Long Term Investments

3 Months Ended

Mar. 31, 2017

Investments, Debt and Equity Securities [Abstract]

Long Term Investments

8. Long Term Investments

Cost method investments

Cost method investments  as of the period ended March 31, 2017 and December 31, 2016 are as follow:

	March 31,		December 31,
	2017		2016
Topsgame (i)	$	3,174,235	$	3,156,985
Frequency (ii)		3,000,000		3,000,000
Total	$	6,174,235	$	6,156,985

(i) Investment in Topsgame

On April 13, 2016, SSF entered into a Game Right Assignment Agreement with SSS for the acquisition of certain game IP rights (“Game IP Rights”) for approximately $2.7 million (RMB18 million) in cash. On April 15, 2016, SSF entered into a Capital Increase Agreement with Nanjing Tops Game Co., Ltd. (“Topsgame”) and its shareholders whereby SSF transferred the Game IP Rights acquired from SSS to Topsgame in exchange for 13% of Topsgame’s equity ownership. Topsgame is a PRC company that specializes in the independent development and operation of online, stand-alone and other games as well as the distribution of domestic and overseas games. The Company’s 13% ownership interest does not provide the Company with the right to nor does the Company have representation on the board of directors of Topsgame.

The Company has recognized the cost of the investment in Topsgame, which is a private company with no readily determinable fair value, based on the acquisition cost of Game IP Rights of approximately $2.7 million and accounts for the investment by the cost method.

On September 14, 2016, SSF increased its investment in Topsgame by RMB 3,900,000 (approximately $584,000) and maintained its 13% equity ownership of Topsgame. The investment continued to be accounted for using the cost method..

(ii) Investment in Frequency

In April 2016, the Company and Frequency Networks Inc. (“Frequency”) entered into a Series A Preferred Stock Purchase Agreement (the “SPA”) for the purchase of 8,566,271 shares of Series A Preferred Stock, Frequency (the “Frequency Preferred Stock”) for a total purchase price of $3 million. The 8,566,271 Series A Preferred Stock represent 9% ownership and voting interest on an as converted basis and does not provide the Company with the right to nor does the Company have representation on the board of directors of Frequency.

The Frequency Preferred Stock is entitled to non-cumulative dividends at the rate of $0.02548 per share per annum, declared at the discretion of Frequency’s board of directors. The Frequency Preferred Stock is also convertible into shares of Frequency common stock at the Company’s election any time after issuance on a 1:1 basis, subject to certain adjustment. Each share of Frequency Preferred Stock also has a liquidation preference of $0.42467 per share, plus any declared but unpaid dividends.

The Company has recognized the cost of the investment in Frequency, which is a private company with no readily determinable fair value, at its cost of $3 million and accounts for the investment by the cost method.

There were no identified events or changes in circumstances that may have had a significant adverse effect on the fair value of our cost method investments, accordingly the fair value of our cost method investments are not estimated.

Equity method investments

Equity method investment movement for the three months ended on March 31, 2017 is as follow:

	March 31, 2017
		December  31, 2016		Capital increase		Gain/(Loss)  on investment			Impairment loss			Foreign currency  translation adjustments		March 31,  2017
Wecast Internet	(i)		132,782		-		(37,382	)		-			3,804		99,204
Hua Cheng	(ii)		364,897		-		(6,364	)		(38,448	)		41,959		362,044
Shandong Media	(iii)		-		-		-			-			-		-
Total			497,679		-		(43,746	)		(38,448	)		45,763		461,248

(i) Investment in Wecast Internet

In October 2016, the Company’s subsidiary, YOU On Demand (Asia) Ltd., invested RMB 1,000,000 (approximately $149,750) in Wecast Internet Limited (“Wecast Internet”) and held its 50% equity ownership.

(ii) Investment in Hua Cheng

As of the period ended March 31, 2017 and December 31, 2016, the Company held 39% equity ownership in Hua Cheng, and accounted for the investment by the equity method.

(iii) Investment in Shandong Media

As of the period ended March 31, 2017 and December 31, 2016, the Company held 30% equity ownership in Shandong Media, and accounts for the investment by the equity method. The investment was fully impaired as of March 31, 2017 and December 31, 2016.