UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): May 20, 2019
ChinaNet Online Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
| Nevada | 001-34647 | 20-4672080 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| No. 3 Min Zhuang Road, Building 6, Yu Quan Hui Gu Tuspark, Haidian District, Beijing, PRC 100195 |
| (Address of Principal Executive Offices) (Zip Code) |
+86-10-6084-6616
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| $0.001 Common Stock | CNET | Nasdaq Capital Market |
Item 2.02. Results of Operations and Financial Condition.
On May 20, 2019, ChinaNet Online Holdings, Inc., a Nevada corporation (the “Company”), issued a press release containing certain financial results for its first fiscal quarter of 2019. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and incorporated herein by reference. As provided in General Instruction B.2 of SEC Form 8-K, such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and it shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or under the Exchange Act, whether made before or after the date hereof, except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.No. Description 99.1 Press Release dated May 20, 2019.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ChinaNet Online Holdings, Inc. | ||
| Date: May 20, 2019 | By: | /s/ Handong Cheng |
| Handong Cheng | ||
| Chief Executive Officer | ||
EXHIBIT 99.1
ChinaNet Online Holdings Reports First Quarter 2019 Unaudited Financial Results
BEIJING, May 20, 2019 (GLOBE NEWSWIRE) -- 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 2019.
First Quarter 2019 Highlights
- Net revenues increased by 3.8% to $8.6 million from $8.3 million in the corresponding period of 2018.
- Revenues from internet advertising service increased by 7.0% to $1.8 million from $1.7 million in the corresponding period of 2018.
- Revenues from search engine marketing service increased by 4.4% to $6.7 million from $6.4 million in the corresponding period of 2018.
Mr. Handong Cheng, Chairman, President, and Chief Executive Officer of CNET, stated, “In the first quarter of 2019, we enhanced our relationships with customers through our core online marketing businesses and improved their sales lead conversion rates. As a result, revenue contribution from our internet advertising service and distribution of the searching engine marketing service increased by 7.0% and 4.4% year over year, respectively. Our effective execution of cost control strategy has also yielded positive results. Accordingly, we narrowed our operating expenses as a percentage of total revenues to 13.8% from 26.0% in the prior year period. Moving forward, we will maintain revenue growth, refine our cost structure, and capitalize on emergent business opportunities in the market to continuously improve our ability to generate profits and create shareholder value.”
First Quarter 2019 Financial Results
NET REVENUES
Net revenues increased by 3.8% to $8.6 million in the first quarter of 2019 from $8.3 million in the corresponding period of 2018, primarily driven by an increase in revenues from distribution of search engine marketing and data services.
Revenues from internet advertising service for the first quarter of 2019 increased by 7.0% to $1.8 million from $1.7 million in the corresponding period of 2018. The increase was mainly attributable to the Company’s continuous efforts to improve the effectiveness of ad placements for its customers.
Revenues from distribution of the search engine marketing service for the first quarter of 2019 increased by 4.4% to $6.7 million from $6.4 million in the corresponding period of 2018. The growth was primarily attributable to the increasing recognition of search engine marketing service among clients that wanted to achieve additional direct marketing results and a higher return on investment.
COST OF REVENUES AND GROSS PROFIT
Cost of revenues was $8.1 million in the first quarter of 2019 compared to $7.7 million in the corresponding period of 2018. The growth was primarily attributable to an increase in revenue contributions from search engine marketing service in the first quarter of 2019, which resulted in higher resource costs as the Company continued to obtain marketing access to well-known search engines in China and optimize customers’ ad placements on the Company’s ad portals.
Gross profit in the first quarter of 2019 was $0.4 million compared to $0.6 million in the corresponding period of 2018.
OPERATING LOSS
Operating expenses in the first quarter of 2019 were $1.2 million compared to $2.1 million in the corresponding period of 2018. As a percentage of total revenues, operating expenses decreased to 13.8% from 26.0% in the corresponding period of 2018.
Sales and marketing expenses in the first quarter of 2019 decreased by 70.0% to $0.2 million from $0.6 million in the corresponding period of 2018. As a percentage of total revenues, sales and marketing expenses decreased to 2.0% from 6.8% in the corresponding period of 2018. The lower expenses were primarily attributable to the Company’s enhanced relationships with its customers and subsequently reduced advertising expenses for the promotion of the Company’s services.
General and administrative expenses in the first quarter of 2019 decreased by 40.6% to $0.8 million from $1.4 million in the corresponding period of 2018. As a percentage of total revenues, general and administrative expenses decreased to 9.5% from 16.5% in the corresponding period of 2018. The decrease in general and administrative expenses was primarily due to the Company’s effective execution of its cost reduction plan and a decrease in allowance for doubtful accounts.
Research and development expenses in the first quarter of 2019 remained at $0.2 million, which was in line with the prior year period.
Operating loss in the first quarter of 2019, as a result of decreased operating expenses, narrowed to $0.7 million compared to $1.5 million in the corresponding period of 2018.
Change in fair value of warrant liabilities in the first quarter of 2019 was recorded as a loss of $0.4 million compared to a gain of $1.47 million in the corresponding period of 2018. The change mainly reflected the effect of the fair value changes of warrant liabilities during the first quarter of 2019.
NET LOSS
Net loss attributable to ChinaNet Online Holdings, Inc. was $1.1 million in the first quarter of 2019 compared to $0.6 million in the corresponding period of 2018.
BALANCE SHEET
As of March 31, 2019, the Company had cash and cash equivalents of $1.5 million compared to $3.7 million as of December 31, 2018.
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.
Jack Wang
Tel: +1-646-308-1635
Email: 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, | |||||||
| 2019 | 2018 | ||||||
| (US $) | (US $) | ||||||
| (Unaudited) | (Unaudited) | ||||||
| Revenues | |||||||
| From unrelated parties | $ | 8,560 | $ | 8,260 | |||
| From related parities | 7 | - | |||||
| Total revenues | 8,567 | 8,260 | |||||
| Cost of revenues | 8,125 | 7,659 | |||||
| Gross profit | 442 | 601 | |||||
| Operating expenses | |||||||
| Sales and marketing expenses | 169 | 564 | |||||
| General and administrative expenses | 810 | 1,364 | |||||
| Research and development expenses | 201 | 218 | |||||
| Total operating expenses | 1,180 | 2,146 | |||||
| Loss from operations | (738 | ) | (1,545 | ) | |||
| Other income/(expenses) | |||||||
| Impairment on long-term investments | - | (471 | ) | ||||
| Interest expense, net | (11 | ) | (10 | ) | |||
| Other expenses | (2 | ) | (22 | ) | |||
| Change in fair value of warrant liabilities | (350 | ) | 1,474 | ||||
| Total other (expenses)/income | (363 | ) | 971 | ||||
| Loss before income tax (expense)/benefit and noncontrolling interests | (1,101 | ) | (574 | ) | |||
| Income tax (expense)/benefit | (39 | ) | 4 | ||||
| Net loss | (1,140 | ) | (570 | ) | |||
| Net loss attributable to noncontrolling interests | 2 | 5 | |||||
| Net loss attributable to ChinaNet Online Holdings, Inc. | $ | (1,138 | ) | $ | (565 | ) | |
| Net loss | $ | (1,140 | ) | $ | (570 | ) | |
| Foreign currency translation (loss)/gain | (36 | ) | 474 | ||||
| Comprehensive loss | (1,176 | ) | (96 | ) | |||
| Comprehensive loss/(income) attributable to noncontrolling interests | 3 | (3 | ) | ||||
| Comprehensive loss attributable to ChinaNet Online Holdings, Inc. | $ | (1,173 | ) | $ | (99 | ) | |
| Loss per share | |||||||
| Loss per common share | |||||||
| Basic and diluted | $ | (0.07 | ) | $ | (0.04 | ) | |
| Weighted average number of common shares outstanding: | |||||||
| Basic and diluted | 16,410,543 | 15,484,082 | |||||
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares and per share data)
| March 31, 2019 | December 31, 2018 | ||||||||
| (US $) | (US $) | ||||||||
| (Unaudited) | |||||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,483 | $ | 3,742 | |||||
| Accounts receivable, net of allowance for doubtful accounts of $3,651 and $3,393, respectively | 6,830 | 6,359 | |||||||
| Prepayment and deposit to suppliers | 2,079 | 2,154 | |||||||
| Due from related parties, net | 207 | 226 | |||||||
| Other current assets, net | 9 | 19 | |||||||
| Total current assets | 10,608 | 12,500 | |||||||
| Long-term investments | 36 | - | |||||||
| Property and equipment, net | 112 | 142 | |||||||
| Intangible assets, net | 41 | 45 | |||||||
| Operating lease right-of-use assets | 20 | - | |||||||
| Blockchain application platform development costs | 3,731 | 3,725 | |||||||
| Deferred tax assets, net | 527 | 556 | |||||||
| Total Assets | $ | 15,075 | $ | 16,968 | |||||
| Liabilities and Equity | |||||||||
| Current liabilities: | |||||||||
| Short-term bank loan | $ | 891 | $ | 874 | |||||
| Accounts payable | 1,165 | 2,869 | |||||||
| Advances from customers | 1,644 | 1,061 | |||||||
| Accrued payroll and other accruals | 411 | 521 | |||||||
| Taxes payable | 3,120 | 2,997 | |||||||
| Other current liabilities | 127 | 118 | |||||||
| Total current liabilities | 7,358 | 8,440 | |||||||
| Long-term liabilities: | |||||||||
| Long-term borrowing from a director | 130 | 128 | |||||||
| Warrant liabilities | 956 | 606 | |||||||
| Total Liabilities | 8,444 | 9,174 | |||||||
| 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 16,412,543 shares and 16,382,543 shares at March 31, 2019 and December 31, 2018, respectively) | 16 | 16 | |||||||
| Additional paid-in capital | 38,288 | 38,275 | |||||||
| Statutory reserves | 2,607 | 2,607 | |||||||
| Accumulated deficit | (35,650 | ) | (34,512 | ) | |||||
| Accumulated other comprehensive income | 1,422 | 1,457 | |||||||
| Total ChinaNet Online Holdings, Inc.’s stockholders’ equity | 6,683 | 7,843 | |||||||
| Noncontrolling interests | (52 | ) | (49 | ) | |||||
| Total equity | 6,631 | 7,794 | |||||||
| Total Liabilities and Equity | $ | 15,075 | $ | 16,968 | |||||
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Three Months Ended March 31, | |||||||
| 2019 | 2018 | ||||||
| (US $) | (US $) | ||||||
| (Unaudited) | (Unaudited) | ||||||
| Cash flows from operating activities | |||||||
| Net loss | $ | (1,140 | ) | $ | (570 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||
| Depreciation and amortization | 38 | 216 | |||||
| Amortization of operating lease right-of-use assets | 84 | - | |||||
| Share-based compensation expenses | 101 | 75 | |||||
| Provision for allowances for doubtful accounts | 192 | 481 | |||||
| Impairment on long-term investments | - | 471 | |||||
| Deferred taxes | 39 | (4 | ) | ||||
| Change in fair value of warrant liabilities | 350 | (1,474 | ) | ||||
| Changes in operating assets and liabilities | |||||||
| Accounts receivable | (547 | ) | 3,413 | ||||
| Prepayment and deposit to suppliers | 22 | (1,178 | ) | ||||
| Due from related parties | 27 | 3 | |||||
| Other current assets | 10 | (47 | ) | ||||
| Accounts payable | (1,833 | ) | (2,105 | ) | |||
| Advances from customers | 562 | (1,668 | ) | ||||
| Accrued payroll and other accruals | (114 | ) | (147 | ) | |||
| Other current liabilities | (115 | ) | (553 | ) | |||
| Taxes payable | 65 | (92 | ) | ||||
| Prepaid lease payment | (11 | ) | - | ||||
| Net cash used in operating activities | (2,270 | ) | (3,179 | ) | |||
| Cash flows from investing activities | |||||||
| Payment for purchase of office equipment | - | (1 | ) | ||||
| Investment to an ownership investee company | (36 | ) | - | ||||
| Short-term loan to an unrelated party | - | (2,000 | ) | ||||
| Collection of short-term loan from an unrelated party | - | 2,672 | |||||
| Payment for acquisition of noncontrolling interest | - | (1,179 | ) | ||||
| Payment for blockchain application platform development costs | - | (1,200 | ) | ||||
| Purchase of software technology | - | (448 | ) | ||||
| Net cash used in investing activities | (36 | ) | (2,156 | ) | |||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock and warrant (net of cash offering cost of US$809) | - | 10,263 | ||||||
| Repayment to investors related to terminated security purchase agreements | - | (493 | ) | |||||
| Proceeds from short-term bank loan | 445 | - | ||||||
| Repayment of short-term bank loan | (445 | ) | - | |||||
| Net cash provided by financing activities | - | 9,770 | ||||||
| Effect of exchange rate fluctuation on cash and cash equivalents | 47 | 116 | ||||||
| Net /(decrease)/increase in cash, cash equivalents, and restricted cash | (2,259 | ) | 4,551 | |||||
| Cash, cash equivalents, and restricted cash at beginning of the period | 3,742 | 2,952 | ||||||
| Cash, cash equivalents, and restricted cash at end of the period | $ | 1,483 | $ | 7,503 | ||||