assets | ||||
Cash and cash equivalents | $4,380,328 | $1,671,230 | $13,070,987 | $26,750,427 |
Prepaid expenses and other current assets | 490,355 | 385,967 | ||
Total current assets | 4,988,395 | 10,431,364 | ||
Total assets | 5,629,925 | 12,138,406 | ||
Liabilities and shareholders' equity (deficit) | ||||
Accrued expenses and other current liabilities | 5,980,164 | 7,187,630 | ||
Total current liabilities | 9,765,666 | 12,085,244 | ||
Shareholders' equity (deficit): | ||||
Ordinary shares ($0.00005 par value; 12,000,000,000 shares authorized; 4,730,648,360 and 4,763,360,860 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 238,120 | 236,485 | ||
Additional paid-in capital | 184,538,349 | 178,195,109 | ||
Accumulated deficit | -187,095,885 | -176,368,243 | ||
Accumulated other comprehensive loss | -1,816,325 | -2,010,189 | ||
Total shareholders' equity (deficit) | -4,135,741 | 53,162 | ||
Total liabilities and equity (deficit) | 5,629,925 | 12,138,406 | ||
Ku6 Media Co., Ltd. [Member] | ||||
Assets | ||||
Cash and cash equivalents | 341,320 | 56,999 | 5,219,295 | 7,754,457 |
Prepaid expenses and other current assets | 195,049 | 250,091 | ||
Amount due from subsidiaries and variable interest entities | 0 | 15,709,401 | ||
Amount due from related parties | 627 | 1,741,836 | ||
Total current assets | 536,996 | 17,758,327 | ||
Investments in subsidiaries | 19,690,895 | 8,082,866 | ||
Total assets | 20,227,891 | 25,841,193 | ||
Liabilities and shareholders' equity (deficit) | ||||
Accrued expenses and other current liabilities | 541,961 | 701,375 | ||
Amounts due to subsidiaries and variable interest entities | 23,821,671 | 24,711,656 | ||
Amounts due to related parties | 0 | 375,000 | ||
Total current liabilities | 24,363,632 | 25,788,031 | ||
Shareholders' equity (deficit): | ||||
Ordinary shares ($0.00005 par value; 12,000,000,000 shares authorized; 4,730,648,360 and 4,763,360,860 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 238,120 | 236,485 | ||
Additional paid-in capital | 184,538,349 | 178,195,109 | ||
Accumulated deficit | -187,095,885 | -176,368,243 | ||
Accumulated other comprehensive loss | -1,816,325 | -2,010,189 | ||
Total shareholders' equity (deficit) | -4,135,741 | 53,162 | ||
Total liabilities and equity (deficit) | $20,227,891 | $25,841,193 |
Additional_Information_Condens3
Additional Information - Condensed Financial Statements (Condensed Balance Sheet) (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Condensed Balance Sheet Statements, Captions [Line Items] | ||||
Ordinary shares, par value | $0.00 | $0.00 | $0.00 | $0.00 |
Ordinary shares, authorized | 12,000,000,000 | 12,000,000,000 | ||
Ordinary shares, issued and outstanding | 4,763,360,860 | 4,730,648,360 | ||
Ku6 Media Co., Ltd. [Member] | ||||
Condensed Balance Sheet Statements, Captions [Line Items] | ||||
Ordinary shares, par value | $0.00 | $0.00 | ||
Ordinary shares, authorized | 12,000,000,000 | 12,000,000,000 | ||
Ordinary shares, issued and outstanding | 4,763,360,860 | 4,730,648,360 |
Additional_Information_Condens4
Additional Information - Condensed Financial Statements (Condensed Statements of Operations) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Operating expenses: | |||
Product development | $1,385,138 | $3,496,393 | $1,972,160 |
Selling and marketing | 941,760 | 1,796,980 | 1,688,740 |
General and administrative | 7,087,924 | 8,089,086 | 6,819,998 |
Total operating expenses | 9,414,822 | 40,608,366 | 10,480,898 |
Loss from operations | -12,972,119 | -43,451,138 | -10,968,303 |
Interest income | 46,540 | 112,671 | 619,716 |
Interest expense | 0 | -16,365 | -618,504 |
Other (expense) / income | 745,958 | 4,101,039 | 1,728,538 |
Foreign exchange ( loss) / gain | -226,641 | 133,064 | 224,332 |
Net loss | -10,727,642 | -34,427,734 | -9,491,138 |
Ku6 Media Co., Ltd. [Member] | |||
Operating expenses: | |||
Product development | 208,656 | 269,876 | 278,168 |
Selling and marketing | 3,802 | 54,503 | 30,773 |
General and administrative | 928,506 | 1,403,657 | 1,119,757 |
Total operating expenses | 1,140,964 | 1,728,036 | 1,428,698 |
Loss from operations | -1,140,964 | -1,728,036 | -1,428,698 |
Interest income | 3,463 | 30,483 | 349,525 |
Interest expense | 0 | 0 | 0 |
Other (expense) / income | 92,144 | -739,530 | 0 |
Foreign exchange ( loss) / gain | -76 | 355,337 | -15,589 |
Equity in losses of subsidiaries | -9,682,209 | -32,345,988 | -8,396,376 |
Net loss | ($10,727,642) | ($34,427,734) | ($9,491,138) |
Additional_Information_Condens5
Additional Information - Condensed Financial Statements (Condensed Statements of Cash Flows) (USD $) | 12 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||||
Operating activities: | ||||||
Net loss | ($10,727,642) | ($34,427,734) | ($9,491,138) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||
Share-based compensation | 600,995 | 1,023,871 | 463,753 | |||
Provisions for Seed Music receivable (related party) | 0 | 980,000 | 0 | |||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses and other current assets | -104,388 | 137,414 | 360,963 | |||
Amount due from related parties | 6,563,757 | -2,093,669 | -1,658,858 | |||
Accrued expenses and other current liabilities | -1,207,465 | [1] | -1,123,760 | [1] | -663,166 | [1] |
Net cash used in operating activities | -5,209,268 | -11,524,248 | -8,086,138 | |||
Investing activities: | ||||||
Loan to Shanda Capital Limited | 0 | 0 | -470,000 | |||
Repayment of loans from related parties under control of Shanda | 498,583 | 3,300,000 | 14,000,000 | |||
Net cash provided by investing activities | 1,742,533 | 3,440,522 | 15,640,239 | |||
Financing activities: | ||||||
Proceeds from exercise of options | 338,563 | 46,400 | 0 | |||
Repurchase of ordinary shares | 0 | -58,147 | -8,169,481 | |||
Net cash provided by (used in) financing activities | 6,185,633 | -3,315,507 | -21,222,221 | |||
Effect of exchange rate changes on cash and cash equivalents | -9,800 | -524 | -11,320 | |||
Net increase (decrease) in cash and cash equivalents | 2,709,098 | -11,399,757 | -13,679,440 | |||
Cash and cash equivalents, beginning of year | 1,671,230 | 13,070,987 | 26,750,427 | |||
Cash and cash equivalents, end of year | 4,380,328 | 1,671,230 | 13,070,987 | |||
Ku6 Media Co., Ltd. [Member] | ||||||
Operating activities: | ||||||
Net loss | -10,727,642 | -34,427,734 | -9,491,138 | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||
Share-based compensation | 600,995 | 1,023,871 | 463,753 | |||
Provisions for Seed Music receivable (related party) | 0 | 980,000 | 0 | |||
Exchange gains | 0 | -355,337 | 0 | |||
Equity in losses of subsidiaries | 9,682,209 | 32,345,988 | 8,396,376 | |||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses and other current assets | 55,042 | 62,083 | 122,056 | |||
Amounts due from subsidiaries and variable interest entities | 0 | 0 | -1,645 | |||
Amount due from related parties | -4,015 | 74,964 | -92,159 | |||
Accrued expenses and other current liabilities | -159,414 | 36,479 | -277,527 | |||
Amounts due to subsidiaries and variable interest entities | 0 | 4,160,000 | -4,013,840 | |||
Net cash used in operating activities | -552,825 | 3,900,314 | -4,894,124 | |||
Investing activities: | ||||||
Loan to subsidiaries | 0 | -12,350,863 | -3,001,557 | |||
Loan to Shanda Capital Limited | 0 | 0 | -470,000 | |||
Repayment of loans from related parties under control of Shanda | 498,583 | 3,300,000 | 14,000,000 | |||
Net cash provided by investing activities | 498,583 | -9,050,863 | 10,528,443 | |||
Financing activities: | ||||||
Proceeds from exercise of options | 338,563 | 46,400 | 0 | |||
Repurchase of ordinary shares | 0 | -58,147 | -8,169,481 | |||
Net cash provided by (used in) financing activities | 338,563 | -11,747 | -8,169,481 | |||
Effect of exchange rate changes on cash and cash equivalents | 0 | 0 | 0 | |||
Net increase (decrease) in cash and cash equivalents | 284,321 | -5,162,296 | -2,535,162 | |||
Cash and cash equivalents, beginning of year | 56,999 | 5,219,295 | 7,754,457 | |||
Cash and cash equivalents, end of year | $341,320 | $56,999 | $5,219,295 | |||
[1] | Refer to Note 2(31). |