You On Demand Holdings (OTC BB:CBBDD)

CALCULATION OF REGISTRATION FEE

YOU ON DEMAND HOLDINGS, INC.

CALCULATION OF REGISTRATION FEE

Item 1.01  Entry into a Material Definitive Agreement. 

On March 26, 2015, Zhong Hai Shi Xun Information Technology Co., Ltd, (“Zhong Hai Video”), the operating company of YOU On Demand Holdings, Inc. (the “Company” or “YOD”) in the People’s Republic of China (“PRC” or “China”), entered into a Mobile Video-on-Demand Service Cooperation Agreement (the “Agreement”) with C Media Limited (“C Media”), pursuant to which YOD’s subscription video-on-demand (“SVOD”) and transactional video-on-demand (“TVOD”) services will become available to users through C Media’s railway Wi-Fi mobile video service platform. The details of the Agreement, including its addendum, were finalized on April 28, 2015. The initial term of the Agreement is one year, during which period C Media will pay to Zhong Hai Video a minimum guarantee payment of RMB1,200,000 yuan (the “Base Revenue”) as well as additional fees in excess of the Base Revenue based on revenue sharing terms as prescribed in the Agreement. Mr. Xuesong Song is the Executive Chairman of the Company and also serves as the Chairman and Chief Executive Officer of C Media. C Media is a shareholder of the Company.

The foregoing summary of the Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Agreement which will be filed with the Company’s quarterly report on form 10-Q for the quarter ended March 31, 2015.

YOU On Demand Holdings, Inc. and Its Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS

		2014			2013
Revenue	$	1,962,622		$	308,695
Cost of revenue		2,756,363			3,126,089
Gross loss		(793,741	)		(2,817,394	)
Operating expense:
Selling, general and administrative expense		7,459,192			7,608,742
Professional fees		653,646			705,692
Depreciation and amortization		536,689			774,480
Impairments of long-lived assets		-			311,249
Total operating expense		8,649,527			9,400,163
Loss from operations		(9,443,268	)		(12,217,557	)
Interest and other income/(expense)
Interest expense, net		(2,374,368	)		(370,752	)
Change in fair value of warrant liabilities		(621,239	)		(466,060	)
Change in fair value of contingent consideration		(160,766	)		(251,963	)
Loss on long-term equity investments		(20,717	)		(2,741	)
Loss from disposal of consolidated entities		(622,939	)		-
Others		(85,516	)		55,831
Net loss from continuing operations before income taxes and non-controlling interest		(13,328,813	)		(13,253,242	)
Income tax benefit		304,670			111,266
Net loss from continuing operations		(13,024,143	)		(13,141,976	)
Net income from discontinued operations		-			5,255,474
Net loss		(13,024,143	)		(7,886,502	)
Net loss attributable to non-controlling interests		615,683			1,054,970
Net loss attributable to YOU On Demand shareholders		(12,408,460	)		(6,831,532	)
Dividends and deemed dividends on preferred stock		(16,402,161	)		(1,358,364	)
Net loss attributable to YOU On Demand common shareholders	$	(28,810,621	)	$	(8,189,896	)
Basic and diluted loss per share:
Loss from continuing operations	$	(1.47	)	$	(0.89	)
Income from discontinued operations		-			0.35
Basic and diluted loss per share	$	(1.47	)	$	(0.54	)
Weighted average shares outstanding:
Basic and diluted		19,600,510			15,226,216

Management Discussion and Analysis

Revenues

Revenue for the year ended December 31, 2014 was $1,963,000, as compared to $309,000 for 2013. The increase is revenue of approximately $1,654,000 was attributable to the growth of our VOD business.

Net loss attributable to non-controlling interest

Hua Cheng has a 20% non-controlling interest in Zhong Hai Video and as such we allocate 20% of the operating loss of Zhong Hai Video to Hua Cheng. During the year ended December 31, 2014, $616,000 of our operating loss from Zhong Hai Video was allocated to Hua Cheng. For the year ended December 31, 2013, operating loss attributable to non-controlling interest was $1,055,000, of which $878,000 was allocated to Hua Cheng.

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2014			2013			2014			2013
Revenue	$	644,891		$	95,295		$	965,268		$	146,852
Cost of revenue		873,025			712,327			2,606,142			2,350,931
Gross loss		(228,134	)		(617,032	)		(1,640,874	)		(2,204,079	)
Operating expenses:
Selling, general and administrative expense		1,861,053			1,726,967			5,772,350			5,856,484
Professional fees		114,271			78,379			375,986			474,114
Depreciation and amortization		124,936			154,719			414,486			620,946
Impairments of long-lived assets		-			-			-			311,249
Total operating expense		2,100,260			1,960,065			6,562,822			7,262,793
Loss from operations		(2,328,394	)		(2,577,097	)		(8,203,696	)		(9,466,872	)
Interest & other income/(expense):
Interest expense, net		(29,151	)		(29,818	)		(2,346,210	)		(88,882	)
Change in fair value of warrant liabilities		281,537			(6,840	)		(655,849	)		(37,130	)
Change in fair value of contingent consideration		(47,634	)		(15,649	)		(160,766	)		(99,343	)
Gain/(loss) on investment in unconsolidated entities		(6,389	)		8,592			(16,646	)		7,873
Gain on sale of subsidiary		-			-			755,426			-
Loss on dissolution of a variable interest entity		-			-			(27,463	)		-
Others		(14,783	)		(11,827	)		(82,464	)		58,769
Net loss from continuing operations before income tax and non-controlling interest		(2,144,814	)		(2,632,639	)		(10,737,668	)		(9,625,585	)
Income tax benefit		28,812			21,168			84,249			82,129
Net loss from continuing operations		(2,116,002	)		(2,611,471	)		(10,653,419	)		(9,543,456	)
Net income from discontinued operations		-			5,589,872			-			5,255,474
Net income/(loss)		(2,116,002	)		2,978,401			(10,653,419	)		(4,287,982	)
Net loss attributable to non-controlling interest		169,364			193,512			696,708			834,685
Net income/(loss) attributable to YOU On Demand shareholders		(1,946,638	)		3,171,913			(9,956,711	)		(3,453,297	)
Dividend on preferred stock		-			(1,029,829	)		(16,402,161	)		(1,029,829	)
Net income/(loss) attributable to YOU on Demand common shareholders	$	(1,946,638	)	$	2,142,084		$	(26,358,872	)	$	(4,483,126	)
Basic and diluted loss per share:
Loss from continuing operations	$	(0.09	)	$	(0.22	)	$	(1.45	)	$	(0.65	)
Income from discontinued operations		-			0.36			-			0.35
Basic and diluted income/(loss) per share	$	(0.09	)	$	0.14		$	(1.45	)	$	(0.30	)
Weighted average shares outstanding:
Basic and diluted		22,012,166			15,553,097			18,203,124			15,034,841

Management Discussion and Analysis

Revenue

Revenue for the three months ended September 30, 2014, totaled $645,000, as compared to $95,000 for 2013. The increase in revenue of approximately $550,000 was attributable to the growth of our VOD business.

Net Loss Attributable to Non-controlling Interest

Hua Cheng has a 20% non-controlling interest in Zhong Hai Video and as such we allocate 20% of the operating loss of Zhong Hai Video to Hua Cheng. During the three months ended September 30, 2014, $169,000 of our operating loss from Zhong Hai Video was allocated to Hua Cheng, as compared to $193,000 during the same period of 2013.

YOU On Demand Holdings, Inc., Its Subsidiaries and Variable Interest Entity
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended						Six Months Ended
		June 30,			June 30,			June 30,			June 30,
		2014			2013			2014			2013
Revenue	$	182,696		$	50,619		$	320,377		$	51,557
Cost of revenue		857,179			790,019			1,733,117			1,638,604
Gross loss		(674,483	)		(739,400	)		(1,412,740	)		(1,587,047	)
Operating expense:
Selling, general and administrative expenses		2,270,657			2,073,537			3,911,297			4,050,767
Professional fees		76,231			223,051			261,715			474,485
Depreciation and amortization		139,590			173,394			289,550			466,227
Impairments of long-lived assets		-			311,249			-			311,249
Total operating expense		2,486,478			2,781,231			4,462,562			5,302,728
Loss from operations		(3,160,961	)		(3,520,631	)		(5,875,302	)		(6,889,775	)
Interest & other income (expense):
Interest expense, net		(28,321	)		(29,704	)		(2,317,059	)		(59,064	)
Change in fair value of warrant liabilities		1,501,632			(4,885	)		(937,386	)		(30,290	)
Change in fair value of contingent consideration		589,994			(42,046	)		(113,132	)		(83,694	)
Gain (loss) on investment in unconsolidated entities		(5,349	)		2,275			(10,257	)		(719	)
Gain (loss) on sale of subsidiary		-			-			755,426			-
Loss on dissolution of variable interest entity		-			-			(27,463	)		-
Other		(15,015	)		71,777			(67,681	)		70,596
Net loss from continuing operations before income taxes and noncontrolling interest		(1,118,020	)		(3,523,214	)		(8,592,854	)		(6,992,946	)
Income tax benefit		32,495			29,821			55,437			60,961
Net loss from continuing operations		(1,085,525	)		(3,493,393	)		(8,537,417	)		(6,931,985	)
Net loss from discontinued operations		-			(97,823	)		-			(334,398	)
Net loss		(1,085,525	)		(3,591,216	)		(8,537,417	)		(7,266,383	)
Plus: Net loss attributable to noncontrolling interests		292,560			310,771			527,344			641,173
Net loss attributable to YOU On Demand shareholders		(792,965	)		(3,280,445	)		(8,010,073	)		(6,625,210	)
Dividends on preferred stock		-			-			(16,402,161	)		-
Net loss attributable to YOU on Demand common shareholders	$	(792,965	)	$	(3,280,445	)	$	(24,412,234	)	$	(6,625,210	)
Basic and diluted loss per share:
Loss from continuing operations	$	(0.05	)	$	(0.22	)	$	(1.50	)	$	(0.44	)
Loss from discontinued operations		-			nil			-			(0.01	)
Basic and diluted loss per share	$	(0.05	)	$	(0.22	)	$	(1.50	)	$	(0.45	)
Weighted average shares outstanding:
Basic and diluted		16,598,990			14,938,780			16,267,036			14,771,261

Management Discussion and Analysis

Revenues

Revenues for the three months ended June 30, 2014, totaled $183,000, as compared to $51,000 for 2013. The increase in revenue of approximately $132,000 was attributable to the growth of our VOD business.

Net Loss Attributable to Non-controlling Interest

Hua Cheng has a 20% non-controlling interest in Zhong Hai Video and as such we allocate 20% of the operating loss of Zhong Hai Video to Hua Cheng. During the three months ended June 30, 2014, $292,000 of our operating loss from Zhong Hai Video was allocated to Hua Cheng, as compared to $260,000 during the same period of 2013.

49% of the operating loss of our Jinan Broadband subsidiary was allocated to Shandong Cable (previously Jinan Parent), the 49% co-owner of this business. During the three months ended June 30, 2013, $51,000 of our operating loss from Jinan Broadband was allocated to Jinan Parent. Effective July 31, 2013, the Company sold its 51% interest in Jinan Broadband. See Note 4 to our unaudited consolidated financial statements included in this report.

Item 4.01. Changes in Registrant’s Certifying Accountant

YOU On Demand Holdings, Inc. (the “Company”) previously engaged UHY LLP (“UHY”) as its independent auditor for the fiscal year ending December 31, 2014. UHY has served as the independent auditor for the Company since August, 1, 2007. On June 24, 2014, the Company’s audit committee authorized the dismissal of UHY as its independent registered public accounting firm. The dismissal became effective on June 25, 2014.

UHY’s audit reports on the Company’s financial statements for the fiscal years ended December 31, 2013 and 2012 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles, except that both reports contain an explanatory paragraph regarding the going concern assumption.

During the Company’s fiscal years ended December 31, 2013 and 2012, and through June 25, 2014, there have been (i) no disagreements with UHY on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to UHY’s satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Company’s financial statements for such years, and (ii) there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K, except that for the fiscal years ended December 31, 2013 and 2012, the Company’s Board of Directors discussed with UHY the existence of a material weakness in the Company’s internal control over financial reporting, as more fully described in the Company’s Annual Reports on Form 10-K for the years ended December 31, 2013 and December 31, 2012, filed on March 31, 2014 and April 8, 2013, respectively, with the Securities and Exchange Commission.

YOU ON DEMAND HOLDINGS, INC.

 

CALCULATION OF REGISTRATION FEE

Proposed

Maximum

Proposed

Amount

Amount to be

Offering

Maximum

of

Title of each class of

Registered

Price Per

Aggregate

Registra

securities to be registered

(1)

Unit (2)

Offering Price (2)

tion Fee

Common Stock, $0.001 par value, issuable upon conversion of Series E Preferred Stock

7,428,574

$

2.66

19,760,007

2,545 (3)

YOU On Demand Holdings, Inc. and Its Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS

		2013			2012
Revenue	$	308,695		$	1,700,799
Cost of revenue		3,126,089			3,460,772
Gross loss		(2,817,394	)		(1,759,973	)
Operating expense:
Selling, general and administrative expenses		7,608,742			9,689,763
Professional fees		705,692			1,046,095
Depreciation and amortization		774,480			2,159,149
Impairments of long-lived assets		311,249			-
Total operating expense		9,400,163			12,895,007
Loss from operations		(12,217,557	)		(14,654,980	)
Interest & other income / (expense)
Interest income		3,426			2,974
Interest expense		(374,178	)		(77,965	)
Stock purchase right		-			(43,748	)
Cost of reset provision		-			(658,719	)
Change in fair value of warrant liabilities		(466,060	)		647,302
Change in fair value of contingent consideration		(251,963	)		1,313,443
Loss (gain) on investment in unconsolidated entities		(2,741	)		67,675
Loss on investment write-off		-			(95,350	)
Loss on write-off of uncollectible loans		-			(513,427	)
Gain on deconsolidation of Shandong Media		-			141,814
Other		55,831			(139,739	)
Net loss from continuing operations before income taxes and noncontrolling interest		(13,253,242	)		(14,010,720	)
Income tax benefit		111,266			354,294
Net loss from continuing operations		(13,141,976	)		(13,656,426	)
Net gain (loss) from discontinued operations (including gain on disposal of $5,616,269 in 2013)		5,255,474			(2,630,979	)
Net loss		(7,886,502	)		(16,287,405	)
Plus: Net loss attributable to noncontrolling interests		1,054,970			2,074,098
Net loss attributable to YOU On Demand shareholders		(6,831,532	)		(14,213,307	)
Dividends on preferred stock		(1,358,364	)		(924,132	)
Net loss attributable to YOU on Demand common shareholders	$	(8,189,896	)	$	(15,137,439	)
Basic earnings (loss) per share
Loss from continuing operations	$	(0.89	)	$	(1.12	)
Gain (loss) from discontinued operations		0.35			(0.24	)
Basic loss per shares	$	(0.54	)	$	(1.36	)
Diluted earnings (loss) per share
Loss from continuing operations	$	(0.89	)	$	(1.12	)
Gain (loss) from discontinued operations		0.35			(0.24	)
Diluted loss per shares	$	(0.54	)	$	(1.36	)
Weighted average shares outstanding
Basic		15,226,216			11,099,746
Diluted		15,226,216			11,099,746

Management Discussion and Analysis

Revenues

Revenues for the year ended December 31, 2013, totaled $309,000, as compared to $5,000 for 2012. The increase is revenue of approximately $304,000 is attributable to the growth of our VOD business.

We may offer, issue and sell from time to time our common stock, preferred stock, debt securities, warrants or units up to $50,000,000 or its equivalent in any other currency, currency units, or composite currency or currencies in one or more issuances. We may offer and sell the securities separately, together or as units, in separate classes or series, in amounts, at prices and on terms to be determined at the time of sale. This prospectus provides a general description of offerings of these securities that we may undertake.

On August 30, 2012, the Company closed the transactions contemplated by the Purchase Agreement and issued and sold to Investors (i) an aggregate of 646,250 Class A Units (consisting of an aggregate of 646,250 shares of Common Stock and Warrants to purchase 646,250 shares of Common Stock), and (ii) an aggregate of 250,000 Class B Units (consisting of an aggregate of 250,000 shares of Series C Preferred Stock and Warrants to purchase 250,000 shares of Common Stock). The Company received aggregate gross proceeds of $3,585,000.

On May 10, 2012, at the Company’s request, the Chairman and Chief Executive Officer of YOU On Demand Holdings, Inc. (the “Company”), Mr. Shane McMahon, made a loan to the Company in the amount of $3,000,000. In consideration for the loan, the Company issued a convertible note to Mr. McMahon in the aggregate principal amount of $3,000,000 (the “Note”).

NEW YORK, April 25, 2012 /PRNewswire/ -- YOU On Demand Holding, Inc.'s (OTCBB: CBBD) PRC joint venture, China's leading national Pay-Per-View (PPV) and Video On Demand (VOD) platform, announced that it has signed a deal with Miramax to distribute films from its renowned library for Transactional Video On Demand (TVOD).

The titles represent some of the top films in movie history ranging from the Oscar® winning There Will Be Blood and Chicago to pop culture icons like Pulp Fiction and the Scream series. 

"The Miramax library includes some of the best known, award winning and critically acclaimed films Hollywood has to offer," said Shane McMahon, Chairman and CEO of YOU On Demand.  "We are very excited to add Miramax films to the YOU On Demand platform."

Miramax now joins YOU On Demand's content partner family including Warner Bros., Disney, Lionsgate, Magnolia, K2 Communications, Gravitas Ventures, American Media Works and Film Buff.

As discussed above, on July 30, 2010, we consummated financings which resulted in gross proceeds of $9.625 million. While we believe that the proceeds from these financings will sustain our business operations for the near term, we anticipate that we will need to raise additional funds to fully implement our business model and related strategies. In addition, the fact that we have incurred significant continuing losses during 2010 and have relied on debt and equity financings to fund out operations to date, could raise substantial doubt about our ability to continue as a going concern.

On October 20, 2010, China Broadband, Inc. entered into separate Warrant Exchange Agreements with the holders of different series of warrants to purchase shares of the Company’s common stock. Pursuant to the Agreements, (i) the holders of Warrants issued on January 11, 2008 to purchase an aggregate of 9,699,993 shares of the Company’s common stock at an exercise price of $0.20 per share, have exchanged their Warrants for an aggregate of 485,000 shares of the Company’s common stock, and (ii) the holders of Warrants issued on July 30, 2010 to purchase an aggregate of 622,591,300 shares of the Company’s common stock at an exercise price of $0.05 per share, have exchanged their Warrants for an aggregate of 373,554,780 shares of the Company’s common stock. Following the consummation of the transactions contemplated by the Agreements, there are 829,836,723 shares of common stock outstanding (on a fully diluted basis) and 11,393,500 Warrants to purchase shares of Company common stock at exercise prices ranging from $0.60 to $2.00.