|
|
Six Months Ended June 30,
2014
|
|
Six Months Ended June 30,
2013
|
Cash flows from operating activities:
|
|
|
|
|
Net loss
|
$
|
(819)
|
$
|
(300)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation
|
|
18
|
|
31
|
Amortization of intangible assets
|
|
83
|
|
83
|
Amortization of debt discount
|
|
-
|
|
-
|
Amortization of deferred financing costs
|
|
-
|
|
-
|
Loss (gain) from change in fair value of derivative
liabilities
|
|
-
|
|
-
|
Loss (gain) on change in fair value of contingent
consideration
|
|
(6)
|
|
15
|
Stock based compensation
|
|
-
|
|
-
|
Income from equity investments
|
|
(174)
|
|
(267)
|
Gain from partial disposal of interest in equity investment
|
|
-
|
|
-
|
Non-controlling interests
|
|
(20)
|
|
(3)
|
Loss from disposal of equipment
|
|
-
|
|
(2)
|
Impairment of goodwill from acquisitions
|
|
-
|
|
-
|
Accrued interest from note receivable
|
|
(17)
|
|
(13)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
778
|
|
(3,644)
|
Cost and estimated earnings in excess of billings on
projects
|
|
72
|
|
98
|
Value added tax refund receivable
|
|
254
|
|
398
|
Prepaid expenses and other current assets
|
|
(107)
|
|
(236)
|
Accounts payable
|
|
(1,069)
|
|
2,611
|
Accrued liabilities
|
|
81
|
|
641
|
Billings in excess of costs and estimated earnings
|
|
424
|
|
55
|
Net cash generated from
operating activities
|
|
(502)
|
|
(533)
|
Cash flows from investing activities:
|
|
|
|
|
Promissory note issued
|
|
-
|
|
(656)
|
Net disposal and purchase of equipment
|
|
-
|
|
30
|
Disposal of partial interest in equity
investment
|
|
-
|
|
-
|
Dividends from equity investments
|
|
239
|
|
212
|
Equity investment
|
|
-
|
|
-
|
Net cash used in investing
activities
|
|
239
|
|
(414)
|
Cash flows from financing activities:
|
|
|
|
|
Repayments of debt
|
|
-
|
|
(69)
|
Proceeds from debt, net of financing costs
|
|
(4)
|
|
-
|
Net repayments from borrowings from related party
|
|
-
|
|
(49)
|
Net cash provided by financing
activities
|
|
(4)
|
|
(118)
|
Effect of exchange rates on cash from continued operations
|
|
53
|
|
(82)
|
Net increase (decrease) in cash
|
|
(214)
|
|
(1,147)
|
Cash at beginning of period
|
|
1,834
|
|
2,270
|
Cash at end of
period
|
$
|
1,620
|
$
|
1,123
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
Cash paid for interest in continued operations
|
$
|
60
|
$
|
36
|
Non-cash investing and financing activities:
|
|
|
|
|
Note payable converted into common shares
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the consolidated
financial statements.
United Communications Partners
Inc. and Subsidiaries
Notes to Unaudited Condensed
Consolidated Financial Statements
Note 1. Organization and Nature of
Business
Organization
United Communications Partners Inc. ("UCP" or the "Company"), is
a holding company that currently conducts its operations through
its wholly owned subsidiary Tre Kronor Media & Reklam Stockholm
AB, ("TKM" or "Tre Kronor") which was acquired on May 4, 2010,
Abrego Spain SL, which was established in November 2010, and Tre
Kronor Holding AB, which was established in August 2013.
In Sight AS
Effective January 1, 2011 TKM acquired a non-controlling 30.1%
interest in In Sight AS (a Norwegian media company) pursuant to an
agreement dated June 2, 2010 between Insight and TKM. The interest
was acquired for a cash consideration of Swedish Kronor (SEK)
4,756,550 ($701,000) which was paid on October 31, 2010.
In Sight AS is a Norwegian based media agency established in
2009. During 2010 and effective from January 1, 2011, In Sight AS
expanded its business significantly after signing a contract with
one of the largest retailers in Norway regarding media strategy,
counseling, media purchases and campaign execution
In the beginning of 2012 In Sight AS issued 23,500 new shares
against cash considerations, thus diluting TKM's non-controlling
interest from 30.1% to 27.1%. On September 18, 2012, TKM agreed to
dispose 14,500 shares to the management of In Sight AS against a
cash consideration of $222,591 (Norwegian Kronor 1,305,000).
Pursuant to the transaction, TKM's non-controlling interest is 21%
(50,000 shares).
HowCom AB (formerly CCCP Media AB)
Since September 2011, TKM holds a non-controlling interest of
33.3%, SEK 33,333 (approximately $4,861) in CCCP Media AB, a
Swedish media agency, with a combined capital of SEK 100,000
(approximately $14,583).
During April 2013, CCCP Media AB acquired the Swedish consulting
firm HowCom AB. In conjunction to the acquisition, the name of the
company CCCP Media AB was changed to HowCom AB ("HC"). In
connection with the acquisition, in May 2013, HowCom AB
participated in the establishing of the Swedish consulting company
HowCom Evolution AB ("HCE") for a combined capital of SEK 100,000
(approximately $14,895) in which HowCom AB holds a controlling
interest of 52% which is the equivalent to SEK 52,000
(approximately $7,745).
Nyheter365 AB (formerly Atna World
AB)
Effective January 1, 2011, TKM acquired all issued and
outstanding shares in the Swedish advertising agency Atna World AB.
Subsequent to the acquisition the name of the company was changed
to Nyheter365 AB ("Nyheter365"). As consideration for the acquired
shares, the former shareholders of Atna World AB received a total
of 10,000,000 shares of common stock in UCP. Such shares were
transferred free of charge from an affiliate to UCP.
As at January 1, 2012, the CEO of Nyheter365 received 20% of the
issued and outstanding shares in Nyheter365, as part of his
remuneration package, subsequent to which TKM holds a controlling
interest of 80% in Nyheter365 with a combined capital of SEK
100,000 (approximately $14,979).
Tre Kronor Media Danmark A/S
In February 2013, TKM participated in the establishing of the
Danish media company Tre Kronor Media Danmark A/S ("TKMDK"). TKMDK
was established with a combined capital of Danish Kroner 500,000,
(approximately $86,200) in which TKM holds a controlling interest
of 80% which is equivalent to DKK 400,000, (approximately $69,000).
The results of operations of TKMDK have been included in the
consolidated statements of operations since February 11, 2013.
Tre Kronor Creative AB
During the first quarter of 2013 TKM established the Swedish
company Tre Kronor Creative AB ("TKC"). Its establishment was based
on a partnership agreement with two leading members of the TKM
staff, whom where to take a 20% holding in the company, with a
combined capital of SEK 100,000 (approximately $15,346). The
agreement was not completed, and both members waived their right to
shares of ownership. As at December 31, 2013, TKM's controlling
interest constitutes the equivalent of SEK 100,000 (approximately
$15,365).
TKC was established with the purpose to separate advertising
activities from TKM in order for TKM to focus entirely on its core
competencies within media consultancy, media planning and media
campaign execution.
In July 2013 it was concluded the advertising business of TKC
would generate a loss and it was decided to close the advertising
business. TKC will continue to do business but its operations will
be refocused on providing clients with other communication
services.
The results of operations of TKC have been included in the
consolidated statements of operations since April 1, 2013.
Tre Kronor Holding AB
In August 2013, the Swedish company Tre Kronor Holding AB
("TKH") was established, with a capital of SEK 100,000 (approx.
$15,302). TKH was established with the purpose to handle joint
activities and shared services for the group, i.e. administrative
and financial services, procurement, shared systems and tools,
investments and growth activities, and started its operations in
May 2014.
Corporate Structure
The Company's corporate organization as of June 30, 2014 is
reflected in the following chart:
Business
United Communications Partners and its subsidiaries
(collectively, the "Company") offer its customers a network of
advertising, media and other communication services. The Company's
strategy is to acquire mid-size or make equity investments in well
established businesses throughout Europe in order to form a
European network of communication agencies.
Going Concern
The accompanying unaudited consolidated financial statements
have been prepared assuming that the Company will continue as a
going concern.
During the six months ended June 30, 2014 and 2013 the Company
incurred net losses of $819,000 and $300,000 respectively. The
Company continues to operate with a working capital deficiency
(approximately $5,861,000 at June 30, 2014), and has limited
financial resources available to pay ongoing financial obligations
as they become due.
The Company's operations used cash of $502,000 during the six
months ended June 30, 2014, compared to a use of cash from
operations of $533,000 during the six months ended June 30,
2013.
The Company's current source of funding, in addition to cash on
hand, is any cash derived from operations and an operating line of
credit of approximately $1,674,600. However, the Company will
require additional financing to conduct its business in accordance
with its plan of operations on a long term basis.
These conditions raise doubt about the Company's ability to
continue as a going concern. Accordingly, the accompanying
condensed consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America, which contemplates continuation of the
Company as a going concern and the realization of assets and the
satisfaction of liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented in the
condensed consolidated financial statements do not necessarily
purport to represent realizable or settlement values. These
unaudited condensed consolidated financial statements do not
include any adjustment that might result from the outcome of this
uncertainty.
Note 2 - Summary of Significant Accounting
Policies
Basis of presentation
The unaudited condensed consolidated financial statements as of
June 30, 2014 and 2013 include the accounts of UCP and its
wholly-owned subsidiaries as described in Note 1. All intercompany
transactions and balances have been eliminated in the consolidated
financial information provided.
These unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and related notes thereto included in the Company's
Annual Report for the year ended December 31, 2013. The Company's
accounting policies are described in the Notes of the consolidated
Financial Statements in its Annual report for the year ended
December 31, 2013 and updated, as necessary, in this Quarterly
Report.
Use of Estimates
The preparation of condensed consolidated financial statements
in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the
reported amounts of income and expenses during the reported period.
The Company evaluates all of its estimates on an on-going
basis.
Significant estimates and assumptions include the valuation of
acquired assets including goodwill, the useful lives of assets,
revenue recognition, income tax valuation, stock valuation, debt
discounts on notes payable, other intangible assets and bad debts.
It is at least reasonably possible that the estimate of the effect
on the financial statements of a condition, situation or set of
circumstances that existed at the date of the condensed
consolidated financial statements, which management considered in
formulating its estimate could change in the near term due to one
or more future confirming events. Accordingly, actual results could
differ in the near term from these estimates, and such differences
could be material.
Revenue recognition
Most of the Company's client contracts are individually
negotiated and accordingly, the terms of client engagements and the
bases on which the Company earns commissions and fees vary
significantly. Direct costs include fees paid to external suppliers
where they are retained to perform part of or all of a specific
project for a client and the resulting expenditure is directly
attributable to the revenue earned. Revenue is stated exclusive of
VAT (value added tax), sales taxes and trade discounts.
The Company's revenue is typically derived from commissions on
media placements and fees for advertising and media services.
Revenue may consist of various arrangements involving fixed fees,
commissions, or incentive-based revenue, as agreed upon with each
client.
The Company also earns commissions from referrals of services to
other vendors, marketing agencies, who ultimately provide the end
service to the customer. Commissions are generally earned on the
date of broadcast or publication.
Revenue for the Company's fixed-fee contracts is recognized when
all of the following criteria are satisfied: (i) persuasive
evidence of an arrangement exists; (ii) the price is fixed or
determinable; (iii) collectability is reasonably assured; and
(iv) services have been performed. Depending on the terms of a
client contract, fees for services performed can be recognized in
two principal ways: proportional performance or completed
contract.
-
Fixed-fee contracts are generally recognized as
earned based on the proportional performance method of revenue
recognition. In assessing contract performance, both input and
output criteria are reviewed. Costs incurred are used as an
objective input measure of performance. The primary input of all
work performed under these arrangements is labor. As a result of
the relationship between labor and cost, there is normally a direct
relationship between costs incurred and the proportion of the
contract performed to date. Costs incurred as a proportion of
expected total costs is used as an initial proportional performance
measure. This indicative proportional performance measure is always
subsequently validated against other more subjective criteria (i.e.
relevant output measures) such as the percentage of interviews
completed, percentage of reports delivered to a client and the
achievement of any project milestones stipulated in the contract.
In the event of divergence between the objective and more
subjective measures, the more subjective measures take precedence
since these are output measures.
-
Certain fees (such as for marketing services related
to rebates offered by clients to their external customers) are
deferred until contract completion as the final act is so
significant in relation to the service transaction taken as a
whole. Fees are also recognized on a completed contract basis if
any of the criteria of the Financial Accounting Standards Board
(FASB), Accounting Standard Codification (ASC) 605-10-S99,
Revenue Recognition, were not satisfied prior to job
completion or if the terms of the contract do not otherwise qualify
for proportional performance.
Incentive-based revenue typically comprises quantitative
criteria. Revenue is recognized when the quantitative targets
have been achieved.
In compliance with FASB ASC 605-45 Principal Agent
Considerations, Reporting Revenue Gross as a Principal versus
Net as an Agent, the Company assess whether its agency or the
third-party supplier is the primary obligor. The Company evaluate
the terms of its client agreements as part of this assessment. In
addition, the Company gives appropriate consideration to other key
indicators such as latitude in establishing price, discretion in
supplier selection and credit risk to the vendor. For a substantial
portion of its client contracts the Company acts as principal as
the Company are the primary obligor and bear credit risk related to
the services it provide. In these contracts the Company
record revenues and costs of revenues gross. In certain
contracts the Company records a net amount principally on those
contracts where the Company only earns a commission.
Foreign Currency
The Company has determined Swedish Kronor is the functional
currency of its foreign operations. Accordingly, the foreign
subsidiaries income and expenses are translated into U.S. dollars
("dollars"), the reporting currency of the Company, at the average
rates of exchange prevailing during the year. The assets and
liabilities are translated into U.S. dollars at the rates of
exchange at the balance sheet date and the related translation
adjustments are included in accumulated other comprehensive income.
During the six months ended June 30, 2014 and 2013 transaction
gains and losses were not material.
Loss per Share
Basic net loss per share has been calculated by dividing net
loss by the weighted average number of common shares outstanding
during the period. UCP had securities outstanding which could
potentially dilute basic earnings per share in the future, but the
incremental shares from the assumed exercise of these securities
were excluded in the computation of diluted net loss per share, as
their effect would have been anti-dilutive.
Impairment of Long-Lived Assets
The Company annually, or whenever events or changes in
circumstances indicate that the carrying amounts of such assets may
not be recoverable, assesses the carrying value of long-lived
assets in accordance with Financial Accounting Standards Board
("FASB") issued ASC 360-10. The Company evaluates the
recoverability of long-lived assets not held for sale by measuring
the carrying amount of the assets against the estimated
undiscounted future cash flows associated with them. If such
evaluations indicate that the future discounted cash flows of
certain long-lived assets are not sufficient to recover the
carrying value of such assets, the assets are adjusted to their
estimated fair values.
Goodwill and Intangible assets - Finite lives
The Company accounts for its acquisitions utilizing the purchase
method of accounting. Under the purchase method of accounting, the
total consideration paid is allocated to the underlying assets and
liabilities, based on their respective estimated fair values. The
excess of purchase price over the estimated fair values of the net
assets acquired is recorded as goodwill. Determining the fair value
of certain acquired assets and liabilities, identifiable intangible
assets in particular, is subjective in nature and often involves
the use of significant estimates assumptions. Finite-lived
identifiable intangible assets are amortized over its expected life
on a straight-line basis, as this basis approximates the expected
cash flows from the Company's existing finite-lived identifiable
intangible assets over the expected future.
UCP acquired all the shares of TKM on May 4, 2010. The
acquisition was completed pursuant to a share transfer agreement
entered into between UCP and the shareholders of TKM. The Company
recorded goodwill in connection with the excess cost over fair
value of the net assets acquired.
Goodwill is accounted for under FASB ASC 350, Goodwill and
other. Under FASB ASC 350, the Company's goodwill is tested
for impairment on an annual basis or whenever facts or
circumstances indicate that the carrying amounts may not be
recoverable. The Company's reporting unit is tested individually
for impairment by comparing the fair value of the reporting unit
with the carrying value of that unit. Fair value is determined
based on a valuation study performed by the Company using the
discounted cash flow method and the estimated market values of the
reporting units. During the year ended December 31, 2012 goodwill
related to the Company's acquisition of TKM was impaired by
$756,000 due to decreased profit expectations for fiscal 2012
through 2016. There was no impairment of goodwill during the six
months ended June 30, 2014.
Equity investments
Investments in business entities in which the Company lacks a
controlling financial interest but does have the ability to
exercise significant influence over operating and financial
policies are accounted for using the equity method in accordance
with ASC-323, Investments—Equity Method
and Joint Ventures.
The Company's proportionate share of net income
or loss of such entity is recorded in "Income from equity
investment" and "Loss from equity investment" included in "Other
income (expense), net" on the Consolidated Statements of
Operations.
Subsequent Events
The Company evaluated subsequent events through the date the
financial statements were issued.
Segment Information
FASB ASC-280 Segment Reporting, Disclosures about
Segments of an Enterprise and Related Information, establishes
standards for reporting information on operating segments in
interim and annual financial statements. The Company operates in
one segment which is providing advertising and media services and
primarily conducting its business in Sweden. The Company's chief
operating decision-maker reviews the Company's operating results on
an aggregate basis and manages the Company's operations as a single
operating segment.
Recent Accounting Pronouncements
There were various other updates recently issued, most of which
represented technical corrections to accounting literature or
application to specific industries and are not expected to have a
material impact on the Company's consolidated financial position,
results of operations or cash flows.
Note 3 - Equity Method Investments
In Sight AS
On October 31, 2010, TKM advanced SEK 4,756,550 approximately
($701,000) to acquire 64,500 shares equaling a 30.1%
non-controlling financial interest in the Norwegian media company
In Sight AS, effective January 1, 2011. In the beginning of 2012 In
Sight AS issued 23,500 new shares against cash considerations, thus
diluting TKM's non-controlling interest from 30.1% to 27.1%. On
September 18, 2012, TKM agreed to dispose 14,500 shares to the
management of In Sight AS against a cash consideration of $222,591
(Norwegian Kronor 1,305,000). Pursuant to the transaction, TKM's
non-controlling interest will constitute 21% (50,000 shares). The
cash consideration was settled on November 28, 2012.
In May 2014 TKM received a dividend from In Sight AS of
approximately $178,000.
The following table represents a summary of the changes in the
value of the equity investment in In Sight AS (dollars in
thousands.)
|
June 30,
|
December 31,
|
|
2014
|
2013
|
|
|
|
Beginning balance
|
$
1,003
|
$
951
|
Acquired
|
-
|
-
|
Disposed
|
-
|
-
|
Dividend received
|
(178)
|
(181)
|
21% of profit
|
119
|
232
|
Currency adjustment
|
(32)
|
1
|
Ending balance
|
$
912
|
$
1,003
|
Howcom AB - former CCCP Media
AB
During September 2011, TKM formed a partnership with two
unrelated individuals by establishing the Swedish company CCCP
Media AB for a combined capital in CCCP AB of SEK 100,000 ($14,583)
in which TKM holds a non-controlling interest of 33.3% which is
equivalent to SEK 33,333 ($4,861).
During April 2013, CCCP Media AB acquired the Swedish consulting
firm HowCom AB. In conjunction to the acquisition, the name of the
company CCCP Media AB was changed to HowCom AB (HC). In connection
with the acquisition, HowCom AB participated in the establishing of
the Swedish consulting company HowCom Evolution AB (HCE) for a
combined capital of SEK 100,000 (approximately $14,895) in which
HowCom AB holds a controlling interest of 51% which is the
equivalent to SEK 51,000 (approximately $7,597).
In May 2014 TKM received a dividend from HowCom AB of
approximately $61,000.
The following table represents a summary of the changes in the
value of the equity investment in HowCom AB (dollars in
thousands.)
|
June 30,
|
December 31,
|
|
2014
|
2013
|
|
|
|
Beginning balance
|
$
77
|
$
39
|
Acquired
|
-
|
-
|
Dividend received
|
(61)
|
(31)
|
33,3% of profit (loss)
|
55
|
68
|
Currency adjustment
|
(2)
|
1
|
Ending balance
|
$
69
|
$
77
|
Note 4 - Promissory note receivable
In January 2013 TKM issued a promissory convertible note
receivable totaling GPB 420,000 to the UK based marketing, media
and advertising consultancy company Crane Media Limited. On
February 1, 2013, the note was partially disbursed with GPB 370,000
(approximately $578,000). By disbursement of GPB 50,000
(approximately $79,000) on May 2, 2013, the note was fully
disbursed. The note bears interest at a rate of 5% per annum and
matures by the end of 2015. At the same time a Co-operation
Agreement was entered into, that grants TKM the option to convert
the note in full or partially into, up to 30%, of the issued and
outstanding shares in Vision Crane Media Limited, a subsidiary of
Crane Media Limited.
During the six months ended June 30, 2014 and 2013 the Company
accrued interest income from the note of $17,244 and $12,762
respectively. The accrued interest income was classified as a part
of interest expenses.
The following table represents a summary of the changes in the
Promissory note receivable to Crane Media Limited (dollars in
thousands.)
|
June 30,
|
December 31,
|
|
2014
|
2013
|
|
|
|
Beginning balance
|
$
684
|
$
-
|
Disbursed loan
|
|
657
|
Accrued interest
|
17
|
30
|
Currency adjustment
|
(24)
|
(3)
|
Ending balance
|
$
677
|
$
684
|
Note 5 - Other intangible assets
In accordance with ASC 805, Business Combinations, the Company
has identified and recognized trade name and customer relationships
in Tre Kronor as intangible assets. Based on a discounted cash flow
model the fair value of the intangible assets was determined to be
$610,000 and $220,000 respectively, both having a useful life of 5
years. For the three and six months ended June 30, 2014 and 2013
intangible assets were amortized by $41,500 and $83,000. At June
30, 2014, and 2013 the net carrying amount of intangible assets
related to the acquisition of TKM was $146,966 and $312,966
respectively.
The following table set forth the future amortization of
intangible assets (dollars in thousands):
2014 (July-December):
$ 83
2015 (January - May):
$ 64
Note 6 - Concentration of Credit Risk
Credit risk represents the loss that would be recognized if
counterparties failed to completely perform as contracted.
During the six months ended June 30, 2014 customer AF, AG and AM
accounted for approximately 24%, 19% and 15% of revenue,
respectively. During the three months ended June 30, 2013 customer
AF, AM and AG accounted for approximately 25%, 17% and 16% of
revenue respectively. No other customer individually represented
more than 10% of revenue for any period presented.
As of June 30, 2014, customers AF and AM accounted for
approximately 38% and 31% of the Company's accounts receivables,
respectively. As of June 30, 2013 customer AM, AF and AB accounted
for approximately 33%, 26% and 19% of the Company's accounts
receivables respectively. No other customer individually
represented more than 10% of accounts receivables at the end of any
period presented.
The Company monitors its exposure to
customers to minimize potential credit losses.
The Company maintains cash and cash equivalent balances at
several financial institutions throughout its operating area, and
at times, may exceed insurance limits and expose the Company to
credit risk. As part of its cash management process, the Company
periodically reviews the relative credit standing of these
financial institutions.
The Company's cash and cash equivalent balances are maintained
at financial institutions located in the United States of America,
Sweden, Denmark and Spain. All cash balances as of June 30, 2014,
were held in bank accounts outside the United States of
America.
Note 7 - Non-controlling interests
For consolidated majority-owned subsidiaries in which the
Company owns less than 100% of the total outstanding shares, the
Company recognizes a non-controlling interest for the ownership
interest of the minority holders.
On January 1, 2012 the CEO of Nyheter365 AB (Nyheter365)
received 20% of the issued and outstanding shares in Nyheter365 as
part of his remuneration package.
On February 11, 2013, TKM participated in the establishing of
the Danish media company Tre Kronor Media Danmark A/S (TKMDK).
TKMDK was established with a combined capital of Danish Kroner
500,000, (approximately $86,200) in which TKM holds a controlling
interest of 80% which is equivalent to DKK 400,000, (approximately
$69,000).
The change in carrying amount of Non-Controlling interest is as
follows (dollars in thousands):
|
|
As of
June 30,
2014
|
As of
December 31, 2013
|
Balance at beginning of period
|
|
$ (22)
|
$
8
|
20% shares in Nyheter365, transferred at par value
|
|
-
|
-
|
20% shares in TKMDK, at par value
|
|
-
|
17
|
Profit (loss) attributable to Non-Controlling interest
|
|
(20)
|
(47)
|
Currency adjustment
|
|
2
|
-
|
Balance at end of period
|
|
$
(40)
|
$ (22)
|
Note 8 - Fair Value Measurement
Valuation Hierarchy
ASC 820 establishes a valuation hierarchy for disclosure of the
inputs to valuation used to measure fair value. This hierarchy
prioritizes the inputs into three broad levels as
follows. Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or
liabilities. Level 2 inputs are quoted prices for
similar assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly or
indirectly through market corroboration, for substantially the full
term of the financial instrument. Level 3 inputs are
unobservable inputs based on the Company's own assumptions used to
measure assets and liabilities at fair value. A
financial asset or liability's classification within the hierarchy
is determined based on the lowest level input that is significant
to the fair value measurement.
The following table represents the assets and liabilities
carried at fair value (dollars in thousands) measured on a
recurring and non-recurring basis as of June 30, 2014:
|
|
|
|
|
Fair Value Measurements at June 30, 2014
|
|
|
|
Total Carrying
Value at
June 30, 2014
|
|
|
Quoted prices
in active
markets
(Level 1)
|
|
|
Significant
other
observable
inputs (Level 2)
|
|
Significant
unobservable
inputs (Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Consideration
|
|
$
8
|
|
|
$
-
|
|
|
$
-
|
|
$
8
|
|
|
Goodwill
|
|
$ 2,954
|
|
|
$
-
|
|
|
$
-
|
|
$
2,954
|
|
|
The contingent consideration is measured at fair value using
quoted market prices of the Company's shares of common stock.
Goodwill is measured at fair value on a non-recurring basis
using discounted cash flows and is classified within level 3 of the
value hierarchy.
The following table represents a summary of the changes in the
fair value of the Company's Level 3 financial liabilities that are
measured at fair value on a recurring basis (dollars in
thousands):
|
June 30,
|
|
December 31,
|
|
2014
|
|
2013
|
Beginning balance - Contingent consideration
|
$
|
15
|
|
$
|
20
|
Recorded contingent consideration
|
|
-
|
|
|
-
|
Net unrealized loss on change in fair value of contingent
consideration
|
|
(6)
|
|
|
(5)
|
Ending balance - Contingent consideration
|
$
|
8
|
|
$
|
15
|
The following table represents a summary of the changes in the
fair value of goodwill that is measured at fair value on a
non-recurring basis (dollars in thousands.)
|
|
|
|
June 30,
|
December 31,
|
|
2014
|
2013
|
Beginning balance
|
$
2,954
|
$
2,954
|
Acquired
|
-
|
-
|
Impaired
|
-
|
-
|
Currency adjustment
|
-
|
-
|
Ending balance
|
$
2,954
|
$
2,954
|
Note 9 - Notes Payable
Notes payable consist of the following (dollars in
thousands):
Loan reference
|
|
Maturity Date
|
|
As of
June 30,
2014
|
As of
December 31,
2013
|
Promissory notes
|
|
January 2009
|
|
$
37
|
$
37
|
Total
|
|
|
|
37
|
37
|
Less: Current portion
|
|
|
|
37
|
37
|
Long-term portion of debt
|
|
|
|
$
-
|
$
-
|
Note 10 - Line of Credit
The Company has a floating rate line of credit facility with SEB
Bank in the amount of $1,674,600. As of June 30, 2014 the amount
outstanding, under this line of credit facility, was $-(nil). The
rate of interest payable under the line of credit facility is
presently 3.8 % per annum.
Note 11 - Stock Based Compensation
In the first quarter of 2011 and during the years 2010 and 2009
the company issued 258,000, 1,250,000 and 3,000,000 shares of
common stock respectively to eight consultants for services
rendered during the period from 2009 through 2012. The total market
value of the shares, on the date of signing the agreements, was
$653,740. For the six months ended June 30, 2014 and 2013 the
Company expensed $-(nil) and $-(nil) respectively as selling,
general and administrative expenses. For the three months ended
June 30, 2014 and 2013, the Company expensed $-(nil).
As of June 30, 2014, there was no unrecognized compensation
costs related to the issuance.
Note 12 - Related Party Transactions
Fee to former Chairman and Secretary of the Board
In November 2011 the Company recognized that former chairman,
was entitled to receive a fee for services rendered during 2008,
2009 and 2010 at a total amount of $188,346 which was classified as
a component of selling, general and administrative expenses in the
year ended December 31, 2011. At December 31, 2013, and December
31, 2012, former chairman has a receivable of $1,624 and $51,020
respectively which has been classified in advances from related
parties.
Fee to former President and Chairman of the Board, CEO
of Tre Kronor
According to the Share Purchase Agreement with the former
shareholders of Tre Kronor, the Company was committed to pay an
aggregate amount of SEK 3,000,000 ($387,000) to the president and
chairman of the Board against redemption of a portion of his
shares. The Company agreed to extend the redemption of the share
portion to December 31, 2013. During the year ended December 31,
2010 the Company advanced a payment of $387,000 to him. At December
31, 2011 such advance was classified as a component of the
Company's Stockholders Equity as Notes Receivable from Affiliate.
During the fourth quarter of 2012 the redemption agreement was
annulled and the president and chairman of the board settled the
Note Receivable by repaying the advanced payment of $387,000 in
cash.
During the year ended December 31, 2013, the President and
Chairman of the Board received a fee of $187,282 through a company
controlled by the President and Chairman of the Board. The fee was
classified as a component of selling, general and administrative
expenses.
During the three and six months ended June 30, 2014, the former
President and Chairman of the Board received a fee of $137,102
through a company controlled by the former President and Chairman
the Board. The fee was classified as a component of selling,
general and administrative expenses.
Fee to Secretary and Director of the Board
During year ended December 31, 2013, the Secretary and Director
of the Board received a fee of $185,362 through a company
controlled by the Secretary and Director of the Board. The fee was
classified as a component of selling, general and administrative
expenses.
During the three and six months ended June 30, 2014, the
Secretary and Director of the Board received a fee of $19,142
through a company controlled by the Secretary and Director of the
Board. The fee was classified as a component of selling, general
and administrative expenses.
Note 13 - Subsequent Events
Management has evaluated subsequent events to determine if
events or transactions occurring through June 30, 2014, the date
these financial statements were available to be issued, require
potential adjustments to or disclosure in the consolidated
financial statements and has concluded that no subsequent events
have occurred that would require recognition in the consolidated
financial statements or disclosure in the notes to the consolidated
financial statements.
UNITED COMMUNICATIONS
PARTNERS INC
291 Broadway, Suite 302, New
York, NY10007, USA
Certifications
We, Niclas Fröberg, Carl Johan Grandinson, Anna-Karin Darlin,
Lars Blomberg and Kenneth Rosenthal, certify that:
1.
We have reviewed this financial statement of United
Communications Partners Inc.
2.
Based on our knowledge, this disclosure statement
does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statement made, in
light of circumstances under which such statements were made, not
misleading with respect to the period covered by this disclosure
statement.
3.
Based on our knowledge, the financial statements and
other financial information included or incorporated by reference
in this disclosure statement, fairly present in all material
respects, the financial condition, results of operations and cash
flows of the issuer as of and for, the periods presented in this
disclosure statement.
Date: August 15, 2014.
UNITED COMMUNICATIONS PARTNERS INC.
/s/Niclas
Fröberg
/s/ Carl Johan
Grandinson
/s/ Anna-Karin
Darlin
_______________________
_______________________
_______________________
Niclas
Fröberg
Carl Johan
Grandinson
Anna-Karin
Darlin
/s/Lars
Blomberg
/s/
Kenneth
Rosenthal
_______________________
_______________________
Lars
Blomberg
Kenneth
Rosenthal