Exhibit 15.2

iTV MEDIA INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013











iTV MEDIA INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                            |  | Page |        
|----------------------------------------------------------------------------------------------------------- |  | ---- | -------
|Consolidated Financial Statements                                                                           |  |      |        
|Independent Auditor’s Report                                                                                |  |      | 2 – 3  
|Consolidated Balance Sheets as of December 31, 2014 and 2013                                                |  |      | 4 – 5  
|Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2014 and 2013 |  |      | 6      
|Consolidated Statements of Shareholders’ Deficit for the Years Ended December 31, 2014 and 2013             |  |      | 7      
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013                        |  |      | 8 – 9  
|Notes to the Consolidated Financial Statements for the Years Ended December 31, 2014 and 2013               |  |      | 10 – 48











Independent Auditor's Report



To the Board of Directors of iTV Media Inc.:



We have audited the accompanying consolidated financial statements
of iTV Media Inc. and its subsidiaries (collectively, the “Group”), which comprise the consolidated balance sheets
as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive loss, of shareholders’
deficit and of cash flows for the years then ended.



Management's Responsibility for the Consolidated Financial
Statements



Management is responsible for the preparation and fair presentation
of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.



Auditor's Responsibility



Our responsibility is to express an opinion on the consolidated
financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement.



An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.



2







Opinion



In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of iTV Media Inc. and its subsidiaries at December 31, 2014
and 2013, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles
generally accepted in the United States of America.



Emphasis of Matter



The Group has history of operating losses and has negative working
capital and an accumulated deficit as of December 31, 2014. The accompanying consolidated financial statements have been prepared
assuming that the Group will continue as a going concern based on the continuing financial support to iTV Media Inc. provided by
a related party as described in Note 2 to the consolidated financial statements.



|PricewaterhouseCoopers Zhong Tian LLP
|-------------------------------------
|Shanghai, People’s Republic of China 
|                                     
|June 30, 2015                        



-3-







iTV MEDIA
INC.

CONSOLIDATED BALANCE SHEETS



|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|--------------------------------------------------------------
|                                                              



|                                                                                                                                    |  |      |    |  | As of             |  |             | As of             | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- |  | ----------------- |  | ----------- | ----------------- | 
|                                                                                                                                    |  | Note |    |  | December 31, 2014 |  |             | December 31, 2013 | 
|ASSETS                                                                                                                              |  |      |    |  |                   |  |             |                   | 
|Current assets:                                                                                                                     |  |      |    |  |                   |  |             |                   | 
|Cash and cash equivalents                                                                                                           |  |      |    |  |                   |  | 6,820,298   |                   | 
|Restricted cash                                                                                                                     |  |      |    |  |                   |  | 2,929,108   |                   | 
|Accounts receivable, net of allowances for doubtful accounts of RMB 315,029 as of December 31, 2014 and Nil as of December 31, 2013 |  |      | 4  |  |                   |  | 10,501,969  |                   | 
|Prepaid expenses and other current assets                                                                                           |  |      | 5  |  |                   |  | 8,300,342   |                   | 
|Total current assets                                                                                                                |  |      |    |  |                   |  | 28,551,717  |                   | 
|                                                                                                                                    |  |      |    |  |                   |  |             |                   | 
|Non-current assets:                                                                                                                 |  |      |    |  |                   |  |             |                   | 
|Property and equipment, net                                                                                                         |  |      | 6  |  |                   |  | 56,414,558  |                   | 
|Goodwill                                                                                                                            |  |      | 7  |  |                   |  | 2,225,000   |                   | 
|Intangible assets, net                                                                                                              |  |      | 8  |  |                   |  | 2,411,795   |                   | 
|Other non-current assets                                                                                                            |  |      |    |  |                   |  | 814,094     |                   | 
|Total non-current assets                                                                                                            |  |      |    |  |                   |  | 61,865,447  |                   | 
|                                                                                                                                    |  |      |    |  |                   |  |             |                   | 
|Total assets                                                                                                                        |  |      |    |  |                   |  | 90,417,164  |                   | 
|                                                                                                                                    |  |      |    |  |                   |  |             |                   | 
|LIABILITIES                                                                                                                         |  |      |    |  |                   |  |             |                   | 
|Current liabilities:                                                                                                                |  |      |    |  |                   |  |             |                   | 
|Accounts and notes payable                                                                                                          |  |      |    |  |                   |  | 11,935,181  |                   | 
|Accruals and other liabilities                                                                                                      |  |      | 9  |  |                   |  | 12,005,407  |                   | 
|Due to related parties                                                                                                              |  |      | 15 |  |                   |  | 9,614,195   |                   | 
|Current portion of long-term loan from related parties                                                                              |  |      | 10 |  |                   |  | 13,042,849  |                   | 
|Taxes payable                                                                                                                       |  |      |    |  |                   |  | 171,381     |                   | 
|Convertible bonds                                                                                                                   |  |      | 11 |  |                   |  | 241,091,311 |                   | 
|Total current liabilities                                                                                                           |  |      |    |  |                   |  | 287,860,324 |                   | 
|                                                                                                                                    |  |      |    |  |                   |  |             |                   | 
|Long-term loan from related parties                                                                                                 |  |      | 10 |  |                   |  | 7,622,265   |                   | 
|Convertible bonds                                                                                                                   |  |      | 11 |  |                   |  | -           |                   | 
|Other non-current liabilities                                                                                                       |  |      |    |  |                   |  | -           |                   | 
|Total non-current liabilities                                                                                                       |  |      |    |  |                   |  | 7,622,265   |                   | 
|                                                                                                                                    |  |      |    |  |                   |  |             |                   | 
|Total liabilities                                                                                                                   |  |      |    |  |                   |  | 295,482,589 |                   | 



-4-







|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS (CONTINUED)                       
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              



|                                                                                                                                                                                                                                             |  |      |    |  | As of             |  |              | As of             | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- |  | ----------------- |  | ------------ | ----------------- | 
|                                                                                                                                                                                                                                             |  | Note |    |  | December 31, 2014 |  |              | December 31, 2013 | 
|                                                                                                                                                                                                                                             |  |      |    |  |                   |  |              |                   | 
|MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES:                                                                                                                                                                                         |  |      |    |  |                   |  |              |                   | 
|Series A mandatorily redeemable convertible preferred shares, US$0.0001 par value; 9,600,000 shares authorized, issued and outstanding as of December 31, 2014 and 2013 (Liquidation value: US$ 20,000,000 as of December 31, 2014 and 2013) |  |      | 12 |  |                   |  | 156,557,700  |                   | 
|Total mandatorily redeemable convertible preferred shares                                                                                                                                                                                    |  |      |    |  |                   |  | 156,557,700  |                   | 
|                                                                                                                                                                                                                                             |  |      |    |  |                   |  |              |                   | 
|SHAREHOLDERS’ DEFICIT                                                                                                                                                                                                                        |  |      |    |  |                   |  |              |                   | 
|Ordinary shares (US$0.0001 par value; 22,000,000 shares authorized, 10,000,000 shares issued and outstanding as of December 31, 2014 and 2013)                                                                                               |  |      | 13 |  |                   |  | 6,826        |                   | 
|Additional paid-in capital                                                                                                                                                                                                                   |  |      | 13 |  |                   |  | 455,612      |                   | 
|Accumulated other comprehensive loss                                                                                                                                                                                                         |  |      |    |  |                   |  | (6,182,044   | )                 | 
|Accumulated deficit                                                                                                                                                                                                                          |  |      |    |  |                   |  | (328,495,673 | )                 | 
|Total iTV Media Inc. shareholders’ deficit                                                                                                                                                                                                   |  |      |    |  |                   |  | (334,215,279 | )                 | 
|                                                                                                                                                                                                                                             |  |      |    |  |                   |  |              |                   | 
|Non-controlling interests                                                                                                                                                                                                                    |  |      |    |  |                   |  | (27,407,846  | )                 | 
|Total shareholders' deficit                                                                                                                                                                                                                  |  |      |    |  |                   |  | (361,623,125 | )                 | 
|                                                                                                                                                                                                                                             |  |      |    |  |                   |  |              |                   | 
|Total liabilities, mandatorily redeemable convertible preferred shares and shareholders’ deficit                                                                                                                                             |  |      |    |  |                   |  | 90,417,164   |                   | 





The accompanying notes are an integral part
of these consolidated financial statements.



-5-







|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS  
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              



|                                                             |  |      |    |  | Year ended        |  |             | Year ended        | 
|------------------------------------------------------------ |  | ---- | -- |  | ----------------- |  | ----------- | ----------------- | 
|                                                             |  | Note |    |  | December 31, 2014 |  |             | December 31, 2013 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Revenues                                                     |  |      |    |  |                   |  | 45,869,226  |                   | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Cost of revenues                                             |  |      |    |  |                   |  | (46,590,622 | )                 | 
|Gross loss                                                   |  |      |    |  |                   |  | (721,396    | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Operating expenses:                                          |  |      |    |  |                   |  |             |                   | 
|General and administrative                                   |  |      |    |  |                   |  | (43,252,626 | )                 | 
|Product research and development                             |  |      |    |  |                   |  | (20,012,983 | )                 | 
|Sales and marketing                                          |  |      |    |  |                   |  | (7,537,956  | )                 | 
|Impairment of goodwill                                       |  |      | 7  |  |                   |  | (3,284,000  | )                 | 
|Total operating expenses                                     |  |      |    |  |                   |  | (74,087,565 | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Loss from operations                                         |  |      |    |  |                   |  | (74,808,961 | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Interest and financing costs                                 |  |      |    |  |                   |  | (20,125,754 | )                 | 
|Other expenses, net                                          |  |      |    |  |                   |  | (179,360    | )                 | 
|Loss before income taxes                                     |  |      |    |  |                   |  | (95,114,075 | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Income taxes                                                 |  |      | 14 |  |                   |  | -           |                   | 
|Net loss                                                     |  |      |    |  |                   |  | (95,114,075 | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Net loss attributable to non-controlling interests           |  |      |    |  |                   |  | 10,604,932  |                   | 
|Net loss attributable to iTV Media Inc.                      |  |      |    |  |                   |  | (84,509,143 | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Net loss                                                     |  |      |    |  |                   |  | (95,114,075 | )                 | 
|Other comprehensive loss, net of tax                         |  |      |    |  |                   |  |             |                   | 
|Foreign currency translation adjustment                      |  |      |    |  |                   |  | (3,279,798  | )                 | 
|Comprehensive loss                                           |  |      |    |  |                   |  | (98,393,873 | )                 | 
|                                                             |  |      |    |  |                   |  |             |                   | 
|Comprehensive loss attributable to non-controlling interests |  |      |    |  |                   |  | 9,917,333   |                   | 
|Comprehensive loss attributable to iTV Media Inc.            |  |      |    |  |                   |  | (88,476,540 | )                 | 



The accompanying notes are an integral part of these consolidated
financial statements.



-6-







|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|                                                  |  | Ordinary
    shares |            |  | Additional
paid-in |  |       | Accumulatedothercomprehensive |  |  | Accumulated |  |  | Non- Controlling |            |   | Totalshareholders’ | 
|------------------------------------------------- |  | ------------------- | ---------- |  | ------------------ |  | ----- | ----------------------------- |  |  | ----------- |  |  | ---------------- | ---------- | - | ------------------ | 
|                                                  |  | Shares              |            |  | Amount             |  |       | capital                       |  |  | loss        |  |  | deficit          |            |   | interests          | 
|                                                  |  |                     |            |  |                    |  |       |                               |  |  |             |  |  |                  |            |   |                    | 
|BALANCE AS OF JANUARY 1, 2013                     |  |                     | 10,000,000 |  |                    |  | 6,826 |                               |  |  | -           |  |  |                  | (5,984,840 | ) |                    | 
|Share-based compensation                          |  |                     | -          |  |                    |  | -     |                               |  |  | 455,612     |  |  |                  | -          |   |                    | 
|Capital contribution by non-controlling interests |  |                     | -          |  |                    |  | -     |                               |  |  | -           |  |  |                  | -          |   |                    | 
|Foreign currency translation adjustment           |  |                     | -          |  |                    |  | -     |                               |  |  | -           |  |  |                  | 3,770,193  |   |                    | 
|Net loss                                          |  |                     | -          |  |                    |  | -     |                               |  |  | -           |  |  |                  | -          |   |                    | 
|BALANCE AS OF DECEMBER 31, 2013                   |  |                     | 10,000,000 |  |                    |  | 6,826 |                               |  |  | 455,612     |  |  |                  | (2,214,647 | ) |                    | 
|Foreign currency translation adjustment           |  |                     | -          |  |                    |  | -     |                               |  |  | -           |  |  |                  | (3,967,397 | ) |                    | 
|Net loss                                          |  |                     | -          |  |                    |  | -     |                               |  |  | -           |  |  |                  | -          |   |                    | 
|BALANCE AS OF DECEMBER
    31, 2014               |  |                     | 10,000,000 |  |                    |  | 6,826 |                               |  |  | 455,612     |  |  |                  | (6,182,044 | ) |                    | 









The accompanying notes are an integral part of these consolidated
financial statements.



-7-







|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                         
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              



|                                                                            |  |      |      |  | Year ended        |  |             | Year ended        | 
|--------------------------------------------------------------------------- |  | ---- | ---- |  | ----------------- |  | ----------- | ----------------- | 
|                                                                            |  | Note |      |  | December 31, 2014 |  |             | December 31, 2013 | 
|                                                                            |  |      |      |  |                   |  |             |                   | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |  |      |      |  |                   |  |             |                   | 
|Net loss                                                                    |  |      |      |  |                   |  | (95,114,075 | )                 | 
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |      |  |                   |  |             |                   | 
|Depreciation of property and equipment                                      |  |      | 6    |  |                   |  | 30,574,558  |                   | 
|Amortization of intangible assets                                           |  |      | 8    |  |                   |  | 449,448     |                   | 
|Impairment of long-lived assets                                             |  |      | 6    |  |                   |  | -           |                   | 
|Impairment of goodwill                                                      |  |      | 7    |  |                   |  | 3,284,000   |                   | 
|Bad debt expense                                                            |  |      | 4, 5 |  |                   |  | 604,548     |                   | 
|Accrued interest for convertible bonds                                      |  |      | 11   |  |                   |  | 14,439,258  |                   | 
|Loss from write-off of property and equipment                               |  |      |      |  |                   |  | 565,852     |                   | 
|Stock-based compensation                                                    |  |      | 13   |  |                   |  | -           |                   | 
|Changes in operating assets and liabilities:                                |  |      |      |  |                   |  |             |                   | 
|Accounts receivable                                                         |  |      |      |  |                   |  | (7,767,136  | )                 | 
|Prepaid expenses and other assets                                           |  |      |      |  |                   |  | (1,136,039  | )                 | 
|Accounts and notes payable                                                  |  |      |      |  |                   |  | 9,496,636   |                   | 
|Taxes payable                                                               |  |      |      |  |                   |  | (59,274     | )                 | 
|Accruals and other liabilities                                              |  |      |      |  |                   |  | 13,698,438  |                   | 
|Net cash used in operating activities                                       |  |      |      |  |                   |  | (30,963,786 | )                 | 
|                                                                            |  |      |      |  |                   |  |             |                   | 
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |  |      |      |  |                   |  |             |                   | 
|Change in restricted cash                                                   |  |      |      |  |                   |  | 98,217      |                   | 
|Purchase of property and equipment                                          |  |      |      |  |                   |  | (22,668,207 | )                 | 
|Purchase of intangible assets                                               |  |      | 8    |  |                   |  | (226,696    | )                 | 
|Cash paid for acquisition, net of cash acquired                             |  |      |      |  |                   |  | -           |                   | 
|Net cash used in investing activities                                       |  |      |      |  |                   |  | (22,796,686 | )                 | 

-8-







iTV MEDIA
INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|--------------------------------------------------------------
|                                                              



|                                                                                     |  |      |    |  | Year ended        |  |             | Year ended        | 
|------------------------------------------------------------------------------------ |  | ---- | -- |  | ----------------- |  | ----------- | ----------------- | 
|                                                                                     |  | Note |    |  | December 31, 2014 |  |             | December 31, 2013 | 
|                                                                                     |  |      |    |  |                   |  |             |                   | 
|CASH FLOWS FROM FINANCING ACTIVITIES                                                 |  |      |    |  |                   |  |             |                   | 
|Cash received from long-term loan from related parties                               |  |      | 10 |  |                   |  | 20,665,114  |                   | 
|Issuance of convertible bonds                                                        |  |      |    |  |                   |  | -           |                   | 
|Capital contribution from non-controlling interests                                  |  |      |    |  |                   |  | -           |                   | 
|Net cash provided by financing activities                                            |  |      |    |  |                   |  | 20,665,114  |                   | 
|                                                                                     |  |      |    |  |                   |  |             |                   | 
|Effects of foreign exchange rate changes on cash and cash equivalents                |  |      |    |  |                   |  | 1,904,891   |                   | 
|                                                                                     |  |      |    |  |                   |  |             |                   | 
|NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS                                 |  |      |    |  |                   |  | (31,190,467 | )                 | 
|                                                                                     |  |      |    |  |                   |  |             |                   | 
|Cash and cash equivalents at beginning of the year                                   |  |      |    |  |                   |  | 38,010,765  |                   | 
|Cash and cash equivalents at end of the year                                         |  |      |    |  |                   |  | 6,820,298   |                   | 
|                                                                                     |  |      |    |  |                   |  |             |                   | 
|SUPPLEMENTARY DISCLOSURE
OF NON-CASH INVESTING AND FINANCING ACTIVITIES              |  |      |    |  |                   |  |             |                   | 
|Accrual related to purchase of property, plant and equipment                         |  |      |    |  |                   |  | (4,174,910  | )                 | 
|Purchase of property and equipment financed by issuance of convertible bonds         |  |      |    |  |                   |  | -           |                   | 
|Issuance of convertible bonds through converting from outstanding loans              |  |      |    |  |                   |  | -           |                   | 
|Issuance of convertible bonds through converting from outstanding accounting payable |  |      |    |  |                   |  | -           |                   | 



The accompanying notes are an integral
part of these consolidated financial statements.



-9-







|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              



|1. |  | ORGANIZATION AND NATURE OF OPERATIONS
|-- |  | -------------------------------------



iTV Media Inc. (“the Company”) was incorporated
under the laws of the British Virgin Islands on April 1, 2010, as an exempted company with limited liability. The Company was formerly
known as Stage Smart Limited and changed its name to iTV Media Inc. on January 11, 2011.



The Company and its subsidiaries engage
in internet TV business by providing video programming services to retail consumer video platforms. As of December 31, 2014 and
2013, the primary operations are conducted in China and Thailand. The accompanying consolidated financial statements include the
financial statements of the Company, its subsidiaries, its variable interest entities (“VIEs” or “VIE subsidiaries”)
and VIEs’ subsidiaries (collectively, the “Group”) as follows:



| | Name of
subsidiaries                                                              |  | Place of 
incorporation                     |  | Date of 
incorporation/
acquisition |  | Relationship                      |  | Principal activities                                                                                           
| | --------------------------------------------------------------------------------- |  | ------------------------------------------- |  | ----------------------------------- |  | --------------------------------- |  | ---------------------------------------------------------------------------------------------------------------
| |                                                                                   |  |                                             |  |                                     |  |                                   |  |                                                                                                                
| | UiTV Media (HK) Ltd. (“iTV HK”)
        (previously known as iTV Media (HK) Ltd.) |  | Hong Kong                                   |  | May 27, 2010                        |  | Wholly-owned subsidiary           |  | Providing general and administrative services, Set-top boxes (“STBs”) rental, content distribution and treasury
| |                                                                                   |  |                                             |  |                                     |  |                                   |  |                                                                                                                
| | iTV Media Technology (Beijing) Ltd. (“iTV BJ”)                                    |  | Beijing, People's Republic of China (“PRC”) |  | September 17, 2010                  |  | Wholly-owned subsidiary           |  | Providing supporting services to ME Television Co., Ltd. (“MeTV”) and iTV.cn Inc.                              
| |                                                                                   |  |                                             |  |                                     |  |                                   |  |                                                                                                                
| | iTV Media (TH) Ltd. (“iTV TH”)                                                    |  | Hong Kong                                   |  | June 18, 2013                       |  | 65%-owned subsidiary              |  | Providing internet TV services to TOT Public Company Limited’s (“TOT”) subscribers in Thailand                 
| |                                                                                   |  |                                             |  |                                     |  |                                   |  |                                                                                                                
| | ME Television Co., Ltd. (“MeTV”)                                                  |  | Thailand                                    |  | June 14, 2011                       |  | Wholly-owned subsidiary of iTV TH |  | Providing internet TV services to TOT subscribers in Thailand                                                  

-10-







|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              



|1. |  | ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)
|-- |  | -------------------------------------------------



| | Name of
subsidiaries                    |  | Place of
incorporation                    |  | Date of
incorporation
/acquisition |  | Relationship                    |  | Principal activities                                                                 
| | --------------------------------------- |  | ----------------------------------------- |  | ---------------------------------- |  | ------------------------------- |  | -------------------------------------------------------------------------------------
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | UiTV Media Inc.                         |  | Canada                                    |  | October 10, 2013                   |  | Wholly-owned subsidiary         |  | Providing Chinese content via internet TV services to Canada subscribers             
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | iTV.cn Inc.                             |  | The United States of America (“the U.S.”) |  | February 1, 2011                   |  | Wholly-owned subsidiary         |  | Providing Chinese content via internet TV services to the U.S. and Canada subscribers
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | UiTV Corporation Ltd. (“UiTV”)          |  | Beijing, PRC                              |  | July 30, 2013                      |  | VIE                             |  | Providing exhibition, telecommunication and internet TV services in China            
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | Beijing LHDS Advertising Ltd. (“LHDS”)  |  | Beijing, PRC                              |  | July 30, 2013                      |  | VIE’s wholly- owned subsidiary  |  | Providing advertising service in China                                               
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | ME Advertising Co., Ltd. (“MeA”)        |  | Thailand                                  |  | June 14, 2014                      |  | Wholly-owned subsidiary of MeTV |  | Providing advertising service in Thailand                                            
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | ME Broadcasting Co., Ltd. (“MeB”)       |  | Thailand                                  |  | June 14, 2014                      |  | Wholly-owned subsidiary of MeTV |  | Providing exhibition telecommunication service in Thailand                           
| |                                         |  |                                           |  |                                    |  |                                 |  |                                                                                      
| | Digital Entertainment Co., Ltd. (“DEC”) |  | Thailand                                  |  | November 4, 2014                   |  | Wholly-owned subsidiary of MeTV |  | Providing internet TV services to CAT Telecom’s subscribers in Thailand              



-11-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              







|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------



| | (a) | Basis of presentation and liquidity
| | --- | -----------------------------------



The consolidated financial statements
of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) for the years presented.



The Group incurred a net loss of RMB
95,114,075 during the year ended December 31, 2014. As of December 31, 2014, the Group had an accumulated deficit of RMB 328,495,673
and negative working capital of RMB 259,308,607.



As a result of the continuing losses
and cash outflows, the Group has secured a support letter from UTStarcom Holdings Corp. (“UTStarcom”), the preferred
shares holder and the convertible bond holder of the Company, to provide an additional investment at fair market price to support
the continuing operations of the Group so as to enable it to meet its liabilities as they fall due and carry on its business for
the next twelve months from the date of this report, if the current controlling shareholder of the Group is willing to amend certain
provisions of the articles of incorporation that will allow UTStarcom, based on its current shareholdings, to obtain control of
the Group. In addition, management is seeking additional financing from other private and institutional investors to support the
on-going operations of the Group.



Management of the Group has agreed
to accept the terms of the additional funding offer provided by UTStarcom and, in the case of the Group having difficulty in meeting
its liabilities as they fall due and carrying on its business as a going concern such that it must obtain additional funding from
UTStarcom, it will undertake to amend the terms of its Articles of Incorporation such that UTStarcom would obtain control of the
Group.



The accompanying consolidated financial
statements have been prepared assuming that the Group will continue as a going concern.



-12-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (b) | Use of estimates
| | --- | ----------------



The preparation of the consolidated
financial statements in conformity with U.S. 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 financial statements
and revenues and expenses during the reported period.



Significant accounting estimates reflected
in the Group’s consolidated financial statements mainly include, but are not limited to, revenue recognition, fair value
of share-based compensation, allowance for doubtful accounts, useful lives of intangible assets and property and equipment, impairment
of goodwill and long-lived assets, valuation of deferred tax assets as well as accounting and valuation of mandatorily redeemable
convertible preferred shares. Actual results could differ from these estimates.



| | (c) | Principles of consolidation
| | --- | ---------------------------



The consolidated financial statements
include the financial statements of the Company, its subsidiaries, its VIEs and VIEs’ subsidiaries. All significant transactions
and balances between the Company, its subsidiaries and VIE subsidiaries have been eliminated upon consolidation.



A VIE is an entity in which the Company,
or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership
of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity.



A subsidiary is an entity in which
the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority
of the members of the board of directors (the “Board”); to cast majority of votes at the meeting of the Board or to
govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.



-13-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (c) | Principles of consolidation (continued)
| | --- | ---------------------------------------



VIE Arrangements with UiTV



On July 30, 2013, the Group gained
control of UiTV Corporation (“UiTV”), which provides exhibition, internet information and communication services and
its subsidiary Beijing LHDS Advertising Ltd., which provides advertising services, through contractual arrangements.



Under current Chinese regulations,
there are restrictions on the percentage interest foreign or foreign-invested companies may have in Chinese companies providing
value-added telecommunications services in China, which include the provision of Internet content, online games and wireless value-added
services. In addition, the operation by foreign or foreign-invested companies of advertising businesses in China is subject to
government approval. In order to comply with these restrictions and other Chinese rules and regulations, iTV BJ entered into a
series of contractual arrangements for the provision of such services with UiTV and its subsidiary, Beijing LHDS Advertising Ltd.
These companies are considered “variable interest entities” for accounting purposes, and are referred to collectively
in this section as “VIEs.” The series of agreements entered between iTV BJ and the VIEs include the Exclusive Technical
Support and Service Agreement; the Proxy Agreement; the Equity Interest Pledge Agreement; and the Exclusive Call Option Agreement.



Through the aforementioned agreements,
iTV BJ has the power to direct the activities most significant to the economic performance of the VIEs and absorbs all, or substantially
all, of the profits or losses. Under the requirements of ASC 810, the Group consolidates the financial statements of UiTV and Beijing
LHDS Advertising Ltd.



-14-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (c) | Principles of consolidation (continued)
| | --- | ---------------------------------------



As of December 31, 2014 and 2013,
the registered capital of the consolidated VIE was RMB 100,000,000.



The following condensed financial information of the
Group’s consolidated VIE is included as below:



|                  |  | December 31, 2014 |           |  | December 31, 2013 | 
|----------------- |  | ----------------- | --------- |  | ----------------- | 
|                  |  | RMB               |           |  | RMB               | 
|                  |  |                   |           |  |                   | 
|Total assets      |  |                   | 785,697   |  |                   | 
|Total liabilities |  |                   | 1,911,998 |  |                   | 



|            |  | December 31, 2014 |           |  | December 31, 2013 | 
|----------- |  | ----------------- | --------- |  | ----------------- | 
|            |  | RMB               |           |  | RMB               | 
|            |  |                   |           |  |                   | 
|Net revenue |  |                   | 2,381,485 |  |                   | 
|Net loss    |  |                   | 1,017,789 |  |                   | 



-15-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (c) | Principles of consolidation (continued)
| | --- | ---------------------------------------



VIE Related Risks



Uncertainties in the PRC legal system
could limit the Group’s ability to enforce these contractual arrangements the Group’s VIE and shareholders of its VIE
if PRC government authorities or courts were to find that such contracts contravene PRC laws and regulations or are otherwise not
enforceable for public policy reasons. In the event that the Group was unable to enforce these contractual arrangements, the Group
would not be able to exert effective control over the affected VIE. Consequently, the VIE’s results of operations, assets
and liabilities would not be included in the Group’s consolidated financial statements. If such were the case, the Group’s
cash flows, financial position and operating performance would be materially adversely affected. The Group’s contractual
arrangements with respect to its consolidated VIE are approved and in place. The Group’s management believes that such contracts
are enforceable, and considers the possibility remote that PRC regulatory authorities with jurisdiction over the Group’s
operations and contractual relationships would find the contracts to be unenforceable.



On January 19, 2015, the PRC
Ministry of Commerce (“MOFCOM”) published the draft Foreign Investment Law. If enacted as proposed, the Foreign Investment
Law may cause the Group’s VIE to be deemed as entities with foreign investment and as a result the Group’s VIE and
subsidiaries in which the VIE has direct or indirect equity ownership could become explicitly subject to the current restrictions
under existing PRC law on foreign investment that engaged in an industry on the restricted industry list. If the enacted version
of the foreign investment Law and the final restricted industry list mandate further actions, such as MOFCOM market entry clearance
or certain restructuring of corporate structure and operations to be completed by companies with existing VIE structure similar
to the one described above, the Group will face substantial uncertainties as to whether these actions can be timely completed,
or at all. As a result, the Group’s operating result and financial condition may be adversely affected.



-16-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (d) | Foreign currency translation
| | --- | ----------------------------



The Group’s reporting currency
is the Renminbi (“RMB”). An entity’s functional currency is the currency of the primary economic environment
in which it operates, normally that is the currency of the environment in which it primarily generates and expends cash. Management’s
judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and
market, expenses, financing and intercompany transactions and arrangements. The functional currencies of the Company, iTV HK and
iTV TH are US$, whereas the functional currencies of the other subsidiaries are their respective local currencies.



Transactions denominated in currencies
other than the respective entities’ functional currencies are re-measured into the functional currencies, in accordance with
ASC 830, Foreign Currency Matters, using the exchange rates prevailing at the transaction dates. Monetary assets and liabilities
denominated in foreign currencies are remeasured into functional currencies using the applicable exchange rates at the balance
sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchange
rates at the dates of the initial transactions. Exchange gains or losses are included in the consolidated statements of operations
and comprehensive loss.



Assets and liabilities are translated
to the reporting currency at the exchange rates at the balance sheet date. Income and expense items are translated using the average
rate for the year. Translation adjustments are recorded in other comprehensive loss within the consolidated statements of operations
and comprehensive loss.



| | (e) | Fair value of financial instruments
| | --- | -----------------------------------



Fair value is defined as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either
recorded or disclosed at fair value, the Group considers the principal or most advantageous market in which it would transact,
and it also considers assumptions that market participants would use when pricing the asset or liability.



The accounting guidance for fair value
measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the
inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon
the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:



-17-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (e) | Fair value of financial instruments (continued)
| | --- | -----------------------------------------------



Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities.



Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.



Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.



Financial assets and liabilities are
measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy.
The carrying values of the Group's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable,
other current liabilities and long-term loan. The carrying value of the short-term financial instruments approximate their fair
values due to the short-term periods between inception and maturity. The carrying value of the long-term loan approximates their
fair values at December 31, 2014 as the interest rates they bear reflect the current market yield for comparable borrowings.



| | (f) | Cash and cash equivalents
| | --- | -------------------------





Cash and cash equivalents include
cash on hand and demand deposits with banks, which are unrestricted as to withdrawal and use, and which have original maturities
less than three months.



| | (g) | Restricted cash
| | --- | ---------------



Restricted cash represents amounts
held by a bank as security for letters of credit facilities and certain contracts and, therefore, are not available for the Group’s
use. The restriction on cash is expected to be released within the next twelve months.



-18-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (h) | Accounts receivable, net
| | --- | ------------------------



The carrying value of accounts receivable
is reduced by an allowance that reflects the Group’s best estimate of the amounts that will not be collected. The Group makes
estimates for the collectability of accounts receivable considering many factors including, but not limited to, reviewing delinquent
accounts receivable, performing aging and customer credit analysis and analyzing historical bad debt records and financial conditions
of the Group’s customers resulting in their inability to make payments due to the Group.



| | (i) | Property and equipment, net
| | --- | ---------------------------



Property and equipment are stated
at cost less accumulated depreciation and impairment loss, if any. Property and equipment are depreciated over their estimated
useful lives on a straight-line basis. Leasehold improvements are amortized over the shorter of the lease term or the estimated
useful lives of the related assets. Property and equipment have no estimated residual value.



The estimated useful lives are as
follows:



|                                   | Useful lives                                      
|---------------------------------- | --------------------------------------------------
|STBs not in use                    | 3 years                                           
|STBs installed at subscriber sites | 3 years                                           
|Computer equipment and servers     | 3 years                                           
|Office equipment                   | 3 years                                           
|Leasehold improvements             | Shorter of the estimated useful life or lease term



The cost of maintenance and repairs
is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization
are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in statements of operations
and comprehensive loss.



-19-











|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (j) | Goodwill
| | --- | --------



Goodwill represents the excess of
the purchase price over the fair value of the identifiable net assets acquired in an acquisition. Goodwill is carried at cost and
is not amortized. In accordance with ASC 350-20, Intangibles-Goodwill and Other, the Group is required to assess goodwill for impairment
on an annual basis and in certain circumstances in between annual tests, and to write-down goodwill when impaired. The Group’s
impairment review process compares the fair value of the reporting unit in which the goodwill resides to its carrying value. The
Group has determined that there is only one reporting unit for purposes of completing its ASC 350-20 analysis.



| | (k) | Intangible assets
| | --- | -----------------



Intangible assets are carried at
cost less accumulated amortization and impairment, if any. Movie copyright is amortized on a double-declining balance basis and
other intangible assets are amortized using the straight-line method over the estimated useful lives as below:



|                 | Useful lives
|---------------- | ------------
|iTV Domain Name  | 20 years    
|Software License | 10 years    
|Trademark        | 10 years    
|Copyright        | 10 years    



The estimated useful lives of amortized
intangible assets are reassessed if circumstances occur that indicate the original estimated useful lives have changed.



| | (l) | Impairment of long-lived assets
| | --- | -------------------------------



The Group evaluates the recoverability
of property and equipment, intangible assets and other non-current assets for possible impairment whenever triggering events or
circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured
by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review
indicates that the carrying amount of property and equipment, intangible assets and other non-current assets is not recoverable,
the carrying amount of such asset is reduced to fair value.



-20-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



| | (m) | Revenue recognition
| | --- | -------------------



Consistent with the criteria under
ASC topic 605 (“ASC 605”), Revenue Recognition, the Group recognizes revenue from sales of services when there is a
signed sales agreement with fixed or determinable fees, services have been provided to the customer and collection of the resulting
customer’s receivable is reasonably assured.



The Group engages primarily in internet
TV business by providing internet TV programming services and STB rental services to retail consumers through business partners.
For the years ended December 31, 2014 and 2013, the group provided internet TV programming services and STB rental services mainly
to one customer. As of December 31, 2014 and 2013, revenue earned from this customer totalled RMB 41,387,662 and RMB 10,304,161
respectively, of which RMB 10,185,933 and RMB 2,565,816, respectively, was outstanding in accounts receivables. Further the Group
also provides non-core services such as advertising and marketing activities, or IT consulting and technical services. The recognition
of each revenue streams is as below:



Service Revenue — STB and
Content.The Group has entered into an agreement with a telecommunications operator in Thailand, TOT, to provide STB rental
and internet TV programming and contents service to TOT’s broadband service subscribers. The Group accounts for the revenue
on a net basis as TOT is the primary obligor in the arrangement. The Group does not have a direct contractual relationship with
the end subscribers and TOT has the discretion to establish the selling price for the services provided to its broadband service
subscribers. Revenues for these services are recognized over the periods as the services are provided and the statements of revenues
from TOT are received.



Service Revenue — Advertising
and marketing. The Group recognizes revenue of advertising and marketing service over the period the related services are provided.



Service Revenue — IT consulting
and technical service. The Group recognizes revenue from the provision of IT consulting and technical service over the period
the related services are provided.



-21-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------





(n)	  Cost of revenues



Cost of revenues consists primarily
of depreciation of STBs, cost of WIFI cards, amortization of content licenses, business taxes and surcharges and related costs
of operations.



The Company incurs business taxes
and surcharges in connection with the provision of technical services in China. STBs are depreciated over 3 years and content licenses
are amortized over their contract terms.



(o)	   Advertising costs



The Group expenses all advertising
costs as incurred. Advertising expenditures, included in sales and marketing expenses, amounted to RMB 531,358 and RMB 517,095
for the year ended December 31, 2014 and 2013, respectively.



(p)    Product research and development expenses



Product research and development costs
are expensed as incurred.



-22-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



(q)	  Income taxes



The Group
accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Tax. Deferred tax assets and
liabilities are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and
liabilities in the financial statements and their respective tax basis, and operating loss carry-forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Group classifies the deferred tax assets which are expected to be realized
over one year in noncurrent assets. Generally accepted accounting principles require that the realizability of net deferred tax
assets be evaluated on an ongoing basis. A valuation allowance is recorded to reduce the net deferred tax assets to an amount that
is more-likely-than-not to be realized. Accordingly, the Group considers various tax planning strategies, forecasts of future taxable
income and its most recent operating results in assessing the need for a valuation allowance. A valuation allowance is recorded
where it is more-likely-than-not that the loss carry-forwards and deferred tax assets will not be realized. The effect on deferred
tax assets and liabilities arising from a change in tax rates is recognized in the statements of operations and comprehensive loss
in the period of such change.



ASC 740 clarifies
the accounting for uncertainty in income taxes recognized in the financial statements and prescribes a recognition threshold and
a measurement attribute for financial statement recognition and measurement of tax position taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by
tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of
being realized upon ultimate settlement, but it prohibits any discounting of any of the related tax effects for the time value
of money. The Group has elected to classify interest and penalties related to an uncertain tax position, if any and when required,
as other expense.



-23-









|iTV MEDIA INC.                                                
|--------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)    
|                                                              
|Amounts expressed in Renminbi (“RMB”), unless otherwise stated
|                                                              





|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- |  | ------------------------------------------------------



(r)    Employee social security and
welfare benefits



The employees of the Group are entitled
to social benefits in accordance with the relevant regulations of the countries in which these companies are incorporated.



The social benefits of the employees
of the Group in the PRC include medical care, welfare subsidies, unemployment insurance and pension benefits.



The Company’s other subsidiaries
in Hong Kong, Thailand and United States of America are also required to pay for employee social benefits based upon certain percentages
of employees’ salaries in accordance with the relevant local regulations.



The Company’s subsidiary in
Thailand is also required to pay an amount that equals to the individual’s 10-month salaries to employees who retire.



Employee social benefits recorded
in the accompanying consolidated statements amounted to RMB 3,256,670 and RMB 3,344,065 for the year ended December 31, 2014 and
2013, respectively. Monthly payments have been paid to the relevant local governments where these subsidiaries are incorporated
according to prescribed bases and percentage by the relevant local authorities. When employees retire, the local governments are
responsible for the benefits and ultimate pension liabilities to employees.



-24-













iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated










| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
| | -- | ------------------------------------------------------



| | (s) | Share-based compensation
| | --- | ------------------------



The Company accounts for the
stock options granted to employees under provisions of ASC 718, “Stock Compensation”. In accordance with ASC 718, the
Company determines whether a share option should be classified and accounted for as a liability award or equity award. All grants
of share-based awards to employees classified as equity awards are recognized in the financial statements based on their grant
date fair values which are calculated using an option pricing model. All grants of share-based awards to employees and directors
classified as liability are remeasured at the end of each reporting period with an adjustment for fair value recorded to the current
period expense in order to properly reflect the cumulative expense based on the current fair value of the vested rewards over the
vesting periods. The Company has elected to recognize compensation expense on share-based awards with a service condition on a
straight-line basis over the requisite service period, which is generally the vesting period.



In accordance with ASC 718,
the Company applied the Black-Scholes option pricing model in determining the fair value of options granted.



ASC 718 requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial
estimates. Share-based compensation expense was recorded net of estimated forfeitures such that expense was recorded only for those
share-based awards that are expected to vest.



According to ASC 718, a change
in any of the terms or conditions of stock options shall be accounted for as a modification of the plan. Therefore, the Company
calculates incremental compensation cost of a modification as the excess of the estimated value of the modified option over the
fair value of the original option immediately before its terms are modified, measured based on the share price and other pertinent
factors at the modification date. For vested options, the Company would recognize incremental compensation cost in the period the
modification occurs and for unvested options, the Company would recognize, over the remaining requisite service period, the sum
of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification
date.



- 25 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated










| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
| | -- | ------------------------------------------------------



| | (t) | Comprehensive loss
| | --- | ------------------



The Company applies ASC 220,
“Comprehensive Income”, with respect to reporting and presentation of comprehensive loss and its components in a full
set of financial statements. Comprehensive loss comprises of net loss and foreign currency translation adjustments in the years
ended December 31, 2014 and 2013.



| | (u) | Profit appropriation and statutory reserves
| | --- | -------------------------------------------



The Company’s PRC subsidiaries
are required to allocate at least 10% of their after-tax profits to a general reserve in accordance with the PRC accounting standards
and regulations until the general reserve has reached 50% of the registered capital of each company. Appropriations to the enterprise
expansion fund and staff welfare and bonus fund are at the discretion of the board of directors of the subsidiaries. These reserves
can only be used for specific purposes and are not transferable to the Company in the form of loans, advances, or cash dividends.



| | (v) | Leases
| | --- | ------



Leases are classified at the
inception date as either a capital lease or an operating lease. The Group did not enter into any material leases whereby it is
the lessor for the years ended December 31, 2014 and 2013. As the lessee, a lease is a capital lease if any of the following conditions
exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease
term is at least 75% of the property’s estimated remaining economic life, or d) the present value of the minimum lease payments
at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date.
A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception
of the lease.



All other leases are accounted
for as operating leases wherein rental payments are expensed as incurred. The Group had no capital leases for the year ended December
31, 2014 and 2013. Operating lease expenses recorded in the accompanying consolidated statements of operations and comprehensive
loss amounted to RMB 3,306,898 and RMB 3,543,834 for the year ended December 31, 2014 and 2013, respectively.



- 26 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 3. | Recent accounting
pronouncements
| | -- | --------------------------------



In April 2014, the FASB issued
Accounting Standards Update No. 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment
(Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. The new guidance
changes the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only
disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should
have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures
about discontinued operations that will provide financial statement users with more information about the assets, liabilities,
income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to
a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. ASU 2014-08 is
effective for the Group in its first quarter of fiscal 2015. Early adoption is permitted, but only for disposals (or classifications
as held for sale) that have not been reported in financial statements previously issued or available for issuance. The adoption
of this update is not expected to have a material impact on its consolidated financial statements.



On May 28, 2014, FASB issued Accounting
Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606).” The new guidance aims to 1. remove
inconsistencies and weaknesses in revenue requirements; 2. provide a more robust framework for addressing revenue issues; 3. improve
comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; 4. provide more
useful information to users of financial statements through improved disclosure requirements; 5. simplify the preparation of financial
statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB is amending
the FASB Accounting Standards Codification® and creating a new Topic 606. The core principle of the new guidance is 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. To achieve that core principle,
an entity should apply the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance
obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance
obligations in the contract. And Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. On
April 1, 2015 the FASB voted in favor of proposing a one year delay of the effective date and to permit companies to voluntarily
adopt the new standard as of the original effective date. Pending enactment of a delay in the effective date, ASU 2014-09 is effective
for the Company’s fiscal year beginning January 1, 2017, with early application not permitted. The Group will evaluate
the impact of the new revenue recognition guidance and will expect to adopt the guidance during the effective period.



- 27 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 3. | Recent accounting pronouncements (CONTINUED)
| | -- | --------------------------------------------



In August 2014, the FASB issued
ASU 2014-12, “Presentation of Financial Statements—Going Concern (Subtopic 205-40).” The amendments in this Update
provide the guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s
ability to continue as a going concern or to provide related footnote disclosures. The amendments require management to assess
an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently
in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an
evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s
plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s
plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment
for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in
this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
Early application is permitted. The Group is in the process of evaluating the impact of the adoption of this standard on its consolidated
financial statements.



In January 2015, the FASB issued
ASU 2015-01, “Income Statement Extraordinary and Unusual Items”. This standard eliminates the concept of extraordinary
and unusual items from U.S. GAAP. The new standard is effective for annual and interim periods after December 15, 2015. Early adoption
is permitted. The Group will not early adopt this Update, and believes the adoption of this update is not expected to have a material
impact on its consolidated financial statements.



In February 2015, the FASB issued
the ASU 2015-02, “Consolidation (Topic 810) — Amendments to the Consolidation Analysis”, which amends the criteria
for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable
interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. The ASU
is effective for interim and annual periods beginning after December 15, 2015. Early application is permitted. The Group will not
early adopt this Update, and believes the adoption of this update is not expected to have a material impact on its consolidated
financial statements.



On April 7, 2015, the FASB issued
the ASU 2015-03, “Interest—Imputation of Interest (Subtopic 835-30)”, which require that debt issuance costs
be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts
or premiums. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning
after December 15, 2016. Early application is permitted. The Group is in the process of evaluating the impact of the adoption of
this standard on its consolidated financial statements.



- 28 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 4. | ACCOUNTS RECEIVABLE
| | -- | -------------------



|                                |  | December 31, 2014 |            |   | December 31, 2013 | 
|------------------------------- |  | ----------------- | ---------- | - | ----------------- | 
|                                |  |                   |            |   |                   | 
|Accounts receivable             |  |                   | 10,816,998 |   |                   | 
|Allowance for doubtful accounts |  |                   | (315,029   | ) |                   | 
|                                |  |                   |            |   |                   | 
|Account receivable, net         |  |                   | 10,501,969 |   |                   | 



For the year ended December
31, 2014 and 2013, the movements of the allowance for doubtful accounts were as below:



|Description                     |  | Balance atbeginning ofthe period |   |  | Charged toexpenses |  |         | Balance atend of theperiod | 
|------------------------------- |  | -------------------------------- | - |  | ------------------ |  | ------- | -------------------------- | 
|Year ended December 31, 2014    |  |                                  |   |  |                    |  |         |                            | 
|Allowance for doubtful accounts |  |                                  | - |  |                    |  | 315,029 |                            | 
|                                |  |                                  |   |  |                    |  |         |                            | 
|Year ended December 31, 2013    |  |                                  |   |  |                    |  |         |                            | 
|Allowance for doubtful accounts |  |                                  | - |  |                    |  | -       |                            | 



- 29 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 5. | PREPAID EXPENSES AND OTHER CURRENT ASSETS
| | -- | -----------------------------------------



|                                               |  | December 31, 2014 |           |  | December 31, 2013 | 
|---------------------------------------------- |  | ----------------- | --------- |  | ----------------- | 
|                                               |  |                   |           |  |                   | 
|VAT deductible                                 |  |                   | 3,171,314 |  |                   | 
|Deferred cost for software integration project |  |                   | 2,377,358 |  |                   | 
|Employee advance                               |  |                   | 1,354,404 |  |                   | 
|Prepaid content cost                           |  |                   | 485,253   |  |                   | 
|Other receivables                              |  |                   | 362,542   |  |                   | 
|Prepaid rental                                 |  |                   | 333,150   |  |                   | 
|Prepaid others                                 |  |                   | 216,321   |  |                   | 
|                                               |  |                   |           |  |                   | 
|Total                                          |  |                   | 8,300,342 |  |                   | 



For the year ended December
31, 2014 and 2013, the Group provided allowance for uncollectible receivables of RMB 289,519 and RMB 332,048, respectively, as
the management is of opinion that the recoverability is low.



For the year ended December
31, 2014 and 2013, the movements of the allowance for uncollectible receivables were as below:



|Description                             |  | Balance atbeginning ofthe period |         |  | Charged toexpenses |  |         | Balance atend of theperiod | 
|--------------------------------------- |  | -------------------------------- | ------- |  | ------------------ |  | ------- | -------------------------- | 
|Year ended December 31, 2014            |  |                                  |         |  |                    |  |         |                            | 
|Allowance for uncollectible receivables |  |                                  | 332,048 |  |                    |  | 289,519 |                            | 
|                                        |  |                                  |         |  |                    |  |         |                            | 
|Year ended December 31, 2013            |  |                                  |         |  |                    |  |         |                            | 
|Allowance for uncollectible receivables |  |                                  | -       |  |                    |  | 332,048 |                            | 



- 30 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 6. | PROPERTY AND EQUIPMENT, NET
| | -- | ---------------------------



Property and equipment and related
accumulated depreciation were as follows:



|                                   |  | December 31, 2014 |             |   | December 31, 2013 | 
|---------------------------------- |  | ----------------- | ----------- | - | ----------------- | 
|                                   |  |                   |             |   |                   | 
|STBs installed at subscriber sites |  |                   | 65,810,530  |   |                   | 
|Computer equipment and servers     |  |                   | 35,850,438  |   |                   | 
|STBs not in use                    |  |                   | 11,586,578  |   |                   | 
|Leasehold improvements             |  |                   | 2,267,579   |   |                   | 
|Office equipment and furniture     |  |                   | 1,852,908   |   |                   | 
|Subtotal                           |  |                   | 117,368,033 |   |                   | 
|                                   |  |                   |             |   |                   | 
|Less: Accumulated depreciation     |  |                   | (57,949,605 | ) |                   | 
|Accumulated impairment             |  |                   | (3,003,870  | ) |                   | 
|                                   |  |                   |             |   |                   | 
|Total property and equipment, net  |  |                   | 56,414,558  |   |                   | 



Depreciation expense was RMB
30,574,558 and RMB 20,129,383 for the years ended December 31, 2014 and 2013, respectively.



For the year ended December
31, 2013, the Group provided impairment of STBs not in use of RMB 1,065,040 by charging to cost of sales as there is no foreseeable
cash flow in from the utilization of these STBs. There was no such impairment charges recorded in the year ended December 31, 2014.



- 31 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 7. | GOODWILL
| | -- | --------



On July 30, 2013, the Group
completed a series of transactions to gain the control of UiTV Corporation (“UiTV”) and its subsidiary Beijing LHDS
Advertising Ltd from UIM Holding Inc., an unrelated party. After this transaction, the Group acquired the business of UiTV and
gained 100% voting rights of UiTV through VIE arrangement. The total consideration of the acquisition was RMB 6,176,900 (US$ 1
million), and the Group assumed all the liabilities and potential liabilities of UiTV. The Group performed a valuation of the fair
values of the designated assets to serve as a basis for allocation of the purchase price to the various accounts for financial
reporting purposes in accordance ASC 805 and 350. No additional intangible asset was identified as of July 30, 2013. The Company
recognized goodwill of RMB 5,509,000 for the excess of the purchase price over the estimated fair value of the identifiable net
assets acquired of RMB 667,900.



Purchase Price Allocation



The final purchase price allocation
results as of July 30, 2013 are set out below:



|Purchase price                       |  |  | 6,176,900 |  
|------------------------------------ |  |  | --------- | -
|                                     |  |  |           |  
|Less:  Fair value of assets acquired |  |  |           |  
|Cash                                 |  |  | 123,342   |  
|Accounts Receivable                  |  |  | 376,838   |  
|Other receivable and pre-payments    |  |  | 1,451,463 |  
|Property plant and equipment         |  |  | 240,415   |  
|Intangible assets                    |  |  | 17,090    |  
|Customer advances                    |  |  | (650,400  | )
|Salaries payable                     |  |  | (31,909   | )
|Taxes payable                        |  |  | (18,939   | )
|Other payables                       |  |  | (840,000  | )
|                                     |  |  |           |  
|Fair value of net assets acquired    |  |  | 667,900   |  
|                                     |  |  |           |  
|Goodwill                             |  |  | 5,509,000 |  



- 32 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 7. | GOODWILL (CONTINUED)
| | -- | --------------------



Goodwill represents the expected
synergies from combining operations of the Company and UiTV, and other intangible benefits that would accrue to the Group that
do not qualify for separate recognition. In accordance with ASC 805, goodwill is not amortized but is tested for impairment. Goodwill
impairment review is performed on annual basis on December 31. The Group estimated the fair value of the reporting unit using discounted
cash flow analysis, and makes assumptions regarding future revenue growth rates, gross margins, working capital levels, and the
terminal value of the reporting unit, amongst others. The discount rates used are pre-tax and reflect specific risks relating to
the relevant cash generating units. For the year ended December 31, 2014, the Group recognized goodwill impairment of RMB 3,284,000
based on the impairment assessment performed. The impairment losses resulted from a revision of long-term financial outlook and
the underperformance of business of the reporting unit. Goodwill is not deductible for tax purpose. There was no goodwill impairment
recorded in the year ended December 31, 2013.



- 33 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 8. | INTANGIBLE ASSETS, NET
| | -- | ----------------------



As of December 31, 2014 and
2013, the Group’s intangible assets consisted of the following:



|                                           |  | December 31, 2014 |           |  | December 31, 2013                       | 
|------------------------------------------ |  | ----------------- | --------- |  | --------------------------------------- | 
|                                           |  | Gross             |           |  | Accumulated Amortization and impairment | 
|                                           |  |                   |           |  |                                         | 
|Intangible assets subject to amortization: |  |                   |           |  |                                         | 
|iTV Domain Name                            |  |                   | 740,184   |  |                                         | 
|Copyright                                  |  |                   | 3,326,800 |  |                                         | 
|Software licenses                          |  |                   | 344,703   |  |                                         | 
|Trademarks                                 |  |                   | 16,400    |  |                                         | 
|                                           |  |                   |           |  |                                         | 
|                                           |  |                   | 4,428,087 |  |                                         | 



The Group recorded amortization
expenses of RMB 449,448 and RMB 471,108 for the year ended December 31, 2014 and 2013, respectively.



| | 9. | ACCRUALS AND OTHER LIABILITIES
| | -- | ------------------------------



|                             |  | December 31, 2014 |            |  | December 31, 2013 | 
|---------------------------- |  | ----------------- | ---------- |  | ----------------- | 
|                             |  |                   |            |  |                   | 
|Other payables               |  |                   | 4,182,294  |  |                   | 
|Advance from customers       |  |                   | 3,907,446  |  |                   | 
|Accrued salaries and welfare |  |                   | 3,421,892  |  |                   | 
|Accrued expenses             |  |                   | 493,775    |  |                   | 
|                             |  |                   |            |  |                   | 
|Total                        |  |                   | 12,005,407 |  |                   | 



- 34 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 10. | LONG-TERM LOAN
| | --- | --------------



In July 2014, the Group launched
a “family and friends” financing plan targeting UTStarcom, and founders and management of the Company in the form of
‘STBs Purchase Lending Ticket’. Under this plan, the Company expects to raise a total of US$4,500,000 by selling 100
tickets (each ticket is for 1,000 STBs at the cost of US$45,000) enabling the Group to purchase a total of 100,000 STBs. The repayment
for each ticket will start from the 7th month after selling the ticket and the repayment term is over 36 months. The monthly repayment
for each ticket is US$4,000 for the first year of the repayment period, US$3,900 for the second year of the repayment period, and
US$3,803 for the last year of the repayment period, and the total amount repaid will be US$140,430.



As at December 31, 2014, the
Group has raised RMB 20,665,114 (equivalent US$3,330,000) from UTStarcom, founders and management of the Company by launching ‘STBs
Purchase Lending Ticket’ financing plan, and accrued RMB 5,111,001 of related interest. According to the repayment term,
as of December 31, 2014, the current portion of principal and related interest accrued for this plan, was RMB 18,153,850, which
was recorded as short-term liability. The rest, in total RMB 7,622,265 was accounted for as long-term liability.



- 35 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 11. | CONVERTIBLE BONDS
| | --- | -----------------



On December 3, 2012, January
2, 2013, May 20, 2013, August 30, 2013, and November 30, 2013, the Company issued a series of convertible bonds, collectively referred
to as “the Bonds” to UTStarcom HK Investment Holdings Ltd (“UTStarcom HK”) in order to raise funds for
its continuing operations. The Bonds were issued with a principal amount of US$3,000,000 (phase I), US$5,000,000 (phase II), US$15,000,000
(phase III), US$5,000,000 (phase IV), US$5,555,074.16 (phase V), and US$1,788,402.60 (phase VI) respectively. Phases I to IV of
the bonds were UTStarcom HK’s investment into the Company, of which cash was delivered upon the issuance of bonds. Phase
V and VI of the convertible bonds were issued in exchange for the settlement of previously outstanding accounts payable and a short-term
loan due to UTStarcom HK by the Company. The maturity dates for the Bonds per the initial contracts were December 31, 2014 (phase
I), December 31, 2014 (phase II), May 31, 2015 (phase III), May 31, 2015 (phase IV), December 31, 2015 (phase V), and December
31, 2015 (phase VI), respectively. With the amendments entered between the Company and UTStarcom HK afterwards, the maturity dates
of the convertible bonds of phase I to phase IV were extended to December 31, 2015. The interest rates for the Bonds are all 6.5%
per annum, compounded annually. Accrued interest on the Bonds shall be payable on each anniversary of the date hereof. All unpaid
principal, together with any then unpaid and accrued interest shall be due and payable on the earlier of (i) the Maturity Date,
(ii) an Event of Default. Providing 5 business days written notice to UTStarcom HK, the Company may prepay the Bonds in whole or
in part upon mutual agreement by the Company and UTStarcom HK, provided that any such prepayment will be applied first to the payment
of expenses due under the Bonds, second to interest accrued on the Bonds and third, if the amount of prepayment exceeds the amount
of all such expenses and accrued interest, to the payment of principal of the Bonds.



The evaluation of each Bond
issuance transaction should be viewed as a single unit. The Company has accounted for the Bonds in accordance with ASC 470, as
a single instrument and a portion as a current liability and the balance as a long-term liability. The value of the Bonds is measured
by the cash received, or carrying value of obligations forgiven, which approximates its fair value at issuance.



As of December 31, 2014 and
2013, the fair value of Bonds was US$ 20,000,000 and US$25,970,000, respectively. The Bonds are valued using the discounted cash
flow method. The valuation involves complex and subjective judgments as well as the Company’s best estimates on the valuation
date. The main inputs to this model include discount rate, terminal growth rate, etc.



- 36 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 11. | CONVERTIBLE BONDS (CONTINUED)
| | --- | -----------------------------



The key terms of the Bonds are
as follows:



Conversion



Investor has the right, at Investor’s
option, at any time prior to payment in full of the principal amount of the Bonds, to convert the outstanding principal amount
of the Bonds and all accrued and unpaid interest on the Bonds into fully paid and non-assessable shares of (1) the Preference Shares
issued in a qualified financing at the conversion price, if a qualified financing has completed prior to such conversion or (2)
the Company’s series A Preferred Stock at a price per share equal to the adjusted conversion price. Qualified Financing is
defined as a transaction or series of transactions prior to the Maturity Date pursuant to which the Company issues and sells shares
of its Preference Shares for aggregate gross proceeds of at least $10,000,000 (excluding all proceeds from the incurrence of indebtedness
that is converted into such Preferred Stock or otherwise cancelled in consideration for the issuance of such Preferred Stock) with
the principal purpose of raising capital. Adjusted Conversion Price is defined as a price per share equal to the lesser of (i)
eighty-five percent (85%) of the price per share paid by the other purchasers of the Preference Shares sold in the Qualified Financing
and (ii) the price per share of the Company’s Series A Preferred Stock was initially issued.



In accordance with ASC 815-10-15-83,
the conversion option does not meet the definition of a derivative. As such, bifurcation of conversion option from the Bonds is
not required.



The fair value of the underlying
Preferred Shares on the issuance dates for the Bonds is less than the initial Preferred Shares issuance price of $2.08. Under ASC
815, no beneficial conversion feature (“BCF”) exists or should be bifurcated from the Bonds.



As of December 31, 2014, the
convertible bonds issued and related interest accrued, totalled RMB 241,091,311 and was recorded as short-term liability.



- 37 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 12. | MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES
| | --- | ---------------------------------------------------



On October 16, 2010, the Company
and UTStarcom Holding Corp. entered into a Series A Preference Shares Purchase Agreement (the “SPA”), pursuant to which
the Company issued 9,600,000 Series A Mandatorily Redeemable Convertible Preference Shares (or “Series A Preferred Shares”)
to UTStarcom Inc. at a price of US$2.08333 per share for a cash consideration of US$20,000,000. The key terms of the Company’s
preference shares extracted from the SPA, the Amended and Restated Articles of Association (the “AOA”) and the Amended
and Restated Memorandum of Association (the “MOA”) of the Company:



Voting
Rights



Each ordinary share has one
vote. Each preferred share carries a number of votes equal to the number of ordinary shares into which such preferred share could
be converted into. The holders of ordinary share and preferred shares shall vote together and not as separate classes, except as
otherwise specifically required by the MOA of the Company.



Dividends



The holders the Series A Preferred
Shares shall be entitled to receive cumulative dividends at a rate of 8% of the Original Issue Price, when and if declared by the
board of directors of the Company, payable in preference and priority to any declaration or payment of any distribution on ordinary
shares of the Company.



After the declared dividends
to the Series A Preferred Shares have been paid or set aside, the holders of the Series A Preferred Shares are also entitled to
receive dividends on the ordinary shares on an as-converted basis.



- 38 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 12. | MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES
(CONTINUED)
| | --- | ---------------------------------------------------------------



Liquidation



In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Company, or in a Deemed Winding Up event as defined in the Amended
and Restated Memorandum and Articles of Association of the Company such as change of control or sales of substantially all of the
Company’s assets, each holder of Series A Preferred Shares shall be paid, prior and in preference to any payment to the holders
of the ordinary shares, for the Liquidation Preference Amount, which shall be equal to the Original Issue Price (as adjusted for
any recapitalizations, share splits, share dividends and similar transactions) plus all unpaid declared dividends. In the event
that the assets available for distribution among the members are insufficient to pay the Preferred Shares’ Liquidation Preference
Amount in full, the holders of Series A Preferred Shares shall be paid in proportion to the full Liquidation Preference Amount
each such holder would otherwise be entitled to receive. After all of the holders of the Series A Preferred Shares have received
their Liquidation Preference Amounts, the balance of all remaining assets available for distribution to members shall be distributed
with equal priority and pro rata amongst the holders of ordinary shares and Series A Preferred Shares on an as-converted basis.



Conversion



Each Series A Preferred Share
is convertible at any time, at the option of its holder, into a number of ordinary as determined by the quotient of the Original
Issue Price and the then-effective conversion price. The initial conversion ratio of Series A Preferred Shares to ordinary shares
shall be 1:1, subject to proportional adjustments for splits or combinations of ordinary shares. In the events that the Company
declares dividends or makes distributions in the form of ordinary shares or other securities of the Company or issues additional
ordinary shares or other securities at a price per share below the then-effective conversion price of the existing Series A Preferred
Shares, the conversion price shall be automatically reduced by multiplying a fraction with the numerator being the number of ordinary
shares issued and outstanding on a fully-diluted basis immediately prior to such event and the denominator being the total number
of ordinary shares or other securities outstanding and issuable upon such event.



- 39 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 12. | MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES
(CONTINUED)
| | --- | ---------------------------------------------------------------



Accounting
for the Series A Preferred Shares



The Series A Preferred Shares
are redeemable contingent on the occurrence of a conditional event (i.e. Deemed Winding Up Event). The Series A Preferred Shares
are initially recorded at the proceeds allocated based on the relative fair value method.



The holders of Series A Preferred
Shares have the ability to convert the instrument into the Company's ordinary shares. The Company evaluated the embedded conversion
option in the Series A Preferred Shares to determine if there were any embedded derivatives requiring bifurcation and to determine
if there were any beneficial conversion features.



The conversion options and the
mandatorily redemption options of the Series A Preferred Shares do not qualify for bifurcation accounting because the underlying
ordinary shares are not publicly traded nor are they readily convertible into cash.



Beneficial conversion features
exist when the conversion price of the redeemable convertible preferred shares is lower than the fair value of the ordinary share
at the commitment date. Since the redeemable convertible preferred shares are convertible from inception but contains conversion
terms that change upon the occurrence of a future event, the contingent beneficial conversion feature is measured at the commitment
date but not recognized until the contingency is resolved. The Company determined the estimated fair values of the ordinary and
preferred shares with the assistance from an independent appraisal firm.



- 40 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 13. | ORDINARY SHARES AND SHARE BASED COMPENSATION
| | --- | --------------------------------------------



The Company was incorporated
in May 27, 2010 with 1 ordinary share and a par value of US$ 1. On October 15, 2010, the Company effected a 1 to 10,000 share split
and increased the maximum number of authorized ordinary shares to 22,000,000 with a par value of US$ 0.0001. The Company also issued
additional 9,990,000 ordinary shares to the shareholder at the aggregate purchase price of US$999 on October 15, 2010. As of December
31, 2014 and 2013, 10,000,000 ordinary shares were issued and outstanding.



In conjunction of the issuance
of Series A Preferred shares, the Board of directors approved the 2010 Global Share Plan (the “Plan”), which provides
for the issuance of up to an aggregate of 2,177,778 Ordinary Shares to employees, directors, and consultants of the Company. As
of December 31, 2014 and 2013, 2,177,778 shares of option with exercise price of US$2.0833 per share granted to employees, directors
and consultants were outstanding. Options granted were exercisable in whole or in part, in accordance with the terms of vesting
schedule: 25% of the options shall vest on the Vesting Commencement Date, and 1/48 of the options shall vest each month thereafter
over the next three years. The fair value for these options at the date of the grant was immaterial and thus no compensation expense
relating to the grants were recorded given their immateriality.



On December 31, 2013, the founder
and ultimate beneficial owner of the Company granted 3,500,000 shares of his own common shares of the Company to two key employees
of the Company, which was a share-based compensation transaction by investor on behalf of the Company. Pursuant to ASC 323, Investments—Equity
Method and Joint Ventures, the Company calculated the fair value of the granted common shares as of December 31, 2013, and recorded
RMB 455,612 of additional paid-in capital and same amount of share-based compensation expense for the year ended December 31, 2013.



- 41 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 14. | TAXATION
| | --- | --------



(a)	   Income
taxes



British Virgin Islands



The Company is incorporated
in the British Virgin Islands and conducts most of its business through its subsidiaries located in the PRC main land, Hong Kong,
United States and Thailand. The Company is not subject to taxes in the British Virgin Islands.



PRC



On March 16, 2007, the National
People’s Congress of PRC enacted the Enterprise Income Tax Law, under which Foreign Invested Enterprises (“FIEs”)
and domestic companies would be subject to enterprise income tax (“EIT”) at a uniform rate of 25%.



Effective from February 22,
2008, the dividends declared out of the profits earned after January 1, 2008 by a FIE to its immediate holding company outside
PRC would be subject to withholding taxes at a rate of 10%. A favorable withholding tax rate will be applied if there is a tax
treaty arrangement between the PRC and the jurisdiction of the foreign holding company. The Company’s subsidiaries in China
are considered FIEs and are wholly owned by iTV Media Inc (HK) Ltd incorporated in Hong Kong. According to the tax treaty between
the PRC and Hong Kong, dividends payable to its Hong Kong parent from FIE in the PRC will be subject to a 5% withholding tax rate.



Other Countries



The maximum applicable income
tax rates of other countries where the Company’s subsidiaries having significant operations in the year ended December 31,
2014 and 2013 were as follows:



|              |  | Year ended        |       |   | Year ended        | 
|------------- |  | ----------------- | ----- | - | ----------------- | 
|              |  | December 31, 2014 |       |   | December 31, 2013 | 
|Hong Kong     |  |                   | 16.5  | % |                   | 
|United States |  |                   | 43.84 | % |                   | 
|Thailand      |  |                   | 20    | % |                   | 



- 42 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 14. | TAXATION (CONTINUED)
| | --- | --------------------



(a)	    Income
taxes (continued)



Losses before income tax expense
of the Group consisted of:



|                       |  | Year ended        |             |   | Year ended        | 
|---------------------- |  | ----------------- | ----------- | - | ----------------- | 
|                       |  | December 31, 2014 |             |   | December 31, 2013 | 
|PRC                    |  |                   | (35,639,012 | ) |                   | 
|Hong Kong              |  |                   | (11,837,293 | ) |                   | 
|United States          |  |                   | (6,046,262  | ) |                   | 
|British Virgin Islands |  |                   | (15,814,212 | ) |                   | 
|Thailand               |  |                   | (25,777,296 | ) |                   | 
|                       |  |                   | (95,114,075 | ) |                   | 



As there were no taxable income
generated in 2014 and 2013, no current income tax expenses were recorded.



Reconciliations of the income
tax computed by applying the Thailand statutory income tax rate of 20% to income tax expense were as follows:





|                                                                         |  | Year ended        |             |   | Year ended        | 
|------------------------------------------------------------------------ |  | ----------------- | ----------- | - | ----------------- | 
|                                                                         |  | December 31, 2014 |             |   | December 31, 2013 | 
|                                                                         |  |                   |             |   |                   | 
|Loss before income taxes                                                 |  |                   | (95,114,075 | ) |                   | 
|Income tax expense computed at Thailand statutory income tax rate of 20% |  |                   | (19,022,815 | ) |                   | 
|Foreign tax rates differential                                           |  |                   | (1,141,613  | ) |                   | 
|Non-deductible expenses                                                  |  |                   | 1,495,381   |   |                   | 
|Tax losses not recognised                                                |  |                   | 18,669,047  |   |                   | 
|Income tax expense                                                       |  |                   | -           |   |                   | 



The Thailand statutory income
tax rate was used because the majority of the Group’s revenues were generated in Thailand.



- 43 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 14. | TAXATION (CONTINUED)
| | --- | --------------------



(b)	   Deferred
tax



Deferred tax assets balances
as of December 31, 2014 and 2013 were RMB 58,741,255 and RMB 50,808,809, respectively, which are derived from losses carried forward.
Full valuation allowances were provided as the Group is of the opinion there is no future taxable profit to offset the tax losses.



The Group has tax losses arising
in Mainland China of RMB 138,338,779 that will expire in one to five years for deduction against future taxable profit.



|Loss expiring in 2015 |  |  | 10,466,542  | 
|--------------------- |  |  | ----------- | 
|Loss expiring in 2016 |  |  | 24,353,104  | 
|Loss expiring in 2017 |  |  | 32,993,758  | 
|Loss expiring in 2018 |  |  | 37,845,943  | 
|Loss expiring in 2019 |  |  | 32,679,432  | 
|                      |  |  | 138,338,779 | 



The Group has tax losses arising
in Thailand of RMB 67,841,557 that will expire in two to five years for deduction against future taxable profit.



|Loss expiring in 2016 |  |  | 543,482    | 
|--------------------- |  |  | ---------- | 
|Loss expiring in 2017 |  |  | 10,164,942 | 
|Loss expiring in 2018 |  |  | 35,190,685 | 
|Loss expiring in 2019 |  |  | 21,942,448 | 
|                      |  |  | 67,841,557 | 



- 44 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 15. | RELATED PARTY BALANCES AND TRANSACTIONS
| | --- | ---------------------------------------



The principal related parties
with which the Group had transactions during the years presented are as follows:



|Name of Related Parties                                       |  | Relationship with the Company                 
|------------------------------------------------------------- |  | ----------------------------------------------
|Starry Holdings Limited (“Starry”)                            |  | Management controlled by the Group            
|UTStarcom Hong Kong Investment Holding Ltd., (“UTStarcom HK”) |  | A subsidiary of one shareholder of the Company
|Grand Pacific Link Limited                                    |  | Non-controlling shareholder                   
|Founders and management team                                  |  | Founders and management of the Company        



The
Group had the following significant related party transactions and balances during the years presented:



|                                                         |  | December 31, 2014 |             |  | December 31, 2013 | 
|-------------------------------------------------------- |  | ----------------- | ----------- |  | ----------------- | 
|                                                         |  |                   |             |  |                   | 
|Other payables                                           |  |                   |             |  |                   | 
|Grand Pacific Link Limited                               |  |                   | 4,503,194   |  |                   | 
|                                                         |  |                   |             |  |                   | 
|Convertible bonds (both current and non-current portion) |  |                   |             |  |                   | 
|UTStarcom HK                                             |  |                   | 241,091,311 |  |                   | 
|                                                         |  |                   |             |  |                   | 
|Long-term loan (both current and non-current portion)    |  |                   |             |  |                   | 
|Founders and management team                             |  |                   | 13,962,917  |  |                   | 
|UTStarcom HK                                             |  |                   | 6,702,197   |  |                   | 
|                                                         |  |                   | 20,665,114  |  |                   | 
|                                                         |  |                   |             |  |                   | 
|Accrued interest for loan                                |  |                   |             |  |                   | 
|Founders and management team                             |  |                   | 3,229,012   |  |                   | 
|UTStarcom HK                                             |  |                   | 1,881,989   |  |                   | 
|                                                         |  |                   | 5,111,001   |  |                   | 



- 45 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 15. | RELATED PARTY BALANCES AND TRANSACTIONS (CONITNUED)
| | --- | ---------------------------------------------------



The Group had the following
significant related party transactions and balances during the year presented:



|                                                                       |  | Year ended December 31, 2014 |            |  | Year ended December 31, 2013 | 
|---------------------------------------------------------------------- |  | ---------------------------- | ---------- |  | ---------------------------- | 
|                                                                       |  |                              |            |  |                              | 
|Payment on behalf of the Group by                                      |  |                              |            |  |                              | 
|Grand Pacific Link Limited                                             |  |                              | 4,503,194  |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Long term loan borrowed from                                           |  |                              |            |  |                              | 
|Founders and management team                                           |  |                              | 13,962,917 |  |                              | 
|UTStarcom HK                                                           |  |                              | 6,702,197  |  |                              | 
|                                                                       |  |                              | 20,665,114 |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Interest accrued for loan                                              |  |                              |            |  |                              | 
|Founders and management team                                           |  |                              | 3,229,012  |  |                              | 
|UTStarcom HK                                                           |  |                              | 1,881,989  |  |                              | 
|                                                                       |  |                              | 5,111,001  |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Interest accrued for convertible bonds                                 |  |                              |            |  |                              | 
|UTStarcom HK                                                           |  |                              | 14,439,258 |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Convertible bonds issued to                                            |  |                              |            |  |                              | 
|UTStarcom HK                                                           |  |                              | -          |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Property and equipment purchased from                                  |  |                              |            |  |                              | 
|UTStarcom HK                                                           |  |                              | -          |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Transfer of loan and interest and account payable to convertible bonds |  |                              |            |  |                              | 
|UTStarcom HK                                                           |  |                              | -          |  |                              | 
|                                                                       |  |                              |            |  |                              | 
|Repayment of the loan due to                                           |  |                              |            |  |                              | 
|Starry                                                                 |  |                              | -          |  |                              | 
|                                                                       |  |                              |            |  |                              | 



- 46 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 16. | COMMITMENT AND CONTINGENCIES
| | --- | ----------------------------



(a) Operating
lease commitments



The Group leases certain office
premises and buildings under non-cancellable operating leases. Rental expenses under these leases for the year ended December 31,
2014 and 2013 were RMB 3,306,898 and RMB 3,543,834 respectively.



As of December 31, 2014 and
2013, the Group had remaining outstanding commitments in respect to its non-cancellable operating leases as follows:



|                  |  | December 31, 2014 |           |  | December 31, 2013 | 
|----------------- |  | ----------------- | --------- |  | ----------------- | 
|                  |  |                   |           |  |                   | 
|Within one year   |  |                   | 1,704,382 |  |                   | 
|2 to 5 years      |  |                   | 26,250    |  |                   | 
|More than 5 years |  |                   | -         |  |                   | 
|                  |  |                   | 1,730,632 |  |                   | 



(b) Contingencies



The Group received a complained
in June 2013 and an amended complaint in September 2013, from a former employee who claimed that the Group owed him approximately
US$ 900,000 in damages. In April, 2014, the court granted the Group’s motion to dismiss the claims. The former employee filed
the second amended complaint in May 2014, seeking compensatory damages of not less than US$ 1,529,329, prejudgment interest, punitive
damages, and costs of suit. In January 2015, the court granted the Group’s motion to dismiss the claim for punitive damages.
For the remaining claims, the Group is in the midst of discovery and has exchanged a number of documents with the former employee’s
counsel to date. At this time, the Company is unable to estimate any range of reasonably possible loss relating to this litigation.



In May 2015, Beijing Great Gold
Culture Media Co., Ltd. (“Great Gold”) filed a lawsuit in the Haidian People's Court in Beijing against UiTV alleging
UiTV infringing its copyright of 32 movies by offering online video service of these movies in 2009. Great Gold demanded UiTV to
compensate its loss of RMB 960,000 for the infringement action mentioned above. On June 9, 2015, Great Gold and UiTV exchanged
the evidence in Court. At this time, the Company is unable to estimate any range of reasonably possible loss relating to this litigation.



- 47 -







iTV
MEDIA INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



Amounts expressed in Renminbi (“RMB”),
unless otherwise stated








| | 17. | SUBSEQUENT EVENTS
| | --- | -----------------



In conjunction with the preparation
of these financial statements, an evaluation of subsequent events was performed through June 30, 2015, which is the date the financial
statements were issued.



On January 22, January 26 and
February 10, 2015, the Group further raised additional RMB 7,264,255 (equivalent US$1,170,000) from UTStarcom under the ‘STBs
Purchase Lending Ticket’ financing plan. (See note 10)



- 48 -