ChinaNet Online Holdings, Inc. (Nasdaq: CNET) ("ChinaNet" or the
"Company"), an integrated online advertising, precision marketing,
and data-analysis and management services platform, today announced
its unaudited financial results for the first fiscal quarter of
2020.
First Fiscal Quarter 2020 Financial
Highlights
- Revenues generated from Ecommerce
O2O advertising and marketing services and revenues generated from
technical solution services were $0.5 million and $0.6 million,
respectively, compared to nil in the first fiscal quarter of 2019.
- Gross margin improved to 20.5% from
5.2% in the first fiscal quarter of 2019.
Mr. Handong Cheng, Chairman, and Chief Executive
Officer of ChinaNet, stated: “The outbreak of COVID-19 and related
policies implemented by local governments significantly impacted
both our business schedules as well as our suppliers’ and
customers’ business schedules in the first fiscal quarter of 2020.
Nevertheless, despite this momentary setback, we continued to lay
the groundwork for our initiatives in healthcare industry
advertising, blockchain technology development, and the integration
of artificial intelligence with data analytics. Looking ahead, we
believe that the combination of these efforts and the prudent cost
control measures we have implemented in response to the epidemic
will help to ensure that we develop new lines of profitable
business, cultivate sustainable value for our shareholders over the
long term, and emerge from this current period of uncertainty on
the right foot. With the start of new stream of revenues, we expect
to see more blockchain technology related services and solutions
provided in the second half of the year with the addition of these
revenues for the growth of the Company. We believe that all
fundamentals have been properly placed for the Company’s
change.”
First Fiscal Quarter 2020
Financial Results
TOTAL REVENUES
Total revenues were $4.4 million in the first
fiscal quarter of 2020 compared to $8.6 million in the first fiscal
quarter of 2019.
Revenues generated from Internet advertising and
related services decreased to $3.2 million in the first fiscal
quarter of 2020 from $8.6 million in the first fiscal quarter of
2019. This decrease was mainly attributable to the epidemic control
measures imposed by local governments in China as a result of the
COVID-19 outbreak during the first fiscal quarter of 2020, which
caused the Company’s operating offices, as well as the offices of
most of the Company’s customers and suppliers, to remain closed
after the Chinese New Year holiday in both February and March 2020.
The decrease was partially offset by the revenues generated from
Ecommerce O2O advertising and marketing services as well as the
revenues generated from technical solutions services, which were
$0.5 million and $0.6 million, respectively, in the first fiscal
quarter of 2020.
COST OF REVENUES
Cost of revenues decreased by 57.1% to $3.5
million in the first fiscal quarter of 2020 from $8.1 million in
the first fiscal quarter of 2019. This decrease was primarily due
to the decrease in costs associated with the distribution of the
right to use search engine marketing services and the decrease in
costs related to providing Internet advertising services on the
Company’s advertising portals, which was in line with the decrease
in the related revenues caused by the outbreak of COVID-19 during
the first fiscal quarter of 2020.
GROSS PROFIT
Gross profit increased to $0.9 million in the
first fiscal quarter of 2020 from $0.4 million in the first fiscal
quarter of 2019. Gross margin increased to 20.5% in the first
fiscal quarter of 2020 from 5.2% in the first fiscal quarter of
2019. The increase was due to the decrease in proportion of
revenues generated from distribution of the right to use search
engine marketing service, which have a relatively low margin,
during the first fiscal quarter of 2020, resulting from both the
outbreak of COVID-19 and the Company’s strategic shift to a
high-technology related business starting from the first fiscal
quarter of 2020.
OPERATING LOSS
Operating expenses were $3.2 million in the
first fiscal quarter of 2020 compared to $1.2 million in the first
fiscal quarter of 2019. As a percentage of total revenues,
operating expenses were 72.4% in the first fiscal quarter of 2020
compared to 13.8% in the first fiscal quarter of 2019.
Sales and marketing expenses remained stable at
$0.2 million in the first fiscal quarter of 2020 compared to $0.2
million in the first fiscal quarter of 2019.
General and administrative expenses increased to
$2.8 million in the first fiscal quarter of 2020 from $0.8 million
in the first fiscal quarter of 2019. The increase was primarily
attributable to the increase in share-based compensation expenses
related to the restricted common stock granted and issued to the
Company’s employees in the first fiscal quarter of 2020 and
partially attributable to both an increase in the allowance for
doubtful accounts due to the uncertainties surrounding future
collection caused by the outbreak of COVID-19 and an increase in
professional service fees and intangible assets amortization
expenses.
Research and development expenses remained
stable at $0.2 million in the first fiscal quarter of 2020 compared
to $0.2 million in the first fiscal quarter of 2019.Operating loss
was $2.3 million in the first fiscal quarter of 2020 compared to
$0.7 million in the first fiscal quarter of 2019.Gain from change
in fair value of warrant liabilities was $0.05 million in the first
fiscal quarter of 2020 compared to a loss from change in fair value
of warrant liabilities of $0.35 million in the first fiscal quarter
of 2019.
NET LOSS
Net loss attributable to ChinaNet Online Holdings, Inc. was $2.3
million in the first fiscal quarter of 2020 compared to $1.1
million in the first fiscal quarter of 2019.
BALANCE SHEET
As of March 31, 2020, the Company had cash and
cash equivalents of $1.56 million compared to $1.60 million as of
December 31, 2019. Advances from customers grew to $2.1 million as
of March 31, 2020, from $2.0 million as of December 31, 2019.
About ChinaNet Online Holdings,
Inc.
ChinaNet Online Holdings, Inc., a parent company
of ChinaNet Online Media Group Ltd., incorporated in the BVI
(ChinaNet), is an integrated online advertising, precision
marketing and data-analysis and management services platform.
ChinaNet provides prescriptive analysis for its clients to improve
business outcomes and to create more efficient enterprises. The
Company leverages an optimization framework, provided by its
comprehensive data-analysis infrastructure, to blend data,
mathematical, and computational sciences into an outcome management
platform for which it monetizes on a per client basis. ChinaNet
uniquely optimizes and prescribes its clients decision making
processes based on its proprietary ecosystem. For more information,
visit www.chinanet-online.com.
Safe Harbor
Statement
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.
Investor Relations
Contact
ICR, Inc.Xinran RaoTel: +1-646-308-1635Email:
CNET@icrinc.com
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, |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
(US $) |
|
(US $) |
| |
|
(Unaudited) |
|
(Unaudited) |
| |
|
|
|
|
| Revenues |
|
|
|
|
|
From unrelated parties |
|
$ |
4,371 |
|
|
$ |
8,560 |
|
| From related parities |
|
|
13 |
|
|
|
7 |
|
|
Total revenues |
|
|
4,384 |
|
|
|
8,567 |
|
|
Cost of revenues |
|
|
3,485 |
|
|
|
8,125 |
|
|
Gross profit |
|
|
899 |
|
|
|
442 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
Sales and marketing expenses |
|
|
165 |
|
|
|
169 |
|
|
General and administrative expenses |
|
|
2,796 |
|
|
|
810 |
|
|
Research and development expenses |
|
|
214 |
|
|
|
201 |
|
|
Total operating expenses |
|
|
3,175 |
|
|
|
1,180 |
|
| |
|
|
|
|
| Loss from
operations |
|
|
(2,276 |
) |
|
|
(738 |
) |
| |
|
|
|
|
|
Other income/(expenses) |
|
|
|
|
|
Interest expense, net |
|
|
(1 |
) |
|
|
(11 |
) |
|
Other expenses |
|
|
(1 |
) |
|
|
(2 |
) |
|
Change in fair value of warrant liabilities |
|
|
46 |
|
|
|
(350 |
) |
|
Total other income/(expenses) |
|
|
44 |
|
|
|
(363 |
) |
| |
|
|
|
|
| Loss before income tax
expense and noncontrolling interests |
|
|
(2,232 |
) |
|
|
(1,101 |
) |
| Income tax expense |
|
|
(78 |
) |
|
|
(39 |
) |
| Net loss |
|
|
(2,310 |
) |
|
|
(1,140 |
) |
|
Net loss attributable to noncontrolling interests |
|
|
- |
|
|
|
2 |
|
| Net loss attributable to
ChinaNet Online Holdings, Inc. |
|
$ |
(2,310 |
) |
|
$ |
(1,138 |
) |
|
Net loss |
|
$ |
(2,310 |
) |
|
$ |
(1,140 |
) |
|
Foreign currency translation gain/(loss) |
|
|
72 |
|
|
|
(36 |
) |
|
Comprehensive loss |
|
|
(2,238 |
) |
|
|
(1,176 |
) |
|
Comprehensive (income)/loss attributable to noncontrolling
interests |
|
|
(1 |
) |
|
|
3 |
|
| Comprehensive loss
attributable to ChinaNet Online Holdings, Inc. |
|
$ |
(2,239 |
) |
|
$ |
(1,173 |
) |
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
Loss per common share |
|
|
|
|
|
Basic and diluted |
|
$ |
(0.11 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
20,397,406 |
|
|
|
16,410,543 |
|
|
|
|
|
|
|
|
|
|
|
CHINANET ONLINE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands, except for number of shares and per share data)
| |
|
March 31, 2020 |
|
December 31,2019 |
| |
|
(US $) |
|
(US $) |
|
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,555 |
|
$ |
1,603 |
|
Accounts receivable, net of allowance for doubtful accounts of
$3,504 and $3,148, respectively |
|
|
3,070 |
|
|
3,260 |
|
Prepayment and deposit to suppliers |
|
|
4,946 |
|
|
6,980 |
|
Due from related parties, net |
|
|
51 |
|
|
81 |
|
Other current assets, net |
|
|
831 |
|
|
11 |
|
Total current assets |
|
|
10,453 |
|
|
11,935 |
| |
|
|
|
|
| Long-term investments |
|
|
34 |
|
|
35 |
| Operating lease right-of-use
assets |
|
|
9 |
|
|
12 |
| Property and equipment, net |
|
|
75 |
|
|
78 |
| Intangible assets, net |
|
|
1,698 |
|
|
1,899 |
| Blockchain platform applications
development costs |
|
|
4,175 |
|
|
3,879 |
| Long-term prepayments |
|
|
1,344 |
|
|
- |
| Deferred tax assets, net |
|
|
706 |
|
|
713 |
|
Total Assets |
|
$ |
18,494 |
|
$ |
18,551 |
| |
|
|
|
|
| Liabilities and
Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Short-term bank loan * |
|
$ |
- |
|
$ |
430 |
|
Accounts payable * |
|
|
257 |
|
|
408 |
|
Advances from customers * |
|
|
2,104 |
|
|
2,006 |
|
Accrued payroll and other accruals * |
|
|
524 |
|
|
491 |
|
Taxes payable * |
|
|
3,261 |
|
|
3,214 |
|
Lease payment liabilities related to short-term leases * |
|
|
170 |
|
|
136 |
|
Other current liabilities * |
|
|
442 |
|
|
221 |
|
Warrant liabilities |
|
|
61 |
|
|
107 |
|
Total current liabilities |
|
|
6,819 |
|
|
7,013 |
|
Long-term liabilities: |
|
|
|
|
|
Long-term borrowing from a director |
|
|
124 |
|
|
|
125 |
|
|
Total Liabilities |
|
|
6,943 |
|
|
|
7,138 |
|
|
|
|
|
|
|
|
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 21,691,926 shares and 19,629,403 shares at
March 31, 2020 and December 31, 2019, respectively) |
|
|
22 |
|
|
|
20 |
|
|
Additional paid-in capital |
|
|
45,485 |
|
|
|
43,111 |
|
|
Statutory reserves |
|
|
2,607 |
|
|
|
2,607 |
|
|
Accumulated deficit |
|
|
(38,083 |
) |
|
|
(35,773 |
) |
|
Accumulated other comprehensive income |
|
|
1,576 |
|
|
|
1,505 |
|
|
Total ChinaNet Online Holdings, Inc.’s stockholders’ equity |
|
|
11,607 |
|
|
|
11,470 |
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
(56 |
) |
|
|
(57 |
) |
|
Total equity |
|
|
11,551 |
|
|
|
11,413 |
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
18,494 |
|
|
$ |
18,551 |
|
|
|
|
|
|
|
|
|
|
|
CHINANET ONLINE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In thousands)
|
|
|
Three Months Ended March 31, |
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
(US $) |
|
(US $) |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
Cash flows from operating activities |
|
|
|
|
|
Net loss |
|
$ |
(2,310 |
) |
|
$ |
(1,140 |
) |
| Adjustments to reconcile
net loss to net cash provided by/(used in) operating
activities |
|
|
|
|
|
Depreciation and amortization |
|
|
207 |
|
|
|
38 |
|
|
Amortization of operating lease right-of-use assets |
|
|
3 |
|
|
|
84 |
|
|
Share-based compensation expenses |
|
|
1,919 |
|
|
|
101 |
|
|
Provision for allowances for doubtful accounts |
|
|
410 |
|
|
|
192 |
|
|
Deferred taxes |
|
|
(5 |
) |
|
|
39 |
|
|
Change in fair value of warrant liabilities |
|
|
(46 |
) |
|
|
350 |
|
| Changes in operating
assets and liabilities |
|
|
|
|
|
Accounts receivable |
|
|
(255 |
) |
|
|
(547 |
) |
|
Prepayment and deposit to suppliers |
|
|
2,236 |
|
|
|
22 |
|
|
Due from related parties |
|
|
29 |
|
|
|
27 |
|
|
Other current assets |
|
|
(5 |
) |
|
|
10 |
|
|
Long-term prepayments |
|
|
(1,125 |
) |
|
|
- |
|
|
Accounts payable |
|
|
(147 |
) |
|
|
(1,833 |
) |
|
Advances from customers |
|
|
123 |
|
|
|
562 |
|
|
Accrued payroll and other accruals |
|
|
34 |
|
|
|
(114 |
) |
|
Other current liabilities |
|
|
319 |
|
|
|
(115 |
) |
|
Taxes payable |
|
|
94 |
|
|
|
65 |
|
|
Lease payment liability related to short-term leases |
|
|
37 |
|
|
|
- |
|
|
Prepaid lease payment |
|
|
- |
|
|
|
(11 |
) |
|
Net cash provided by/(used in) operating
activities |
|
|
1,518 |
|
|
|
(2,270 |
) |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Investment to an ownership investee company |
|
|
- |
|
|
|
(36 |
) |
|
Short-term loan to an unrelated party |
|
|
(815 |
) |
|
|
- |
|
|
Payment for blockchain platform applications development costs |
|
|
(302 |
) |
|
|
- |
|
|
Net cash used in investing activities |
|
|
(1,117 |
) |
|
|
(36 |
) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds from short-term bank loan |
|
|
- |
|
|
|
445 |
|
|
Repayment of short-term bank loan |
|
|
(430 |
) |
|
|
(445 |
) |
|
Net cash used in financing activities |
|
|
(430 |
) |
|
|
- |
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuation on cash and cash
equivalents |
|
|
(19 |
) |
|
|
47 |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(48 |
) |
|
|
(2,259 |
) |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the period |
|
|
1,603 |
|
|
|
3,742 |
|
|
Cash and cash equivalents at end of the period |
|
$ |
1,555 |
|
|
$ |
1,483 |
|
|
|
|
|
|
|
|
|
|
|
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