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, business strategies and marketing solutions for small
and medium-sized enterprises (SMEs) by utilizing data analysis and
cloud computing technologies in the People's Republic of China,
today announced financial results for the second fiscal quarter of
2016.
Second Quarter Financial Highlights
- Gross profit of $2.5 million generated in the second fiscal
quarter of 2016, a 10.5% increase from $2.3 million generated in
the same period a year ago
- Consolidated gross margin increased to 29.6%, compared to 23.6%
in the same period a year ago, a 25.5% increase YOY
- Internet advertising and data service gross margin improved to
43%, compared to 33% in the same period a year ago
Second Quarter 2016 Financial Results
Chairman and CEO of ChinaNet, Mr. Handong Cheng commented,
“During the first half of 2016 we have continued our successful
path to restructuring our business to reduce low-margin television
advertising business, and instead focus on the research and
development of our data service system. This effort has begun to
payoff, with the internet advertisement and data services segment
improving 56.1% from the first quarter of this year to the second.
We believe new partnerships like that with Dark Horse Club, and
products like our Business Intelligent Marketing Data Services
System -- CloudX, now officially launched and with copyright
approval, will continue to drive revenue and growth for us in the
second half of 2016 and beyond.”
Revenues for the three months ended June 30, 2016 were $8.4
million compared to $9.6 million for the three months ended June
30, 2015, representing an 11.9% decrease, which was primarily due
to decrease in revenues from TV advertising service during the
period. Excluding the impact of RMB depreciation, revenue decreased
from RMB 58.7 million during the three months ended June 30, 2015
to RMB 55.1 million during the same period in 2016, which was a
6.1% decline. During the second quarter, revenues from improving
internet advertisement and data services was $5.7 million, which
increased 56.1% from $3.6 million in the first quarter of 2016.
ChinaNet continues to focus on integrating and upgrading its
internet advertising and data service to SME clients and investing
in developing new service modules for clients, and believes that
the launch of new services in future will help to increase market
penetration and recurring revenues.
Gross profit for the three months ended June 30, 2016 was $2.5
million compared to $2.3 million for the same period in 2015. Gross
margin was 29.6%, up from 23.6% in the second quarter of 2015,
primarily due to the improvement in gross margin of the internet
advertising and data service, which increased to 43% for the second
quarter of 2016 from 33% for the second quarter of 2015. The
improvement in gross margin of the internet advertising and data
service was primarily due to optimizing and upgrading of the
Company’s online promotion analysis and cost control system, which
improved the promotion accuracy, Ad. effect conversion rate and
promotion cost control.
The Company incurred an operating loss of $1.0 million for the
three months ended June 30, 2016 compared to an operating loss of
$1.3 million in the same period a year ago.
Net loss attributable to ChinaNet for the three months ended
June 30, 2016 was $1.3 million and loss per share was $0.04,
compared to a net loss of $1.2 million and loss per share of $0.04
in the second quarter of 2015.
First Half 2016 Financial
Results
Revenues for the six months ended June 30, 2016 were $13.5
million, a decrease of 11.8% from $15.3 million for the same period
a year ago, which was primarily due to decrease in revenues from TV
advertising service during the period. Excluding the impact of RMB
depreciation, revenue decreased by approximately 6% from RMB 93.8
million for the six months ended June 30, 2015 to RMB 88.1 million
during the same period in 2016.
Gross profit was $4.1 million, up 31.6% for the first six months
of 2016, and gross profit margin of 30.4%, up 49.0% compared to
2015. Operating expenses increased by 1% to $6.5 million compared
to $6.4 million for the first six months of 2015. The Company
reported an operating loss of $2.4 million in the first half of
2016.
Net loss attributable to ChinaNet common shareholders and net
loss per share was $2.7 million and $0.09 for the six months ended
June 30, 2016. The weighted average diluted shares outstanding were
28.4 million shares.
Balance Sheet and Cash Flow
The Company had $2.9 million in cash and cash equivalents as of
June 30, 2016, compared to $5.5 million as of December 31, 2015,
working capital of $10.2 million, compared to $13.7 million as of
December 31, 2015, and a current ratio of 2.5 to 1, compared to 2.9
to 1 as of December 31, 2015. Total stockholders' equity of
ChinaNet was $25.3 million at June 30, 2016 compared to $27.3
million at December 31, 2015.
The Company had a $0.3 million of cash inflows from operations
in the six months ended June 30, 2016 compared to a $0.9 million of
cash inflows in the first six months of 2015.
Business Updates
In June, ChinaNet announced the official launch of its new SME
Intelligent Marketing Data Services System, CloudX (the “System” or
“CloudX”) an eco-system containing brand promotion, store
management, marketing services and membership services. The new
System enables ChinaNet to now manage and collect data from on-line
business development to offline sales channels. The System is based
on CloudX technology and consists of three components: a store
management system including a stock and sales system and
intelligent Point-of-Sale (POS) system, and a multi-functional app
with an online retail store. The store management system collects
and analyzes product sale numbers from stores in real time and is
analyzed by ChinaNet for suggested adjustments to product stock and
inventory to improve customer sales. By utilizing CloudX in stores,
ChinaNet can provide owners with sales analysis reports, including
each single item’s sales amount and period of time, improving
management efficiency and store credibility. The System can be
installed on either PC or mobile terminals.
In July, the Company received copyright approval from the
National Copyright Administration of China (NCAC), establishing the
intellectual property rights for the system in China.
In August, ChinaNet announced a new partnership with the
restaurant division of Dark Horse Club to provide data-driven
marketing services for the fast growing restaurant industry in
China. Established in 2008, Dark Horse Club is an entrepreneurs
network connecting industry veterans with newcomers in China. At
the center of the ChinaNet-Dark Horse Club Partnership is the Super
Harbor app, which interfaces the Company’s CloudX ecosystem with
consumers. Super Harbor is a membership and point system invested
in and technologically supported by ChinaNet. The app constitutes a
key component of the Company’s strategic expansion from B2B to the
new and differentiated B2B2C business model.
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 Chuangye.com.
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, 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.CONSOLIDATED BALANCE
SHEETS(In thousands, except for number of shares
and per share data) |
|
|
|
|
|
|
|
|
|
June 30,2016 |
|
December 31, 2015 |
|
|
|
(US $) |
|
(US $) |
|
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
2,876 |
|
|
$ |
5,503 |
|
Term
deposit |
|
3,197 |
|
|
|
3,265 |
|
Accounts
receivable, net |
|
3,206 |
|
|
|
2,549 |
|
Other
receivables, net |
|
464 |
|
|
|
1,910 |
|
Prepayment
and deposit to suppliers |
|
5,017 |
|
|
|
5,843 |
|
Due from
related parties |
|
333 |
|
|
|
41 |
|
Other
current assets |
|
43 |
|
|
|
45 |
|
Assets
classified as held for sale |
|
1,850 |
|
|
|
1,882 |
|
Total current assets |
|
16,986 |
|
|
|
21,038 |
|
|
|
|
|
|
|
|
Long-term investments |
|
1,561 |
|
|
1,133 |
|
Property and equipment,
net |
|
661 |
|
|
681 |
|
Intangible assets,
net |
|
6,868 |
|
|
5,638 |
|
Deposit and prepayment for
purchasing of software technology |
|
1,003 |
|
|
1,024 |
|
Goodwill |
|
4,305 |
|
|
4,396 |
|
Deferred tax assets-non
current |
|
1,392 |
|
|
1,550 |
|
Total Assets |
$ |
32,776 |
|
$ |
35,460 |
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
90 |
|
|
$ |
95 |
|
Advances
from customers |
|
800 |
|
|
|
1,313 |
|
Accrued
payroll and other accruals |
|
592 |
|
|
|
685 |
|
Guarantee
payment and prepayment from new investors |
|
924 |
|
|
|
944 |
|
Taxes
payable |
|
3,102 |
|
|
|
3,186 |
|
Other
payables |
|
448 |
|
|
|
234 |
|
Liabilities
classified as held for sale |
|
833 |
|
|
|
913 |
|
Total current liabilities |
|
6,789 |
|
|
|
7,370 |
|
Long-term liabilities: |
|
|
|
|
Deferred tax
liability-non current |
|
58 |
|
|
|
118 |
|
Long-term
borrowing from a director |
|
132 |
|
|
|
135 |
|
Total Liabilities |
|
6,979 |
|
|
|
7,623 |
|
|
|
|
|
|
Commitments and contingencies |
|
- |
|
|
|
129 |
|
|
|
|
|
|
Equity: |
|
|
|
|
ChinaNet
Online Holdings, Inc.’s stockholders’ equity |
|
|
|
|
Common stock
(US$0.001 par value; authorized 50,000,000 shares; issued and
outstanding 30,395,722 shares and 29,640,130 shares at June 30,
2016 and December 31, 2015, respectively) |
|
30 |
|
|
|
30 |
|
Additional
paid-in capital |
|
27,645 |
|
|
|
26,510 |
|
Statutory
reserves |
|
2,607 |
|
|
|
2,607 |
|
Retained
deficit |
|
(6,561 |
) |
|
|
(3,870 |
) |
Accumulated
other comprehensive income |
|
1,607 |
|
|
|
2,056 |
|
Total
ChinaNet Online Holdings, Inc.’s stockholders’ equity |
|
25,328 |
|
|
|
27,333 |
|
|
|
|
|
|
Noncontrolling interests |
|
469 |
|
|
|
375 |
|
Total equity |
|
25,797 |
|
|
|
27,708 |
|
Total Liabilities and Equity |
$ |
32,776 |
|
|
$ |
35,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHINANET ONLINE HOLDINGS,
INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS(In thousands, except for number
of shares and per share data) |
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
Three Months Ended June 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
(US $) |
|
(US $) |
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
Revenues |
|
|
|
|
|
|
|
|
From
unrelated parties |
$ |
13,276 |
|
|
$ |
14,835 |
|
|
$ |
8,264 |
|
|
$ |
9,174 |
|
From
related parties |
|
220 |
|
|
|
468 |
|
|
|
172 |
|
|
|
405 |
|
Total revenues |
|
13,496 |
|
|
|
15,303 |
|
|
|
8,436 |
|
|
|
9,579 |
|
Cost of revenues |
|
9,395 |
|
|
|
12,187 |
|
|
|
5,939 |
|
|
|
7,319 |
|
Gross profit |
|
4,101 |
|
|
|
3,116 |
|
|
|
2,497 |
|
|
|
2,260 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
1,943 |
|
|
|
2,230 |
|
|
|
1,063 |
|
|
|
1,045 |
|
General and administrative expenses |
|
3,538 |
|
|
|
3,139 |
|
|
|
1,832 |
|
|
|
1,894 |
|
Research and development expenses |
|
1,016 |
|
|
|
1,063 |
|
|
|
590 |
|
|
|
573 |
|
Total
operating expenses |
|
6,497 |
|
|
|
6,432 |
|
|
|
3,485 |
|
|
|
3,512 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
(2,396 |
) |
|
|
(3,316 |
) |
|
|
(988 |
) |
|
|
(1,252 |
) |
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
Interest income |
|
53 |
|
|
|
63 |
|
|
|
26 |
|
|
|
34 |
|
Interest expense |
|
- |
|
|
|
(34 |
) |
|
|
- |
|
|
|
(17 |
) |
Other (expenses)/income |
|
(13 |
) |
|
|
31 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Total
other income |
|
40 |
|
|
|
60 |
|
|
|
25 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
Loss before
income tax expense, equity method investments, noncontrolling
interests and discontinued operation |
|
(2,356 |
) |
|
|
(3,256 |
) |
|
|
(963 |
) |
|
|
(1,236 |
) |
Income tax (expense)/benefit |
|
(152 |
) |
|
|
308 |
|
|
|
(180 |
) |
|
|
86 |
|
Loss before
equity method investments, noncontrolling interests and
discontinued operation |
|
(2,508 |
) |
|
|
(2,948 |
) |
|
|
(1,143 |
) |
|
|
(1,150 |
) |
Share of income in equity investment affiliates |
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
1 |
|
Loss from
continuing operations |
|
(2,508 |
) |
|
|
(2,946 |
) |
|
|
(1,143 |
) |
|
|
(1,149 |
) |
Loss from and on
disposal of discontinued operation, net of income tax |
|
(60 |
) |
|
|
(109 |
) |
|
|
(14 |
) |
|
|
(84 |
) |
Net
loss |
|
(2,568 |
) |
|
|
(3,055 |
) |
|
|
(1,157 |
) |
|
|
(1,233 |
) |
Net
(income)/loss attributable to noncontrolling interests from
continuing operations |
|
(123 |
) |
|
|
58 |
|
|
|
(123 |
) |
|
|
24 |
|
Net loss
attributable to ChinaNet Online Holdings, Inc. |
$ |
(2,691 |
) |
|
$ |
(2,997 |
) |
|
$ |
(1,280 |
) |
|
$ |
(1,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(2,568 |
) |
|
|
$ |
(3,055 |
) |
|
$ |
(1,157 |
) |
|
$ |
(1,233 |
) |
Foreign currency translation (loss)/gain |
|
(478 |
) |
|
|
|
23 |
|
|
|
(590 |
) |
|
|
143 |
|
Comprehensive loss |
$ |
(3,046 |
) |
|
|
$ |
(3,032 |
) |
|
$ |
(1,747 |
) |
|
$ |
(1,090 |
) |
Comprehensive (income)/loss attributable to noncontrolling
interests |
|
(94 |
) |
|
|
|
58 |
|
|
|
(111 |
) |
|
|
25 |
|
Comprehensive loss attributable to ChinaNet Online Holdings,
Inc. |
$ |
(3,140 |
) |
|
|
$ |
(2,974 |
) |
|
$ |
(1,858 |
) |
|
$ |
(1,065 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share |
|
|
|
|
|
|
|
|
Loss
from continuing operations per common share |
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
|
(0.09 |
) |
|
|
$ |
(0.11 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.04 |
) |
Loss
from discontinued operations per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
|
- |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
28,376,797 |
|
|
|
|
26,572,856 |
|
|
|
28,396,797 |
|
|
|
26,776,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHINANET ONLINE HOLDINGS,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands) |
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2016 |
|
2015 |
|
|
|
(US $) |
|
(US $) |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
Cash flows from operating activities |
|
|
|
|
|
Net
loss |
$ |
(2,568 |
) |
|
$ |
(3,055 |
) |
Adjustments to
reconcile net loss to net cash
provided by operating activities |
|
|
|
|
|
Depreciation and amortization |
|
760 |
|
|
|
888 |
|
Share-based compensation expenses |
|
1,135 |
|
|
|
956 |
|
Loss
on disposal of fixed assets |
|
21 |
|
|
|
- |
|
Reverse of allowances for doubtful accounts |
|
- |
|
|
|
(77 |
) |
Share of income in equity investment affiliates |
|
- |
|
|
|
(2 |
) |
Loss
on deconsolidation of VIEs |
|
9 |
|
|
|
- |
|
Deferred taxes |
|
152 |
|
|
|
(328 |
) |
Changes in
operating assets and liabilities |
|
|
|
|
|
Accounts receivable |
|
(771 |
) |
|
|
(1,619 |
) |
Other receivables |
|
1,325 |
|
|
|
1,856 |
|
Prepayment and deposit to suppliers |
|
612 |
|
|
|
1,236 |
|
Due
from related parties |
|
(25 |
) |
|
|
(56 |
) |
Other current assets |
|
1 |
|
|
|
(75 |
) |
Accounts payable |
|
(154 |
) |
|
|
(273 |
) |
Advances from customers |
|
(388 |
) |
|
|
1,490 |
|
Accrued payroll and other accruals |
|
(89 |
) |
|
|
26 |
|
Other payables |
|
296 |
|
|
|
(8 |
) |
Taxes payable |
|
86 |
|
|
|
(109 |
) |
Commitment and contingencies |
|
(129 |
) |
|
|
- |
|
Net cash provided by
operating activities |
|
273 |
|
|
|
850 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Payment for office equipment and leasehold improvement |
|
(148 |
) |
|
|
(20 |
) |
Long-term investment in and advance to cost/equity method
investees |
|
(754 |
) |
|
|
(186 |
) |
Payment for purchasing of software technology |
|
(1,991 |
) |
|
|
(1,958 |
) |
Proceeds from disposal of VIEs |
|
28 |
|
|
|
- |
|
Cash
effect on deconsolidation of VIEs |
|
(18 |
) |
|
|
- |
|
Net cash used in
investing activities |
|
(2,883 |
) |
|
|
(2,164 |
) |
Cash flows from financing activities |
|
|
|
|
Repayment of short-term loan to noncontrolling interest of VIE |
|
- |
|
(82 |
) |
Guarantee payment and prepayment from new investors |
|
- |
|
1,000 |
|
Net cash provided by
financing activities |
|
- |
|
918 |
|
|
|
|
|
|
Changes in cash and cash equivalents included in
assets held for sale |
|
55 |
|
- |
|
|
|
|
|
|
Effect of exchange rate fluctuation on cash and
cash equivalents |
|
(72 |
) |
4 |
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(2,627 |
) |
(392 |
) |
|
|
|
|
|
Cash
and cash equivalents at beginning of the period |
|
5,503 |
|
5,037 |
|
Cash
and cash equivalents at end of the period |
$ |
2,876 |
|
$ |
4,645 |
|
|
|
|
|
Contact:
MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us
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