One Horizon Group Announces Second Quarter 2015 Financial Results

LIMERICK, IRELAND--(Marketwired - Aug 19, 2015) -  One Horizon Group, Inc. (NASDAQ: OHGI) ("One Horizon", "We" or the "Company"), which operates its own Chinese retail VoIP service, branded Aishuo, and develops and licenses a bandwidth efficient mobile voice over Internet Protocol ("VoIP") platform for smartphones, today announced financial and operational results for the three and six months ended June 30, 2015.

Operation Highlights

• Aishuo App builds on success and continues rapid expansion:
  • Logged over 1.6 million downloads as of June 30, 2015 and over 7 million downloads as of today;
  • Now supports all of the major Chinese mobile payment platforms including China UnionPay, Alibaba's Alipay, Paypal and Tencent's Wechat Wallet to support a range of premium Aishuo app services;
  • Now available for download on iTunes, in addition to over 40 other smartphone App stores;
  • Has been further optimized for the Xiaomi smartphone model range, China's biggest selling smartphone brand;
  • Agreement with Nanjing Lin Ren Communications, a manufacturer of Smartphones, Phablets and Tablets to pre-install Aishuo App in Android devices prior to shipment; and
  • Agreement to be the exclusive supplier of Voice over IP services using the Aishuo platform to KeyIdea Information Technology Co., Ltd, a renowned manufacturer of satellite equipment in China, for its new maritime satellite service.
• Smartfren Telekom Tbk in Indonesia expanded its service by adding 400,000 new telephone numbers to the SmartCall App

"The success of our Aishuo App has continued to build momentum in the second quarter," stated Founder and CEO Brian Collins. "With Aishuo now available across a wide range of mobile storefronts, support from all major Chinese mobile payment platforms, and exclusive agreements beginning to ramp up, we are confident that Aishuo will drive multiple revenue streams through the remainder of 2015 and beyond. In conjunction, successful and expanding partnerships with Smartfren and other Tier 1 carriers for our validated technology are also supporting international adoption and revenue growth."

Second Quarter 2015 Financial Results

Revenue for the three months ended June 30, 2015 was $0.1 million compared to $1.3 million in the same period in 2014. The decrease was primarily due to the shift in the business to concentrate on the roll out of the B2C business in China through the Aishuo App. This roll out has gained over 7 million downloads, has greatly increased One Horizon's exposure and overall recognition, and has allowed the Company to take market share and acquire customers in what the Company believes will be an increasingly competitive user marketplace.

Gross margin for the second quarter of 2015 was ($0.5) million as compared to $0.8 million for the three months ended June 30, 2014. The decrease was mainly due to the reduced revenue. Moving forward, the management expect that gross profit will begin to increase with the growth in the Company's business in China.

Operating expenses for the three months ended June 30, 2015 declined to $0.7 million from $1.2 million during the same period in 2014. The Company does not expect operating costs to rise significantly until revenue grows following the increase of end users. 

Net loss and net loss per share attributable to common stockholders for the three months ended June 30, 2015 were $1.6 million and $0.05 per share, respectively, compared to a net loss of $0.5 million and a net loss per share of $0.02 during the same period in 2014. The weighted average shares outstanding were 33.3 million for the three months ended June 30, 2015.

Six Months 2015 Financial Results

Revenues for the six months ended June 30, 2015 were $0.9 million compared to $2.5 million in the same period in 2014. Gross margin was ($0.3) million and $1.4 million for the first six months of 2015 and 2014, respectively.

Operating expenses were $1.9 million for the first half of 2015 compared to $2.4 million in the first half of 2014.

Net loss and net loss per share attributable to common stockholders for the six months ended June 30, 2015 were $2.5 million and $0.07, respectively, compared to a net loss of $0.9 million and a net loss per share of $0.03 during the same period in 2014. The weighted average shares outstanding increased to 33.3 million for the six months ended June 30, 2015 from 32.9 million for the first half year of 2014.

Financial Condition

The Company had $0.9 million in cash as of June 30, 2015. The Company had $21.8 million of assets and $15.3 million stockholders' equity as of June 30, 2015. Cash outflows from operations were $1.0 million for the six months ended June 30, 2015.

On August 10, 2015, One Horizon closed a public offering of $3 million of 1,714,286 shares of common stock and warrants to purchase up to an aggregate of 857,143 shares of its common stock at a combined offering price of $1.75 per share and accompanying warrant. The warrants will have a per share exercise price of $2.50, are exercisable immediately and will expire three years from the date of issuance. In connection with the offering, the Company granted the Underwriters an option for a period of 45 days to purchase up to 257,142 additional shares of common stock and/or 128,571 additional warrants, in each case, solely to cover over-allotments, if any. The net proceeds to the Company from the Offering are approximately $2.64 million, or approximately $3.054 million if the Underwriters exercise in full their option to purchase additional shares and Warrants, after deducting underwriting discounts and commissions and estimated Offering expenses payable by the Company.

About One Horizon Group, Inc.
One Horizon Group Inc.'s business is to optimize communications over the Internet through its wholly owned subsidiary, Horizon Globex GmbH, Zug, which develops and markets one of the world's most bandwidth-efficient mobile voice over Internet Protocol (VoIP) platforms for smartphones, and also offers a range of other optimized data Applications including messaging and mobile advertising. The company controls and operates the Aishuo mobile VoIP service in China. Horizon Globex GmbH is an ISO 9001 and ISO 20000-1 certified company. The Company has operations in Ireland, Switzerland, the United Kingdom, China, India, Singapore and Hong Kong. For more information on the Company, its products and services, 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.
Condensed Consolidated Balance Sheets
June 30, 2015 and December 31, 2014
(in thousands, except share data)
(unaudited)
			June 30,				December 31,
			2015				2014
Assets
Current assets:
	Cash		$	870			$	3,172
	Accounts receivable (net), currrent portion			5,448				9,072
	Other assets			569				576
	Total current assets			6,887				12,820
Accounts receivable (net), net of current portion				3,456				-
Property and equipment, net				126				212
Intangible assets, net				11,006				10,960
Investment				19				19
Debt issue costs				329				395
Total assets			$	21,823			$	24,406
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	164			$	556
	Accrued expenses			382				360
	Accrued compensation			15				15
	Income taxes			94				93
	Amounts due to related parties			100				600
	Current portion of long-term debt			10				73
	Total current liabilities			765				1,697
Long-term liabilities
	Long term debt, net of current portion			-				108
	Amount due to related parties			2,488				2,598
	Convertible debenture			2,748				2,598
	Deferred income taxes			190				235
	Mandatorily redeemable preferred shares			90				90
Total liabilities				6,281				7,326
Equity
Preferred stock:
	$0.0001 par value, authorized 50,000,000; issued and outstanding 170,940 shares (December 2014 - 170,940)			1				1
Common stock:
	$0.0001 par value, authorized 200,000,000 shares issued and outstanding 33,281,069 shares (December 2014 - 33,281,069)			3				3
Additional paid-in capital				32,442				32,163
Deferred compensation				(107	)			(214	)
Retained Earnings (Deficit)				(17,758	)			(15,227	)
Accumulated other comprehensive income				706				63
Total One Horizon Group, Inc., stockholders' equity				15,287				16,789
Non-controlling interest				255				291
Total Equity				15,542				17,080
Total liabilities and equity			$	21,823			$	24,406
See accompanying notes to condensed consolidated financial statements.

ONE HORIZON GROUP, INC.
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2015 and 2014
(in thousands, except per share data)
(unaudited)
			Three Months ended June 30,								Six Months ended June 30,
			2015				2014				2015				2014
Revenue			$	108			$	1,304			$	853			$	2,489
Cost of revenue	- Hardware			47				66				108				128
	- Amortization of software development costs			580				483				1,092				969
				627				549				1,200				1,097
Gross margin				(519	)			755				(347	)			1,392
Expenses:
	General and administrative			729				1,190				1,814				2,318
	Depreciation			16				46				36				94
				745				1,236				1,850				2,412
Loss from operations				(1,264	)			(481	)			(2,197	)			(1,020	)
Other income and expense:
	Interest expense			(284	)			(20	)			(374	)			(20	)
	Interest expense - related parties			(1	)			(35	)			(1	)			(75	)
	Foreign exchange			(76	)			(10	)			9				(19	)
	Interest income			-				1				1				2
				(361	)			(64	)			(365	)			(112	)
Income (loss) before income taxes				(1,625	)			(545	)			(2,562	)			(1,132	)
Income taxes (recovery) - deferred				(45	)			-				(45	)			(156	)
Net Income (Loss) for the period				(1,580	)			(545	)			(2,517	)			(976	)
Net income (loss) attributable to the non-controlling interest				(31	)			(22	)			(36	)			(65	)
Net Income (Loss) for the period atrributable to One Horizon Group, Inc.				(1,549	)			(523	)			(2,481	)			(911	)
Less: Preferred Dividends				(25	)							(50	)
Net loss attributable to One Horizon Group, Inc. Common stockholders			$	(1,574	)		$	(523	)		$	(2,531	)		$	(911	)
Earnings per share attributable to One Horizon Group, Inc. shareholders
	Basic net loss per share		$	(0.05	)		$	(0.02	)		$	(0.07	)		$	(0.03	)
	Diluted net loss per share		$	(0.05	)		$	(0.02	)		$	(0.07	)		$	(0.03	)
Weighted average number of shares outstanding
	Basic and diluted			33,281				32,935				33,281				32,935
See accompanying notes to condensed consolidated financial statements.

ONE HORIZON GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income
For the three and six months ended June 30, 2015 and 2014
(in thousands)
(unaudited)
			Three Months ended June 30,								Six Months ended June 30,
			2015				2014				2015				2014
Net income (loss)			$	(1,580	)		$	(545	)		$	(2,517	)		$	(976	)
Other comprehensive income:
Forgin currency translation adjustment gain (loss)				624				(84	)			643				(65	)
Comprehensive income (loss)				(956	)			(629	)			(1,874	)			(1,041	)
	Comprehensive income (loss) attributable to the non-controlling interest			(31	)			(22	)			(36	)			(65	)
Total comprehensive income (loss)			$	(925	)		$	(607	)		$	(1,838	)		$	(976	)
See accompanying notes to condensed consolidated financial statements

ONE HORIZON GROUP, INC.
Consolidated Statement of Equity
For the six months ended June 30, 2015
(in thousands)
(unaudited)

		Preferred Stock					Common Stock					Additional Paid-in Capital			Deferred Compensation				Retained Earnings (Deficit)				Accumulated Other Comprehensive Income (Loss)			Non-controlling Interest				Total Equity
		Number of Shares		Amount			Number of Shares		Amount
Balance December 31, 2014		171		$	1		33,282		$	3		$	32,163		$	(214	)		$	(15,227	)		$	63		$	291			$	17,080
Net income (loss)																				(2,481	)						(36	)			(2,517	)
Foreign currency translations																								643							643
Preferred dividends																				(50	)										(50	)
Amortization of deferred compensation																107															107
Options issued for services													279																		279
Balance June 30, 2015		171		$	1		33,282		$	3		$	32,442		$	(107	)		$	(17,758	)		$	706		$	255			$	15,542

See accompanying notes to condensed consolidated financial statements

ONE HORIZON GROUP, INC.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2015 and 2014
(in thousands)
(unaudited)
					2015				2014
Cash provided by (used in) operating activities:
Operating activities:
	Net loss for the period				$	(2,481	)		$	(911	)
	Adjustment to reconcile net loss for the period to net cash provided by (used in) operating activities:
		Depreciation of property and equipment				36				94
		Amortization of intangible assets				1,092				969
		Amortization of debt issue costs				66				-
		Amortization of beneficial conversion feature				51				-
		Amortization of debt discount				99				-
		Amortization of deferred compensation				107				-
		Common shares issued for services received				-				65
		Options issued for services				279				258
		Net income (loss) attributable to non-controlling interest				(36	)			(65	)
		Changes in operating assets and liabilities:
			Accounts receivable			168				(674	)
			Other assets			7				(715	)
			Accounts payable and accrued expenses			(370	)			276
			Deferred income taxes			(45	)			(156	)
	Net cash provided by (used in) operating activities					(1,027	)			(859	)
Cash used in investing activities:
	Acquisition of intangible assets					(560	)			(637	)
	Acquisition of property and equipment					(1	)			(49	)
	Proceeds from disposition of property and equipment					32				-
	Net cash (used in) investing activities					(529	)			(686	)
Cash flow from financing activities:
	Increase (decrease) in long-term borrowing, net					(171	)			(30	)
	Advances from (repayments to) related parties, net					(610	)			-
	Dividends paid					(50	)			-
	Net cash provided by (used in) financing activities					(831	)			(30	)
Increase (decrease) in cash during the period						(2,387	)			(1,575	)
Foreign exchange effect on cash						85				(71	)
Cash at beginning of the period						3,172				2,070
Cash at end of the period					$	870			$	424
See accompanying notes to condensed consolidated financial statements.

ONE HORIZON GROUP, INC.
Condensed Consolidated Statements of Cash Flows (continued)
For the six months ended June 30, 2015 and 2014
(in thousands)
(unaudited)
Supplementary Information:
			2015			2014
	Interest paid		$	76		$	-
	Income taxes paid			-			-
	Non-cash transactions:
See accompanying notes to condensed consolidated financial statements.