One Horizon Group Announces Second Quarter 2014 Results

BAAR, SWITZERLAND--(Marketwired - Aug 13, 2014) - One Horizon Group, Inc. (NASDAQ: OHGI) ("One Horizon" or the "Company"), which develops and licenses bandwidth efficient mobile voice over Internet Protocol ("VoIP") platform for smart phones, today announced financial results for the three and six months ended June 30, 2014.

One Horizon developed a proprietary VoIP platform ("Horizon Platform") that enables wireless carriers around the world 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 by reducing IP overhead and optimizing packet flow, delivery and playback. One Horizon targets emerging markets with high population densities, high penetration of mobile phones, congested mobile networks, and high growth in smartphone adoption. It has formed several joint ventures with local partners to capitalize on those opportunities.

Mobile operators pay an annual software licensing fee to the Company and tiered user fee for each active subscriber using the white-label VoIP service powered by the Horizon Platform. The Company continues to expand its revenue sources to mobile advertising and mobile payments by introducing new value-added services and features.

Recent Development Highlights:

• Q2 2014 revenues were approximately $1.3 million vs. $1.25 million in Q2 2013
• Gross margin improved from 29.4% in Q2 2013 to 57.9% in Q2 2014
• Signed an agreement with the Industrial Development Agency of Ireland for possible funding and grants
• Continued building up the LeiXin core network rollout for JV with Leiqiang Telecommunications Co. Ltd.
• Founder and CTO Brian Collins named CEO in July
• Received approval to uplist our common stock to on NASDAQ Capital Market
• Closed a private placement of $1 million for a total of 10 units of securities, each unit consisting of 17,094 shares of Series A preferred stock and 10,000 Class B warrants.

"We are just beginning to see the benefits from years of hard work," stated Brian Collins, Founder and CEO of One Horizon. "After spending the last 6 years developing and perfecting One Horizon mobile VoIP software platform to meet the stringent demands of our customers, we remain focused on launching our unique services with our mobile carrier customers and increasing user adoption. Tier 1 and Tier 2 mobile service providers around the world are looking for ways to optimize their network while capturing a bigger piece of their customers' spending on mobile. Our technology enables them to achieve both and differentiate themselves from their competitors."

Second Quarter 2014 Financial Results

Revenues for the three months ended June 30, 2014 were approximately $1.30 million, up 4% from $1.25 million in the same period in 2013. The increase in revenues was primarily due to higher sales of master licenses which Management expects to continue as more companies and users sign up for the One Horizon VoIP Platform. Overall contract value for master license contracts signed from inception through June 30, 2014 was $65.4 million, of which only $9.1 million was recognized through June 30, 2014. Contracts with Tier 1 entities typically require agreed-upon fixed payments over fixed future periods extending beyond one year. Contracts with Tier 2 entities have long-term variable payment terms based on customer usage. In addition to sales of master licenses, the Company recognized approximately $0.8 million of revenue from the sale of hardware, user licenses, consultancy and maintenance services during the three months ended June 30, 2014.

Cost of goods sold and operating expenses for the three months ended June 30, 2014 were approximately $0.55 million and $1.24 million respectively. Gross margin was 57.9% for the second quarter of 2014 compared to 29.4% for the same period a year ago. The primary reason for the increase in gross profit and gross margin was lower hardware sales and corresponding cost of sales.

Operating expenses was $1.2 million for the three months ended June 20, 2014 compared to $2.3 million in the same period a year ago. The Company reported an operating loss of $0.5 million for the second quarter of 2014 compared to an operating loss of $1.9 million in the second quarter of 2013. Excluding non-cash depreciation and amortization and stock-based compensation expenses, non-GAAP adjusted operating income for the three months ended June 30, 2014 was $0.2 million compared to a loss of $1.4 million in the same period a year ago.

The Company recorded a net loss of $0.55 million and a net loss per share attributable to common stockholder of $0.02 for the three months ended June 30, 2014, compared to a net loss of $1.9 million and $0.06 per share for same quarter in 2013. The weighted average shares outstanding increased from $31.7 million during the three months ended June 30, 2013 to $32.9 million during the same period in 2014 due to the issuance of shares to advisors and employees.

Six Months 2014 Financial Results

Revenues for the six months ended June 30, 2014 were approximately $2.5 million compared to $3.2 million in the same period a year ago. Gross profit and gross profit margins were approximately $1.4 million and 55.9%, respectively, for the first six months of 2014.

Operating expenses declined to $2.4 million for the first half of 2014 from $3.8 million in the first half of 2013. Operating loss was approximately $1 million for the six months ended June 30, 2014 compared to an operating loss of $1.9 million in the corresponding period a year ago. Excluding non-cash depreciation and amortization and stock-based compensation expenses, non-GAAP adjusted operating income of $0.2 million for the six months ended June 30, 2014, an improvement from an operating loss of $0.5 million in the comparative period in 2013.

Net loss and net loss per share attributable to common stockholders for the six months ended June 30, 2014 were $0.98 million and $0.03, respectively, compared to a net loss of $2.05 million and a net loss per share of $0.06 during the same period in 2013. The weighted average shares outstanding increased to $32.9 million for the six months ended June 30, 2014 from $31.45 million for the first half year of 2013.

Financial Condition

The Company had $21.9 million of assets and $15.8 million shareholders' equity as of June 30, 2014. Cash outflows from operations were $0.9 million for the six months ended June 30, 2014.

On July 21, 2014, One Horizon closed a private placement of $1,000,000 for a total of 10 units of securities at a purchase price of $100,000 per Unit, each consisting of (i) 17,094 shares of the Company's Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share, initially convertible into 17,094 shares of the Company's common stock, par value $0.0001 per share, and (ii) 10,000 Class B Warrants, each exercisable to purchase 1 share of Common Stock at an exercise price of $4.00 per share.

Business Updates

During the second quarter of 2014, the Company continued building up the LeiXin core network rollout. The Global Exchange (network control center) was placed in a high availability data center in Shanghai and eight Horizon line servers were connected to the telecommunications network. This level of rollout allowed the Company to issue a preliminary Android App to a group of Chinese students in Nanjing for them to evaluate the user Interface and the core features of our optimized smartphone App. Based on this feedback, the research and development teams in Ireland and China made some adjustments to the App look and feel service to accommodate this target user community.

One Horizon signed a global exchange agreement with a second tier telecommunications company in Hong Kong that targets U.S. citizens traveling overseas. Through a new configuration on the Horizon VoIP app called "RoamFrii," U.S. travelers can eliminate certain roaming charges while traveling internationally.

The research and development teams made further progress on technology and application upgrades. The team based in Switzerland is re-engineering the Horizon VoIP app user interface and expect to release the new version of the software in the third quarter of 2014.

On July 28, 2014, the board of directors appointed Brian Collins, Founder and the Chief Technology officer of the Company, Chief Executive Officer and President of the Company, effective July 28, 2014. Mr. Collins will also act as the Chairman of the Board of the Company upon his appointment as the Chief Executive Officer. Mr. Collins is the co-inventor of the Horizon Platform, and has over 20 years' experience in the technology sector with a background in software engineering. Mr. Collins brings experience in founding and operating technology companies along with his extensive knowledge of software engineering.

One Horizon received approval to commence trading on NASDAQ Capital Markets under the same ticker symbol "OHGI" on July 9, 2014.

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, Baar, 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. Horizon Globex GmbH is an ISO 9001 and ISO 20000-1 certified company. The Company has operations in Switzerland, the United Kingdom, China, India, Singapore, Hong Kong and Ireland. 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.

Non-GAAP Adjusted Loss from Operations Reconciliation ($000s):
			Q2 2014				Q2 2013
Reported Operating Income:			$	(481	)		$	(1,892	)
	Depreciation and Amortization		$	529			$	443
	Stock-based compensation expenses		$	129			$	0
Non-GAAP Adjusted Operating Income			$	177			$	(1,449	)

ONE HORIZON GROUP, INC.
Consolidated Balance Sheets
June 30, 2014 and December 31, 2013
(In thousands, except share data)
			June 30,				December 31,
			2014				2013
Assets
Current assets:
Cash			$	424			$	2,070
Accounts receivable				7,938				7,264
Other assets				854				139
Total current assets				9,216				9,473
Property and equipment, net				270				315
Intangible assets, net				12,411				12,760
Investments				21				23
Total assets			$	21,918			$	22,571
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable			$	681			$	661
Accrued expenses				1,227				964
Accrued compensation				50				59
Income taxes				94				117
Amounts due to related parties				3,500				3,500
Current portion of long-term debt				66				65
Total current liabilities				5,618				5,366
Long-term liabilities
Long term debt, net of current portion				153				184
Deferred income taxes				289				445
Mandatorily redeemable preferred shares				90				90
Total liabilities				6,150				6,085
Stockholders' Equity
Preferred stock:
$0.0001 par value, authorized 50,000,000;
no shares issued or outstanding				-				-
Common stock:
$0.0001 par value, authorized 200,000,000 shares issued and outstanding 32,935,069 shares (December 2013 32,920,069)				3				3
Additional paid-in capital				28,592				28,269
Accumulated deficit				(14,230	)			(13,319	)
Accumulated other comprehensive income				1,072				1,137
	Total One Horizon Group, Inc. stockholders' equity			15,437				16,090
Non-controlling interest				331				396
Total stockholders' equity				15,768				16,486
Total liabilities and stockholders' equity			$	21,918			$	22,571

ONE HORIZON GROUP, INC.
Consolidated Statements of Operations
For the three and six months ended June 30, 2014
(In thousands, except per share data)
				Three Months ended June 30,								Six Months ended June 30,
				2014				2013				2014				2013
Revenue				$	1,304			$	1,253			$	2,489			$	3,172
Cost of revenue:
	Hardware				66				481				128				488
	Amortization of software development costs				483				404				969				850
Gross margin					755				368				1,392				1,834
Expenses:
		General and administrative			1,190				2,221				2,318				3,694
		Depreciation			46				39				94				75
					1,236				2,260				2,412				3,769
Loss from operations					(481	)			(1,892	)			(1,020	)			(1,935	)
Other income and expense:
		Interest expense			(20	)			(7	)			(20	)			(12	)
		Interest expense - related parties			(35	)			(50	)			(75	)			(100	)
		Foreign exchange			(10	)			-				(19	)			-
		Interest income			1				-				2				-
					(64	)			(57	)			(112	)			(112	)
Loss before income taxes					(545	)			(1,949	)			(1,132	)			(2,047	)
Income taxes expense (benefit)					-				-				(156	)			-
Net Loss for the period					(545	)			(1,949	)			(976	)			(2,047	)
Loss attributable to the non-controlling interest					(22	)			(44	)			(65	)			(44	)
Net Loss for the period attributable to One Horizon Group, Inc.				$	(523	)		$	(1,905	)		$	(911	)		$	(2,003	)
Earnings (loss) per share attributable to One Horizon Group, Inc. shareholders
		Basic and diluted net (loss) per share		$	(0.02	)		$	(0.06	)		$	(0.03	)		$	(0.06	)
Weighted average number of shares outstanding
		Basic and Diluted			32,935				31,676				32,935				31,446

ONE HORIZON GROUP, INC.
Consolidated Statements of Comprehensive Income
For the three and six months ended June 30, 2014
(In thousands)
		Three Months ended June 30,								Six Months ended June 30,
		2014				2013				2014				2013
Net Loss		$	(545	)		$	(1,949	)		$	(976	)		$	(2,047	)
Other comprehensive income (loss):
Foreign currency translation adjustment gain (loss)			(84	)			13				(65	)			(50	)
Total comprehensive loss			(629	)			(1,936	)			(1,041	)			(2,097	)
Comprehensive loss attributable to the non-controlling interest			(22	)			(44	)			(65	)			(44	)
Comprehensive loss attributable to One Horizon Group, Inc.		$	(607	)		$	(1,892	)		$	(976	)		$	(2,053	)

OHE HORIZON GROUP, INC.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2014 and 2013
(in thousands)
			2014				2013
Cash provided by (used in) operating activities:
Net income (loss) for the period			$	(911	)		$	(2,003	)
Adjustment to reconcile net income (loss) for the period to
net cash provided by (used in) operating activities:
Depreciation of property and equipment				94				75
Amortization of intangible assets				969				850
Common stock issued for services received				65				593
Options issued for services received				258				-
Deferred income taxes				(156	)			-
Warrants issued for services received				-				247
Net income (loss) attributable to non-controlling interest				(65	)			(44	)
Changes in operating assets and liabilities:
	Accounts receivable			(674	)			(2,181	)
	Other assets			(715	)			(86	)
	Accounts payable and accrued expenses			276				821
Net cash provided by (used in) operating activities				(859	)			(1,728	)
Cash used in investing activities:
Acquisition of intangible assets				(637	)			(494	)
Acquisition of property and equipment				(49	)			(104	)
Other assets				-				(31	)
Net cash (used in) investing activities				(686	)			(629	)
Cash provided by (used in) financing activities:
Increase (decrease) in long-term borrowing, net				(30	)			2
Proceeds from issuance of common stock				-				3,100
Advances from related parties, net of repayment				-				500
Net cash provided by (used in) financing activities				(30	)			3,602
Increase (decrease) in cash during the period			$	(1,575	)		$	1,245
Foreign exchange effect on cash				(71	)			-
Cash at beginning of the period				2,070				699
Cash at end of the period			$	424			$	1,944