NEW YORK, March 31, 2017 /PRNewswire/ -- Wecast
Network Inc. (NASDAQ: WCST) ("Wecast" or the "Company" or "WCST"),
announced today its Q4 and Full Year 2016 operating results for the
period ended December 31, 2016 (a
full copy of the Company's annual report on Form 10-K is also being
posted at www.sec.gov).
Conference Call: CEO, Bing Yang, Chairman Bruno Wu and CFO Simon
Wang will host a conference call at 8:00 a.m. EDT today.
To join the webcast, please visit the 'Webcasts and Events'
section of the WCST corporate website,
http://corporate.wecastnetworkinc.com/. Otherwise, the toll-free
dial-in is: 877-407-3107; international callers should dial:
201-493-6796.
WCST FULL YEAR 2016 OPERATING RESULTS
Revenue for the year ended December 31,
2016 was $4,544,000, as
compared to $4,606,000 for the same
period in 2015, a decrease of approximately $62,000, or 1%. The revenue decrease was
primarily due to the partnership with Zhejiang Yanhua Culture Media
Co ("Yanhua") and the restructuring of the video on demand business
in Q4 2016.
Revenues, which were solely from our legacy video on demand
business, were down quarter over quarter due to the new accounting
mechanisms present in the previously announced new video on demand
content model. In Q4 2016, the Company restructured its
legacy video on demand business and signed a five year agreement to
form a partnership with Yanhua where Yanhua will act as the
exclusive distribution operator (within the territory of PRC) of
the Company's licensed library of major studio films.
Pursuant to the Yanhua Agreement, $107,517 of the first installment of RMB 6,500,000 was recognized as revenue in 2016
based on the relative fair value of licensed content delivered to
Yanhua by December 31, 2016.
Cost of revenue was $4,434,000 for
the year ended December 31, 2016, as
compared to $3,674,000 for the same
period in 2015, an increase of approximately $760,000, or 21%. The increase in cost of revenue
was primarily due to the cost associated with the restructuring of
the legacy video on demand business and the additional expense
(approximately $564,000) caused by
the restructuring. Our cost of revenue is primarily comprised
of content licensing fees.
Gross profit for the year ended December
31, 2016 was $110,000, as
compared to gross profit of $932,000
for 2015.
Selling, general and administrative expenses (SG&A) for the
year ended December 31, 2016,
increased approximately $2,134,000,
or 26% to $10,371,000, as compared to
$8,237,000 for the year ended
December 31, 2015. The increase was
primarily attributed to the bad debt expense occurred in 2016 of
$2,589,000, which was partially
offset by a decrease in compensation expense by $550,000.
Professional fees are generally related to audit & review
fees, legal fees and consulting fees. Our professional fees
increased approximately $641,000, or
90%, to $1,357,000 for the year ended
December 31, 2016, from $716,000 in 2015. The increase in professional
fees was related to our increasing legal service fees, which
increased from $56,000 in 2015 to
$415,000 in 2016, primarily
attributed to the restructuring-based investment activities that
occurred in 2016.
Our depreciation and amortization expense increased
approximately $99,000, or 25%, to
$489,000 for the year ended
December 31, 2016, from $390,000 during 2015. The increase was
mainly due to the new office building purchased in 2016.
On November 10, 2016, the Board of
Directors ("Board") of WCST held a special meeting and at the
recommendation of the Company's audit committee, the Board
determined that it is in the best interests of the Company and the
Company's shareholders to amend the terms of the SSS earn-out share
award which would in effect reduce the total equity dilution to
shareholders related to the earn-out and reduce the potential
negative impact on the Company's future earnings (by shortening the
payout period and paying all earn-out shares earlier than
required). Based on evidence provided to the Board, the
requisite thresholds necessary to trigger issuance of all shares of
common stock subject to the earn-out share award had been achieved
and on November 11, 2016, the Company
issued 10,000,000 shares of its common stock to Sun Seven Stars
("SSS") at the closing price $1.37 on
the stock issuance date, which accounts for $13.7 million share award expense (based on the
market price of the common stock) which negatively impacted
operating expense and therefore net income. This was a one
time non-cash expense.
Our loss from operations increased $19,416,000 to $27,827,000 for the year ended December 31, 2016, from $8,411,000 during 2015. This was mostly due to
the earn-out share award expenses mentioned above.
Basic and diluted loss per share for 2016 was $0.72 as compared to a $0.34 loss per share in the in 2015.
CEO Bing Yang stated, "As has been communicated and documented,
my team, around the middle of 2016, began work on transforming
Wecast. In that short period of time we assembled a new
experienced management team, stabilized the foundation, capitalized
the Company, rebranded the Company, reconfigured the business
structure, expanded the Company's mission and business lines, made
several key investments and finally, injected several privately
held and revenue producing assets into the corporation.
Today, via the filing of the 10-K for 2016, we officially turn the
page on the old company model and move on to the next
chapter. And the success of that next chapter will come down
to two things: First, driving the new operating model to
produce an unprecedented opportunity for revenue & margin
expansion and then second, building a track record of enhanced,
precise and repeatable execution. I am pleased to note that
today, the Company is raising its full-year revenue guidance form
$280 million to $300 million based on our current visibility of,
and internal projections for, 2017. If realized, this would
represent an approximate 66x increase over 2016 revenue. Q1
2017 revenue will be based on approximately 5 weeks of revenue from
our new businesses. This takes into account the timing of the
closing of the Sun Video Group deal announced in late January and
then the remaining time left in the quarter once it was deemed that
Wecast had control of Sun Video Group and could then consolidate
its revenues. Therefore, in order to meet this annual target
we expect revenues to ramp in Q2, Q3 & Q4."
About Wecast Network Inc.
(http://corporate.wecastnetworkinc.com)
Wecast Network Inc (NASDAQ: WCST) is leveraging and
optimizing its current operations as a premium content Video On
Demand service provider in China
to evolve into a global, vertical, ubiquitous and transactional
B2B2C, mobile-driven, consumer management platform for both
enterprises and consumers. By aiming to establish the world's
premier multimedia, social networking and smart e-commerce-enabled
network with the largest global effective connected user base,
Wecast, through this expanded, cloud-based, ecosystem of connected
screens combined with strong partnerships with leading global
providers, will be capable of delivering a vast array of
WCST/YOD–branded products and services to enterprise customers and
end-use consumers - anytime and anywhere, across
multiple platforms and devices.
Wecast has content distribution agreements in place with many
of Hollywood's top studios including Disney Media
Distribution, Paramount Pictures, NBC Universal and Twentieth
Century Fox Television Distribution, Miramax, as well as a broad
selection of the best content from Chinese filmmakers. In
addition, the Company has governmental partnerships and licenses as
well as numerous JV partnerships and strategic cooperation
agreements with an array of distribution and content partners in
the global new media space. Wecast is headquartered in both
New York, NY and Beijing, China.
Safe Harbor Statement
This press release contains certain statements that may
include "forward looking statements." All statements other than
statements of historical fact included herein are "forward-looking
statements." These forward looking statements are often identified
by the use of forward-looking terminology such as "believes,"
"expects" or similar expressions, involve known and unknown risks
and uncertainties. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, they do involve assumptions, risks and uncertainties,
and these expectations may prove to be incorrect. You should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. The Company's
actual results could differ materially from those anticipated in
these forward-looking statements as a result of a variety of
factors, including those discussed in the Company's periodic
reports that are filed with the Securities and Exchange Commission
and available on its website (http://www.sec.gov). All
forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by
these factors. Other than as required under the securities laws,
the Company does not assume a duty to update these forward-looking
statements.
CONTACT:
Jason Finkelstein
VP Strategy & Investor
Relations
Wecast Network,
Inc.
212-206-1216
Financial Tables Follow
Wecast Network,
Inc., Its Subsidiaries and Variable Interest Entity
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
Twelve Months
Ended
|
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
$
|
4,543,616
|
|
$
|
4,606,380
|
|
Cost of
revenue
|
|
4,434,260
|
|
|
3,673,895
|
|
Gross
profit
|
|
109,356
|
|
|
932,485
|
|
Operating
expenses:
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
10,370,548
|
|
|
8,237,056
|
|
Professional
fees
|
|
1,357,454
|
|
|
715,723
|
|
Depreciation and
amortization
|
|
489,308
|
|
|
390,373
|
|
Impairment of other
intangible assets
|
|
2,018,628
|
|
|
-
|
|
Earn-out share award
expense
|
|
13,700,000
|
|
|
-
|
|
Total operating
expenses
|
|
27,935,938
|
|
|
9,343,152
|
|
Loss from
operations
|
|
(27,826,582)
|
|
|
(8,410,667)
|
|
Interest and other
income/(expense):
|
|
|
|
|
|
|
Interest expense, net
|
|
(254,292)
|
|
|
(119,913)
|
|
Change in fair value of warrant
liabilities
|
|
324,432
|
|
|
189,833
|
|
Equity in loss of equity method
investees
|
|
(31,557)
|
|
|
(156,135)
|
|
Impairment of equity method
investments
|
|
(38,448)
|
|
|
(214,998)
|
|
Others
|
|
58,621
|
|
|
136,511
|
|
Loss before income
taxes and non-controlling interest
|
|
(27,767,826)
|
|
|
(8,575,369)
|
|
Income tax
benefit
|
|
330,124
|
|
|
34,448
|
|
Net
loss
|
|
(27,437,702)
|
|
|
(8,540,921)
|
|
|
|
|
|
|
|
|
Net loss attributable
to non-controlling interest
|
|
1,601,761
|
|
|
439,648
|
|
Net loss
attributable to Wecast Network shareholders
|
$
|
(25,835,941)
|
|
$
|
(8,101,273)
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per share
|
$
|
(0.72)
|
|
$
|
(0.34)
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
Basic and
diluted
|
|
35,998,001
|
|
|
23,948,487
|
|
Wecast Network,
Inc., Its Subsidiaries and Variable Interest Entity
|
CONSOLIDATED
BALANCE
SHEETS
|
|
|
|
December
31,
|
|
|
|
2016
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
|
2,538,976
|
$
|
3,768,897
|
|
Restricted
cash
|
|
-
|
|
2,994,364
|
|
Accounts receivable,
net
|
|
1,260,529
|
|
1,689,415
|
|
Licensed content,
current
|
|
124,319
|
|
556,591
|
|
Prepaid
expenses
|
|
285,588
|
|
362,421
|
|
Deferred issuance
cost
|
|
-
|
|
551,218
|
|
Other current
assets
|
|
322,483
|
|
157,594
|
|
Total current
assets
|
|
4,407,576
|
|
10,080,500
|
|
Property and
equipment, net
|
|
4,636,188
|
|
154,434
|
|
Licensed content,
non-current
|
|
17,593,528
|
|
21,085
|
|
Intangible assets,
net
|
|
389,620
|
|
2,412,591
|
|
Goodwill
|
|
6,648,911
|
|
6,648,911
|
|
Long-term
investments
|
|
6,654,664
|
|
450,115
|
|
Other non-current
assets
|
|
842,782
|
|
58,089
|
|
Total
assets
|
$
|
41,297,588
|
$
|
19,825,725
|
|
LIABILITIES,
CONVERTIBLE REDEEMABLE PREFERRED STOCK AND EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable
(including accounts payable of consolidated variable interest
entities
("VIEs") without recourse to the
Company of $5,817 and $44,867 as of December
31, 2016 and 2015,
respectively)
|
$
|
5,817
|
$
|
45,788
|
|
Deferred revenue of
VIEs without recourse to the Company
|
|
824,563
|
|
15,080
|
|
Accrued
interest
|
|
557,918
|
|
437,589
|
|
Accrued other expenses
(including accrued expenses of VIEs without recourse to
the Company
of $268,074 and $280,038 as of December
31, 2016 and 2015, respectively)
|
|
704,771
|
|
758,477
|
|
Accrued salaries
(including accrued salaries of VIEs without recourse to the Company
of nil
and $10,861 as of December 31, 2016
and 2015, respectively)
|
|
766,957
|
|
1,058,124
|
|
Payable for purchase
of building
|
|
987,015
|
|
-
|
|
Other current
liabilities (including other current liabilities of VIEs without
recourse to the
Company of $394,314 and $298,422 as of
December 31, 2016 and 2015, respectively)
|
|
461,528
|
|
312,170
|
|
Accrued license
content fees of VIEs without recourse to the Company
|
|
1,236,661
|
|
933,532
|
|
Convertible promissory
note
|
|
3,000,000
|
|
3,000,000
|
|
Warrant
liabilities
|
|
70,785
|
|
395,217
|
|
Deposit
payable
|
|
-
|
|
2,994,364
|
|
Total current
liabilities
|
|
8,616,015
|
|
9,950,341
|
|
Deferred income
taxes
|
|
-
|
|
330,124
|
|
Total
liabilities
|
|
8,616,015
|
|
10,280,465
|
|
Commitments and
contingencies:
|
|
|
|
|
|
Convertible
redeemable preferred stock:
|
|
|
|
|
|
Series A - 7,000,000
shares issued and outstanding, liquidation and deemed
liquidation
preference of $3,500,000 as of
December 31, 2016 and 2015, respectively
|
|
1,261,995
|
|
1,261,995
|
|
Equity:
|
|
|
|
|
|
Series E Preferred
Stock - $0.001 par value; 16,500,000 shares authorized,
7,154,997 and
7,254,997 shares issued and outstanding,
liquidation preference of $12,521,245 and
$12,696,245 as of December 31, 2016 and
December 31, 2015, respectively
|
|
7,155
|
|
7,255
|
|
Common stock - $0.001
par value; 1,500,000,000 shares authorized, 53,918,523
and 24,249,109
shares issued and outstanding as of
December 31, 2016 and 2015, respectively
|
|
53,918
|
|
24,249
|
|
Additional paid-in
capital
|
|
149,021,460
|
|
97,512,542
|
|
Accumulated
deficit
|
|
(112,293,781)
|
|
(86,457,840)
|
|
Accumulated other
comprehensive loss
|
|
(1,415,717)
|
|
(414,910)
|
|
Total Wecast
Network shareholder's equity
|
|
35,373,035
|
|
10,671,296
|
|
Non-controlling
interest
|
|
(3,953,457)
|
|
(2,388,031)
|
|
Total
equity
|
|
31,419,578
|
|
8,283,265
|
|
Total liabilities,
convertible redeemable preferred stock and equity
|
$
|
41,297,588
|
$
|
19,825,725
|
|
Wecast Network,
Inc., Its Subsidiaries and Variable Interest Entity
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net loss
|
$
|
(27,437,702)
|
|
$
|
(8,540,921)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
Share-based
compensation expense
|
|
319,718
|
|
|
1,240,615
|
|
Provision for doubtful
accounts
|
|
2,825,124
|
|
|
9,087
|
|
Depreciation and
amortization
|
|
489,938
|
|
|
390,373
|
|
Amortization of debt
issuance costs
|
|
122,696
|
|
|
-
|
|
Income tax
benefit
|
|
(330,124)
|
|
|
(34,448)
|
|
Equity in
losses of equity method investees
|
|
31,557
|
|
|
156,135
|
|
Loss on disposal of
assets
|
|
-
|
|
|
2,538
|
|
Change in fair value
of warrant liabilities
|
|
(324,432)
|
|
|
(189,833)
|
|
Earn-out share award
expense
|
|
13,700,000
|
|
|
-
|
|
Impairment of
intangible assets
|
|
2,018,628
|
|
|
-
|
|
Impairment of equity
method investments
|
|
38,448
|
|
|
214,998
|
|
Impairment of licensed
content
|
|
496,467
|
|
|
-
|
|
Foreign currency
exchange gain
|
|
(79,662)
|
|
|
(219,925)
|
|
|
|
|
|
|
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
(2,615,801)
|
|
|
(607,426)
|
|
Licensed
content
|
|
37,568
|
|
|
499,581
|
|
Prepaid expenses and
other assets
|
|
(441,729)
|
|
|
(74,469)
|
|
Accounts
payable
|
|
(38,715)
|
|
|
(65,026)
|
|
Accrued expenses,
salary and other current liabilities
|
|
634,401
|
|
|
196,027
|
|
Deferred
revenue
|
|
809,483
|
|
|
1,649
|
|
Accrued license
content fees
|
|
378,964
|
|
|
585,525
|
|
Net cash used in
operating activities
|
|
(9,365,173)
|
|
|
(6,435,520)
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Acquisition of
property and equipment
|
|
(3,141,789)
|
|
|
(35,179)
|
|
Investments in
intangible assets
|
|
(2,992,072)
|
|
|
(218,020)
|
|
Acquisition of
leasehold improvements
|
|
(570,275)
|
|
|
-
|
|
Payments for long term
investments
|
|
(3,733,750)
|
|
|
-
|
|
Deposit for
investment
|
|
(972,077)
|
|
|
-
|
|
Net cash used in
investing activities
|
|
(11,409,963)
|
|
|
(253,199)
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
Proceeds from issuance
of shares and warrant
|
|
20,000,000
|
|
|
-
|
|
Cost associated with
financing activities
|
|
(294,890)
|
|
|
(310,156)
|
|
Net cash (used
in)/provided by financing activities
|
|
19,705,110
|
|
|
(310,156)
|
|
Effect of exchange
rate changes on cash
|
|
(159,895)
|
|
|
(44,599)
|
|
Net decrease in
cash
|
|
(1,229,921)
|
|
|
(7,043,474)
|
|
|
|
|
|
|
|
|
Cash at the
beginning of the year
|
|
3,768,897
|
|
|
10,812,371
|
|
|
|
|
|
|
|
|
Cash at the end of
the year
|
$
|
2,538,976
|
|
$
|
3,768,897
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Cash paid for income
taxes
|
$
|
-
|
|
$
|
-
|
|
Cash paid for
interest
|
$
|
-
|
|
$
|
-
|
|
Exchange of Series E
Preferred Stock for Common stock
|
$
|
100
|
|
$
|
110
|
|
Issuance of
convertible note for licensed content
|
$
|
17,717,847
|
|
$
|
-
|
|
Issuance of shares
for the settlement of liability
|
$
|
75,000
|
|
$
|
-
|
|
Issuance of shares
upon conversion of convertible note, including accrued interest and
debt
issuance cost
|
$
|
17,733,297
|
|
$
|
-
|
|
Issuance of earn-out
shares
|
$
|
13,700,000
|
|
$
|
-
|
|
Acquisition of long
term investment through transfer of Game IP rights
|
$
|
2,714,441
|
|
$
|
-
|
|
Workforce intangible
acquired for shares
|
$
|
121,695
|
|
$
|
-
|
|
Payable for purchase
of building
|
$
|
987,015
|
|
$
|
-
|
|
Restricted cash
received (returned) related to the deposit of financing
activities
|
$
|
2,994,364
|
|
$
|
2,994,364
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/wecast-network-announces-q4-and-full-year-2016-results-300432407.html
SOURCE Wecast Network Inc.