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): April 16, 2015
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 and Zip Code) |
Registrant's telephone number, including area code: +86-10-51600828
________________________________________________________________________________
(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: |
||
| [ ] | 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)) | |
Item 2.02. Results of Operations and Financial Condition.
On April 16, 2015, ChinaNet Online Holdings, Inc., a Nevada corporation (the "Company"), issued a press release containing certain financial results for its fiscal year ended December 31, 2014. 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 April 16, 2015.
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.
| Date: April 16, 2015 | ChinaNet Online Holdings, Inc. |
|
| By: | /s/ Handong Cheng Handong Cheng Chief Executive Officer |
|
EXHIBIT INDEX
|
Exhibit No. |
Description |
|
99.1 |
Press Release dated April 16, 2015. |
EXHIBIT 99.1
ChinaNet Online Holdings Reports Fiscal Year 2014 Financial Results
Management to Host Earnings Conference Call on Friday, April 17th at 8:30 am ET
BEIJING, April 16, 2015 (GLOBE NEWSWIRE) -- ChinaNet Online Holdings, Inc. (Nasdaq:CNET) ("ChinaNet" or the "Company"), a leading B2B (business to business) Internet technology company providing online-to-offline (O2O) sales channel expansion services for small and medium-sized enterprises (SMEs) and entrepreneurial management and networking services for entrepreneurs in the People's Republic of China, announced today financial results for the fiscal year 2014.
Summary Financials
| Fiscal Year 2014 Results (USD) | |||
| FY 2014 | FY 2013 | CHANGE | |
| Sales | $38.9 million | $30.3 million | +28.4% |
| Gross Profit | $6.6 million | $13.7 million | -51.8% |
| Gross Margin | 17.0% | 45.3% | -62.5% |
| Net Loss Attributable to ChinaNet | ($13.7) million | ($0.2) million | -- |
| EPS (Diluted) | ($0.61) | ($0.01) | -- |
| Non-GAAP Adjusted Net Loss Attributable to ChinaNet (1) | (3.4) million | -- | -- |
| Non-GAAP Adjusted EPS (Diluted) (1) | ($0.15) | -- | -- |
| (1) Non-GAAP Adjusted Net Loss Attributable to ChinaNet and EPS excluded (1) Share-based compensation expenses related to restricted shares of common stock and common stock purchase options issued to employees, management and directors in December 2014 of $4.7 million; (2) goodwill impairment and impairment of intangible assets of $5.6 million incurred in the fourth fiscal quarter of 2014. | |||
Revenue for the fiscal year ended December 31, 2014 was $38.9 million compared to $30.3 million for the fiscal year ended December 31, 2013, primarily due to an increase in search engine marketing service revenue. Internet advertising and related services, TV advertising, and brand management and sales channel building revenues were $31.3 million, $6.4 million, and $0.9 million in fiscal year 2014, respectively.
| Fiscal Year 2014 Revenue Breakdown by Business Unit (USD in thousands) | |||||
| FY 2014 | % | FY 2013 | % | % Change | |
| Internet Advertisement and Related Services | $31,261 | 80% | $20,672 | 68% | +51% |
| TV Advertisement | $6,429 | 17% | $6,801 | 23% | -5% |
| Bank Kiosk | $276 | 1% | $251 | 1% | -- |
| Brand Mgmt. & Sales Channel Building | $931 | 2% | $2,569 | 8.5% | -64% |
Gross profit and gross margin for the fiscal year ended December 31, 2014 were $6.6 million and 17% compared to $13.7 million and 45.3%, respectively, for the fiscal year ended December 31, 2013. The primary reason for the year-over-year decrease in the gross margin were lower margin for the new search engine marketing services and the increased costs of internet resources purchased from key search engines and technical services providers related to lead generation, and direct labor and other costs for brand management and sales channel building services to clients.
Operating expenses excluding gain/losses related to disposal of intangible assets and VIEs increased by 76% to $21.5 million for the fiscal year ended December 31, 2014. Excluding the Share-based compensation expenses related to restricted shares of common stock and common stock purchase options issued to employees, management and directors included in operating expenses, general and administrative expenses decreased by 58% from $7.7 million to $3.2 million, as a result of decrease in allowance for doubtful accounts and overall cost reduction plan executed by management during the year,sales and marketing expenses increased to $6.0 million from $2.6 million, which was primarily due to the increase in brand building expenses for promoting websites and services to enhance brand awareness. Goodwill impairment and impairment of intangible assets was $5.6 million for the year ended December 31, 2014, with no comparable losses incurred for the year ended December 31, 2013. ChinaNet loss from operations was $14.6 million in 2014, compared to $0.6 million income from operations in 2013.
Net loss attributable to ChinaNet common stockholders and net loss per share were $13.7 million and $0.61, respectively, for the fiscal year ended December 31, 2014. The weighted average diluted shares outstanding was 22.4 million shares in 2014 versus 22.3 million in 2013. Excluding the share-based compensation expenses and assets impairment losses as discussed above, the Non-GAAP adjusted net loss attributable to ChinaNet common stockholders and net loss per share were 3.4 million and 0.15, respectively.
Balance Sheet and Cash Flow
The Company had $5.0 million in cash and cash equivalents as of December 31, 2014, compared to $3.4 million as of December 31, 2013, working capital of $17.3 million, compared to $24.0 million as of December 31, 2013, and a current ratio of 2.7 to 1, compared 3.3 to 1 as of December 31, 2013. Total shareholders' equity of ChinaNet was $36.2 million at December 31, 2014 compared to $45.1 million at December 31, 2013.
The Company generated approximately $2.0 million of cash flows from operations for the year ended December 31, 2014 compared to a $2.8 million of cash inflows for the year ended December 31, 2013.
Guidance for 2015
Management anticipates releasing the revenues and net income guidance for fiscal year 2015 in June 2015.
Business Updates
In November 2014 ChinaNet gave a major update to its 28.com website with upgrades in site navigation and streamlining of its comprehensive category listings. The site received upgrades to its aesthetics and style, with dynamic features to attract customers including new photography. Additionally, larger image dimensions on the site gave customers more visual area to their exhibit space.
ChinaNet launched a new value-added service for SMEs, Wisdom Eye, a two-way online to offline (O2O) Customer Relationship Management (CRM) system individually customized for the SME industry in December 2014. SMEs using Wisdom Eye can now seamlessly and efficiently manage their marketing, advertising and sales resources, track their cost per lead (CPL) and cost per sales (CPS), improve digital advertising effectiveness and monitor sales efficiency. In addition, Wisdom Eye can automatically generate extensive reports and conduct intelligent data analysis, providing a strong basis for business decisions to support their sales growth. Wisdom Eye includes modern authentication, access controls and encryption to create a completely secure platform.
The Company received a "Diamond Partner" Award in December 2014 from Baidu, China's leading internet search provider, in honor of the significant level of partnership and long-standing collaboration between the two companies.
The following month in January 2015 ChinaNet launched "Business Direct 3.0" in cooperation with Baidu Direct Reach of Baidu. Business Direct 3.0 is a technically marked-up service based on the Baidu Direct Reach mobile platform for traditional service enterprises, which is centered on mobile search, accounts, maps, personalized recommendations and other ways for customers to direct Reach Marketing services. The introduction of Business Direct 3.0 provides an opportunity for the traditional service industry to transit to the mobile Internet, helping companies and their sublets attain new users, and providing users with a better service experience. The service also provides mobile enterprise solutions, allowing users direct access to businesses in the mobile terminal service, making online users into offline customers. ChinaNet expects this underdeveloped market will reach a potential market size of USD $12 billion or more. Additionally, very few competitors are engaged in this market, and the Company believes none have the penetration that ChinaNet holds in SME sectors. Business Direct 3.0 will complete a full information cycle from B2b2c, making businesses marketing more direct, effective and easier.
In March 2015, ChinaNet and Baidu further cemented their relationship and demonstrated the quick success of Business Direct 3.0 by signing a service partner agreement to cross-sell branded services and products in conjunction with Business Direct 3.0 and Baidu's Baidu Direct Reach. The service partner agreement, with power of attorney authorized by Baidu, allows ChinaNet to resell any related Baidu Direct Reach service with the Baidu name and conversely allows Baidu to leverage the ChinaNet brand and Business Direct 3.0 name, products and services. ChinaNet will now be positioned within Baidu's service provider ecosystem of internet and mobile products.
In the first quarter of 2015, ChinaNet made a cash investment for an approximately 10% ownership stake in O'Yummy Investment Management (Beijing) Co., Ltd., a food brand management company and exclusive partner of South Korea ice cream restaurant chain "Snow Hill". In connection with its investment, ChinaNet will cooperate with the company to expand the Snow Hill chain in China.
ChinaNet also made a strategic alliance with Gridsum Technology Co., Ltd. to develop an all-around O2O internet and mobile search engine marketing and search engine optimization solution for SMEs in China. The exclusive strategic alliance represents the collaboration between ChinaNet and Gridsum in 5 areas for serving SMEs. These include (1) the mutual development of search engine optimizing and analytical tools and products for SMEs; (2) establishing an internet and mobile development O2O solution; (3) provision of service and the architecture of a new value added service through Baidu Branding Zone and Baidu Forum; (4) a 360 search engine marketing service and extended value added service, and (5) potential joint funding of an internet and mobile marketing and advertising technology research centre for SMEs in China.
In April 2015, ChinaNet subsidiary, Quanzhou Zhilang Company partnered with a real estate developer to initiate an O2O business zone near Huaqiao University in Quanzhou, Fujian Province, China to help establish and grow new commercial occupants by using "Business Direct 3.0" solutions in connection with brand management and developing solution, iMAP.
Conference Call
ChinaNet will host a conference call at 8:30 am ET on Friday, April 17th to discuss its fourth quarter and full year 2014 results. Please use the following information:
| Date: | Friday, April 17, 2015 |
| Time: | 8:30 am Eastern Time |
| Conference Line (U.S.): | 1-888-576-4398 |
| International Dial-In: | 1-719-325-2454 |
| Conference ID: | 2232899 |
| Webcast: | http://public.viavid.com/index.php?id=113825 |
Please dial in at least 10-minutes before the call to ensure timely participation.
A playback of the call will be available until 8:30 am ET on April 24, 2015. To listen, call 1-877-870-5176 within the United States or 1-858-384-5517 when calling internationally. Please use the replay pin number 2232899.
About ChinaNet Online Holdings, Inc.
The Company, a parent company of ChinaNet Online Media Group Ltd., incorporated in the BVI ("ChinaNet"), is a leading digital B2B (business to business) Internet technology company focusing on providing O2O sales channel expansion service for small and medium-sized enterprises (SMEs) and entrepreneurial management and networking service for entrepreneurs in China. The Company, through certain contractual arrangements with operating companies in the PRC, provides Internet advertising and other services for Chinese SMEs via its portal websites, 28.com, Liansuo.com and sooe.cn, TV commercials and program production via China-Net TV, and in-house LCD advertising on banking kiosks targeting Chinese banking patrons. Website: http://www.chinanet-online.com.
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.
| CHINANET ONLINE HOLDINGS, INC. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except for number of shares and per share data) | ||
| As of December 31, | ||
| 2014 | 2013 | |
| (US $) | (US $) | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 5,037 | $ 3,442 |
| Term deposit | 3,465 | 3,467 |
| Accounts receivable, net | 2,407 | 7,673 |
| Other receivables, net | 8,392 | 4,299 |
| Prepayment and deposit to suppliers | 8,092 | 14,692 |
| Due from related parties | 51 | 502 |
| Other current assets | 61 | 27 |
| Deferred tax assets-current | 176 | 153 |
| Total current assets | 27,681 | 34,255 |
| Long-term investments | 909 | 845 |
| Property and equipment, net | 943 | 1,057 |
| Intangible assets, net | 9,238 | 6,015 |
| Deposit and prepayment for purchasing of software technology | 850 | 2,453 |
| Goodwill | 6,772 | 11,450 |
| Deferred tax assets-non current | 1,037 | 759 |
| Total Assets | $ 47,430 | $ 56,834 |
| Liabilities and Equity | ||
| Current liabilities: | ||
| Short-term bank loan * | $ 817 | $ 818 |
| Accounts payable * | 782 | 421 |
| Advances from customers * | 832 | 995 |
| Accrued payroll and other accruals * | 585 | 676 |
| Due to noncontrolling interest of VIE * | 638 | -- |
| Payable for purchasing of software technology * | 2,826 | -- |
| Taxes payable * | 3,332 | 7,029 |
| Other payables * | 602 | 288 |
| Total current liabilities | 10,414 | 10,227 |
| Long-term liabilities: | ||
| Deferred tax liability-non current * | 964 | 1,439 |
| Long-term borrowing from director | 143 | 143 |
| Total Liabilities | 11,521 | 11,809 |
| 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 29,030,130 shares and 22,376,540 shares at December 31, 2014 and 2013, respectively) | 29 | 22 |
| Additional paid-in capital | 24,703 | 19,870 |
| Statutory reserves | 2,607 | 2,602 |
| Retained earnings | 5,222 | 18,965 |
| Accumulated other comprehensive income | 3,625 | 3,689 |
| Total ChinaNet Online Holdings, Inc.'s stockholders' equity | 36,186 | 45,148 |
| Noncontrolling interests | (277) | (123) |
| Total equity | 35,909 | 45,025 |
| Total Liabilities and Equity | $ 47,430 | $ 56,834 |
| CHINANET ONLINE HOLDINGS, INC. | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME | ||
| (In thousands, except for number of shares and per share data) | ||
| Year Ended December 31, | ||
| 2014 | 2013 | |
| (US $) | (US $) | |
| Sales | ||
| From unrelated parties | $ 38,544 | $ 29,932 |
| From related parties | 353 | 361 |
| 38,897 | 30,293 | |
| Cost of sales | 32,275 | 16,563 |
| Gross margin | 6,622 | 13,730 |
| Operating expenses | ||
| Sales and marketing expenses | 7,017 | 2,574 |
| General and administrative expenses | 6,207 | 7,691 |
| Research and development expenses | 2,659 | 1,995 |
| Loss on disposal of intangible asset | -- | 315 |
| (Gain)/loss on disposal of VIEs | (266) | 543 |
| Goodwill impairment and impairment of intangible assets | 5,639 | -- |
| 21,256 | 13,118 | |
| (Loss)/income from operations | (14,634) | 612 |
| Other income (expenses) | ||
| Interest income | 122 | 125 |
| Interest expense | (52) | (26) |
| Other (expenses)/income | (28) | 5 |
| 42 | 104 | |
| (Loss)/income before income tax expense, equity method investments and noncontrolling interests | (14,592) | 716 |
| Income tax benefit/(expense) | 653 | (816) |
| Loss before equity method investments and noncontrolling interests | (13,939) | (100) |
| Share of income/(losses) in equity investment affiliates | 47 | (183) |
| Net loss | (13,892) | (283) |
| Net loss attributable to noncontrolling interests | 154 | 49 |
| Net loss attributable to ChinaNet Online Holdings, Inc. | $ (13,738) | $ (234) |
| Net loss | $ (13,892) | $ (283) |
| Foreign currency translation (loss)/gain | (64) | 1,306 |
| Comprehensive (Loss)/income | $ (13,956) | $ 1,023 |
| Comprehensive loss attributable to noncontrolling interests | 154 | 39 |
| Comprehensive (loss)/income attributable to ChinaNet Online Holdings, Inc. | $ (13,802) | $ 1,062 |
| Loss per share | ||
| Loss per common share | ||
| Basic and diluted | $ (0.61) | $ (0.01) |
| Weighted average number of common shares outstanding: | ||
| Basic and diluted | 22,414,523 | 22,284,485 |
| CHINANET ONLINE HOLDINGS, INC. | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| Year Ended December 31, | ||
| 2014 | 2013 | |
| (US $) | (US $) | |
| Cash flows from operating activities | ||
| Net loss | $ (13,892) | $ (283) |
| Adjustments to reconcile net loss to net cash provided by operating activities | ||
| Depreciation and amortization | 1,437 | 1,617 |
| Share-based compensation expenses | 4,840 | 125 |
| (Reverse of)/provision for allowances for doubtful accounts | (861) | 2,702 |
| Share of (income)/losses in equity investment affiliates | (47) | 183 |
| Goodwill impairment and impairment of intangible assets | 5,639 | -- |
| Loss on disposal of property and equipment | -- | 3 |
| (Gain)/loss on disposal of VIEs | (266) | 543 |
| Loss on disposal of intangible asset | -- | 315 |
| Deferred taxes | (850) | (486) |
| Changes in operating assets and liabilities | ||
| Accounts receivable | 5,226 | (3,676) |
| Other receivables | 1,370 | 98 |
| Prepayment and deposit to suppliers | (1,499) | 380 |
| Due from related parties | 449 | (282) |
| Other current assets | (42) | 106 |
| Accounts payable | 390 | 301 |
| Advances from customers | (118) | (104) |
| Accrued payroll and other accruals | (60) | (242) |
| Other payables | 318 | (69) |
| Taxes payable | (76) | 1,525 |
| Net cash provided by operating activities | 1,958 | 2,756 |
| Cash flows from investing activities | ||
| Purchases of vehicles and office equipment | (280) | (79) |
| Deposit and prepayment for purchasing of software technology | (847) | (2,420) |
| Short-term loan to unrelated entities | -- | (790) |
| Repayment of short-term loan from unrelated entities | 790 | -- |
| Long-term investment in cost/equity method investees | (18) | (40) |
| Collection of receivable on disposal of VIEs | 1,604 | -- |
| Payment for acquisition of VIEs | -- | (2,258) |
| Cash effect on deconsolidation of VIEs | (358) | (146) |
| Net cash provided by/(used in) investing activities | 891 | (5,733) |
| Cash flows from financing activities | ||
| Proceeds from short-term bank loan | 814 | 807 |
| Repayment of short-term bank loan | (814) | -- |
| Short-term loan from noncontrolling interest of VIE | 717 | -- |
| Repayment of short-term loan to noncontrolling interest of VIE | (81) | -- |
| Repayment to former VIE | (1,893) | -- |
| Net cash (used in)/provided by financing activities | (1,257) | 807 |
| Effect of exchange rate fluctuation on cash and cash equivalents | 3 | 129 |
| Net increase/(decrease) in cash and cash equivalents | 1,595 | (2,041) |
| Cash and cash equivalents at beginning of the year | 3,442 | 5,483 |
| Cash and cash equivalents at end of the year | $ 5,037 | $ 3,442 |
CONTACT: MZ North America
Ted Haberfield, President
Direct: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mzgroup.us