SOURCE: One Horizon Group, Inc.

One  Horizon Group, Inc.

March 31, 2016 16:05 ET

One Horizon Group Announces Full Year 2015 Financial Results

LIMERICK, IRELAND--(Marketwired - Mar 31, 2016) - One Horizon Group, Inc. (NASDAQ: OHGI), a leading carrier-grade VoIP solution for mobile providers and smartphones, today announced its financial results for the year ending December 31, 2015.

Brian Collins, Founder and CEO of One Horizon, commented, "During 2015, we focused our attention on continuing to develop and license our leading mobile VoIP solutions to tier-1 and tier-2 operators globally as well as market our mobile VoIP brand in China, Aishuo. We are pleased to have achieved over 15 million downloads of Aishuo and double our quarter-on-quarter revenue since its launch in February of 2015. As a result, Aishuo revenues have increased for a 3rd consecutive 100% growth quarter accelerating the Company's monetization strategy. Going forward, we are confident we will continue to build our brand, subscribers and revenue."

One Horizon develops and licenses a proprietary VoIP platform ("Horizon Platform") that enables wireless carriers globally to provide customized and optimized voice and data services over any mobile, fixed and satellite network through an easy to install mobile App. Its SmartPacket™ technology underlying the Horizon Platform enables greater bandwidth efficiency and longer battery life while talking. One Horizon targets emerging markets with high population densities, high penetration of mobile phones, congested mobile networks, and high growth in smartphone adoption. Mobile operators can pay an annual software licensing fee to the Company or share the profits of their deployment with Company in a revenue share arrangement.

Operational Highlights to Date

  • Mobile VoIP application in China, Aishuo, has achieved over 15 million downloads.

  • Aishuo quarter-on-quarter revenue doubled since its launch in February 2015 putting the company growth trajectory 18 months ahead of its forecasted targets to acquire 15 million app subscribers over a two-year period.

  • Continued its focus on emerging markets with high population densities, high penetration of mobile phones, congested mobile cellular networks and high growth in the adoption of smartphones, specifically:

    • Smart Communications, Inc. launched a pre-paid VoIP Smartphone App using One Horizon's optimized software platform.

    • One Horizon and Singapore Telecommunications Limited ("SingTel") signed agreement to deliver optimized VoIP to smartphones for mobile satellite users.

    • Smartfren Telecom, Tbk in Indonesia commenced the rollout of a pre-paid VoIP Smartphone App using One Horizon's software platform. 

    • Initiated sales and marketing strategy in the U.S. and Latin America focused on pilot programs with key mobile telcos, affiliate marketing programs, enterprise solutions, and continued monetization of current telco accounts.

  • The Company was showcased by Microsoft Corporation for its new VoIP as a Service platform hosted in the Microsoft Azure cloud. The Company has already signed numerous new operator deals including with Globecomm Asia Pte. Ltd, a leading provider of voice and data connectivity over satellite, that are hosted in the cloud. Such distributions are foreseen to drive company revenues as they ramp-up their operational deployments.

  • The Company took steps during this pivotal year to make a general provision of $5.6 million in long-term accounts receivables versus $180,000 in 2014 due to the uncertainty of the timing of collections that are expected and contractually due.

  • The Company was granted its first VoIP patent by the United States Patent and Trade Office (USPTO) of US Patent (No.: US 9,137,729 B2).

Full Year 2015 Financial Results

Our revenue for the year ended December 31, 2015 was approximately $1.5 million as compared to approximately $5.1 million for the year ended December 31, 2014, a decrease of roughly $3.6 million or 70%. The decrease was primarily due to the shift in business to concentrate on the roll out of the B2C business in China through the Aishuo app. This roll out has gained us over 15 million downloads since it's in launch in February 2015 through to the date of this report. It has greatly increased our exposure and overall recognition which allows us to take market share and acquire customers in what the Company believes will be an increasingly competitive user marketplace. During the quarter ended December 31, 2015 the revenue by Aishuo grew to just over $30,000 approximately as compared to $16,000 and $7,000 approximately in the third and second quarters in 2015 respectively. Management expects further growth in this sector of revenue.

Our Cost of revenue for hardware was approximately $0.1 million for the year ended December 31, 2015, compared to approximately $0.4 million for the year ended December 31, 2014. Our cost of sales is primarily composed of the costs of ancillary hardware sold with the Horizon Platform together with the amortization of software development costs. In addition, we recognize costs relating to the provision of hardware when a customer acquires such ancillary hardware.

The B2B business continues and one new global exchange was sold in the first quarter of 2015. We have converted most of the B2B partnership into a revenue share basis and we are starting to see some payments from these operating companies. For customers with existing accounts receivable balances, revenue share basis payments are first applied to reduce their receivable balance before additional revenue is recorded. The strategic shift being executed by the Company is in-line with longer term development goals and management believes it will position the Company for a greater long-term shareholder value creation.

Gross profit before the amortization charge, a non-GAAP measure, for the year ended December 31, 2015 was approximately $1.4 million as compared to $4.7 million for the previous year. Our adjusted gross profits decreased by 70% from 2014 to 2015. The decrease was mainly due to the reduced revenue as set forth above herein. However, management anticipates gross profit to increase with the growth of our business and the global smartphone market as well as our established expansion plan of entering into markets with high population density, high penetration of mobile phones, congested mobile cellular networks and high adoption of smartphones.

Operating expenses including general and administrative expenses, allowance for doubtful accounts, depreciation and restated and development expenses were approximately $9.5 million or 633% of sales for the year ended December 31, 2015, as compared to approximately $5.1 million, or 99% of sales for the same period in 2014, an increase of $4.4 million. The significant increase in expenses arose due to the additional provision for doubtful accounts of $5.6 million in the year ended December 31, 2015 compared to $0.3 million for the same period in 2014. Management determined this additional allowance was necessary in their fourth quarter analysis of collectability. This increase arose due to the change in collection policy on certain customers to receiving payments under a revenue share arrangement. As a result of this change the Company is unable to predict with certainty of the timing of long-term future receipts and has therefore decided to fully provide for the balances expected beyond 12 months from the balance sheet date. The provision will be reduced if customer payments are received against these provided balances. General and administrative expenses were approximately $3.3 million for the year ended December 31, 2015 as compared to approximately $4.2 million for the same period in 2014. The reduction was mainly due to the reduction in staff and office costs in Switzerland. The resources have been replaced in lower cost jurisdictions in Ireland and China.

Net loss for the year ended December 31, 2015 was approximately $11.0 million as compared to a net loss of $2.0 million for the same period in 2014. Going forward, management expects to generate a growth in revenue based on the roll out of the products primarily in the China, Asia and Latin America regions. Going forward, management believes the Company will continue to grow the business and increase profitability if we are successful in selling the Horizon B2B solution to new telecommunications company customers globally and the B2C service to end users.

Financial Condition

The company had $1.7 million in cash as of December 31, 2015, which includes proceeds from the issuance of common stock of $2.9 million that closed in August 2015. The Company has $15.9 million of assets and $9.9 million shareholders' equity as of December 31, 2015. Cash outflows from operations were $2.1 million for the twelve months ended December 31, 2015.

About One Horizon Group, Inc.

One Horizon Group, Inc. (NASDAQ: OHGI) a leading developer and operator of carrier-grade optimized VoIP solutions for mobile telcos and enterprises. The company currently services over 15 million subscribers across 20 licensed brands worldwide. The technology is one of the world's most bandwidth-efficient mobile VoIP, messaging and advertising platforms for smartphones. Founded in 2012, the Company now has operations in Ireland, Switzerland, the United Kingdom, China, India, Singapore, Hong Kong and Latin America. For more information on the Company please visit http://www.onehorizongroup.com.

Safe Harbor Statement

This news release may contain "forward-looking" statements. These forward-looking statements are only predictions and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ from those in the forward looking-statements. Potential risks and uncertainties include such factors as uncertainty of consumer demand for the Company's products, as well as additional risks and uncertainties that are identified and described in Company's SEC reports. Actual results may differ materially from the forward-looking statements in this press release. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. The Company does not undertake, and it specifically disclaims, any obligation to update any forward-looking statements to reflect occurrences, developments, events or circumstances after the date of such statement.

   
ONE HORIZON GROUP, INC.  
Consolidated Balance Sheets  
December 31, 2015 and 2014  
(in thousands, except share data)  
   
    2015     2014  
                 
Assets                
                 
Current assets:                
  Cash   $ 1,772     $ 3,172  
  Accounts receivable, net     3,560       9,072  
  Other assets     402       576  
  Total current assets     5,734       12,820  
                 
Property and equipment, net     96       212  
Intangible assets, net     9,823       10,960  
Investment     18       19  
Debt issue costs     263       395  
Total assets   $ 15,934     $ 24,406  
                 
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable   $ 223     $ 556  
  Accrued expenses     220       360  
  Accrued compensation     18       15  
  Income taxes     90       93  
  Amount due to related parties, current portion     -       600  
  Current portion of long-term debt     5       73  
  Total current liabilities     556       1,697  
                 
Long-term liabilities                
  Long term debt, net of current portion     -       108  
  Amount due to related parties, net of current portion     2,354       2,598  
  Convertible debenture     2,899       2,598  
  Deferred income taxes     215       235  
  Mandatorily redeemable preferred shares     73       90  
Total liabilities     6,097       7,326  
                 
Stockholders' Equity                
One Horizon Group, Inc. stockholders' equity                
Preferred stock: $0.0001 par value, authorized 50,000,000; issued and outstanding 170,940 shares     1       1  
Common stock: $0.0001 par value, authorized 200,000,000 shares, issued and outstanding 35,147,283 shares (2014: 33,281,069);     3       3  
Additional paid-in capital     36,070       32,163  
Deferred Compensation     -       (214 )
Retained Earnings (Deficit)     (26,201 )     (15,227 )
Accumulated other comprehensive income     (36 )     63  
  Total One Horizon Group, Inc. stockholders' equity     9,837       16,789  
Non-controlling interest     -       291  
  Total stockholders' equity     9,837       17,080  
                 
Total liabilities and stockholders' equity   $ 15,934     $ 24,406  
                 
                 
                 
ONE HORIZON GROUP, INC.  
Consolidated Statements of Operations  
For the years ended December 31, 2015 and 2014  
(in thousands, except per share data)  
   
    Year ended December 31,  
    2015     2014  
                 
Revenue   $ 1,532     $ 5,122  
                 
Cost of revenue                
  Hardware     116       362  
  Amortization of intangibles     2,111       1,890  
      2,227       2,252  
Gross margin     (695 )     2,870  
                 
  Expenses:                
  General and administrative     3,326       4,374  
  Increase in Allowance for doubtful accounts     5,562       180  
  Depreciation     67       146  
  Research and development     579       379  
      9,534       5,079  
                 
Loss from operations     (10,229 )     (2,209 )
                 
Other income and expense:                
  Interest expense     (722 )     (16 )
  Interest expense - related parties     (2 )     36  
  Gain on settlement of lease     36       -  
  Foreign exchange     (29 )     8  
  Interest income     2       2  
      (715 )     30  
                 
Loss from continuing operations before income taxes     (10,944 )     (2,179 )
                 
Income taxes (recovery)     (20 )     (210 )
Net loss for the year     (10,924 )     (1,969 )
                 
Loss attributable to non-controlling interest     (50 )     (105 )
Net loss for the year attributable to One Horizon Group, Inc.     (10,874 )     (1,864 )
                 
Less: Preferred dividends     (100 )     (44 )
                 
Net loss attributable to One Horizon Group, Inc. Common stockholders   $ (10,974 )   $ (1,908 )
                 
Earnings per share                
                 
Basic net loss per share   $ (0.32 )   $ (0.06 )
                 
Diluted net loss per share   $ (0.30 )   $ (0.06 )
                 
Weighted average number of shares outstanding                
  Basic and diluted     33,996       32,981  
                   

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