Oriental Culture Holding LTD Announces First Half Year of 2024 Unaudited Financial Results
HONG KONG, Nov. 12, 2024 (GLOBE NEWSWIRE) -- Oriental Culture Holding LTD. ("OCG" or the "Company") $(OCG)$, a leading online provider of collectibles and artwork e-commerce services, today announced its unaudited financial results for the six months ended June 30, 2024.
First Half Year of 2024 Financial Highlights
-- Total revenues were approximately $0.4 million for the six months ended
June 30, 2024, compared with the total revenues of approximately $0.8
million for the six months ended June 30, 2023.
-- Gross profit was approximately $0.3 million for the six months ended June
30, 2024, compared with approximately gross profit of $0.6 million for
the six months ended June 30, 2023.
-- Gross margin was 65.8% for the six months ended June 30, 2024, compared
with a gross margin of 76.0% for the six months ended June 30, 2023.
-- Loss from operations was approximately $2.1 million for the six months
ended June 30, 2024, compared with income from operations of
approximately $2.4 million for the six months ended June 30, 2023.
-- Net loss was approximately $1.9 million for the six months ended June 30,
2024, compared with approximately $2.1 million for the six months ended
June 30, 2023.
-- Basic and diluted loss per share was $0.28 for the six months ended June
30, 2024, compared with $0.50 for the six months ended June 30, 2023.
Recent developments
Starting from May 13, 2024, the trading platform operated by HKDAEx limited ("HKDAEx"), a wholly owned subsidiary of the Company, for products and commodities other than collectible and artwork in Hong Kong merged with our main online platform for collectibles and artwork operated by China International Assets and Equity of Artworks Exchange Limited (the "International Exchange"), also a wholly owned subsidiary of the Company in Hong Kong, to better integrate our resources, reduce costs, and provide better customer services. The trading platform of HKDAEx and its related trading business ceased operation as of June 30, 2024.
On May 31, 2024, the Company entered into a Securities Purchase Agreement (the "Agreement") with certain purchasers (the "Purchasers"), pursuant to which the Company sold to the Purchasers in a private placement 14,000,000 ordinary shares (the "Shares") of the Company, at a purchase price of $0.50 per share for an aggregate price of $7,000,000 (the "Private Placement"). In connection with offering, the Company issued the warrants to the Purchasers to purchase up to an aggregate of 14,000,000 ordinary shares at an exercise price of $0.50 per share (the "Warrants"). The Warrants have a term of two years and are exercisable by the holder at any time on or after six months after the issuance date. As a result of this Private Placement, Mr. Huajun Gao and Mr. Aiming Kong's beneficial ownership in the Company changed from 10.7% each to 2.6% each. Mr. Gao and Mr. Kong are not officers, directors or employees of the Company, its VIE or subsidiaries of the VIE.
Impact of investigation and charge against Nanjing Jinwang
On July 1, 2022, Mr. Huajun Gao and Mr. Aiming Kong, each a shareholder of Oriental Culture Holding LTD (the "Company"), were detained by Nan County Public Safety Bureau of Yiyang City, Hunan Province, China. On July 26, 2022, Nan County People's Procuratorate ("NCPP") approved the arrest of Mr. Gao and Mr. Kong with charge of illegal business operation of Nanjing Jinwang Art Purchase E-commerce Co., Ltd., a company controlled by Mr. Gao and Mr. Kong ("Nanjing Jinwang") and prosecuted them. The Court had the trial in January 2024 and both of them are currently released on bail waiting for the judgement of the Court.
On July 1, 2022, the bank accounts of Nanjing Jinwang were frozen by Nan County Public Safety Bureau, including a trust account into which the customers of the Company deposit their security deposits in order to trade on the Company's two online trading platforms which the Company has entrusted Nanjing Jinwang for escrow.
Also, on July 1, 2022, Nan County Public Safety Bureau froze certain bank accounts of Kashi Longrui Business Management Services Co., Ltd. ("Kashi Longrui"), Kashi Dongfang Cangpin Culture Development Co., Ltd. ("Kashi Dongfang") and Nanjing Yanyu Information Technology Co., Ltd. ("Nanjing Yanyu"), all subsidiaries of Jiangsu Yanggu Culture Development Co., Ltd., the variable interest entity of the Company in China because they, each had business relationship with Nanjing Jinwang.
Neither the Company nor its VIE or subsidiaries of its VIE has received any notification for enforcement charges from Nan County Public Safety Bureau, other than cash and short-term investment in the frozen bank accounts with balances totaling approximately $17.3 million and due from Nangjng Jinwang of approximately $0.1 million relating to the Nanjing Jinwang investigation as described above as of June 30, 2024. Currently the customers can freely transfer their deposits and make their withdrawals based on their actual needs. Mr. Gao and Mr. Kong are not officers, directors or employees of the Company, its VIE or subsidiaries of the VIE.
Due to the Nanjing Jinwang case and frozen bank accounts, the business operations of the Company have been materially and negatively impacted as its customers experienced difficulties withdrawing their security deposits through online banking and have concerns regarding their deposited funds. The Company has taken remedial measures to assist its customers in withdrawing security deposits, such as through manual and in person application with the bank to transfer funds, so that they will have confidence in the Company and continue to list and trade art and collectible products on the online platforms of the Company. However, the Company's business has been material and negatively impacted and there can be no assurance that the Company will be able to restore customer confidence in using the Company's services efficiently or at all.
The Company has and will continue to communicate with Nan County Public Safety Bureau and other government authorities to obtain more information regarding the investigation and to attempt to unfreeze the bank accounts for the subsidiaries of the VIE. The Company will monitor the development of the case and will provide additional information concerning its impact on the Company's business in due course.
This investigation and case against Nanjing Jinwang and slow recovery of Chinese economy after COVID-19 have negative impacted on our revenue and net income for the six months ended June 30, 2024. Our revenue decreased approximately $0.4 million from approximately $0.8 million for the six months ended June 30, 2023 to approximately $0.4 million for the same period of 2024.
Liquidity and Capital Resources
The Company typically financed its operations through internally generated cash and equity financing. As of June 30, 2024, excluding restricted cash and investments, the Company had approximately $18.8 million in cash. The Company's working capital was approximately $23.7 million at June 30, 2024, excluding the funds that were frozen relating to Nanjing Jinwang investigation. As of June 30, 2024, cash and short term investment in the frozen bank accounts with balances totaling approximately $17.3 million and due from Nanjing Jinwang of approximately $0.5 million relating to the Nanjing Jinwang investigation. Currently the customers can freely transfer their deposits and make their withdrawals based on their actual needs.
If the Company is unable to realize its assets within the normal operating cycle of a 12-month period, the Company may have to consider supplementing its available sources of funds through the following sources:
-- other available sources of equity or debt financing from financial
institutions or investors; and
-- financial support from our related parties and shareholders.
Based on the above considerations, the Company's management believes that it has sufficient funds to meet its working capital requirements and debt obligations as they become due over the next 12 months.
Results of Operations
The tables in the following discussion summarize our consolidated statements of income and comprehensive income for the periods indicated. The operating results in any period are not necessarily of the results that may be expected for any future period.
Six Months Ended June 30, 2024 and June 30, 2023
For the Six Months
Ended
June 30, Variance
------------------------- -------------------
2024 2023 Amount %
----------- ----------- ---------- ------
(Unaudited) (Unaudited)
Net revenues $ 392,624 $ 722,624 $ (330,000) (45.7)%
Net revenues
-- related
parties 54,633 76,836 (22,203) (28.9)%
---------- ---------- --------- ------
Total
operating
revenues 447,257 799,460 (352,203) (44.1)%
Less: cost of
revenues (152,802) (191,526) 38,724 (20.2)%
---------- ---------- --------- ------
Gross profit 294,455 607,934 (313,479) (51.6)%
Operating
expenses (2,373,523) (2,997,869) 624,346 (20.8)%
---------- ---------- --------- ------
Loss from
operations (2,079,068) (2,389,935) 310,867 (13.0)%
Other income,
net 205,996 261,869 (55,873) (21.3)%
---------- ---------- --------- ------
Loss before
income taxes (1,873,072) (2,128,066) 254,994 (12.0)%
Provision for
income taxes - 8,643 (8,643) (100.0)%
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