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 quarter of 2018.
First Quarter 2018
Highlights
- Net revenues increased by 13.7% to $8.3 million from $7.3
million in the corresponding period of 2017.
- Revenues from search engine marketing and data services
increased by 29.6% to $6.4 million from $5.0 million in the
corresponding period of 2017.
- Net loss attributable to ChinaNet narrowed to $0.6 million from
$1.1 million in the corresponding period of 2017.
Mr. Handong Cheng, Chairman, President, and
Chief Executive Officer of CNET, stated, “We are pleased to enter
2018 with a capital infusion from our equity offering in January.
As we make progress in developing a blockchain-powered marketing
solution combined with artificial intelligence (AI) for our
small-to-medium enterprise customers, we continue to leverage our
existing business for cash flow and customer acquisition. We are
currently in discussion with a number of B2B commerce platforms who
are interested in utilizing our unique blockchain solutions to help
improve their merchant credibility and asset traceability. We will
provide our shareholders with relevant updates in due course.”
“Looking ahead, we remain committed to building
our end-to-end B2B2C ecosystem with our blockchain technology as
its foundation. We are confident that we have the right strategy
and team in place to secure a leading position in the arena of
blockchain applications in China,” Mr. Cheng concluded.
Mr. George Chu, Chief Operating Officer of CNET,
stated, “We continue to grow our existing business at a measured
pace while allocating the majority of our resources to blockchain
technology. During the quarter, our net revenues increased by 13.7%
to $8.3 million from $7.3 million in the same period of 2017. With
a leaner cost structure and with the capital injection from our
equity offering in January this year, we are confident that we will
be able to make meaningful progress in the development of our
blockchain technology and marketing AI in the coming quarters.”
First Quarter 2018 Financial
Results
NET REVENUES Net revenues
increased by 13.7% to $8.3 million in the first quarter of 2018
from $7.3 million in the corresponding period of 2017, primarily
driven by an increase in search engine marketing and data services
revenue.
Search engine marketing and data services
revenue for the first quarter of 2018 increased by 29.6% to $6.4
million from $5.0 million in the corresponding period of 2017. The
growth was primarily attributable to the rapid expansion of the
Company’s search engine marketing client base as enterprises in
China continued to migrate to search engine marketing from other
advertising and marketing channels for its more direct results and
higher return on investment.
COST OF REVENUES AND GROSS
PROFIT Cost of revenues was $7.7 million in the first
quarter of 2018 compared to $6.0 million in the corresponding
period of 2017. The growth was primarily attributable to an
increase in revenue contributions from search engine marketing and
data services in the first quarter of 2018, which have higher
resource costs as the Company continued to obtain marketing and
data access to the most popular search engines, internet portals,
and mobile portals in China.
Gross profit in the first quarter of 2018, as a
result of increased cost of revenues, was $0.6 million compared to
$1.3 million in the corresponding period of 2017. The decrease in
gross profit was primarily attributable to the Company’s increased
investment in internet resources for lead generation and sponsored
search.
OPERATING LOSSOperating
expenses in the first quarter of 2018 was $2.6 million compared to
$2.3 million in the corresponding period of 2017. As a percentage
of total revenues, operating expenses decreased to 31.7% from 32.0%
in the corresponding period of 2017.
Sales and marketing expenses in the first
quarter of 2018 decreased by 32.4% to $0.6 million from $0.8
million in the corresponding period of 2017. As a percentage of
total revenues, sales and marketing expenses decreased to 6.8% from
11.5% in the corresponding period of 2017. The decrease was
primarily attributable to the successful execution of the Company’s
cost control initiatives, which resulted in a reduction of general
expenses in the Company’s sales department as well as lower
advertising expenses in the first quarter of 2018.
General and administrative expenses in the first
quarter of 2018 increased by 27.2% to $1.4 million from $1.1
million in the corresponding period of 2017. As a percentage of
total revenues, general and administrative expenses increased to
16.8% from 15.0% in the corresponding period of 2017. The growth in
general and administrative expenses was primarily due to a $0.5
million increase in allowance for doubtful accounts, which was
partially offset by a reduction in the Company’s share-based
compensation expenses, professional service expenses, staff
salaries, and other administrative expenses.
Research and development expenses in the first
quarter of 2018 decreased by 51.1% to $0.2 million from $0.4
million in the corresponding period of 2017. The decrease was due
to reduced headcount in the Company’s research and development
department and its efforts to further optimize its cost and expense
structures in the first quarter of 2018. However, research
and development expenses will likely increase in the coming
quarters as the Company continues to invest resources in developing
its blockchain and AI applications.
Impairment on long-term investments in the first
quarter of 2018 was $0.5 million.
Operating loss in the first quarter of 2018, as
a result of increased operating expenses, was $2.0 million compared
to $1.0 million in the corresponding period of 2017.
NET LOSSNet loss attributable
to ChinaNet Online Holdings, Inc. narrowed to $0.6 million in the
first quarter of 2018 from $1.1 million in the corresponding period
of 2017.
BALANCE SHEETAs of March 31,
2018, the Company had cash and cash equivalents of $7.5 million
compared to $3.0 as of December 31, 2017. Advances from customers
was $2.0 million at the end of the first quarter of 2018 compared
to $3.6 million at the end of the fourth quarter of 2017.
About ChinaNet Online Holdings,
Inc.ChinaNet Online Holdings, Inc. (“ChinaNet”), a parent
company of ChinaNet Online Media Group Ltd. and incorporated in the
British Virgin Islands, 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 StatementThis
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 ContactICR,
Inc.Jack WangTel: +1-646-308-1635Email: CNET@icrinc.com
|
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS (In thousands, except for number of shares
and per share data) |
|
|
|
Three Months Ended March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
(US $) |
|
(US $) |
|
|
(Unaudited) |
|
(Unaudited) |
Revenues |
|
|
|
|
From
unrelated parties |
|
$ |
8,260 |
|
|
$ |
7,245 |
|
From
related parties |
|
|
- |
|
|
|
19 |
|
Total
revenues |
|
|
8,260 |
|
|
|
7,264 |
|
Cost of revenues |
|
|
7,659 |
|
|
|
5,992 |
|
Gross profit |
|
|
601 |
|
|
|
1,272 |
|
|
|
|
|
|
Operating expenses |
|
|
|
|
Sales and
marketing expenses |
|
|
564 |
|
|
|
834 |
|
General
and administrative expenses |
|
|
1,389 |
|
|
|
1,092 |
|
Research
and development expenses |
|
|
193 |
|
|
|
395 |
|
Impairment on long-term investments |
|
|
471 |
|
|
|
- |
|
Total
operating expenses |
|
|
2,617 |
|
|
|
2,321 |
|
|
|
|
|
|
Loss from operations |
|
|
(2,016 |
) |
|
|
(1,049 |
) |
|
|
|
|
|
Other income/(expenses) |
|
|
|
|
Interest
income |
|
|
1 |
|
|
|
19 |
|
Interest
expense |
|
|
(11 |
) |
|
|
(36 |
) |
Other
expenses |
|
|
(22 |
) |
|
|
(3 |
) |
Change in
fair value of warrant liabilities |
|
|
1,474 |
|
|
|
- |
|
Total
other income/(expense) |
|
|
1,442 |
|
|
|
(20 |
) |
Loss before income tax benefit and noncontrolling
interests |
|
|
(574 |
) |
|
|
(1,069 |
) |
Income
tax benefit |
|
|
4 |
|
|
|
- |
|
Net loss |
|
|
(570 |
) |
|
|
(1,069 |
) |
Net
loss/(income) attributable to noncontrolling interests |
|
|
5 |
|
|
|
(18 |
) |
Net loss attributable to ChinaNet Online Holdings,
Inc. |
|
$ |
(565 |
) |
|
$ |
(1,087 |
) |
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(570 |
) |
|
$ |
(1,069 |
) |
Foreign
currency translation gain |
|
|
474 |
|
|
|
106 |
|
Comprehensive loss |
|
|
(96 |
) |
|
|
(963 |
) |
Comprehensive (income)/loss attributable to noncontrolling
interests |
|
|
(3 |
) |
|
|
19 |
|
Comprehensive loss attributable to ChinaNet Online
Holdings, Inc. |
|
$ |
(99 |
) |
|
$ |
(944 |
) |
|
|
|
|
|
Loss per share |
|
|
|
|
Loss per
common share |
|
|
|
|
Basic and
diluted |
|
$ |
(0.04 |
) |
|
$ |
(0.09 |
) |
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
15,484,082 |
|
|
|
11,982,504 |
|
|
|
CHINANET ONLINE HOLDINGS,
INC.CONSOLIDATED BALANCE SHEETS(In
thousands, except for number of shares and per share data) |
|
|
March 31,2018 |
|
December 31,2017 |
|
(US $) |
|
(US $) |
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
7,503 |
|
$ |
2,952 |
Accounts
receivable, net |
|
3,567 |
|
|
7,215 |
Other
receivables, net |
|
2,094 |
|
|
2,646 |
Prepayment and deposit to suppliers |
|
5,424 |
|
|
4,073 |
Due from
related parties, net |
|
- |
|
|
14 |
Total current assets |
|
18,588 |
|
|
16,900 |
|
|
|
|
Long-term
investments |
|
477 |
|
|
918 |
Property and equipment,
net |
|
264 |
|
|
299 |
Intangible assets,
net |
|
3,786 |
|
|
3,808 |
Prepayment for
blockchain applications development |
|
1,200 |
|
|
- |
Prepayment for
acquisition of noncontrolling interest |
|
1,193 |
|
|
- |
Goodwill |
|
5,483 |
|
|
5,277 |
Deferred tax assets,
net |
|
1,415 |
|
|
1,358 |
Total Assets |
$ |
32,406 |
|
$ |
28,560 |
|
|
|
|
Liabilities and
Equity |
|
|
|
Current liabilities: |
|
|
|
Short-term bank loan * |
$ |
795 |
|
$ |
765 |
Accounts
payable * |
|
832 |
|
|
2,851 |
Advances
from customers * |
|
2,010 |
|
|
3,559 |
Accrued
payroll and other accruals * |
|
421 |
|
|
559 |
Due to
investors related to terminated security purchase agreements |
|
477 |
|
|
938 |
Payable
for purchasing of software technology * |
|
- |
|
|
436 |
Taxes
payable * |
|
3,199 |
|
|
3,168 |
Other
payables * |
|
302 |
|
|
687 |
Total current liabilities |
|
8,036 |
|
|
12,963 |
Long-term liabilities: |
|
|
|
Long-term
borrowing from a director |
|
139 |
|
|
|
134 |
|
Warrant
liabilities |
|
801 |
|
|
|
- |
|
Total Liabilities |
|
8,976 |
|
|
|
13,097 |
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Equity: |
|
|
|
ChinaNet
Online Holdings, Inc.’s stockholders’ equity |
|
|
|
Common
stock (US$0.001 par value; authorized 50,000,000 shares; issued
andoutstanding 16,132,543 shares and 13,982,542 shares at
March 31, 2018 andDecember 31, 2017, respectively) |
|
16 |
|
|
|
14 |
|
Additional paid-in capital |
|
39,615 |
|
|
|
31,554 |
|
Statutory
reserves |
|
2,607 |
|
|
|
2,607 |
|
Accumulated deficit |
|
(21,052 |
) |
|
|
(20,487 |
) |
Accumulated other comprehensive income |
|
2,064 |
|
|
|
1,598 |
|
Total
ChinaNet Online Holdings, Inc.’s stockholders’ equity |
|
23,250 |
|
|
|
15,286 |
|
|
|
|
|
Noncontrolling interests |
|
180 |
|
|
|
177 |
|
Total equity |
|
23,430 |
|
|
|
15,463 |
|
|
|
|
|
Total Liabilities and Equity |
$ |
32,406 |
|
|
$ |
28,560 |
|
|
|
CHINANET ONLINE HOLDINGS,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands) |
|
|
Three Months Ended March 31, |
|
2018 |
|
|
|
2017 |
|
|
(US $) |
|
|
(US $) |
|
|
(Unaudited) |
(Unaudited) |
Cash flows from operating activities |
|
|
Net loss |
$ |
(570 |
) |
|
$ |
(1,069 |
) |
Adjustments to
reconcile net loss to net cash
used in operating activities |
|
|
Depreciation and amortization |
216 |
|
|
|
354 |
|
Share-based compensation expenses |
75 |
|
|
|
211 |
|
Provision
for/(reverse of) allowances for doubtful accounts |
481 |
|
|
|
(29 |
) |
Impairment on long-term investments |
471 |
|
|
|
- |
|
Deferred
taxes |
(4 |
) |
|
|
- |
|
Change in
fair value of warrant liabilities |
(1,474 |
) |
|
|
- |
|
Changes in
operating assets and liabilities |
|
|
Accounts
receivable |
3,413 |
|
|
|
(903 |
) |
Other
receivables |
(47 |
) |
|
|
20 |
|
Prepayment and deposit to suppliers |
(1,178 |
) |
|
|
(3,192 |
) |
Due from
related parties |
3 |
|
|
|
(870 |
) |
Accounts
payable |
(2,105 |
) |
|
|
295 |
|
Advances
from customers |
(1,668 |
) |
|
|
3,185 |
|
Accrued
payroll and other accruals |
(147 |
) |
|
|
(90 |
) |
Other
payables |
(553 |
) |
|
|
44 |
|
Taxes
payable |
(92 |
) |
|
|
37 |
|
Net cash used in
operating activities |
(3,179 |
) |
|
|
(2,007 |
) |
|
|
|
Cash flows from investing activities |
|
|
Payment
for purchase of office equipment |
(1 |
) |
|
|
- |
|
Short-term loan to an unrelated party |
(2,000 |
) |
|
|
- |
|
Repayment
of short-term loan from an unrelated party |
2,672 |
|
|
|
- |
|
Prepayment for acquisition of noncontrolling interest |
(1,179 |
) |
|
|
- |
|
Prepayment for blockchain applications development |
(1,200 |
) |
|
|
- |
|
Payment
for purchasing of software technology |
(448 |
) |
|
|
- |
|
Net cash used in
investing activities |
(2,156 |
) |
|
|
- |
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from the Financing (net of cash issuance cost of
US$809) |
|
10,263 |
|
|
|
- |
|
Repayment to investors
related to terminated security purchase agreements |
|
(493 |
) |
|
|
- |
|
Net cash provided by
financing activities |
|
9,770 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuation on cash and cash
equivalents |
|
116 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents |
|
4,551 |
|
|
|
(1,988 |
) |
|
|
|
|
|
|
|
|
Cash and
cash equivalents at beginning of the period |
|
2,952 |
|
|
|
3,035 |
|
Cash and
cash equivalents at end of the period |
$ |
7,503 |
|
|
$ |
1,047 |
|
|
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