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): November 16, 2009
CHINANET ONLINE
HOLDINGS, INC.
(Exact Name of Registrant as Specified
in Charter)
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Nevada
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000-52672
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20-4672080
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(State or Other Jurisdiction of
Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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No.3 Min Zhuang Road, Building
6,
Yu Quan Hui Gu Tuspark, Haidian
District, Beijing, PRC 100195
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(Address of Principal Executive
Offices and Zip Code)
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Registrant’s telephone number, including area code:
011-86-51600828
____________________________________
(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 (see General Instruction
A.2. below):
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o
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Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 2.02. Results of Operations and
Financial Condition.
On
November 16, 2009, ChinaNet Online Holdings, Inc., a Nevada corporation, issued a press release containing certain
financial results for its third fiscal quarter of 2009. A
copy of the press release is attached to this Current Report on Form 8-K as
Exhibit 99.1.
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:
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No.
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Description
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99.1
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Press Release dated November 16, 2009
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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.
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Dated: November 17, 2009
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CHINANET ONLINE
HOLDINGS, INC.
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By:
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/s/ Zhige Zhang | |
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Name: Zhige
Zhang
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Title: Chief Financial
Officer
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Exhibit Index
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No.
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Description
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99.1
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Press Release dated November 16, 2009
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Exhibit
99.1
ChinaNet
Online Holdings, Inc. Reports Record
Third
Quarter 2009 Financial Results
Beijing,
China, November 16, 2009 -- ChinaNet Online Holdings, Inc. (“ChinaNet”, OTC BB:
CHNT), a leading full-service media development, advertising and communications
company for small and medium-sized enterprises in the People's Republic of China
("PRC"), today announced higher revenues, net income and cash flow for the third
quarter 2009.
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§
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Revenues
increased 21.7 percent to $8.1 million in the third quarter
2009
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§
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Third
quarter 2009 adjusted net income increased
19.9 percent to $1.9 million with adjusted earnings per share of
$0.12
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§
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First
nine months 2009 revenues increased 105.1 percent to $27.3
million
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§
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First
nine months adjusted net income increased 120.1 percent to $4.5
million
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§
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First
nine months 2009 adjusted earnings per share increased 106.7 percent to
$0.31
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§
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Gross
margins improved 581 basis points to 50.4 percent for the third quarter of
2009
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§
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Cash
flow from operations was $4.7 million for the first nine months of
2009
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§
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Management
to host earnings conference call November 16th at 11:30 a.m.
ET
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SUMMARY
FINANCIALS
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Third
Quarter 2009 Results
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Q3 2009*
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Q3 2008
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CHANGE
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Sales
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$8.1
million
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$6.7
million
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+21.7%
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Gross
Profit
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$4.1
million
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$3.0
million
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+37.5%
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Adjusted
Net Income
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$1.9
million
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$1.6
million
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+19.9%
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GAAP
Net Income
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$0.6
million
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$1.6
million
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-59.9%
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Adjusted
EPS (Basic)
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$0.12
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$0.12
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--
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GAAP
EPS (Basic)
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($0.33)
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$0.12
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--
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*Net income of
Q3 2009 included a
$1.3 million
non-cash charge related to the changes in the value of warrants, and a
$5.9 million non-cash charge related to the beneficial conversion feature of
Series A preferred stock.
1
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The
First Nine Months of 2009 Results
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2009*
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2008
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CHANGE
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Sales
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$27.3
million
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$13.3
million
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+105.1%
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Gross
Profit
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$11.4
million
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$4.6
million
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+144.8%
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Adjusted
Net Income
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$4.5
million
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$2.1
million
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+120.1%
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GAAP
Net Income
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$3.2
million
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$2.1
million
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+57.3%
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Adjusted
EPS (Basic)
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$0.31
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$0.15
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+106.7%
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GAAP
EPS (Bacic)
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($0.18)
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$0.15
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--
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*Net income for the
first nine months of
2009 included a $1.3 million non-cash charge
related to the changes in the value of warrants and a $5.9 million
non-cash charge related to the beneficial conversion feature of Series A
preferred stock.
Third Quarter 2009 Financial
Results
Revenues for the third quarter of 2009 increased 21.7 percent to approximately $8.1 million compared to $6.7 million for the third quarter of 2008. The increase resulted
from a
significant increases in
Internet advertising and TV advertising. For the third quarter of 2009 Internet advertising comprised
approximately 58.2 percent of total revenues, an increase
of 59.6 percent year-over-year to $4.7 million. Growth was the result our
successful brand building efforts for the www.28.com website which offers customers a
comprehensive suite of
client service technologies, assisted by the efforts of a more experienced sales
team. During the third quarter of 2009 revenues generated by
TV advertising increased 40.1 percent year-over-year to approximately
$3.1 million or 38.3 percent of total revenues. As of September 30, 2009, the number of active
customers for the Company’s Internet advertising business was
779 and the number of customers being
serviced by its TV advertising business was 344. Approximately 44% of customers were being serviced by both
platforms.
Cost of
sales for the three months ended September 30, 2009 was approximately $4.0
million or 49.6 percent of revenues as compared to $3.7 million or 55.4 percent
of revenues for the three months ended September 30, 2008. The costs associated
with the Company’s advertising services include costs for purchasing resources
from other well-known portal websites in the PRC for Internet advertising and
purchasing TV advertisement time from approximately ten different provincial TV
stations.
For the third quarter of 2009 the gross
profit was $4.1 million, representing gross margins of
50.4 percent, compared to the third quarter
of 2008 with $3.0 million in gross profit and a gross
margin of 44.6 percent. Gross profit grew by
37.5 percent on a year-over-year basis. The
increase in gross profit was a result of increased revenues and leverage in the
business model.
2
Operating expenses for the three months
ended September 30, 2009 were approximately
$1.4 million, up 74.4% percent from $0.8 million in the same period of 2008.
Selling expenses for the period increased to approximately $0.6 million from $0.5 million in the third quarter of 2008
primarily as a result of brand development expenses for www.28.com, increased payrolls for staff incentives, an expanded sales force, and increased
marketing expenses. General and administrative expenses were $0.6 million and
$0.2 million in the third quarter 2009 and 2008, respectively, with the increase
primarily due to non-recurring expenses associated with the US public company
listing and non-cash equity compensation for services.
Operating income for the third quarter
of 2009 totaled approximately $2.7 million, a 24.3 percent increase from the $2.2 million reported for the third quarter
of 2008. Operating margins
were 33.5 percent and 32.8 percent for the third quarter of 2009
and 2008, respectively.
GAAP net income for the third quarter was $0.6 million, representing a decrease of 59.9% as compared to $1.6 million reported in the same
period in the prior year.
Earnings per basic
share were a negative $0.33 for the third quarter in 2009 as
compared to $0.12 for the third quarter in 2008, which
was based on 15.8 million and 13.8 million shares outstanding, respectively. The Company had an effective tax rate of 26.4 percent and 26.5 percent for the third quarters of 2009
and 2008, respectively,
excluding the effect of a $1.3 million non-cash charge related to the changes in fair value of warrants
recorded in the third quarter of 2009.
During the third quarter
of 2009 the Company incurred a non-cash charge of $1.3 million for the change in
the value of warrants and a $5.9 million non-cash charge related to the
beneficial conversion feature of Series A preferred stock which was recorded as
deemed dividend, a deduction of retained earnings and a deduction of net income
attributable to common shareholders. Adjusting for non-cash
charges, net income for the third quarter of 2009 was $1.9 million, with $0.12
in earnings per basic share.
"The
third quarter continued our momentum as we executed on our growth plan while
expanding both gross and operating margins," Mr. Handong Cheng, Chairman and CEO
of the Company. “We continue to see strong growth in both our Internet and TV
advertising business, which was driven by both existing and new customers. With
over 20% annual growth projected for the Chinese internet advertising market
through 2010, we believe ChinaNet’s “one-stop shop” advertising platform is well
positioned to capitalize on this large growth opportunity and further increase
market share.”
3
2009
Nine Month Financial Results
For the
nine months ended September 30, 2009, revenues increased approximately 105.1
percent to $27.3 million compared to the same period in 2008. Gross profit was
$11.4 million for the first nine months of 2009, representing an increase of
144.8 percent from the first nine months of 2008. Gross margins were 41.7
percent for the first nine months of 2009 compared to 34.9 percent for the same
year ago period.
Income
from operations was $6.3 million for the first nine months of 2009, representing
an increase of 118.2 percent over the first nine months of 2008. Operating
margins were 22.9 percent for the first nine months of 2009 compared to 21.5
percent for the first nine months of 2008. The Company incurred cash expenses,
in addition to non-cash equity compensation expenses, related to going
public.
GAAP Net
income for the first nine months of 2009 was $3.2 million for the nine months
ended September 30, 2009, an increase of approximately 57.3 percent from $2.1
million with corresponding basic earnings per share of negative $0.18 compared
to $0.15 based on 14.5 million and 13.8 million shares, respectively. During the
first nine months of 2009 the Company incurred a non-cash charge of $1.3 million
for the change in the value of warrants and a $5.9 million non-cash charge
related to the beneficial conversion feature of Series A preferred stock which
was recorded as deemed dividend, a deduction of retained earnings and a
deduction of net income attributable to common shareholders, with no associated
charge in 2008. Adjusting for non-cash charges during each respective period,
net income was $4.5 million and $2.1 million, yielding $0.31 and $0.15 in
earnings per basic share.
“The
management team has been focused on enhancing our 28.com advertising platform by
adding new modules into the network,” Mr. Chen continued. “In August 2009, we
launched a new product entitled “Internet Information Management” (IIM),
intelligence software that is based on our proprietary search engine
optimization technology which helps our clients gain an early warning in order
to identify, and respond to potential negative exposure on the internet. There
are approximately 32 customers since the platform launched 3 months ago, all
coming from the Company’s existing customers. We expect that growth from our IIM
product, in addition to our multi-platform advertising network, will drive
further growth during 2010.”
Balance
Sheet and Cash Flow
The
Company had a current ratio of 4 to 1 and $13.9 million in cash and equivalents
on September 30, 2009, which includes $9.2 million in net proceeds from the
August 2009 financing. Accounts receivables were $2.4 million on September 30,
2009, compared to $1.0 million on December 31, 2008. For the first nine months
of 2009, the Company generated $4.7 million in cash from operations versus $1.3
million for the same period in 2008, with the variance principally coming from
the increase in net income and prudent asset management.
4
Financial
Outlook for 2009 and 2010
Management reaffirms 2009 guidance and
expects to report calendar 2009 sales of $42.7 million and net income of $8.3
million, representing an increase of 98.6% and 196.4% compared to 2008 sales and
adjusted net income, respectively. Management reaffirms 2010 guidance and
expects to report calendar 2010 sales of $72.3 million and net income of $14.1
million.
Conference
Call
The
conference call will take place at 11:30 a.m. EST on Monday, November 16, 2009.
Interested participants should call 1-877-941-8418 when calling within the
United States or 1-480-629-9809 when calling internationally.
A
playback will be available through November 23, 2009. To listen, please call
1-800-406-7325 within the United States or 1-303-590-3030 when calling
internationally. Utilize the pass code 4180080 for the replay.
This call
is being webcast by ViaVid Broadcasting and can be accessed by clicking on this
link http://viavid.net/dce.aspx?sid=00006C94,
or visiting ViaVid's website at www.viavid.net,
where the webcast can be accessed through November 23, 2009.
About
ChinaNet Online Holdings, Inc.
The
Company, a parent company of ChinaNet Online Media Group Ltd., incorporated in
the BVI ("ChinaNet" or "Zhong Wang Zai Xian"), is a leading full-service media
development, advertising and communications company for small medium-sized
enterprises (“SMEs”) in the PRC. The Company, through its certain contractual
arrangements with operating companies in the PRC, provides internet advertising
and other services for Chinese SMEs via its portal website www.28.com, TV
commercials and program production via China-Net TV, and in-house LCD
advertising on banking kiosks targeting Chinese banking patrons. Website: www.chinanet-online.com.
5
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.
For
further information, contact:
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Mark
Elenowitz
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Ted
Haberfield
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TriPoint
Capital Advisors
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HC
International, Inc.
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US
+1-917-512-0822
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US
+1-760-755-2716
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thaberfield@hcinternational.net
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www.hcinternational.net
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