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 22, 2012
 
CHINANET ONLINE HOLDINGS, INC.
(Exact Name of Registrant as Specified in Charter)
  
Nevada	 
000-52672	 
20-4672080	
(State or Other Jurisdiction of
Incorporation)	(Commission File Number)	(IRS Employer Identification No.)	

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)	

+86-10-51600828
(Registrant’s telephone number, including area code)
N/A
 (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):
 
       [  ]  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 May 22, 2012, ChinaNet Online Holdings, Inc., a Nevada corporation (the “Company”), issued a press release containing certain financial results for its first fiscal quarter of 2012.  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 8.01. Other Events.
 
Attached as Exhibit 99.2 is a slideshow presentation containing information about the Company’s business and certain other financial information that will be made available to investors participating in the Company’s conference call being held on May 22, 2012.
 
Item 9.01. Financial Statements and Exhibits.
 
(d)           Exhibits:
 
No.	Description	
99.1	Press Release dated May 22, 2012	
99.2	Corporate Presentation	

 

 
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.
 
Dated:  May 22, 2012	CHINANET ONLINE HOLDINGS, INC.	
 
 	By:	 /s/ Handong Cheng	

 	Name: Handong Cheng	
 	Title:   Chief Executive Officer	

 

 
Exhibit Index

No.	Description	
99.1	Press Release dated May 22, 2012	
99.2	Corporate Presentation	

 

 

Exhibit 99.1

ChinaNet Online Holdings Reports First Quarter 2012 Financial Results
 
Provides FY2012 revenue and net income guidance of $42 million and $2.8 million, respectively
 
Management to host Conference call on Tuesday, May 22nd at 8:30amET

BEIJING, May 22, 2012 -- ChinaNet Online Holdings, Inc. ("ChinaNet" or the “Company”), (Nasdaq: CNET), 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, today announced financial results for the first quarter 2012.
 
Summary Financials
 
First Quarter 2012 Results (USD) (Unaudited)	
 	
 	Q1 2012	Q1 2011	CHANGE	
Sales	$14.9 million	$7.0 million	+113%	
Gross Profit	$2.4 million	$5.0 million	-52%	
Gross Margin	16%	71%	-77%	
Net (Loss)/Income Attributable to Common Stockholders	($0.4 million)	$2.6 million	-115%	
EPS (Diluted)	($0.02)	$0.14	-114%	
 
First Quarter 2012 Financial Results
 
Revenues for the first quarter of 2012 increased by 113% to $14.9 million from $7.0 million in the first quarter of 2011, primarily due to an increase in revenues from the sale of TV and internet advertising and marketing services on the Company’s web portals. TV advertising revenue increased significantly to $10.4 million for the three months ended March 31, 2012 from $0.7 million in the same period in 2011. TV advertising revenues were generated by selling approximately 10,396 minutes of advertising time purchased from provincial TV stations as compared with approximately 835 minutes of advertising time that we sold in the same period in 2011. Revenue from internet advertising and marketing increased by 50% to $4.3 million, as compared to the first quarter of 2011 due to the addition of Sooe.cn and increasing the number of clients on Liansuo.com.
 
Q1 2012 Revenue Breakdown by Business Unit (USD in thousands)
 
 	 	 	Q1 2012	 	 	%	 	 	 	Q1 2011	 	 	%	 	 	% Change	 	
Internet Advertisement	 	$	4,306	 	 	 	28.8	%	 	$	2,874	 	 	 	40.9	%	 	 	+49.8	%	
Technical Services	 	$	39	 	 	 	0.3	%	 	$	3,212	 	 	 	45.7	%	 	 	-98.8	%	
TV Advertisement	 	$	10,369	 	 	 	69.4	%	 	$	726	 	 	 	10.3	%	 	 	+1328	%	
Bank Kiosk	 	$	71	 	 	 	0.5	%	 	$	137	 	 	 	2.0	%	 	 	-48.1	%	
Brand Mgmt. & Sales Channel Expansion	 	$	150	 	 	 	1.0	%	 	$	75	 	 	 	1.1	%	 	 	+100	%	

 

 
Total cost of sales for the first quarter of 2012 was $12.5 million, compared to $2.0 million for the same period in 2011. Gross profit was $2.4 million for the first quarter of 2012, representing gross margin of 16.0%, compared to $5.0 million of gross profit and gross margin of 71% in the first quarter of 2011. The decrease in gross margin is due to the percentage of sales from the Company’s lower margin TV advertising revenue, which accounted for approximately 69% of total revenues as well as increasing in resource cost.
 
Operating expenses for the three months ended March 31, 2012 were approximately $2.3 million, up 15.7% from $2.0 million in the comparable period of 2011. General and administrative expenses increased $0.4 million to $1.2 million. Research and development expenses dropped 6.2% year-over-year to $0.3 million.
 
The Company had an operating income of $0.13 million in the first quarter of 2012 compared to $3.0 million operating income in the first quarter of 2011.
 
Net loss attributable to common stockholders for the first quarter of 2012 was $0.4 million and loss per share was $0.02 compared to $2.6 million net income attributable to common stockholders and $0.14 earnings per share in the first quarter of 2011, respectively.
 
Balance Sheet and Cash Flow
 
The Company had $9.0 million in cash and cash equivalents as of March 31, 2012, compared to $10.7 million as of December 31, 2011, working capital of $27.3 million, compared to $27.0 million as of December 31, 2011, and a current ratio of 3.8 to 1 compared 4.5 to 1 as of December 31, 2011.
 
The Company had cash inflow from operations of $0.4 million for the three months ended March 31, 2012. Total shareholders’ equity of ChinaNet was $41.6 million at March 31, 2012, compared to $41.7 million at December 31, 2011.
 
Guidance for 2012
 
Management forecasts full year 2012 revenues to be at least $42 million and net income of at least $2.8 million.
 
Business Updates
 
ChinaNet is focused on strategically expanding its client base of over 6,000 current customers by continuing to grow its internet advertising and marketing services business. Currently, 28.com, which connects SME franchisors with new franchisees, generates the majority of revenues. ChinaNet will continue to invest in new technology and expects to increase its market share to over 55% by the end of the third quarter 2012.
 
As previously announced, management is focused on several new growth and management initiatives to help offset short-term economic challenges on 28.com. Below are additional initiatives:

 

 
·  	Improving internal management with cost reduction plan, expect to increase net profit margin by 2%-5%;	
 
·  	Addition of Sooe.cn with commercialization expected in Q3 2012;	
 
·  	Sales campaign with China Business Journal to attract better quality and larger clients in Q3 2012, further extending Liansuo.com’s client base by 20% or more;	
 
·  	Launching Weibo (like Twister) related value-added marketing service to existing or larger branded customers in Q3 2012 with 3 rd  party alliance;	
 
·  	Launching of Zhifuwan.com, an integrated SEM and e-Commerce marketing service as additional value-added services to all other web portals, helping SMEs to further market their Taobao B2C sites by means of technology in Q3 2012.	
 
·  	With the complexity of additional features, the commercial launch of flying cloud (www.feitengyun.com) has been re-scheduled to occur by the end of October 2012.	
 
With these initiatives, management expects ChinaNet to return to profitability in Q2 2012 based on current and improving economic conditions.
 
Conference Call
 
Date:	Tuesday, May 22, 2012	
Time:	8:30 am Eastern Time	
Conference Line (U.S.):	1-877-317-6776	
International Dial-In:	1-412-317-6776	
Conference ID:	10014350	
Webcast:	http://webcast.mzvaluemonitor.com/Home/Login/3b108b0d-3f0e-43ef-b58a-c0e8c22a56a1	
 
Please dial in at least 10-minutes before the call to ensure timely participation.
 
A playback of the call will be available until 9:00 am ET on May 29, 2012. To listen, call 1-877-344-7529 within the United States or 1-412-317-0088 when calling internationally. Please use the replay pin number 10014350.
 
About ChinaNet Online Holdings, Inc.
 
The Company, a parent company of ChinaNet Online Media Group Ltd., incorporated in the BVI ("ChinaNet"), a leading business to business Internet technology company focusing on providing online-to-offline sales channel expansion service for small and medium-sized enterprises and entrepreneurial management and networking service for entrepreneurs in China. Founded in 2003 and based in Beijing, PRC, the Company's services include its 28.com portal to connect SME franchisors with new franchisees, Internet advertising and marketing with other value-added communication channels, brand management & sales channel solutions, and cloud-computing based management tools, to be officially commercialized in 2012. 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.

Contact:
 
Ted Haberfield, President
MZ North America, IR
MZ Group
Direct: +1-760-755-2716
Email:  thaberfield@mzgroup.us

 

 
-- FINANCIAL TABLES –

CHINANET ONLINE HOLDINGS, INC.	 	
CONSOLIDATED BALANCE SHEETS	 	
(In thousands)	 	

 	 	March 31, 
2012	 	 	December 31,
2011	 	
 	 	(US $'000)	 	 	(US $'000)	 	
 	 	(unaudited)	 	 	 	 	
Assets	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	
  Cash and cash equivalents	 	$	8,964	 	 	$	10,695	 	
  Accounts receivable, net	 	 	7,623	 	 	 	4,444	 	
  Other receivables	 	 	5,844	 	 	 	3,631	 	
  Prepayment and deposits to suppliers	 	 	13,718	 	 	 	15,360	 	
  Due from related parties	 	 	278	 	 	 	324	 	
  Contingent consideration receivables	 	 	160	 	 	 	159	 	
  Other current assets	 	 	153	 	 	 	129	 	
  Deferred tax assets-current	 	 	222	 	 	 	-	 	
Total current assets	 	 	36,962	 	 	 	34,742	 	
 	 	 	 	 	 	 	 	 	
Investment in and advance to equity investment affiliates	 	 	1,212	 	 	 	1,396	 	
Property and equipment, net	 	 	1,775	 	 	 	1,902	 	
Intangible assets, net	 	 	7,941	 	 	 	8,151	 	
Goodwill	 	 	11,068	 	 	 	10,999	 	
Deferred tax assets-non current	 	 	196	 	 	 	92	 	
 	 	$	59,154	 	 	$	57,282	 	
 	 	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
  Accounts payable	 	$	214	 	 	$	268	 	
  Advances from customers	 	 	1,890	 	 	 	724	 	
  Accrued payroll and other accruals	 	 	485	 	 	 	616	 	
  Due to equity investment affiliate	 	 	538	 	 	 	220	 	
  Due to related parties	 	 	84	 	 	 	161	 	
  Payable for acquisition	 	 	553	 	 	 	550	 	
  Taxes payable	 	 	5,701	 	 	 	5,040	 	
  Other payables	 	 	158	 	 	 	114	 	
  Dividends payable	 	 	-	 	 	 	5	 	
Total current liabilities	 	 	9,623	 	 	 	7,698	 	

Deferred tax liability-non current	 	 	1,850	 	 	 	1,893	 	
Long-term borrowing from director	 	 	138	 	 	 	137	 	
 	 	 	11,611	 	 	 	9,728	 	
 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	

Stockholders’ equity:	 	 	 	 	 	 	 	 	
  Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 22,186,540 shares and 22,146,540 shares at March 31, 2012 and December 31, 2011, respectively)	 	 	22	 	 	 	22	 	
  Additional paid-in capital	 	 	20,764	 	 	 	20,747	 	
  Statutory reserves	 	 	2,117	 	 	 	2,117	 	
  Retained earnings	 	 	16,322	 	 	 	16,688	 	
  Accumulated other comprehensive income	 	 	2,358	 	 	 	2,132	 	
Total ChinaNet’s Online Holdings, Inc.’s stockholders’ equity	 	 	41,583	 	 	 	41,706	 	
 	 	 	 	 	 	 	 	 	
  Noncontrolling interest	 	 	5,960	 	 	 	5,848	 	
Total stockholders’ equity	 	 	47,543	 	 	 	47,554	 	
 	 	 	 	 	 	 	 	 	
 	 	$	59,154	 	 	$	57,282	 	

 

 
CHINANET ONLINE HOLDINGS, INC.	 	 	
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME	 	 	
(In thousands, except for number of shares and per share data)	 	 	

 	 	Three Months Ended March 31,	 	 	
 	 	2012	 	 	2011	 	 	
 	 	(US $'000)	 	 	(US $'000)	 	 	
 	 	(unaudited)	 	 	(unaudited)	 	 	
 	 	 	 	 	 	 	 	
Sales	 	 	 	 	 	 	 	
    To unrelated parties	 	$	14,920	 	 	$	6,834	 	 	
    To related parties	 	 	15	 	 	 	190	 	 	
 	 	 	14,935	 	 	 	7,024	 	 	
 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	12,538	 	 	 	2,030	 	 	
Gross margin	 	 	2,397	 	 	 	4,994	 	 	
 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	 	 	 	 	 	 	 	
  Selling expenses	 	 	689	 	 	 	713	 	 	
  General and administrative expenses	 	 	1,243	 	 	 	890	 	 	
  Research and development expenses	 	 	331	 	 	 	353	 	 	
 	 	 	2,263	 	 	 	1,956	 	 	
 	 	 	 	 	 	 	 	 	 	
  Income from operations	 	 	134	 	 	 	3,038	 	 	
 	 	 	 	 	 	 	 	 	 	
Other income (expense):	 	 	 	 	 	 	 	 	 	
  Interest income	 	 	5	 	 	 	1	 	 	
  Gain on deconsolidation of subsidiaries	 	 	-	 	 	 	229	 	 	
  Other(expenses)/ income	 	 	(1	)	 	 	6	 	 	
 	 	 	4	 	 	 	236	 	 	
 	 	 	 	 	 	 	 	 	 	
Income before income tax expense, equity method investments and noncontrolling interests	 	 	138	 	 	 	3,274	 	 	
  Income tax expense	 	 	236	 	 	 	431	 	 	
(Loss)/income before equity method investments and noncontrolling interests	 	 	(98	)	 	 	2,843	 	 	
 Share of losses in equity investment affiliates	 	 	(193	)	 	 	(47	)	 	
Net (loss)/income	 	 	(291	)	 	 	2,796	 	 	
 Net (income)/loss attributable to noncontrolling interests	 	 	(75	)	 	 	16	 	 	
Net (loss)/income attributable to ChinaNet Online Holdings, Inc.	 	 	(366	)	 	 	2,812	 	 	
 Dividend of Series A convertible preferred stock	 	 	-	 	 	 	(169	)	 	
Net (loss)/income attributable to common shareholders of ChinaNet Online Holdings, Inc.	 	$	(366	)	 	$	2,643	 	 	
 	 	 	 	 	 	 	 	 	 	
(Loss)/earnings per share	 	 	 	 	 	 	 	 	 	
(Loss)/earnings per common share	 	 	 	 	 	 	 	 	 	
Basic	 	$	(0.02	)	 	$	0.15	 	 	
Diluted	 	$	(0.02	)	 	$	0.14	 	 	
 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding:	 	 	 	 	 	 	 	 	 	
   Basic	 	 	22,182,584	 	 	 	17,244,315	 	 	
   Diluted	 	 	22,182,584	 	 	 	20,819,982	 	 	

 

 
CHINANET ONLINE HOLDINGS, INC.	 	
CONSOLIDATED STATEMENTS OF CASH FLOWS	 	
(In thousands)	 	

 	 	Three Months Ended March 31,	 	
 	 	2012	 	 	2011	 	
 	 	(US $'000)	 	 	(US $'000)	 	
 	 	(unaudited)	 	 	(unaudited)	 	
 	 	 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	 	 	
Net (loss)/income	 	$	(291	)	 	$	2,796	 	
Adjustments to reconcile net income to net cash provided by operating activities	 	 	 	 	 	 	 	 	
  Depreciation and amortization	 	 	409	 	 	 	199	 	
  Share-based compensation expenses	 	 	17	 	 	 	107	 	
  Share of losses in  equity investment affiliates	 	 	193	 	 	 	47	 	
  Gain on deconsolidation of subsidiaries	 	 	-	 	 	 	(229	)	
  Gain on disposal of property and equipment	 	 	-	 	 	 	(3	)	
  Deferred taxes	 	 	(381	)	 	 	(15	)	
Changes in operating assets and liabilities	 	 	 	 	 	 	 	 	
  Accounts receivable	 	 	(3,154	)	 	 	(1,302	)	
  Other receivables	 	 	261	 	 	 	3,691	 	
  Prepayments and deposits to suppliers	 	 	1,740	 	 	 	(162	)	
  Due from equity investment affiliate	 	 	-	 	 	 	(8	)	
  Due from related parties	 	 	48	 	 	 	(190	)	
  Other current assets	 	 	(22	)	 	 	(19	)	
  Accounts payable	 	 	(56	)	 	 	336	 	
  Advances from customers	 	 	1,162	 	 	 	(1,263	)	
  Accrued payroll and other accruals	 	 	(133	)	 	 	(60	)	
  Due to director	 	 	-	 	 	 	(403	)	
  Due to related parties	 	 	(78	)	 	 	(137	)	
  Other payables	 	 	18	 	 	 	39	 	
  Taxes payable	 	 	630	 	 	 	397	 	
Net cash provided by operating activities	 	 	363	 	 	 	3,821	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	
  Purchases of vehicles and office equipment	 	 	(9	)	 	 	(57	)	
  Purchases of intangible assets	 	 	-	 	 	 	(11	)	
  Project development deposit to a third party	 	 	(2,452	)	 	 	-	 	
  Cash from acquisition of VIEs	 	 	-	 	 	 	24	 	
  Cash effect on deconsolidation of VIEs	 	 	-	 	 	 	(181	)	
  Long-term investment in and advance to equity investment affiliates	 	 	-	 	 	 	(1,518	)	
Net cash used in investing activities	 	 	(2,461	)	 	 	(1,743	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	
  Cash investment contributed by noncontrolling interest	 	 	-	 	 	 	74	 	
  Dividend paid to convertible preferred stockholders	 	 	(5	)	 	 	(171	)	
  Short-term loan borrowed from equity investment affiliate	 	 	316	 	 	 	-	 	
Net cash provided by (used in) financing activities	 	 	311	 	 	 	(97	)	
 	 	 	 	 	 	 	 	 	
Effect of exchange rate fluctuation on cash and cash equivalents	 	 	56	 	 	 	59	 	
 	 	 	 	 	 	 	 	 	
Net (decreased) increase in cash and cash equivalents	 	 	(1,731	)	 	 	2,040	 	
 	 	 	 	 	 	 	 	 	
  Cash and cash equivalents at beginning of year	 	 	10,695	 	 	 	15,590	 	
  Cash and cash equivalents at end of period	 	$	8,964	 	 	$	17,630	 	

 

 

Exhibit 99.2