ChinaNet Online Holdings, Inc. (Nasdaq:CNET) ("ChinaNet" or the
"Company"), a leading B2B (business to business) Internet
technology company providing online-to-offline (O2O) sales channel
expansion services for small and medium-sized enterprises (SMEs)
and entrepreneurial management and networking services for
entrepreneurs in the People's Republic of China, today announced
financial results for the first fiscal quarter of 2015.
Summary
Financials |
|
First Quarter 2015
Results (USD) (Unaudited) |
|
Q1 2015 |
Q1 2014 |
CHANGE |
Sales |
$5.8 million |
$5.2 million |
12.8% |
Gross Profit |
$0.9 million |
$1.4 million |
-33.7% |
Gross Margin |
15.4% |
26.3% |
-41.4% |
Net Loss Attributable to ChinaNet |
($1.8) million |
($0.7) million |
-- |
EPS (Diluted) |
($0.07) |
($0.03) |
-- |
Non-GAAP Adjusted Net Loss Attributable to
ChinaNet (1) |
(1.4) million |
-- |
-- |
Non-GAAP Adjusted EPS (Diluted) (1) |
(0.05) |
-- |
-- |
|
(1)
Non-GAAP Adjusted Net Loss Attributable to ChinaNet and EPS
excluded a share-based compensation expense related to restricted
shares of the Company's common stock issued to management of $0.4
million. |
First Quarter 2015 Financial
Results
Revenues for the three months ended March 31, 2015 were $5.8
million compared to $5.2 million for the three months ended March
31, 2014, representing a 12.8% increase, primarily due to the
increase in revenues from the search engine marketing service.
Internet advertising and related services, TV advertising, and
brand management and sales channel building revenues were $5.6
million, $0.1 million, and $0.1 million in the first quarter of
2015, respectively.
First Quarter 2015
Revenue Breakdown by Business Unit (USD in thousands) |
|
|
Q1 2015 |
% |
Q1 2014 |
% |
% Change |
Internet Advertisement and related
services |
$5,598 |
95.7% |
$3,580 |
69.0% |
56.4% |
TV Advertisement |
$58 |
1.0% |
$1,182 |
22.8% |
-95.1% |
Bank Kiosks |
$69 |
1.2% |
$71 |
1.4% |
-2.8% |
Brand Mgmt. & Sales Channel Building |
$123 |
2.1% |
$350 |
6.8% |
-64.9% |
Gross profit for the three months ended March 31, 2015 was $0.9
million compared to $1.4 million for the same period in 2014. Gross
margin was 15.4%, down from 26.3% in the first quarter of 2014.
This decrease is primarily due to the increase in lower margin
revenue from search engine marketing service, which accounted for
approximately 52% of total revenue for the three months ended March
31, 2015.
The Company incurred an operating loss of $2.1 million for the
three months ended March 31, 2015 compared to an operating loss of
$0.7 million in the same period a year ago.
Net loss attributable to ChinaNet for the three months ended
March 31, 2015 was $1.8 million and loss per share was $0.07,
compared to a net loss of $0.7 million in the first quarter of
2014. Excluding the share-based compensation expense as discussed
above, the Non-GAAP adjusted net loss attributable to ChinaNet
common stockholders and net loss per share were 1.4 million and
0.05, respectively.
Balance Sheet and Cash Flow
The Company had $2.2 million in cash and cash equivalents as of
March 31, 2015, compared to $5.0 million as of December 31, 2014,
working capital of $16.0 million, compared to $17.3 million as of
December 31, 2014, and a current ratio of 2.4 to 1, compared to 2.7
to 1 as of December 31, 2014. Total shareholders' equity of
ChinaNet was $34.7 million at March 31, 2015 compared to $36.2
million at December 31, 2014.
The Company had a $2.3 million of cash outflows from operations
in the first quarter of 2015 compared to a $1.4 million of cash
outflows for the first three months of 2014.
Business Updates
In April, ChinaNet announced that in addition to offering its
total solution of products and services, it successfully proved a
new added revenue model with its pilot SME customer, Beijing
Saturday Educational Technology Co., Ltd. ("Beijing Saturday").
Founded in 2000, "Saturday Children's" theme park (Saturday
Children's) is one of the country's first indoor children's theme
parks and is owned and operated by Beijing Saturday. In the third
quarter of 2014 ChinaNet committed a cash investment for an
approximately 10% ownership stake in Beijing Saturday. ChinaNet
cooperated with the company to expand Saturday Children's theme
parks in China. ChinaNet provided Beijing Saturday full support to
enhance Saturday Children's with brand management, brand channel
expansion, marketing and advanced marketing chain management
systems. The Company helped to properly manage each franchise store
through its management system and used Baidu Wallet to facilitate
online payment. ChinaNet is also currently implementing its new
"Business Direct 3.0" service with Beijing Saturday. Saturday
Children's focus on third and fourth-tier cities has helped to
create strong demand and it expects to open 600 new parks in 2015
with the help of ChinaNet.
Also in April, the Company's subsidiary Liansuo.com signed an
agreement with Haoxiangni Jujube Co., Ltd. to create a one-stop
purchasing service platform and expand Haoxiangni Jujube's online
stores. Haoxiangni is the largest jujube enterprise in China and
has the most types of Jujube products of its competitors. The
company has nearly 2,000 stores across more than 280 cities.
Liansuo.com is helping Haoxiangni create a one-stop purchasing
service platform and expand the online stores through its active
marketing program that includes traditional and online advertising,
trade shows and referrals.
The number of larger customers served by Liansuo.com has seen
steady growth because of the Company's premium advertising efforts
and effective marketing web portal.
In May, ChinaNet entered into a definitive securities purchase
agreement (the "Agreement") with Beijing Jinrun Fangzhou Science
& Technology Co., Ltd. (Shenzhen Stock Exchange, Stock Code:
430120) (the "Purchaser" or "Jinrun Technology") to raise
US$3,500,000 (the "Purchase Price"), pursuant to which the
Purchaser has agreed to purchase 2,800,000 shares of common stock
of the Company (the "Shares"). In accordance with the Agreement,
the Purchaser made a ten percent (10%) non-refundable guarantee
payment to the Company in an amount equal to US$350,000 on May 7,
2015. The Purchaser shall pay an additional fifteen percent (15%)
of the Purchase Price by June 4, 2015. The Purchaser shall pay the
remaining seventy-five percent (75%) of the Purchase Price at the
closing which shall take place on the date mutually agreed to by
the parties, subject to the closing conditions contained in the
Agreement. On the date the Agreement was signed, the Purchaser also
entered into a Lock-Up Agreement with the Company, whereby the
Purchaser agreed not to transfer the Shares until May 5, 2017. Upon
the Company's prior written approval, the lock-up restriction may
be waived after May 5, 2016. The proceeds from the offering, net of
certain fees and expenses, will be used for working capital to fund
technology research and development, marketing for new services and
product launches, and potential mergers and acquisitions.
Also in May, the Company entered into a strategic alliance
with Shanghai Pudong Development Bank and signed a cooperation
framework to launch a credit card and loan microcredit product for
small enterprises and individual entrepreneurs including
franchisees and chain store investors. The product will be intended
to offer, under the authorization of ChinaNet, an "unsecured and
free mortgage" micro-loan through credit card to the recipients to
be used in merchant shops for business related operating costs. The
product is now in the design and finalization process, and will be
officially launched by the third fiscal quarter of 2015.
Conference Call
ChinaNet will host a conference call at 8:30 am ET on Tuesday,
May 19th to discuss its first quarter 2015 results. Please use
the following information:
Date: |
Tuesday, May 19, 2015 |
Time: |
8:30 am Eastern Time |
Conference Line (U.S.): |
1-888-461-2024 |
International Dial-In: |
1-719-325-2455 |
Conference ID: |
9156062 |
Webcast: |
http://public.viavid.com/index.php?id=114737 |
Please dial in at least 10-minutes before the call to ensure
timely participation.
A playback of the call will be available until 12:00 pm ET on
June 2, 2015. To listen, call 1-877-870-5176 within the United
States or 1-858-384-5517 when calling internationally. Please use
the replay pin number 9156062.
About ChinaNet Online Holdings, Inc.
The Company, a parent company of ChinaNet Online Media Group
Ltd., incorporated in the BVI ("ChinaNet"), is a leading digital
B2B (business to business) Internet technology company focusing on
providing O2O sales channel expansion service for small and
medium-sized enterprises (SMEs) and entrepreneurial management and
networking service for entrepreneurs in China. The Company, through
certain contractual arrangements with operating companies in the
PRC, provides Internet advertising and other services for Chinese
SMEs via its portal websites, 28.com, Liansuo.com and sooe.cn, TV
commercials and program production via China-Net TV, and in-house
LCD advertising on banking kiosks targeting Chinese banking
patrons. Website: http://www.chinanet-online.com.
Safe Harbor
This release contains certain "forward-looking statements"
relating to the business of ChinaNet Online Holdings, Inc., which
can be identified by the use of forward-looking terminology such as
"believes," "expects," "anticipates," "estimates" or similar
expressions. Such forward-looking statements involve known and
unknown risks and uncertainties, including business uncertainties
relating to government regulation of our industry, market demand,
reliance on key personnel, future capital requirements, and
competition in general and other factors that may cause actual
results to be materially different from those described herein as
anticipated, believed, estimated or expected. Certain of these
risks and uncertainties are or will be described in greater detail
in our filings with the Securities and Exchange Commission. These
forward-looking statements are based on ChinaNet's current
expectations and beliefs concerning future developments and their
potential effects on the Company. There can be no assurance that
future developments affecting ChinaNet will be those anticipated by
ChinaNet. These forward-looking statements involve a number of
risks, uncertainties (some of which are beyond the control of the
Company) or other assumptions that may cause actual results or
performance to be materially different from those expressed or
implied by such forward-looking statements. ChinaNet undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required under applicable securities
laws.
CHINANET ONLINE
HOLDINGS, INC. |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(In thousands, except for
number of shares and per share data) |
|
|
March 31,
2015 |
December 31,
2014 |
|
(US $) |
(US $) |
|
(Unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 2,184 |
$ 5,037 |
Term deposit |
3,452 |
3,465 |
Accounts receivable, net |
2,660 |
2,407 |
Other receivables, net |
8,160 |
8,392 |
Prepayment and deposit to suppliers |
10,235 |
8,092 |
Due from related parties |
59 |
51 |
Other current assets |
177 |
61 |
Deferred tax assets-current |
291 |
176 |
Total current
assets |
27,218 |
27,681 |
|
|
|
Long-term investments |
1,089 |
909 |
Property and equipment, net |
853 |
943 |
Intangible assets, net |
8,847 |
9,238 |
Deposit and prepayment for purchasing of
software technology |
847 |
850 |
Goodwill |
6,746 |
6,772 |
Deferred tax assets-non current |
1,106 |
1,037 |
Total Assets |
$ 46,706 |
$ 47,430 |
|
|
|
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Short-term bank loan * |
$ 814 |
$ 817 |
Accounts payable * |
741 |
782 |
Advances from customers * |
2,108 |
832 |
Accrued payroll and other accruals * |
512 |
585 |
Due to noncontrolling interest of VIE
* |
636 |
638 |
Payable for purchasing of software
technology * |
2,489 |
2,826 |
Taxes payable * |
3,294 |
3,332 |
Other payables * |
626 |
602 |
Total current
liabilities |
11,220 |
10,414 |
|
|
|
Long-term
liabilities: |
|
|
Deferred tax liability-non current * |
922 |
964 |
Long-term borrowing from director |
142 |
143 |
Total Liabilities |
12,284 |
11,521 |
|
|
|
Commitments and
contingencies |
|
|
|
|
|
Equity: |
|
|
ChinaNet Online Holdings, Inc.'s
stockholders' equity |
|
|
Common stock (US$0.001 par value;
authorized 50,000,000 shares; issued and outstanding 29,080,130
shares and 29,030,130 shares at March 31, 2015 and December 31,
2014, respectively) |
29 |
29 |
Additional paid-in capital |
25,158 |
24,703 |
Statutory reserves |
2,607 |
2,607 |
Retained earnings |
3,434 |
5,222 |
Accumulated other comprehensive
income |
3,504 |
3,625 |
Total ChinaNet Online Holdings, Inc.'s
stockholders' equity |
34,732 |
36,186 |
|
|
|
Noncontrolling interests |
(310) |
(277) |
Total equity |
34,422 |
35,909 |
|
|
|
Total Liabilities and
Equity |
$ 46,706 |
$ 47,430 |
|
|
CHINANET ONLINE
HOLDINGS, INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
(In thousands, except for
number of shares and per share data) |
|
|
Three Months
Ended March 31, |
|
2015 |
2014 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Sales |
|
|
From unrelated parties |
$ 5,785 |
$ 5,182 |
From related parties |
63 |
1 |
|
5,848 |
5,183 |
Cost of sales |
4,946 |
3,822 |
Gross margin |
902 |
1,361 |
|
|
|
Operating expenses |
|
|
Sales and marketing expenses |
1,203 |
589 |
General and administrative expenses |
1,302 |
987 |
Research and development expenses |
490 |
450 |
|
2,995 |
2,026 |
|
|
|
Loss from operations |
(2,093) |
(665) |
|
|
|
Other income (expenses) |
|
|
Interest income |
29 |
31 |
Interest expense |
(17) |
(16) |
Other income/(expenses) |
32 |
(1) |
|
44 |
14 |
|
|
|
Loss before income tax expense,
equity method investments and noncontrolling
interests |
(2,049) |
(651) |
Income tax benefit/(expense) |
226 |
(48) |
Loss before equity method investments
and noncontrolling interests |
(1,823) |
(699) |
Share of income/(losses) in equity
investment affiliates |
1 |
(15) |
Net loss |
(1,822) |
(714) |
Net loss attributable to noncontrolling
interests |
34 |
46 |
Net loss attributable to ChinaNet
Online Holdings, Inc. |
(1,788) |
(668) |
|
|
|
Net loss |
(1,822) |
(714) |
Foreign currency translation loss |
(120) |
(324) |
Comprehensive loss |
$ (1,942) |
$ (1,038) |
Comprehensive loss attributable to
noncontrolling interests |
33 |
45 |
Comprehensive loss attributable to ChinaNet
Online Holdings, Inc. |
$ (1,909) |
$ (993) |
|
|
|
Loss per share |
|
|
Loss per common share |
|
|
Basic and diluted |
$ (0.07) |
$ (0.03) |
|
|
|
Weighted average number of common
shares outstanding: |
|
|
Basic and diluted |
26,366,797 |
22,376,540 |
|
|
CHINANET ONLINE
HOLDINGS, INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In thousands) |
|
|
Three Months
Ended March 31, |
|
2015 |
2014 |
|
(US $) |
(US $) |
|
(Unaudited) |
(Unaudited) |
Cash flows from operating
activities |
|
|
Net loss |
$ (1,822) |
$ (714) |
Adjustments to reconcile net
loss to net cash used
in operating activities |
|
|
Depreciation and amortization |
444 |
360 |
Share-based compensation expenses |
455 |
8 |
Reverse of allowances for doubtful
accounts |
(220) |
-- |
Share of (income)/losses in equity
investment affiliates |
(1) |
15 |
Deferred taxes |
(226) |
(132) |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
(42) |
520 |
Other receivables |
200 |
152 |
Prepayment and deposit to suppliers |
(2,175) |
(2,089) |
Due from related parties |
(8) |
118 |
Other current assets |
(119) |
(78) |
Accounts payable |
(38) |
168 |
Advances from customers |
1,279 |
134 |
Accrued payroll and other accruals |
(72) |
(36) |
Other payables |
42 |
71 |
Taxes payable |
(25) |
152 |
Net cash used
in operating activities |
(2,328) |
(1,351) |
|
|
|
Cash flows from investing
activities |
|
|
Purchases of vehicles and office
equipment |
-- |
(13) |
Long-term investment in cost/equity
method investees |
(183) |
-- |
Repayment of short-term loan from
unrelated entities |
-- |
250 |
Payment for purchasing of software
technology |
(326) |
(850) |
Net cash
used in
investing activities |
(509) |
(613) |
|
|
|
Cash flows from financing
activities |
|
|
Short-term loan from noncontrolling
interest of VIE |
-- |
197 |
Net cash provided
by financing activities |
-- |
197 |
|
|
|
Effect of exchange rate fluctuation on cash
and cash equivalents |
(16) |
(15) |
|
|
|
Net decrease in cash and cash
equivalents |
(2,853) |
(1,782) |
|
|
|
Cash and cash equivalents at beginning of
the period |
5,037 |
3,442 |
Cash and cash equivalents at end of the
period |
$
2,184 |
$
1,660 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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