☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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For the quarterly period ended September 30, 2016
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or
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|
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
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For the transition period from _____ to _____
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Delaware
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98-0469479
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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1600 Old Country Road, Plainview, New York
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11803
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(Address of principal executive offices)
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(Zip Code)
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(516) 622-8300
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(Registrant’s Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Large accelerated filer
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☐
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Accelerated filer
|
☒
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Non-accelerated filer
(Do not check if a smaller reporting company)
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☐
|
Smaller reporting company
|
☐
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|
Part I. Financial Information
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Page No.
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1
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1
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2
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3
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4
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5
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13 | |
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24 | ||
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24 | ||
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Part II. Other Information
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24 | ||
25
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||
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26 |
NEULION, INC.
|
|
(in thousands, except share and per share data)
|
(Expressed in U.S. dollars)
|
|
September 30,
|
December 31,
|
||||||
|
2016
|
2015
|
||||||
|
(unaudited)
|
|||||||
|
||||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash and cash equivalents
|
$
|
69,559
|
$
|
53,413
|
||||
Accounts receivable, net of allowance of doubtful accounts of $437 and $688
|
12,287
|
12,967
|
||||||
Other receivables
|
879
|
604
|
||||||
Inventory
|
197
|
199
|
||||||
Prepaid expenses and deposits
|
3,546
|
2,928
|
||||||
Due from related parties
|
378
|
304
|
||||||
Total current assets
|
86,846
|
70,415
|
||||||
Property, plant and equipment, net
|
6,846
|
6,585
|
||||||
Intangible assets, net
|
26,228
|
23,627
|
||||||
Goodwill
|
13,229
|
11,496
|
||||||
Deferred tax assets
|
30,730
|
30,614
|
||||||
Other assets
|
2,845
|
1,413
|
||||||
Total assets
|
$
|
166,724
|
$
|
144,150
|
||||
|
||||||||
LIABILITIES AND EQUITY
|
||||||||
Current
|
||||||||
Accounts payable
|
$
|
28,520
|
$
|
10,006
|
||||
Accrued liabilities
|
12,887
|
10,230
|
||||||
Due to related parties
|
-
|
18
|
||||||
Deferred revenue
|
13,105
|
11,570
|
||||||
Total current liabilities
|
54,512
|
31,824
|
||||||
Long-term deferred revenue
|
2,503
|
1,067
|
||||||
Deferred rent liabilities
|
1,365
|
1,649
|
||||||
Deferred tax liabilities
|
1,093
|
1,425
|
||||||
Other long-term liabilities
|
114
|
127
|
||||||
Total liabilities
|
59,587
|
36,092
|
||||||
|
||||||||
Stockholders' equity
|
||||||||
Common stock (par value: $0.01; shares authorized: 500,000,000; shares issued and outstanding:
|
||||||||
2016: 281,274,033 and 2015: 280,903,667)
|
2,813
|
2,809
|
||||||
Additional paid-in capital
|
168,189
|
167,705
|
||||||
Promissory notes receivable
|
(209
|
)
|
(209
|
)
|
||||
Accumulated deficit
|
(63,656
|
)
|
(62,247
|
)
|
||||
Total stockholders’ equity
|
107,137
|
108,058
|
||||||
Total liabilities and stockholders’ equity
|
$
|
166,724
|
$
|
144,150
|
NEULION, INC.
|
|||||||
|
|||||||
COMPREHENSIVE LOSS
|
|||||||
(unaudited)
|
|||||||
(in thousands, except share and per share data)
|
|||||||
(Expressed in U.S. dollars)
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
||||||||||||||||
Revenue
|
$
|
23,857
|
$
|
21,901
|
$
|
74,261
|
$
|
66,259
|
||||||||
|
||||||||||||||||
Costs and expenses
|
||||||||||||||||
Cost of revenue, exclusive of depreciation and amortization shown separately below
|
4,322
|
3,863
|
13,108
|
12,404
|
||||||||||||
Selling, general and administrative, including stock-based compensation
|
13,429
|
11,150
|
38,252
|
32,454
|
||||||||||||
Research and development
|
5,212
|
6,588
|
14,851
|
19,384
|
||||||||||||
Depreciation and amortization
|
2,401
|
2,046
|
6,499
|
5,634
|
||||||||||||
|
25,364
|
23,647
|
72,710
|
69,876
|
||||||||||||
Operating income (loss)
|
(1,507
|
)
|
(1,746
|
)
|
1,551
|
(3,617
|
)
|
|||||||||
|
||||||||||||||||
Other income (expense)
|
||||||||||||||||
(Loss) gain on foreign exchange
|
(62
|
)
|
(218
|
)
|
10
|
(558
|
)
|
|||||||||
Investment income, net
|
9
|
85
|
63
|
269
|
||||||||||||
Interest on convertible note, including amortization of debt discount
|
-
|
-
|
-
|
(123
|
)
|
|||||||||||
Gain on conversion of convertible note and revaluation of related derivative, net
|
-
|
-
|
-
|
507
|
||||||||||||
|
(53
|
)
|
(133
|
)
|
73
|
95
|
||||||||||
Net and comprehensive income (loss) before income taxes
|
(1,560
|
)
|
(1,879
|
)
|
1,624
|
(3,522
|
)
|
|||||||||
Income taxes
|
(1,155
|
)
|
(1,241
|
)
|
(3,033
|
)
|
(3,329
|
)
|
||||||||
Net and comprehensive loss
|
$
|
(2,715
|
)
|
$
|
(3,120
|
)
|
$
|
(1,409
|
)
|
$
|
(6,851
|
)
|
||||
|
||||||||||||||||
Net loss per weighted average number of shares
|
||||||||||||||||
of common stock outstanding - basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
0.00
|
$
|
(0.03
|
)
|
|||||
|
||||||||||||||||
Weighted average number of shares
|
||||||||||||||||
of common stock outstanding - basic and diluted
|
282,072,241
|
224,324,763
|
282,244,706
|
224,213,231
|
NEULION, INC.
|
(unaudited)
|
(in thousands, except share data)
|
(Expressed in U.S. dollars)
|
|
Common stock
|
Additional
|
Promissory
|
Accumulated
|
Total
|
|||||||||||||||||||
|
Shares
|
Amount
|
paid-in capital
|
notes
|
deficit
|
equity
|
||||||||||||||||||
Balance, December 31, 2015
|
280,903,667
|
$
|
2,809
|
$
|
167,705
|
$
|
(209
|
)
|
$
|
(62,247
|
)
|
$
|
108,058
|
|||||||||||
Exercise of stock options
|
2,235,565
|
22
|
427
|
-
|
-
|
449
|
||||||||||||||||||
Stock-based compensation:
|
||||||||||||||||||||||||
Stock options
|
-
|
-
|
2,079
|
-
|
-
|
2,079
|
||||||||||||||||||
Restricted stock
|
1,963,000
|
20
|
1,224
|
-
|
-
|
1,244
|
||||||||||||||||||
Directors' compensation
|
145,805
|
1
|
165
|
-
|
-
|
166
|
||||||||||||||||||
Repurchase and cancellation of
|
||||||||||||||||||||||||
common stock
|
(3,974,004
|
)
|
(39
|
)
|
(3,411
|
)
|
-
|
-
|
(3,450
|
)
|
||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(1,409
|
)
|
(1,409
|
)
|
||||||||||||||||
Balance, September 30, 2016
|
281,274,033
|
$
|
2,813
|
$
|
168,189
|
$
|
(209
|
)
|
$
|
(63,656
|
)
|
$
|
107,137
|
NEULION, INC.
|
|
(unaudited)
|
(in thousands)
|
(Expressed in U.S. dollars)
|
|
Nine months ended September 30,
|
|||||||
|
2016
|
2015
|
||||||
OPERATING ACTIVITIES
|
||||||||
|
||||||||
Net loss
|
$
|
(1,409
|
)
|
$
|
(6,851
|
)
|
||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
6,499
|
5,634
|
||||||
Stock-based compensation
|
3,489
|
1,843
|
||||||
Amortization of debt discount
|
-
|
123
|
||||||
Gain on revaluation of convertible note derivative
|
-
|
(507
|
)
|
|||||
Deferred income taxes
|
(112
|
)
|
215
|
|||||
|
||||||||
Changes in operating assets and liabilities, net of acquisitions
|
||||||||
Accounts receivable
|
680
|
15,838
|
||||||
Income tax receivable
|
-
|
4,318
|
||||||
Other receivables
|
(275
|
)
|
166
|
|||||
Inventory
|
2
|
75
|
||||||
Prepaid expenses, deposits and other assets
|
(1,997
|
)
|
(2,076
|
)
|
||||
Due from related parties
|
(74
|
)
|
(181
|
)
|
||||
Accounts payable
|
18,514
|
7,734
|
||||||
Accrued liabilities
|
2,321
|
(1,540
|
)
|
|||||
Deferred revenue
|
2,971
|
(972
|
)
|
|||||
Deferred rent liability
|
(284
|
)
|
(171
|
)
|
||||
Long-term liabilities
|
(13
|
)
|
(56
|
)
|
||||
Due to related parties
|
(18
|
)
|
166
|
|||||
Cash provided by operating activities
|
30,294
|
23,758
|
||||||
|
||||||||
INVESTING ACTIVITIES
|
||||||||
Acquisition of Saffron Digital Limited
|
(9,000
|
)
|
-
|
|||||
Cash acquired from acquisition of DivX Corporation
|
-
|
9,718
|
||||||
Purchase of property, plant and equipment
|
(2,147
|
)
|
(1,172
|
)
|
||||
Cash (used in) provided by investing activities
|
(11,147
|
)
|
8,546
|
|||||
|
||||||||
FINANCING ACTIVITIES
|
||||||||
Repurchases of common stock
|
(3,450
|
)
|
-
|
|||||
Proceeds from exercise of stock options
|
449
|
843
|
||||||
Proceeds from exercise of broker units
|
-
|
19
|
||||||
Cash (used in) provided by financing activities
|
(3,001
|
)
|
862
|
|||||
|
||||||||
Net increase in cash and cash equivalents, during the period
|
16,146
|
33,166
|
||||||
Cash and cash equivalents, beginning of period
|
53,413
|
25,898
|
||||||
Cash and cash equivalents, end of period
|
$
|
69,559
|
$
|
59,064
|
||||
|
||||||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for income taxes
|
$
|
2,826
|
$
|
2,783
|
||||
|
||||||||
Supplemental disclosure of non-cash activities:
|
||||||||
Par value of shares of common stock issued upon exercise of cashless warrants
|
$
|
-
|
$
|
19
|
||||
|
||||||||
Accretion of issuance costs on Class 4 Preference Shares
|
$
|
-
|
$
|
23
|
||||
Issuance of shares of common stock upon acquisition of DivX Corporation
|
$
|
-
|
$
|
58,521
|
||||
Issuance of convertible note upon acquisition of DivX Corporation
|
$
|
-
|
$
|
27,000
|
Prepaid expenses and deposits
|
$
|
53
|
||
Property, plant and equipment
|
14
|
|||
Intangible assets
|
7,200
|
|||
Goodwill
|
1,733
|
|||
Net assets acquired
|
$
|
9,000
|
Useful Life
|
|||||||
Amount
|
(years)
|
||||||
Developed technology
|
$
|
3,900
|
5 | ||||
Customer relationships
|
3,300
|
5 | |||||
$
|
7,200
|
2016
|
$
|
360
|
||
2017
|
1,440
|
|||
2018
|
1,440
|
|||
2019
|
1,440
|
|||
2020
|
1,440
|
|||
Thereafter
|
600
|
|||
$
|
6,720
|
Cash
|
$
|
9,718
|
||
Accounts receivable
|
7,094
|
|||
Contracts receivable
|
16,668
|
|||
Income tax receivable
|
4,317
|
|||
Other receivables
|
247
|
|||
Prepaid expenses
|
1,342
|
|||
Deferred tax asset
|
384
|
|||
Other assets
|
334
|
|||
Property and equipment, net
|
3,592
|
|||
Intangible assets
|
28,500
|
|||
Goodwill
|
169
|
|||
Accounts payable
|
(721
|
)
|
||
Accrued liabilities
|
(5,560
|
)
|
||
Deferred revenue
|
(3,000
|
)
|
||
Deferred tax liability
|
(2,154
|
)
|
||
Deferred rent liability
|
(1,912
|
)
|
||
Net assets acquired
|
$
|
59,018
|
Useful Life
|
|||||||
Amount
|
(years)
|
||||||
Developed technology
|
$
|
14,400
|
5
|
||||
Customer relationships
|
9,400
|
5
|
|||||
Trademarks
|
4,700
|
7
|
|||||
$
|
28,500
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Total revenue
|
$
|
23,857
|
$
|
21,901
|
$
|
74,261
|
$
|
68,498
|
||||||||
Net loss
|
$
|
(2,715
|
)
|
$
|
(3,120
|
)
|
$
|
(1,409
|
)
|
$
|
(9,075
|
)
|
||||
Loss per share – basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
0.00
|
$
|
(0.04
|
)
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
||||||||||||||||
KyLin TV
|
$
|
90
|
$
|
121
|
$
|
274
|
$
|
459
|
||||||||
New York Islanders
|
69
|
71
|
209
|
221
|
||||||||||||
Renaissance
|
30
|
30
|
90
|
90
|
||||||||||||
Smile Train
|
24
|
24
|
72
|
72
|
||||||||||||
|
$
|
213
|
$
|
246
|
$
|
645
|
$
|
842
|
As of
|
||||||||
September 30,
|
December 31,
|
|||||||
|
2016
|
2015
|
||||||
Renaissance
|
$
|
-
|
$
|
(18
|
)
|
|||
KyLin TV
|
378
|
304
|
||||||
|
$
|
378
|
$
|
286
|
September 30,
|
||||||||
|
2016
|
2015
|
||||||
Class 3 Preference Shares
|
-
|
17,176,818
|
||||||
Class 4 Preference Shares
|
-
|
10,912,265
|
||||||
Stock options – Amended and Restated 2012 Omnibus Securities and Incentive Plan
|
23,779,350
|
21,817,795
|
||||||
Restricted stock – Amended and Restated 2012 Omnibus Securities and Incentive Plan
|
9,240,500
|
4,500,000
|
||||||
Stock options – Fourth Amended and Restated Stock Option Plan
|
2,058,750
|
4,895,300
|
||||||
Warrants
|
1,924,741
|
1,924,741
|
||||||
|
37,003,341
|
61,226,919
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||||||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||||||||||||||||||
North America
|
$
|
15,807
|
66
|
%
|
$
|
14,312
|
65
|
%
|
$
|
49,056
|
66
|
%
|
$
|
44,517
|
67
|
%
|
||||||||||||||||
Asia
|
5,104
|
21
|
%
|
5,280
|
24
|
%
|
16,317
|
22
|
%
|
14,380
|
22
|
%
|
||||||||||||||||||||
Europe
|
2,543
|
11
|
%
|
1,444
|
7
|
%
|
6,791
|
9
|
%
|
4,617
|
7
|
%
|
||||||||||||||||||||
Australia
|
403
|
2
|
%
|
865
|
4
|
%
|
2,097
|
3
|
%
|
2,745
|
4
|
%
|
||||||||||||||||||||
|
$
|
23,857
|
100
|
%
|
$
|
21,901
|
100
|
%
|
$
|
74,261
|
100
|
%
|
$
|
66,259
|
100
|
%
|
|
3 months ended September 30,
|
9 months ended September 30,
|
||||||||||||||||||||||
|
2016
|
2015
|
% change
|
2016
|
2015
|
% change
|
||||||||||||||||||
Revenue - Pro Forma (amounts in millions)
|
$
|
23.9
|
$
|
21.9
|
9%
|
|
$
|
74.3
|
$
|
68.5
|
8%
|
|
||||||||||||
Revenue (GAAP) as reported
|
$
|
23.9
|
$
|
21.9
|
$
|
74.3
|
$
|
66.3
|
||||||||||||||||
Revenue (GAAP) DivX (prior to acquisition)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2.2
|
|
3 months ended September 30,
|
9 months ended September 30,
|
||||||||||||||||||||||
|
2016
|
2015
|
% change
|
2016
|
2015
|
% change
|
||||||||||||||||||
Pro Forma Revenue - non-GAAP (amounts in millions)
|
$
|
24.0
|
$
|
25.6
|
-6%
|
|
$
|
75.3
|
$
|
81.4
|
-7%
|
|
||||||||||||
Revenue (GAAP) as reported
|
$
|
23.9
|
$
|
21.9
|
$
|
74.3
|
$
|
66.3
|
||||||||||||||||
Revenue (GAAP) DivX (prior to acquisition)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2.2
|
||||||||||||||||
Revenue due to purchase accounting adjustment
|
$
|
0.1
|
$
|
3.7
|
$
|
1.0
|
$
|
12.9
|
|
3 months ended September 30,
|
9 months ended September 30,
|
||||||||||||||||||||||
|
2016
|
2015
|
% change
|
2016
|
2015
|
% change
|
||||||||||||||||||
Revenue - NeuLion Digital Platform (amounts in millions)
|
$
|
16.3
|
$
|
14.3
|
14%
|
|
$
|
50.4
|
$
|
46.3
|
9%
|
|
|
3 months ended September 30,
|
9 months ended September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Pro Forma Cost of Revenue as a % of Pro Forma non-GAAP Revenue
|
18%
|
|
15%
|
|
17%
|
|
16%
|
|
|
3 months ended September 30,
|
9 months ended September 30,
|
||||||||||||||||||||||
|
2016
|
2015
|
% change
|
2016
|
2015
|
% change
|
||||||||||||||||||
Pro Forma Adjusted EBITDA (amounts in millions)
|
$
|
2.3
|
$
|
5.0
|
-54%
|
|
$
|
12.7
|
$
|
16.0
|
-21%
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
||||||||||||||||
GAAP Revenue
|
$
|
23,857
|
$
|
21,901
|
$
|
74,261
|
$
|
66,259
|
||||||||
|
||||||||||||||||
Pro forma adjustment
|
-
|
-
|
-
|
2,239
|
||||||||||||
|
||||||||||||||||
Pro Forma GAAP Revenue
|
$
|
23,857
|
$
|
21,901
|
$
|
74,261
|
$
|
68,498
|
||||||||
|
||||||||||||||||
Revenue excluded due to purchase accounting
|
68
|
3,741
|
1,015
|
12,937
|
||||||||||||
|
||||||||||||||||
Pro Forma Non-GAAP Revenue
|
$
|
23,925
|
$
|
25,642
|
$
|
75,276
|
$
|
81,435
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
||||||||||||||||
Consolidated Net Loss on a GAAP basis
|
$
|
(2,715
|
)
|
$
|
(3,120
|
)
|
$
|
(1,409
|
)
|
$
|
(6,851
|
)
|
||||
|
||||||||||||||||
Pro forma adjustment
|
-
|
-
|
-
|
(2,225
|
)
|
|||||||||||
|
||||||||||||||||
Consolidated Net Loss on a Pro Forma GAAP basis
|
$
|
(2,715
|
)
|
$
|
(3,120
|
)
|
$
|
(1,409
|
)
|
$
|
(9,076
|
)
|
||||
|
||||||||||||||||
Revenue excluded due to purchase accounting
|
68
|
3,741
|
1,015
|
12,937
|
||||||||||||
Depreciation and amortization
|
2,401
|
2,046
|
6,499
|
6,167
|
||||||||||||
Stock-based compensation
|
1,361
|
921
|
3,489
|
1,843
|
||||||||||||
Acquisition-related expenses
|
-
|
-
|
102
|
360
|
||||||||||||
Gain on revaluation of convertible note derivative
|
-
|
-
|
-
|
(507
|
)
|
|||||||||||
Income tax expense
|
1,155
|
1,241
|
3,033
|
3,942
|
||||||||||||
Investment income and foreign exchange (gain) loss
|
53
|
133
|
(73
|
)
|
349
|
|||||||||||
|
||||||||||||||||
Pro Forma Adjusted EBITDA
|
$
|
2,323
|
$
|
4,962
|
$
|
12,656
|
$
|
16,015
|
· | Market acceptance of our services. We compete in markets where the value of certain aspects of our services is still in the process of market acceptance. We believe that our future growth depends in part on the continued and increasing acceptance and realization of the value of our service offerings. |
· | Technological change. Our success depends in part on our ability to keep pace with technological changes in and evolving industry standards applicable to our service offerings and to successfully develop, launch, and drive demand for new and enhanced, innovative, high-quality solutions that meet or exceed customer needs. |
· | Technology spending. Our growth and results depend in part on general economic conditions and the pace and level of technology spending by potential customers to take their content digital. |
|
3 months ended September 30,
|
|||||||
|
2016
|
2015
|
||||||
Revenue
|
$
|
23,857
|
$
|
21,901
|
||||
|
||||||||
Costs and expenses
|
||||||||
Cost of revenue, exclusive of depreciation and
|
||||||||
amortization shown separately below
|
4,322
|
3,863
|
||||||
Selling, general and administrative, including
|
||||||||
stock-based compensation
|
13,429
|
11,150
|
||||||
Research and development
|
5,212
|
6,589
|
||||||
Depreciation and amortization
|
2,401
|
2,045
|
||||||
|
25,364
|
23,647
|
||||||
Operating loss
|
(1,507
|
)
|
(1,746
|
)
|
||||
Other expense
|
(53
|
)
|
(134
|
)
|
||||
Net and comprehensive loss before income taxes
|
(1,560
|
)
|
(1,880
|
)
|
||||
Income taxes
|
(1,155
|
)
|
(1,240
|
)
|
||||
Net and comprehensive loss
|
$
|
(2,715
|
)
|
$
|
(3,120
|
)
|
|
9 months ended September 30,
|
|||||||
|
2016
|
2015 (1)
|
||||||
Revenue
|
$
|
74,261
|
$
|
66,259
|
||||
|
||||||||
Costs and expenses
|
||||||||
Cost of revenue, exclusive of depreciation and
|
||||||||
amortization shown separately below
|
13,108
|
12,404
|
||||||
Selling, general and administrative, including
|
||||||||
stock-based compensation
|
38,252
|
32,455
|
||||||
Research and development
|
14,851
|
19,384
|
||||||
Depreciation and amortization
|
6,499
|
5,633
|
||||||
|
72,710
|
69,876
|
||||||
Operating income (loss)
|
1,551
|
(3,617
|
)
|
|||||
Other income
|
73
|
95
|
||||||
Net and comprehensive income (loss) before income taxes
|
1,624
|
(3,522
|
)
|
|||||
Income taxes
|
(3,033
|
)
|
(3,329
|
)
|
||||
Net and comprehensive loss
|
$
|
(1,409
|
)
|
$
|
(6,851
|
)
|
Period
|
Total Number
of Shares
Purchased(1)
|
Weighted
Average Price Paid
Per Share(2)
|
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs(1)
|
Approximate
Dollar
Value of Shares
That May
Yet Be
Purchased
Under the
Plans or
Programs(1)
|
||||||||||||
July 1, 2016 - July 31, 2016
|
846,100
|
|
$0.77
|
846,100
|
$
|
7,788,274
|
||||||||||
August 1, 2016 - August 31, 2016
|
678,800
|
|
$0.80
|
678,800
|
$
|
7,246,039
|
||||||||||
September 1, 2016 - September 30, 2016
|
814,800
|
|
$0.85
|
814,800
|
$
|
6,549,974
|
||||||||||
Total
|
2,339,700
|
2,339,700
|
(1)
|
On March 8, 2016, the Company announced that its Board of Directors authorized the repurchase of up to $10 million of the Company’s shares of common stock over the next 12 months through a normal course issuer bid (“NCIB”) for up to 14,109,057 shares of common stock. On March 24, 2016, the Company announced that it had received the TSX’s approval to commence the NCIB, and that the NCIB would commence on April 1, 2016. Repurchases are made by a broker on behalf of the Company in open market transactions pursuant to an automatic repurchase plan meeting the requirements of Rule 10b5-1 under the Exchange Act and subject to certain daily limits, and the Company settles with the broker after each month’s end. The NCIB will terminate on March 31, 2017 or on such earlier date as the purchases under the NCIB are completed or as the Company may otherwise determine.
|
(2)
|
The weighted average price paid per share of common stock includes the cost of commissions.
|
Exhibit No.
|
Description
|
|
31.1*
|
Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2*
|
Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32**
|
Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
* | Filed herewith. |
** | Furnished herewith. As provided in Item 601(b)(32) of Regulation S-K, this certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference in such filing. |
|
|
|
|
NEULION, INC.
|
|
|
|
|
|
|
|
|
|
|
Date: November 3, 2016
|
By: /s/ Roy E. Reichbach
|
|
|
Name: Roy E. Reichbach
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Date: November 3, 2016
|
By: /s/ Trevor Renfield
|
|
|
Name: Trevor Renfield
|
|
|
Title: Chief Financial Officer
|
|
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Roy E. Reichbach
|
|
|
Name:
|
Roy E. Reichbach
|
|
Title:
|
Chief Executive Officer
(Principal Executive Officer)
|
|
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Trevor Renfield
|
|
|
Name:
|
Trevor Renfield
|
|
Title:
|
Chief Financial Officer
(Principal Financial Officer)
|
|
Date:
|
November 3, 2016
|
/s/ Roy E. Reichbach
|
|
|
Name:
|
Roy E. Reichbach
|
|
Title:
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
Date:
|
November 3, 2016
|
/s/ Trevor Renfield
|
|
|
Name:
|
Trevor Renfield
|
|
Title:
|
Chief Financial Officer
(Principal Financial Officer)
|
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 31, 2016 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Entity Registrant Name | NEULION, INC. | |
Entity Central Index Key | 0001387713 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 280,603,078 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 437 | $ 688 |
Common stock, par value per share | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 281,274,033 | 280,903,667 |
Common stock, shares outstanding | 281,274,033 | 280,903,667 |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands |
Common stock [Member] |
Additional paid-in capital [Member] |
Promissory notes [Member] |
Accumulated deficit [Member] |
Total |
---|---|---|---|---|---|
Balance at Dec. 31, 2015 | $ 2,809 | $ 167,705 | $ (209) | $ (62,247) | $ 108,058 |
Balance, shares at Dec. 31, 2015 | 280,903,667 | 280,903,667 | |||
Exercise of stock options | $ 22 | 427 | $ 449 | ||
Exercise of stock options, shares | 2,235,565 | ||||
Stock-based compensation: | |||||
Stock options | 2,079 | 2,079 | |||
Restricted stock | $ 20 | 1,224 | 1,244 | ||
Restricted stock, shares | 1,963,000 | ||||
Directors' compensation | $ 1 | 165 | 166 | ||
Directors' compensation, shares | 145,805 | ||||
Repurchase and cancellation of common stock | $ (39) | (3,411) | (3,450) | ||
Repurchase and cancellation of common stock, shares | (3,974,004) | ||||
Net loss | (1,409) | (1,409) | |||
Balance at Sep. 30, 2016 | $ 2,813 | $ 168,189 | $ (209) | $ (63,656) | $ 107,137 |
Balance, shares at Sep. 30, 2016 | 281,274,033 | 281,274,033 |
Nature of Operations |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Nature of Operations [Abstract] | |
Nature of Operations | 1. Nature of Operations
NeuLion, Inc. (“NeuLion” or the “Company”) is a leading provider of digital video solutions and services with the mission to deliver and enable the highest quality on-demand and live digital content experiences anywhere and on any device. The NeuLion Digital Platform is a proprietary, cloud-based, fully-integrated, turnkey solution that enables the distribution and monetization of digital video content. Through the Company’s comprehensive solution suite, including the NeuLion Digital Platform, the DivX video viewing solution and the MainConcept advanced media processing products, NeuLion serves enterprise customers throughout the digital video ecosystem.
The Company is headquartered in Plainview, New York and was domesticated under Delaware law on November 30, 2010. The Company’s common stock is listed on the Toronto Stock Exchange (“TSX”) under the symbol NLN. |
Basis of Presentation and Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | 2. Basis of Presentation and Significant Accounting Policies
The Company’s accounting policies are consistent with those presented in its annual consolidated financial statements as at December 31, 2015. These interim unaudited condensed consolidated financial statements do not include all footnote disclosures required by U.S. generally accepted accounting principles (“GAAP”) for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements, including the notes thereto, for the year ended December 31, 2015, as they appear in the Company’s Annual Report on Form 10-K.
These financial statements are prepared in conformity with U.S. GAAP, which requires management to make certain estimates that affect the reported amounts in the interim unaudited condensed consolidated financial statements, and the disclosures made in the accompanying notes. Despite the Company’s intention to establish accurate estimates and use reasonable assumptions, actual results may differ from these estimates. All significant intercompany transactions and accounts have been eliminated on consolidation.
In the opinion of management, these interim unaudited condensed consolidated financial statements contain all of the adjustments of a normal and recurring nature necessary to present fairly the Company’s financial position as at September 30, 2016 and December 31, 2015 and the results of operations and cash flows for the three and nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the entire year.
The accompanying interim unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes. As of September 30, 2016, the Company’s significant accounting policies and estimates remain unchanged from those detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue recognition and as subsequently amended. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for the Company beginning in the first quarter of 2018. Early adoption is permitted but not before the first quarter of 2017. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application recognized at the date of initial application. The Company is currently evaluating the impact of this guidance on its operations and believes the impact the adoption of this guidance may be material to its financial position or results of operations.
In September 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”), which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 is effective for periods beginning after December 15, 2015, including interim periods within those fiscal years. The new guidance must be applied prospectively to adjustments to provisional amounts that occur after the effective date of the ASU, with early adoption permitted. The adoption of this standard did not have a material effect on the Company’s financial statements and related disclosures.
In November 2015, the FASB issued ASU 2015-17, “Income Taxes” (“ASU 2015-17”), which requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The amendments in this ASU apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments. For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If an entity applies the guidance prospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If an entity applies the guidance retrospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The Company adopted this guidance on a prospective basis effective October 1, 2015.
In February 2016, the FASB issued new accounting guidance on leases. The guidance, which is effective January 1, 2019, with early adoption permitted, requires virtually all leases to be recognized on consolidated balance sheets and requires retrospective presentation. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and disclosures.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statements of cash flows. The new standard will become effective for the Company beginning with the first quarter of 2017, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and disclosures.
In June 2016, the FASB issued an Update 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which (i) significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model; and (ii) provides for recording credit losses on available-for-sale (AFS) debt securities through an allowance account. The update also requires certain incremental disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and disclosures.
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Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | 3. Business Combinations
(i) Saffron Digital Limited (“Saffron Digital”)
On June 3, 2016, the Company completed the acquisition of Saffron Digital in an all-cash asset transaction for total consideration of $9,000, of which $7,500 was paid on closing and $1,500 was paid in September 2016.
Saffron Digital helped its customers build multi-platform digital video services for entertainment delivered over-the-top to internet connected devices. Saffron Digital has been working with Hollywood studios and other entertainment content owners for the last ten years, gaining extensive industry expertise and experience in developing and delivering high profile, global premium over-the-top video on demand (OTT VOD) digital services. The Saffron Digital platform supports advanced implementations of subscription video on demand, electronic sell through and advertising supported video on demand.
The acquisition was accounted for using the purchase method of accounting in accordance with Accounting Standards Codification 805 — Business Combinations. Accordingly, the results of operations of Saffron Digital have been included in the accompanying consolidated financial statements since the date of the acquisition. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the acquisition and are based on assumptions that the Company’s management believes are reasonable given the information currently available.
The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates.
The Company incurred $0 and $102 of acquisition-related expenses during the three and nine months ended September 30, 2016, respectively, that are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.
The total purchase price for Saffron Digital has been allocated as follows:
The following are the identifiable intangible assets acquired and their respective useful lives, as determined based on valuations:
The fair value of the intangible assets has been estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted-average cost of capital. The estimated amortization expense for 2016 and for each of the four succeeding years and thereafter is as follows:
(ii) DivX Corporation (“DivX”)
On January 30, 2015, the Company completed the acquisition of 100% of the outstanding securities of DivX for total consideration of $59,018. The Company also assumed an earn-out liability based on the achievement of certain revenue milestones over the three-year period following March 31, 2014. On January 30, 2015, management valued the earn-out liability at zero due to the historical performance and forecast of DivX. On closing, the Company issued 35,890,216 shares of common stock of the Company valued at $31,905 on the issuance date and a $27,000 two-year convertible promissory note (the “Note”). At the Company’s Annual Meeting of Stockholders on June 4, 2015, the Company’s stockholders approved the conversion of the Note. Upon such approval, the Note principal of $27,000 automatically converted into 25,840,956 shares of common stock.
The acquisition was accounted for using the purchase method of accounting in accordance with Accounting Standards Codification 805 — Business Combinations. Accordingly, the results of operations of DivX have been included in the accompanying consolidated financial statements since the date of the acquisition. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the acquisition and are based on assumptions that the Company’s management believes are reasonable given the information currently available.
The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates.
The Company incurred $0 and $400 of acquisition-related expenses during the three and nine months ended September 30, 2015, respectively, that are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.
The total purchase price for DivX has been allocated as follows:
The following are the identifiable intangible assets acquired and their respective useful lives, as determined based on valuations:
The fair value of the intangible assets has been estimated using the income approach in which the after-tax cash flows are discounted to present value. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model as well as the weighted-average cost of capital.
Contracts Receivable
The purchase price allocation includes estimated contracts receivable of $16,668, which are attributable to an adjustment to record the fair value of assumed contractual payments due to DivX for which no additional obligation exists in order to receive such payments. These contractual payments are for fixed multi-year site licenses and guaranteed minimum-royalty licenses.
DivX’s revenue is primarily derived from royalties paid by licensees to acquire intellectual property rights. Revenue in such transactions is recognized during the period in which such customers report the number of royalty-eligible units that they have shipped. As the first royalty reports received from customers post-acquisition were for shipments made prior to the acquisition, these amounts did not meet the requirements for the Company to recognize the revenue; however, the cash payments associated with these reports were received by the Company subsequently.
In certain multi-year site licenses and guaranteed minimum-royalty licenses, DivX, under previous ownership, entered into extended payment programs. Revenue related to such extended payment programs was recognized at the earlier of when cash was received or when periodic payments became due. In each case, the payment terms extend over the term of the multi-year license, and the remaining contractual payments that existed at the acquisition date were received by the Company subsequently. As the Company assumed no additional obligations under such contracts, these payments were considered a fixed payment stream, rather than revenue. This fixed payment stream was accounted for as an element of accounts receivable and included as part of the acquisition accounting.
The fair value of the remaining payments due under the applicable contracts was estimated by calculating the discounted cash flows associated with such future billings. Although the Company has not recognized revenue as it collects the corresponding site license payments under these pre-acquisition contracts, the Company has recognized interest income at the discount rate of the contracts receivable. Interest income recognized during the three and nine months ended September 30, 2016 was $0 and $19, respectively (three and nine months ended September 30, 2015 were $87 and $257, respectively).
Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined results of operations of the Company and DivX, on a pro forma basis, as though the Company had acquired DivX on January 1, 2015. The pro forma information for all periods presented also includes the effects of business combination accounting resulting from the acquisition, including amortization charges from acquired intangibles assets.
The results for the three and nine months ended September 30, 2016 are actual results.
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Economic Dependence and Concentration of Credit Risk |
9 Months Ended |
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Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Economic Dependence and Concentration of Credit Risk | 4. Economic Dependence and Concentration of Credit Risk
For the three months ended September 30, 2016, the Ultimate Fighting Championship (“UFC”) accounted for 11% of revenue. For the nine months ended September 30, 2016, the National Hockey League (“NHL”) accounted for 10% of revenue. For the three months ended September 30, 2015, LG Electronics accounted for 12% of revenue. For the nine months ended September 30, 2015, LG Electronics and the NHL accounted for 23% of revenue: 12% and 11%, respectively.
As at September 30, 2016, Samsung Companies, the World Surf League and Rogers Media accounted for 39% of accounts receivable: 11%; 11%; and 17%, respectively. As at December 31, 2015, Samsung Companies and Toshiba Companies accounted for 33% of accounts receivable: 19% and 14%, respectively.
As at September 30, 2016, the National Football League and the National Basketball Association (“NBA”) accounted for 68% of accounts payable: 25% and 43%, respectively. As at December 31, 2015, the UFC and the NBA accounted for 51% of accounts payable: 37% and 14%, respectively.
As at September 30, 2016, approximately 64% of the Company’s cash and cash equivalents were held in accounts with U.S. banks that received an A-2 rating from Standard and Poor’s and a P-1 rating from Moody’s. |
Related Party Transactions |
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Related Party Transactions | 5. Related Party Transactions
The Company has entered into certain transactions and agreements in the normal course of operations with related parties. Significant related party transactions are as follows:
KyLin TV, Inc. (“KyLin TV”)
KyLin TV is an IPTV company that is controlled by Charles B. Wang, a member of the Board of Directors and the husband of the Executive Chair of the Company. On June 1, 2008, the Company entered into an agreement with KyLin TV to build and deliver the setup and back office operations for KyLin TV’s IPTV service. Effective April 1, 2012, the Company amended its agreement with KyLin TV, such that, in addition to the services previously provided, KyLin TV was appointed the exclusive distributor of the Company’s business to consumer (“B2C”) IPTV interests. As exclusive distributor, KyLin TV obtains, advertises and markets all of the Company’s B2C content, in accordance with the terms of the amendment. Accordingly, KyLin TV records the gross revenues from the Company’s B2C content as well as the associated license fees, whereas the Company records revenues in accordance with the revised fee schedule in the amendment. The Company also provides and charges KyLin TV for administrative and general corporate support. The amounts charged for the administrative and general corporate support services provided by the Company for the three and nine months ended September 30, 2016 were $24 and $73, respectively (three and nine months ended September 30, 2015 were $33 and $94, respectively), and were recorded as a recovery in selling, general and administrative expense.
New York Islanders Hockey Club, L.P. (“New York Islanders”)
The Company provides IT-related professional services and administrative services to the New York Islanders, a professional hockey club that is minority-owned by Mr. Wang.
Renaissance Property Associates, LLC (“Renaissance”)
The Company provides IT-related professional services to Renaissance, a real estate management company owned by Mr. Wang. In June 2009, the Company signed a sublease agreement with Renaissance for office space in Plainview, New York. The sublease agreement expires in December 2019. The sublease contains a cancellation option with 6 months’ notice. Rent expense paid by the Company to Renaissance for the three and nine months ended September 30, 2016 of $170 and $395, respectively (three and nine months ended September 30, 2015 were $108 and $323), inclusive of taxes and utilities, is included in selling, general and administrative expense.
Smile Train, Inc. (“Smile Train”)
The Company provides IT-related professional services to Smile Train, a public charity whose founder and significant benefactor is Mr. Wang.
The Company recognized revenue from related parties as follows:
The amounts due from (to) related parties are as follows:
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Loss Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss Per Share | 6. Loss Per Share
Basic loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of preferred stock, restricted stock, stock options and warrants.
The following table summarizes the securities convertible into common stock that were outstanding as at September 30, 2016 and 2015. The underlying shares of common stock were not included in the computation of diluted loss per share for the three and nine months ended September 30, 2016 and 2015 because their effect would have been anti-dilutive.
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Capital Stock |
9 Months Ended |
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Sep. 30, 2016 | |
Class of Stock Disclosures [Abstract] | |
Capital Stock | 7. Capital Stock
At the Company’s Annual Meeting of Stockholders on June 2, 2016, the Company’s stockholders approved a proposal to amend and restate the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 300 million to 500 million. |
Segmented Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segmented Information | 8. Segmented Information
The Company’s assets and operations are located primarily in the United States. The Company operates in one segment. Our chief operating decision-maker reviews our operating results on an aggregate basis and manages our operations as a single operating segment. Total revenue from customers, based on the location of the customers, was as follows:
As at September 30, 2016 and December 31, 2015, the value of property and equipment at locations outside the U.S. was not material. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 9. Income Taxes
The tax provision for the three
and nine months ended September 30, 2016 was $1,155 and $3,033, respectively, compared to $1,241 and $3,329 for the three and
nine months ended September 30, 2015. The provision for income taxes during 2016 is primarily comprised of current and
deferred tax expense in the U.S. and in profitable cost-plus foreign jurisdictions, and foreign withholding taxes. The
difference between the tax provision and the expected statutory rate is primarily due to losses in foreign jurisdictions
without tax benefit and non-deductible expenses. The provision for income taxes during 2015 is primarily comprised of
current and deferred tax expense in profitable cost-plus foreign jurisdictions, changes in deferred tax liabilities that
cannot be offset by deferred tax assets, and foreign withholding taxes.
At December 31, 2015, based on the weight of available evidence, including profitability in recent periods and the availability of expected future taxable income, the Company concluded that it was more likely than not that the benefits of federal deferred income tax assets will be realized. Accordingly, the Company reduced the valuation allowances on its federal and some state deferred income tax assets. As of September 30, 2016, the Company continues to maintain a valuation allowance to offset certain foreign and state deferred income tax assets, as realization of such assets does not meet the more-likely-than-not threshold.
The Company does not believe there are any material uncertain tax provisions under Accounting Standards Codification 740, “Income Taxes”. The Company's federal and state tax returns remain open for the years 2012, 2013, 2014, 2015 and 2016. |
Share Repurchase Program |
9 Months Ended |
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Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Share Repurchase Program | 10. Share Repurchase Program
On March 8, 2016, the Company announced that its Board of Directors authorized the repurchase of up to $10 million of the Company’s shares of common stock over the next 12 months through a normal course issuer bid (“NCIB”) for up to 14,109,057 shares of common stock. On March 24, 2016, the Company announced that it had received the TSX’s approval to commence the NCIB, and that the NCIB would commence on April 1, 2016.
From April to August 2016, a broker on behalf of the Company purchased 3,974,004 shares of the Company’s common stock at a total cost of $3,450. The Company settled with the broker and cancelled these shares prior to September 30, 2016.
In September 2016, a broker on behalf of the Company purchased 699,100 shares of the Company’s common stock at a total cost of $633. The Company settled with the broker and cancelled these shares on October 6, 2016.
In October 2016, a broker on behalf of the Company purchased 562,300 shares of the Company’s common stock at a total cost of $411. The Company intends to settle with the broker and cancel these shares in November 2016. |
Subsequent Event |
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Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Event | 11. Subsequent Event
On October 13, 2016, the Company, through a wholly-owned subsidiary, purchased an approximately 50,000-square-foot office building in Melville, New York to serve as its new headquarters. The Company expects to relocate to the new building from its current leased office space in Plainview, New York in the second half of 2017. The purchase price was $7,300. |
Basis of Presentation and Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue recognition and as subsequently amended. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for the Company beginning in the first quarter of 2018. Early adoption is permitted but not before the first quarter of 2017. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application recognized at the date of initial application. The Company is currently evaluating the impact of this guidance on its operations and believes the impact the adoption of this guidance may be material to its financial position or results of operations.
In September 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”), which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 is effective for periods beginning after December 15, 2015, including interim periods within those fiscal years. The new guidance must be applied prospectively to adjustments to provisional amounts that occur after the effective date of the ASU, with early adoption permitted. The adoption of this standard did not have a material effect on the Company’s financial statements and related disclosures.
In November 2015, the FASB issued ASU 2015-17, “Income Taxes” (“ASU 2015-17”), which requires that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The amendments in this ASU apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments. For public business entities, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If an entity applies the guidance prospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If an entity applies the guidance retrospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The Company adopted this guidance on a prospective basis effective October 1, 2015.
In February 2016, the FASB issued new accounting guidance on leases. The guidance, which is effective January 1, 2019, with early adoption permitted, requires virtually all leases to be recognized on consolidated balance sheets and requires retrospective presentation. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and disclosures.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statements of cash flows. The new standard will become effective for the Company beginning with the first quarter of 2017, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and disclosures.
In June 2016, the FASB issued an Update 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which (i) significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model; and (ii) provides for recording credit losses on available-for-sale (AFS) debt securities through an allowance account. The update also requires certain incremental disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and disclosures. |
Business Combination (Tables) |
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Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Pro Forma Information |
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Schedule of Total Purchase Price Allocation | The total purchase price for Saffron Digital has been allocated as follows:
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Schedule of Identifiable Intangible Assets Acquired and Their Respective Useful Lives | The following are the identifiable intangible assets acquired and their respective useful lives, as determined based on valuations:
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Schedule of Estimated Amortization Expense | The estimated amortization expense for 2016 and for each of the four succeeding years and thereafter is as follows:
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Div X [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Total Purchase Price Allocation | The total purchase price for DivX has been allocated as follows:
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Schedule of Identifiable Intangible Assets Acquired and Their Respective Useful Lives | The following are the identifiable intangible assets acquired and their respective useful lives, as determined based on valuations:
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Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue from Related Parties | The Company recognized revenue from related parties as follows:
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Schedule of Amounts Due from (to) Related Parties | The amounts due from (to) related parties are as follows:
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Loss Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Anti-dilutive Securities | The following table summarizes the securities convertible into common stock that were outstanding as at September 30, 2016 and 2015. The underlying shares of common stock were not included in the computation of diluted loss per share for the three and nine months ended September 30, 2016 and 2015 because their effect would have been anti-dilutive.
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Segmented Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Total Revenue from Customers Based on Location | Total revenue from customers, based on the location of the customers, was as follows:
|
Business Combination (Narratives) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 |
Jun. 03, 2016 |
Jun. 04, 2015 |
Jan. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Div X [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Ownership percentage | 100.00% | |||||||
Total consideration | $ 59,018 | |||||||
Earn-out consideration achievement of milestone period | 3 years | |||||||
Earn-out liability | ||||||||
Common stock issued for acquisition | 35,890,216 | |||||||
Value of common stock issued for acquisition | $ 31,905 | |||||||
Convertible promissory note incurred as consideration | $ 27,000 | |||||||
Term of convertible promissory note | 2 years | |||||||
Convertible note | $ 27,000 | |||||||
Number of share issued upon conversion of note | 25,840,956 | |||||||
Acquisition-related expenses | $ 400 | |||||||
Contracts receivable | $ 16,668 | |||||||
Interest income recognized | $ 87 | $ 19 | $ 257 | |||||
Saffron Digital [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total consideration | $ 1,500 | $ 7,500 | ||||||
Acquisition-related expenses | $ 102 |
Business Combination (Schedule of Total Purchase Price Allocation) (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 03, 2016 |
Dec. 31, 2015 |
Jan. 30, 2015 |
---|---|---|---|---|
Total purchase price allocation | ||||
Goodwill | $ 13,229 | $ 11,496 | ||
Saffron Digital [Member] | ||||
Total purchase price allocation | ||||
Prepaid expenses and deposits | $ 53 | |||
Property, plant and equipment, net | 14 | |||
Intangible assets | 7,200 | |||
Goodwill | 1,733 | |||
Net assets acquired | $ 9,000 | |||
Div X [Member] | ||||
Total purchase price allocation | ||||
Cash | $ 9,718 | |||
Accounts receivable | 7,094 | |||
Contracts receivable | 16,668 | |||
Income tax receivable | 4,317 | |||
Other receivables | 247 | |||
Prepaid expenses and deposits | 1,342 | |||
Deferred tax asset | 384 | |||
Other assets | 334 | |||
Property, plant and equipment, net | 3,592 | |||
Intangible assets | 28,500 | |||
Goodwill | 169 | |||
Accounts payable | (721) | |||
Accrued liabilities | (5,560) | |||
Deferred revenue | (3,000) | |||
Deferred tax liability | (2,154) | |||
Deferred rent liability | (1,912) | |||
Net assets acquired | $ 59,018 |
Business Combination (Schedule of Estimated Amortization Expense) (Details) - Saffron Digital [Member] $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | |
2016 | $ 360 |
2017 | 1,440 |
2018 | 1,440 |
2019 | 1,440 |
2020 | 1,440 |
Thereafter | 600 |
Total | $ 6,720 |
Business Combination (Schedule of Pro Forma Information) (Details) - Div X [Member] - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Pro forma information | ||||
Total revenue | $ 23,857 | $ 21,901 | $ 74,261 | $ 68,498 |
Net loss | $ (2,715) | $ (3,120) | $ (149) | $ (9,075) |
Loss per share - basic and diluted | $ (0.01) | $ (0.01) | $ 0.00 | $ (0.04) |
Related Party Transactions (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
KyLin TV [Member] | ||||
Related Party Transaction [Line Items] | ||||
Selling, general and administrative expense from related parties | $ 24 | $ 33 | $ 73 | $ 94 |
Renaissance [Member] | ||||
Related Party Transaction [Line Items] | ||||
Selling, general and administrative expense from related parties | $ 170 | $ 108 | $ 395 | $ 323 |
Related Party Transactions (Schedule of Revenue) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Related Party Transaction [Line Items] | ||||
Revenue | $ 213 | $ 246 | $ 645 | $ 842 |
KyLin TV [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue | 90 | 121 | 274 | 459 |
New York Islanders [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue | 69 | 71 | 209 | 221 |
Renaissance [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue | 30 | 30 | 90 | 90 |
Smile Train, [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue | $ 24 | $ 24 | $ 72 | $ 72 |
Related Party Transactions (Schedule of Amounts Due from (to) Related Parties) (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Related Party Transaction [Line Items] | ||
Amounts due from (to) related parties | $ 378 | $ 286 |
Renaissance [Member] | ||
Related Party Transaction [Line Items] | ||
Amounts due from (to) related parties | (18) | |
KyLin TV [Member] | ||
Related Party Transaction [Line Items] | ||
Amounts due from (to) related parties | $ 378 | $ 304 |
Capital Stock (Details) - shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Class of Stock Disclosures [Abstract] | ||
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Contingency [Line Items] | ||||
Income tax expense | $ 1,155 | $ 1,241 | $ 3,033 | $ 3,329 |
Minimum [Member] | ||||
Income Tax Contingency [Line Items] | ||||
Tax years open for examination | 2012 | |||
Maximum [Member] | ||||
Income Tax Contingency [Line Items] | ||||
Tax years open for examination | 2015 |
Share Repurchase Program (Details) - USD ($) $ in Thousands |
1 Months Ended | 5 Months Ended | 9 Months Ended | ||
---|---|---|---|---|---|
Oct. 31, 2016 |
Sep. 30, 2016 |
Aug. 31, 2016 |
Sep. 30, 2016 |
Mar. 08, 2016 |
|
Equity, Class of Treasury Stock [Line Items] | |||||
Value of stock repurchased during period | $ 3,450 | ||||
Common stock [Member] | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Total value of shares authorized to be repurchased | $ 10,000 | ||||
Number of shares authorized to be repurchased | 14,109,057 | ||||
Stock repurchased during period, shares | 699,100 | 3,974,004 | |||
Value of stock repurchased during period | $ 633 | $ 3,450 | |||
Common stock [Member] | Subsequent Event [Member] | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Stock repurchased during period, shares | 562,300 | ||||
Value of stock repurchased during period | $ 411 |
Subsequent Event (Details) - Subsequent Event [Member] $ in Thousands |
1 Months Ended |
---|---|
Oct. 30, 2016
USD ($)
ft²
| |
Area of lease | ft² | 50,000 |
Payments for purchase of new headquarters building | $ | $ 7,300 |
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