2015 Q4 Form 10-K Financial Statement

#000117184317001878 Filed on March 31, 2017

View on sec.gov

Income Statement

Concept 2015 Q4 2015 2014 Q4
Revenue $32.27M
YoY Change -15.03%
Cost Of Revenue $24.66M
YoY Change -22.15%
Gross Profit $7.610M
YoY Change 20.79%
Gross Profit Margin 23.59%
Selling, General & Admin $12.08M
YoY Change -4.85%
% of Gross Profit 158.79%
Research & Development $2.164M
YoY Change -18.65%
% of Gross Profit 28.44%
Depreciation & Amortization $1.768M
YoY Change 22.78%
% of Gross Profit 23.23%
Operating Expenses $16.93M
YoY Change 10.27%
Operating Profit -$9.316M
YoY Change 2.94%
Interest Expense $47.00K
YoY Change -32.86%
% of Operating Profit
Other Income/Expense, Net $104.0K
YoY Change -446.67%
Pretax Income -$9.212M
YoY Change -28.86%
Income Tax -$1.496M
% Of Pretax Income
Net Earnings -$9.092M
YoY Change -33.83%
Net Earnings / Revenue -28.18%
Basic Earnings Per Share
Diluted Earnings Per Share -$848.7K
COMMON SHARES
Basic Shares Outstanding 10.71M
Diluted Shares Outstanding

Balance Sheet

Concept 2015 Q4 2015 2014 Q4
SHORT-TERM ASSETS
Cash & Short-Term Investments $8.770M
YoY Change 3.18%
Cash & Equivalents $5.503M $5.500M $5.037M
Short-Term Investments $3.270M
Other Short-Term Assets $45.00K $7.770M
YoY Change -6.72%
Inventory
Prepaid Expenses
Receivables $2.549M $2.590M
Other Receivables $1.910M $1.910M
Total Short-Term Assets $21.04M $21.04M
YoY Change -23.99%
LONG-TERM ASSETS
Property, Plant & Equipment $681.0K $680.0K
YoY Change -27.66%
Goodwill $4.396M $6.772M
YoY Change -35.09%
Intangibles $5.638M
YoY Change
Long-Term Investments $778.0K $1.130M
YoY Change 24.18%
Other Assets $2.570M
YoY Change 35.98%
Total Long-Term Assets $14.42M $14.42M
YoY Change -26.99%
TOTAL ASSETS
Total Short-Term Assets $21.04M $21.04M
Total Long-Term Assets $14.42M $14.42M
Total Assets $35.46M $35.46M
YoY Change -25.24%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $95.00K $100.0K $782.0K
YoY Change -87.85% -87.18% 85.75%
Accrued Expenses $690.0K
YoY Change 16.95%
Deferred Revenue
YoY Change
Short-Term Debt $940.0K
YoY Change 14.63%
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities $7.370M $7.370M
YoY Change -29.2%
LONG-TERM LIABILITIES
Long-Term Debt $260.0K
YoY Change 85.71%
Other Long-Term Liabilities
YoY Change
Total Long-Term Liabilities $260.0K
YoY Change 85.71%
TOTAL LIABILITIES
Total Short-Term Liabilities $7.370M $7.370M
Total Long-Term Liabilities $260.0K
Total Liabilities $7.623M $8.130M
YoY Change -27.67%
SHAREHOLDERS EQUITY
Retained Earnings -$3.870M
YoY Change
Common Stock $12.00K
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $27.33M $27.33M
YoY Change
Total Liabilities & Shareholders Equity $35.46M $35.46M
YoY Change -25.24%

Cashflow Statement

Concept 2015 Q4 2015 2014 Q4
OPERATING ACTIVITIES
Net Income -$9.092M
YoY Change -33.83%
Depreciation, Depletion And Amortization $1.768M
YoY Change 22.78%
Cash From Operating Activities $5.540M
YoY Change 182.65%
INVESTING ACTIVITIES
Capital Expenditures $356.0K
YoY Change -131.5%
Acquisitions
YoY Change
Other Investing Activities -$390.0K
YoY Change -119.31%
Cash From Investing Activities -$4.630M
YoY Change -620.22%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -130.0K
YoY Change -89.68%
NET CHANGE
Cash From Operating Activities 5.540M
Cash From Investing Activities -4.630M
Cash From Financing Activities -130.0K
Net Change In Cash 780.0K
YoY Change -50.94%
FREE CASH FLOW
Cash From Operating Activities $5.540M
Capital Expenditures $356.0K
Free Cash Flow $5.184M
YoY Change 67.77%

Facts In Submission

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<div style="display: inline; font-family: times new roman; font-size: 10pt"><table style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top"> <td style="width: 0"></td> <td style="width: 0.25in"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">1.</div></td> <td style="text-align: justify">Organization and nature of operations</td> </tr> </table> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">ChinaNet Online Holdings, Inc. (the &#x201c;Company&#x201d;) was incorporated in the State of Texas in <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> April</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2006</div> and re-domiciled to become a Nevada corporation in <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> October</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2006.</div> On <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> June</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">26,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2009,</div> the Company consummated a share exchange transaction with China Net Online Media Group Limited (the &#x201c;Share Exchange&#x201d;), a company organized under the laws of British Virgin Islands (&#x201c;China Net BVI&#x201d;). As a result of the Share Exchange, China Net BVI became a wholly owned subsidiary of the Company and the Company is now a holding company, which, through certain contractual arrangements with operating companies in the People&#x2019;s Republic of China (the &#x201c;PRC&#x201d;), is engaged in providing advertising, precision marketing, online to offline <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">(O2O)</div> sales channel expansion and the related data services to small and medium enterprises (&#x201c;SMEs&#x201d;) and entrepreneurial management and networking services for entrepreneurs in the PRC.</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company&#x2019;s wholly owned subsidiary, China Net BVI was incorporated in the British Virgin Islands on <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> August</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">13,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2007.</div> On <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> April</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">11,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2008,</div> China Net BVI became the parent holding company of a group of companies comprised of CNET Online Technology Limited, a Hong Kong company (&#x201c;China Net HK&#x201d;), which established and is the parent company of Rise King Century Technology Development (Beijing) Co., Ltd., a wholly foreign-owned enterprise (&#x201c;WFOE&#x201d;) established in the PRC (&#x201c;Rise King WFOE&#x201d;). The Company refers to the transactions that resulted in China Net BVI becoming an indirect parent company of Rise King WFOE as the &#x201c;Offshore Restructuring.&#x201d;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">PRC regulations prohibit direct foreign ownership of business entities providing internet content, or ICP services in the PRC, and restrict foreign ownership of business entities engaging in the advertising business. To satisfy PRC laws and regulations, the Company conducts certain business in the PRC through its Variable Interest Entities (&#x201c;VIEs&#x201d;). Through a series of contractual agreements (the &#x201c;Contractual Agreements&#x201d; or &#x201c;VIE Agreements&#x201d;) between Rise King WFOE and Business Opportunity Online (Beijing) Network Technology Co., Ltd. (&#x201c;Business Opportunity Online&#x201d;), Beijing CNET Online Advertising Co., Ltd. (&#x201c;Beijing CNET Online&#x201d;) (collectively the &#x201c;PRC Operating Entities&#x201d; or the &#x201c;VIEs&#x201d;) and its common individual owners (the &#x201c;PRC Shareholders&#x201d; or the &#x201c;Control Group&#x201d;), the Company, through Rise King WFOE, secures significant rights to influence the PRC Operating Entities&#x2019; business operations, policies and management, approve all matters requiring shareholder approval, and the right to receive <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">100%</div> of the income earned by the PRC Operating Entities. In return, Rise King WFOE provides consulting services to the PRC Operating Entities. In addition, to ensure that the PRC Operating Entities and the PRC Shareholders perform their obligations under the Contractual Arrangements, the PRC Shareholders have pledged all of their equity interests in the PRC Operating Entities to Rise King WFOE. They also entered into an option agreement with Rise King WFOE which provides that at such time as when the current restrictions under PRC law on foreign ownership of Chinese companies engaging in the Internet content, information services or advertising business in China are lifted, Rise King WFOE <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> may</div> exercise its option to purchase the equity interests in the PRC Operating Entities, directly.</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Pursuant to the Contractual Agreements, all of the equity owners' rights and obligations of the VIEs were assigned to Rise King WFOE, which resulted in the equity owners lacking the ability to make decisions that have a significant effect on the VIEs, Rise King WFOE's ability to extract the profits from the operation of the VIEs and assume the residual benefits of the VIEs. Due to the fact that Rise King WFOE and its indirect parent are the sole interest holders of the VIEs, the Company included the assets, liabilities, revenues and expenses of the VIEs in its consolidated financial statements, which is consistent with the provisions of FASB Accounting Standards Codification (&quot;ASC&quot;) Topic <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">810</div> &#x201c;Consolidation&#x201d;, subtopic <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">10.</div></div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><div style="display: inline; color: windowtext">As of <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> December</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">31,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2016,</div> </div>the Company&#x2019;s VIE, Beijing CNET Online is a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">51%</div> shareholder of Shanghai Borongdingsi Computer Technology Co., Ltd. (&#x201c;Shanghai Borongdingsi&#x201d;), a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">10%</div> stockholder of Chuangshi Meiwei (Beijing) International Investment Management Co., Ltd. (&#x201c;Chuangshi Meiwei&#x201d;) and a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">10%</div> shareholder of Beijing Saturday Education Technology Co., Ltd. (&#x201c;Beijing Saturday&#x201d;). The Company&#x2019;s VIE, Business Opportunity Online is a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">51%</div> shareholder of Beijing Chuang Fu Tian Xia Network Technology Co., Ltd. (&#x201c;Beijing Chuang Fu Tian Xia&#x201d;), <div style="display: inline; color: windowtext">a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">19%</div> shareholder of Guohua Shiji (Beijing) Communication Co., Ltd. (&#x201c;Guohua Shiji&#x201d;), </div>the sole shareholder of Business Opportunity Online (Hubei) Network Technology Co., Ltd. (&#x201c;Business Opportunity Online Hubei&#x201d;), the sole shareholder of Beijing Chuang Shi Xin Qi Advertising Media Co., Ltd. (&#x201c;Beijing Chuang Shi Xin Qi&#x201d;), the sole shareholder of Beijing Hong Da Shi Xing Network Technology Co., Ltd. (&#x201c;Beijing Hong Da Shi Xing&#x201d;), the sole shareholder of Beijing Shi Ji Cheng Yuan Advertising Media Co., Ltd. (&#x201c;Beijing Shi Ji Cheng Yuan&#x201d;) and a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">23.18%</div> shareholder of Shenzhen City Mingshan Network Technology Co., Ltd. (&#x201c;Shenzhen Mingshan&#x201d;). Business Opportunity Online Hubei is the sole shareholder of Hubei CNET Advertising Media Co., Ltd. (&#x201c;Hubei CNET&#x201d;), the sole shareholder of Sheng Tian Network Technology (Hubei) Co., Ltd. (&#x201c;Sheng Tian Hubei&#x201d;) and a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">25.5%</div> shareholder of Zhao Shang Ke Network Technology (Hubei) Co., Ltd. (&#x201c;Zhao Shang Ke Hubei&#x201d;).</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <!-- Field: Page; Sequence: 79 --> <!-- Field: /Page --> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> December</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">31,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2016,</div> the Company also controls <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">two</div> wholly-owned investment holding companies, ChinaNet Investment Holding Ltd, a British Virgin Islands company (&#x201c;ChinaNet Investment BVI&#x201d;), and ChinaNet Online Holdings Co., Ltd., a PRC company (&#x201c;ChinaNet Online PRC&#x201d;). ChinaNet Investment BVI co-incorporated ChinaNet Online Holdings Korea (&#x201c;ChinaNet Korea&#x201d;) with <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">four</div> unaffiliated individuals and beneficially own <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">15%</div> equity interest in ChinaNet Korea. ChinaNet Online PRC co-incorporated ChinaNet Chuang Tou (Shenzhen) Co., Ltd. (&#x201c;ChinaNet Chuang Tou&#x201d;) with <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">two</div> unaffiliated individuals and beneficially own <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">19%</div> equity interest in ChinaNet Chuang Tou.</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company operated its business primarily in China through its PRC subsidiaries and PRC operating entities, or VIEs as discussed above.</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> August</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">18,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2016,</div> the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to effect a <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">one</div>-for-<div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">two</div> and <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">one</div>-half <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">(1</div> for <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2.5)</div> reverse stock split of the Company&#x2019;s common stock (the &#x201c;Common Stock&#x201d;), which became effective on <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> August</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">19,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2016</div> (the &#x201c;Reverse Stock Split&#x201d;). When the Reverse Stock Split became effective, each <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">two</div> and <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">one</div>-half shares of issued and outstanding Common Stock were converted into <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">one</div> newly issued and outstanding share of Common Stock. No fractional shares were issued in connection with the reverse stock split. Any fractional shares of Common Stock that would have otherwise resulted from the reverse stock split were rounded up to the nearest full share. The Reverse Stock Split did not change the par value of the Common Stock and had no effect on the number of authorized shares of Common Stock of the Company. As a result of the Reverse Stock Split, <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"></div><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">30,395,722</div></div> shares of Common Stock that were issued and outstanding at <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> August</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">19,</div> <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2016</div> was reduced to <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">12,158,542</div></div> shares of Common Stock (taking into account the rounding of fractional shares). All number of shares, share amounts and per share data have been retroactively restated to reflect the <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">1</div> for <div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">2.5</div> reverse stock split of the Company wherever applicable for all the periods presented.</div></div>
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<div style="display: inline; font-family: times new roman; font-size: 10pt"><div style="display: inline; font-family: times new roman; font-size: 10pt"><div style="display: inline; font-family: times new roman; font-size: 10pt"><table style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt;" cellspacing="0" cellpadding="0"><tr style="vertical-align: top"><td style="width: 21pt">c)</td> <td style="text-align: justify">Use of estimates</td> </tr> </table> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27.55pt; text-align: justify; text-indent: 0in">&nbsp;</div> <div style=" font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27.55pt; text-align: justify; text-indent: 0in">The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.</div></div></div></div>
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