Net revenues from offline business were US$1.6 million in the second quarter of 2015, an increase of 8.6% from US$1.5 million in the first quarter of 2015 and a decrease of 25.4% from US$2.1 million in the second quarter of 2014. The QoQ increase was primarily due to the recognition of Mole III film box office revenue sharing, while partially offset by a decrease in the Company's toys business. The YoY decrease was primarily due to the decrease in the Company's toys and merchandise licensing businesses, while partially offset by the contribution of Mole III film box office revenue sharing.

Cost of Revenues

Total cost of revenues was US$3.0 million in the second quarter of 2015, an increase of 7.4% from US$2.8 million in the first quarter of 2015 and flat as compared with US$3.0 million in the second quarter of 2014.

PC business related cost of revenues was US$1.3 million in the second quarter of 2015, flat as compared with US$1.3 million in the first quarter of 2015 and a decrease of 22.8% from US$1.6 million in the second quarter of 2014. The YoY decrease was primarily due to the decrease in bandwidth cost, depreciation expenses and payroll expenses.

Mobile business related cost of revenues was US$0.1 million in the second quarter of 2015, a decrease of 28.8% from US$0.2 million in the first quarter of 2015 and an increase of 210.0% from US$51 thousand in the second quarter of 2014. The YoY increase was due to an increase in payroll expenses. 

Offline business related cost of revenues was US$1.6 million in the second quarter of 2015, an increase of 22.5% from US$1.3 million in the first quarter of 2015 and an increase of 20.3% from US$1.3 million in the second quarter of 2014. The QoQ and YoY increases were both primarily due to the increase in the Company's Mole III film production cost as well as payroll expenses, while partially offset by a decrease in cost related to the Company's toys business.

Gross Profit and Gross Margin

Gross profit was US$5.7 million in the second quarter of 2015, a decrease of 8.6% from US$6.2 million in the first quarter of 2015 and a decrease of 24.7% from US$7.5 million in the second quarter of 2014.

Gross margin was 65.1% in the second quarter of 2015, as compared with 68.7% in the first quarter of 2015 and 71.3% in the second quarter of 2014.

Gross margin for the PC business was 79.8% in the second quarter of 2015, as compared with 78.4% in the first quarter of 2015 and 78.6% in the second quarter of 2014.

Gross margin for the mobile business was 79.5% in the second quarter of 2015, as compared with 85.6% in the first quarter of 2015 and 92.7% in the second quarter of 2014.

Gross margin for the offline business was 0.6% in the second quarter of 2015, as compared with 11.9% in the first quarter of 2015 and 38.3% in the second quarter of 2014.  Excluding the margin impact from the Company's Mole III film, gross margins would have been 32.5% in the second quarter of 2015.

Total Operating Expenses

Total operating expenses were US$7.4 million in the second quarter of 2015, a decrease of 6.5% from US$8.0 million in the first quarter of 2015 and a decrease of 19.9% from US$9.3 million in the second quarter of 2014.

• Product development expenses were US$3.4 million in the second quarter of 2015, a decrease of 5.7% from US$3.6 million in the first quarter of 2015 and flat as compared with US$3.4 million in the second quarter of 2014. The QoQ decrease was primarily due to the decrease in payroll expenses, while partially offset by an increase in mobile gaming outsourcing fee.
• Sales and marketing expenses were US$2.2 million in the second quarter of 2015, a decrease of 18.5% from US$2.7 million in the first quarter of 2015 and a decrease of 24.9% from US$2.9 million in the second quarter of 2014. The QoQ and YoY decreases were primary due to a decrease in film promotion costs.
• General and administrative expenses were US$2.7 million in the second quarter of 2015, a decrease of 11.8% from US$3.0 million in the first quarter of 2015 and a decrease of 13.2% from US$3.1 million in the second quarter of 2014. The QoQ and YoY decreases were primarily due to the decrease in indirect tax costs related to intercompany service charges.

Loss from Operations

Loss from operations was US$1.8 million in the second quarter of 2015, flat as compared with US$1.8 million both in the first quarter of 2015 and the second quarter of 2014.

Share of Loss in Equity Method Investment

Share of loss in equity method investment was US$0.5 million in the second quarter of 2015, as compared with US$0.4 million in the first quarter of 2015 and US$0.2 million in the second quarter of 2014.

Net Loss Attributable to Holders of Ordinary Shares

Net loss attributable to holders of ordinary shares was US$1.6 million in the second quarter of 2015, as compared with US$1.6 million in the first quarter of 2015 and US$0.8 million in the second quarter of 2014.

Basic and diluted loss per ADS were both US$0.046 in the second quarter of 2015, as compared with US$0.045 for both basic and diluted loss per ADS in the first quarter of 2015 and US$0.023 for both basic and diluted loss per ADS in the second quarter of 2014.

Non-GAAP net loss attributable to holders of ordinary shares was US$1.3 million in the second quarter of 2015, as compared with US$1.2 million in the first quarter of 2015 and US$0.2 million in the second quarter of 2014.

Non-GAAP basic and diluted loss per ADS were both US$0.036 in the second quarter of 2015, as compared with US$0.034 for both basic and diluted loss per ADS, in the first quarter of 2015 and US$0.007 for both basic and diluted loss per ADS in the second quarter of 2014.

Cash and Cash Equivalents

As of June 30, 2015, the Company had US$70.5 million of cash and cash equivalents, as compared with US$72.0 million as of March 31, 2015.

Capital Expenditures

The company had capital expenditures of US$0.1 million in the second quarter of 2015, as compared with US$4.0 million in the first quarter of 2015, and US$0.3 million in the second quarter of 2014. The Company's capital expenditures were used primarily for (i) purchase of computer hardware and equipment, (ii) prepayments for land use rights, and (iii) payments for intangible assets. Actual future capital expenditures may differ from the amounts indicated above.

Share-based Compensation

Share-based compensation was US$0.4 million for the second quarter of 2015 as compared with US$0.4 million in the first quarter of 2015 and US$0.6 million in the second quart of 2014.