SOURCE: One Horizon Group, Inc.

One  Horizon Group, Inc.

November 16, 2015 08:01 ET

One Horizon Group Announces Third Quarter 2015 Financial and Operational Results, Provides Monetization Update

LIMERICK, IRELAND--(Marketwired - Nov 16, 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 nine months ended September 30, 2015. The Company also provided a monetization update with a focus on its Aishuo App business.

Operational Highlights for the Quarter

  • Quarter on quarter revenue growth of 195% from $108k to $319k.
  • Signed a new New York based licensee, Roam Frii LLC (roamfrii.com), which officially launched its Wi-Fi calling platform "Roam Frii" during the quarter.
  • In September, the Company successfully completed a $3 million financing.
  • Initiation of analyst coverage by Ashok Kumar, Head of Technology Research with Aegis Capital Corporation.

Aishuo Highlights for the Quarter

  • As of November 13 logged over 11 million downloads of Aishuo, representing a quarter over quarter growth of 57%. Aishuo is now ~75% of the way to the 24 month download goal after launching 9 months ago.
  • Aishuo's quarter over quarter revenue growth of 129% from $7k to $16k in a marketplace dominated by free app-to-app calls giving an early indication of the revenue opportunities for the Company's high quality mobile VoIP service in China as it grows through 2016 and 2017.
  • During the quarter Aishuo added services and features to drive adoption and growth:
    • Voicemail service: If a call arrives when the Aishuo user is busy or offline, the caller will receive a personal greeting recorded by the user in the App. The caller can proceed to leave a voicemail regardless of what phone the caller or user is using. The voicemail will be delivered immediately when the user is available.
    • Multi-User Family-Phone: A support service allowing a whole family to share one registered account on separate devices without any limitation on the number of members. Within a multi-user family-phone service, family members can be accessed on their own devices by one rented fixed line telephone number from inside Aishuo and can share call credit amongst each other.
    • Capability to continue an Aishuo call while moving between 3G and Wi-Fi: Seamless call radio hand-off as standard on Apple iOS and Android Apps. Traditional Voice over IP services will drop a telephone call when the Internet connection is replaced.
  • Signed cooperation agreement to trial Aishuo with YTO Express, China's largest logistics company with over 12,500 pick-up points with over 180,000 employees servicing more than 2,300 cities in China.

"During the third quarter, and since our launch in February, we have seen tremendous growth in Aishuo downloads, and coupled with the doubling of Aishuo's quarterly revenues we are seeing early indications of how our unique mobile VoIP service is being adopted," said Founder and CEO Brian Collins. "Being so far ahead of pace, without exceeding our cost framework and without diluting existing ownership, has positioned us well to exceed our initial internal estimates of market share, monetization, and most importantly, total shareholder return.

"Downloads and in-app credit-purchases are being driven by our strong VoIP technology feature set which continues to evolve, now with voicemail, multi-user family support, and 3G to Wi-Fi transition capabilities. Our platform in which users can pay for high-quality calls to landlines and mobiles, while having an individual number for reciprocal communication, is a key differentiator. This feature is nearly unprecedented in China and we're already seeing the effects of this, even without being entirely focused on the mid to lower monetization funnel. These downloads represent a significant user base for us to continue to monetize and drive multiple revenue streams as we scale up our complementary paid services to the App.

"Accomplishing our downloads goal, while still in the early stages of the space's maturation, is paramount to our long-term success as we feel users are cheaper to acquire early in spatial development, with higher retention longer-term. We realize we are still in user aggregation mode and that the focus is still very much at the top of the monetization funnel. We are optimistic that as our users transition down the monetization funnel, we will realize at least industry standard annual ARPU. At only industry standard ARPU our monetization efforts of Aishuo as-is, without further revenue channels being leveraged or further product roadmap development, will very clearly distinguish our app and differentiate our broader model from those in the space. High and increasing download rates speak well to the prospect of generating strong monetization figures, and we will remain focused on maintaining both. Again, being well ahead of download pace will allow us more time to focus on monetization by the completion of our stated 24 month expansion period.

"Finally, our success is also being supported by the high caliber partnerships and licensees who are utilizing our technology both in the US and abroad. Moving forward, we will continue to focus on adding new features to attract and convert users to paid subscribers, as well as expand our list of partnerships to solidify our growth."

Third Quarter 2015 Financial Results
Revenue for the three months ended September 30, 2015 was $0.3 million compared to $0.1 million during the three months ended June 30, 2015, an increase over greater than 100%. Revenue was down from $1.6 million in three months ended September 30, 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 11 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. Chinese driven revenues were up more than 100% sequentially in the three months ended September 30, 2015 to ~$16,000 from ~$7,000 during the three months ended June 30, 2015, the first quarter of monetization availability from Aishuo. Management expects Aishuo revenue to continue to accelerate.

Gross profit for the third quarter of 2015 was ($0.2) million as compared to $0.9 million for the three months ended September 30, 2014. The decrease was mainly due to the reduced revenue. The gross profit reflects the amortization charge relating to the capitalized software development costs of approximately $483,000 and $477,000 for the quarters ended September 30, 2015 and September 30, 2014 respectively. Moving forward, management expects that gross profit will begin to increase with the growth in the Company's business in China.

Operating expenses for the three months ended September 30, 2015 and 2014 were approximately $1.3 million. 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 September 30, 2015 were $1.6 million and $0.05 per share, respectively, compared to a net loss of $0.4 million and a net loss per share of $0.01 during the same period in 2014. The weighted average shares outstanding were 34.6 million for the three months ended September 30, 2015.

Nine Months 2015 Financial Results
Revenues for the nine months ended September 30, 2015 were $1.2 million compared to $4.1 million in the same period in 2014. Gross profit was ($0.5) million and $2.3 million for the first nine months of 2015 and 2014, respectively. The gross profit reflects the amortization charge relating to the capitalized software development costs of approximately $1.575 million and $1.466 million for the nine months ended September 30, 2015 and September 30, 2014 respectively.

Operating expenses were $3.2 million for the first nine months of 2015 compared to $3.7 million in the first nine months of 2014.

Net loss and net loss per share attributable to common stockholders for the nine months ended September 30, 2015 were $4.1 million and $0.12, respectively, compared to a net loss of $1.3 million and a net loss per share of $0.04 during the same period in 2014. The weighted average shares outstanding increased to 33.6 million for the nine months ended September 30, 2015 from 33.0 million for the first nine months of 2014.

Financial Condition
The Company had $2.6 million in cash as of September 30, 2015. The Company had $22.9 million of assets and $16.3 million stockholders' equity as of September 30, 2015. Cash outflows from operations were $1.7 million for the nine months ended September 30, 2015.

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 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    
September 30, 2015 and December 31, 2014    
(in thousands, except share data)    
(unaudited)    
         
  September 30,   December 31,  
  2015   2014  
             
Assets            
             
Current assets:            
  Cash $ 2,605   $ 3,172  
  Accounts receivable (net), currrent portion   3,811     9,072  
  Other assets   487     576  
  Total current assets   6,903     12,820  
             
Accounts receivable (net), net of current portion   5,127     -  
Property and equipment, net   108     212  
Intangible assets, net   10,417     10,960  
Investment   19     19  
Debt issue costs   296     395  
Total assets $ 22,870   $ 24,406  
             
Liabilities and Stockholders' Equity            
             
Current liabilities:            
  Accounts payable $ 198   $ 556  
  Accrued expenses   369     360  
  Accrued compensation   15     15  
  Income taxes   94     93  
  Amounts due to related parties   -     600  
  Current portion of long-term debt   7     73  
  Total current liabilities   683     1,697  
             
 Long-term liabilities            
  Long term debt, net of current portion   -     108  
  Amount due to related parties   2,521     2,598  
  Convertible debenture   2,824     2,598  
  Deferred income taxes   190     235  
  Mandatorily redeemable preferred shares   90     90  
Total liabilities   6,308     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 35,147,283 shares (December 2014 - 33,281,069)   3     3  
Additional paid-in capital   35,500     32,163  
Deferred compensation   (53 )   (214 )
Retained Earnings (Deficit)   (19,386 )   (15,227 )
Accumulated other comprehensive income   256     63  
Total One Horizon Group, Inc., stockholders' equity   16,321     16,789  
Non-controlling interest   241     291  
Total Equity   16,562     17,080  
Total liabilities and equity $ 22,870   $ 24,406  
             
    -     -  
 
 
ONE HORIZON GROUP, INC.        
Condensed Consolidated Statements of Operations        
For the three and nine months ended September 30, 2015 and 2014        
(in thousands, except per share data)        
(unaudited)         
                   
    Three Months ended September 30,   Nine Months ended September 30,  
    2015   2014   2015   2014  
                           
                           
Revenue   $ 319   $ 1,641   $ 1,172   $ 4,130  
                           
Cost of revenue - Hardware   -     285     108     413  
  - Amortization of software development costs   483     477     1,575     1,446  
      483     762     1,683     1,859  
                           
Gross margin     (164 )   879     (511 )   2,271  
                           
Expenses:                          
  General and administrative   1,182     1,134     2,674     3,198  
  Depreciation   16     26     52     120  
  Research and Development   144     125     466     379  
      1,342     1,285     3,192     3,697  
                           
Income from operations     (1,506 )   (406 )   (3,703 )   (1,426 )
                           
Other income and expense:                          
  Interest expense   (177 )   -     (551 )   (2 )
  Interest expense - related parties   (1 )   (14 )   (2 )   (107 )
  Foreign exchange   67     (5 )   76     (24 )
  Interest income   -     -     1     2  
      (111 )   (19 )   (476 )   (131 )
                           
Income (loss) before income taxes   (1,617 )   (425 )   (4,179 )   (1,557 )
                           
Income taxes (recovery) - deferred   -     (54 )   (45 )   (210 )
                           
Net Income (Loss) for the period   (1,617 )   (371 )   (4,134 )   (1,347 )
                           
Net income (loss) attributable to the non-controlling interest   (14 )   (23 )   (50 )   (88 )
                           
Net Income (Loss) for the period atrributable to One Horizon Group, Inc.   (1,603 )   (348 )   (4,084 )   (1,259 )
                           
Less: Preferred Dividends     (25 )   (19 )   (75 )   (19 )
                           
Net loss attributable to One Horizon Group, Inc. Common stockholders $ (1,628 ) $ (367 ) $ (4,159 ) $ (1,278 )
                           
                           
                           
Earnings per share attributable to One Horizon Group, Inc. shareholders                        
                           
  Basic net income per share $ (0.05 ) $ (0.01 ) $ (0.12 ) $ (0.04 )
                           
  Diluted net income per share $ (0.05 ) $ (0.01 ) $ (0.12 ) $ (0.04 )
                           
Weighted average number of shares outstanding                        
  Basic and diluted   34,628     33,029     33,608     32,966  
                           
                           
   
   
ONE HORIZON GROUP, INC.  
Condensed Consolidated Statements of Comprehensive Income  
For the three and nine months ended September 30, 2015 and 2014  
(in thousands)  
(unaudited)  
    Three Months ended September 30,     Nine Months ended September 30,  
    2015     2014     2015     2014  
                         
                         
Net income (loss) $ (1,617 ) $ (371 ) $ (4,134 ) $ (1,347 )
Other comprehensive income:                        
Forgin currency translation adjustment gain (loss)   (450 )   (674 )   193     (739 )
Comprehensive income (loss)   (2,067 )   (1,045 )   (3,941 )   (2,086 )
                         
  Comprehensive income (loss) attributable to the non-controlling interest   (14 )   (23 )   (50 )   (88 )
                         
Total comprehensive income (loss) $ (2,053 ) $ (1,022 ) $ (3,891 ) $ (1,998 )
                         
                         
   
   
ONE HORIZON GROUP, INC.  
Consolidated Statement of Equity  
For the nine months ended September 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)                                   (4,084 )           (50 )   (4,134 )
Foreign currency translations                                           193           193  
Preferred dividends                                   (75 )                 (75 )
                                                           
Amortization of deferred compensation                             161                         161  
                                                           
issuance of common shares for cash           1,866     -     3,266                               3,266  
                                                           
Options issued for services                       462                               462  
                                                           
Costs to raising of share issuance                       (391 )                             (391 )
                                                           
Balance September 30, 2015 171   $ 1   35,148   $ 3   $ 35,500   $ (53 ) $ (19,386 )   $ 256   $ 241   $ 16,562  
                                                           
                                                           
   
   
ONE HORIZON GROUP, INC.  
Condensed Consolidated Statements of Cash Flows  
For the nine months ended September 30, 2015 and 2014  
(in thousands)  
(unaudited)  
             
    2015     2014  
               
               
Cash provided by (used in) operating activities:              
               
               
Operating activities:              
  Net income for the period $ (4,084 )   $ (1,259 )
               
  Adjustment to reconcile net income for the period to net cash provided by (used in) operating activities:              
    Depreciation of property and equipment   52       120  
    Amortization of intangible assets   1,575       1,446  
    Increase in allowance for doubtful accounts   200       130  
    Amortization of debt issue costs   99       -  
    Amortization of beneficial conversion feature   76       -  
    Amortization of debt discount   150       -  
    Amortization of deferred compensation   161       -  
    Common shares issued for services received   -       120  
    Options issued for services   462       387  
    Net income (loss) attributable to non-controlling interest   (50 )     (88 )
    Changes in operating assets and liabilities:              
      Accounts receivable   (66 )     (1,782 )
      Other assets   89       (482 )
      Accounts payable and accrued expenses   (349 )     1,590  
      Deferred income taxes   (45 )     (210 )
               
  Net cash provided by (used in) operating activities   (1,730 )     (28 )
               
Cash used in investing activities:              
               
  Acquisition of intangible assets   (844 )     (874 )
  Acquisition of property and equipment   (1 )     (48 )
  Proceeds from disposition of property and equipment   32       -  
               
  Net cash (used in) investing activities   (813 )     (922 )
               
Cash flow from financing activities:              
               
               
  Increase (decrease) in long-term borrowing, net   (174 )     (48 )
  Proceeds from issuance of preferred stock   -       982  
  Proceeds from issuance of common stock, net   2,875       -  
  Advances from (repayments to) related parties, net   (677 )     (1,319 )
  Dividends paid   (75 )     -  
               
  Net cash provided by (used in) financing activities   1,949       (385 )
               
               
Increase (decrease) in cash during the period   (594 )     (1,335 )
Foreign exchange effect on cash   27       (85 )
               
Cash at beginning of the period   3,172       2,070  
               
Cash at end of the period $ 2,605     $ 650  
               
               
 
 
ONE HORIZON GROUP, INC.
Condensed Consolidated Statements of Cash Flows (continued)
For the nine months ended September 30, 2015 and 2014
(in thousands)
(unaudited)
 
Supplementary Information:
       
       
  2015   2014
           
           
  Interest paid $ 146   $ -
  Income taxes paid   -     -
           
  Non-cash transactions:          
           
           

Contact Information

  • Contact:
    Ted Haberfield
    MZ Group
    President - MZ North America
    Direct: 760-755-2716
    Mobile: 858-204-5055
    www.mzgroup.us