ChinaNet Online Holdings Reports First Quarter 2013 Financial Results

ChinaNet Online Holdings Reports First Quarter 2013 Financial Results

 Projects $36 million Revenue and $1.2 million Net Income for Full Year 2013

   Management to Host Conference Call on Tuesday, May 21^st at 8:30 a.m. ET

BEIJING, May 21, 2013 (GLOBE NEWSWIRE) -- ChinaNet Online Holdings, Inc.
(Nasdaq:CNET) ("ChinaNet" or the "Company"), a leading B2B (business to
business) Internet technology company providing online-to-offline ("O2O")
sales channel expansion services for small and medium-sized enterprises (SMEs)
and entrepreneurial management and networking services for entrepreneurs in
the People's Republic of China, today announced financial results for the
first quarter of 2013 and guidance for fiscal year 2013.

Summary Financials

First quarter 2013 Results (USD) (Unaudited)
                                            Q1 2013      Q1 2012       CHANGE
Sales                                        $7.0 million $14.9 million -53%
Gross Profit                                 $2.6 million $2.4 million  +8%
Gross Margin                                 36.6%        16.0%         +129%
Net Income/(Loss) Attributable to Common     $0.0 million -$0.4 million N/A
Stockholders
EPS (Diluted)                                $0.00        -$0.02        N/A

First Quarter 2013 Financial Results

Revenues for the three months ended March 31, 2013 were $7.0 million compared
to $14.9 million for the three months ended March 31, 2012, representing a 53%
decrease. Low margin TV advertising fell by $7.7 million, accounting for the
majority of the year-over-year revenue decline.

Mr. George Chu, Chief Operation Officer of the Company, stated, "Our financial
results for the first quarter of 2013 reflect successful execution of our long
term strategy. We continued to invest in new services such as mobile
advertising and marketing, brand management and sales channel building and
flying cloud during the 2012 economic downturn. We expect 2013 to be a
challenging year as the overall economy has slowed further due to the economic
policies set by the government. However, our expansion strategy and targeted
investments in technology and new products will not be held back because these
investments have already helped us win new business and enter new markets. Our
strong financial position allows us to maintain these strategic investments,
which will only strengthen our company for the eventual rebound in our
clients' spending."

First Quarter 2013 Revenue Breakdown by Business Unit (USD in thousands)

                                    Q1 2013 %   Q1 2012 %    % Change
Internet Advertisement               $3,811  54% $4,345  29%  -12%
TV Advertisement                     $2,638  37% $10,369 69% -75%
Bank Kiosk                           $69     1%  $71     1%   -3%
Brand Mgmt. & Sales Channel Building $531    8%  $150    1%   +254%

Revenue from Internet advertisements for the three months ended March 31, 2013
decreased by 12% to $3.8 million compared to the same period a year ago,
primarily due to lower spending per customer caused by the general decline in
spending by China's SMEs. Sales of brand management and sales channel building
services increased by 254% to $0.5 million, representing 8% of total sales for
the three months ended March 31, 2013. This increase was due to the timing of
projects completed and successful efforts by ChinaNet in expanding its
customer base. TV advertising revenues fell to $2.6 million in the first
quarter of 2013 from $10.4 million as the Company had significantly higher TV
advertising activity in the first quarter of 2012 related to the launch of its
entrepreneurial reality show.

Gross profit for the three months ended March 31, 2013 was $2.6 million, up 8%
from $2.4 million in the same period one year ago. Gross margin was 36.6%, up
significantly from 16.0% in the first quarter of 2012. Gross margins improved
due to significantly lower sales of TV advertisements, which carry much lower
margins.

Operating expenses for the three months ended March 31, 2013 were
approximately $2.6 million compared to $2.3 million in the same period in
2012. The Company increased selling expenses and research and development
expenses by 14% and 36%, respectively, to expand its sales force and increase
investments in cloud-based application software and mobile advertising
platforms.

The Company had a slight operating loss of $0.1 million in the three months
ended March 31, 2013 compared to $0.1 million of operating income in the same
period one year ago.

Net income attributable to common stockholders for the three months ended
March 31, 2013 was $0.0 million and earnings per share was $0.00, compared to
-$0.4 million and -$0.02 for the three months ended March 31, 2012,
respectively.

Balance Sheet and Cash Flow

The Company had $7.2 million in cash and cash equivalents as of March 31,
2013, compared to $8.8 million as of December 31, 2012, working capital of
$25.6 million, compared to $25.2 million as of December 31, 2012, and a
current ratio of 3.6 to 1 compared 3.5 to 1 as of December 31, 2012. Total
shareholders' equity of ChinaNet was $44.5 million at March 31, 2013 compared
to $44.2 million at December 31, 2012.

The Company had $0.4 million of cash outflows from operations for the first
three months of 2013 compared to a $0.4 million of cash inflows for the first
three months of 2012.

Guidance for 2013

Management is providing the following guidance for fiscal year 2013.

Revenues: $36 million

Net Income: $1.2 million

Business Updates

Super 8 International Limited ("Super 8"), a subsidiary of Wyndham Worldwide,
selected Liansuo.com, a subsidiary of ChinaNet, to help expand its franchise
outside the U.S. Super 8 International Limited is one of the largest economy
hotel operators in the world, operating more than 2,600 hotels worldwide,
representing over 56,000 rooms in total. Liansuo.com will help Super 8
franchise hotels quickly expand its franchise footprint in Tier 1 and Tier 2
cities in China.

ChinaNet received the awards of "The Most Leading Enterprise of Chinese
Entrepreneurial Merchandising and Franchising Marketing Industry" as well as
"The Most Trustworthy E-Commerce Platform in Entrepreneurial Merchandising and
Franchising Industry" in China by the China Electronic Commerce Association
(CECA). These awards are only awarded to one enterprise in each industry.

The Beijing Zhongguancun Enterprises Credit Promotion Association (ECPA)
completed a credit assessment for the Company. ChinaNet was awarded a high
grade, which makes the Company eligible to receive future subsidies and
funding from the State Development Bank, local governments and related
entities.

Liansuo.com, co-hosted the 19^th Annual Beijing International Franchise Expo
held at the Beijing National Agricultural Exhibition from April 5 to April 6,
2013. As the media co-host of this year's Franchise Expo, Liansuo.com ran
promotions and publicity for the Franchise Expo, provided video interviews for
the companies in attendance, offered project consulting services on site for
entrepreneurs, and disseminated news reports after the exhibition.

Flying Cloud plans to host 10,000 SMEs APP and Mobile sites for the customers.
In addition, Flying Cloud expects to update its new products website in the
first half of 2013.

ChinaNet participated in the 14^th Taiwan Franchise Expo held at the Taipei
World Trade Center from April 5 to April 7, 2013. In the process, the Company
was able to learn what concerns and priorities franchise owners in Taiwan are
considering in their evaluation of entering the mainland China market.

Liansuo.com, signed an agreement with Mendale Textile Limited ("Mendale") to
help expand its franchise in China and internationally. Mendale has
successfully expanded its owned and operated stores, as well as its franchise
stores, across several provinces in China. Liansuo.com will provide online
advertising and marketing to help Mendale further increase its brand
recognition among consumers and entrepreneurs.

Liansuo.com participated in the 2013 Chinese Franchise Expo held at the China
National Convention Center in Beijing from April 26 to April 28, 2013. As the
strategic partner of the live webcast of this event, Liansuo.com invited
various business leaders to share their valuable experiences in the franchise
industry.

Conference Call

Date: Tuesday, May 21, 2013

Time: 8:30 a.m. Eastern Time

Conference Line (U.S.): 1-877-317-6776

International Dial-In: 1-412-317-6776

Conference ID: 10029114

Webcast: http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=1313

A power point presentation will be available for downloading on the date of
the conference call on ChinaNet's corporate website www.chinanet-online.com;
under Investor Relations-News/Events-Events and Presentations.

Please dial in at least 10 minutes before the call to ensure timely
participation.

A playback of the call will be available until 8:30 am Eastern Time on May 28,
2013. To listen, call 1-877-344-7529 within the United States or
1-412-317-0088 when calling internationally. Please use the replay pin number
10029114.

About ChinaNet Online Holdings, Inc.

ChinaNet Online Holdings, Inc., a parent company of ChinaNet Online Media
Group Ltd., incorporated in the BVI, is a leading business to business
Internet technology company focusing on providing online-to-offline sales
channel expansion service for small and medium-sized enterprises and
entrepreneurial management and networking service for entrepreneurs in China.
Founded in 2003 and based in Beijing, PRC, the Company's services include its
28.com portal to connect SME franchisors with new franchisees, Internet
advertising and marketing with other value-added communication channels, brand
management and sales channel solutions, and cloud-computing based management
tools, expected to be officially commercialized in 2013. Website:
http://www.chinanet-online.com.

Safe Harbor

This release contains certain "forward-looking statements" relating to the
business of ChinaNet Online Holdings, Inc., which can be identified by the use
of forward-looking terminology such as "believes," "expects," "anticipates,"
"estimates" or similar expressions. Such forward-looking statements involve
known and unknown risks and uncertainties, including business uncertainties
relating to government regulation of our industry, market demand, reliance on
key personnel, future capital requirements, competition in general and other
factors that may cause actual results to be materially different from those
described herein as anticipated, believed, estimated or expected. Certain of
these risks and uncertainties are or will be described in greater detail in
our filings with the Securities and Exchange Commission. These forward-looking
statements are based on ChinaNet's current expectations and beliefs concerning
future developments and their potential effects on the Company. There can be
no assurance that future developments affecting ChinaNet will be those
anticipated by ChinaNet. These forward-looking statements involve a number of
risks, uncertainties (some of which are beyond the control of the Company) or
other assumptions that may cause actual results or performance to be
materially different from those expressed or implied by such forward-looking
statements. ChinaNet undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities
laws.

CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares and per share data)
                                             March 31, 2013 December 31, 2012
                                             (US $)         (US $)
                                             (Unaudited)    
Assets                                                      
Current assets:                                             
Cash and cash equivalents                     $3,792        $5,483
Term deposit                                  3,375          3,357
Accounts receivable, net                      9,831          8,486
Other receivables, net                        3,128          3,103
Prepayment and deposit to suppliers           14,822         14,596
Due from related parties                      260            210
Other current assets                          135            136
Deferred tax assets-current                   42             50
Total current assets                          35,385         35,421
                                                           
Investment in and advance to equity           892            959
investment affiliates
Property and equipment, net                   1,501          1,636
Intangible assets, net                        6,944          7,167
Goodwill                                      11,144         11,083
Deferred tax assets-non current               794            652
Total Assets                                  $56,660       $56,918
Liabilities and Equity                                      
Current liabilities:                                        
Accounts payable                              $219          $110
Advances from customers                       1,636          1,065
Accrued payroll and other accruals            877            904
Payable for acquisition                       --             1,266
Taxes payable                                 6,846          6,683
Other payables                                240            217
Total current liabilities                     9,818          10,245
Long-term liabilities:                                      
Deferred tax liability-non current            1,643          1,689
Long-term borrowing from director             139            139
Total Liabilities                             11,600         12,073
Commitments and contingencies                               
Equity:                                                     
ChinaNet Online Holdings, Inc.'s                            
stockholders' equity
Common stock (US$0.001 par value; authorized
50,000,000 shares; issued and outstanding                   
22,186,540 shares at March 31, 2013 and       22             22
December 31, 2012)
Additional paid-in capital                    20,019         20,008
Statutory reserves                            2,296          2,296
Retained earnings                             19,535         19,505
Accumulated other comprehensive income        2,605          2,393
Total ChinaNet Online Holdings, Inc.'s        44,477         44,224
stockholders' equity
Noncontrolling interests                      583            621
Total equity                                  45,060         44,845
Total Liabilities and Equity                  $56,660       $56,918



CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)
(In thousands, except for number of shares and per share data)
                                                 Three Months Ended March 31,
                                                 2013          2012
                                                 (US $)        (US $)
                                                 (Unaudited)   (Unaudited)
Sales                                                          
From unrelated parties                            $6,990      $14,920
From related parties                              59            15
                                                 7,049         14,935
Cost of sales                                     4,467         12,538
Gross margin                                      2,582         2,397
                                                              
Operating expenses                                             
Selling expenses                                  788           689
General and administrative expenses               1,402         1,243
Research and development expenses                 449           331
                                                 2,639         2,263
                                                              
Loss/(income) from operations                     (57)          134
                                                              
Other income (expenses)                                        
Interest income                                   32            5
Other expenses                                    (1)           (1)
                                                 31            4
                                                              
Loss/(income) before income tax expense, equity   (26)          138
method investments and noncontrolling interests
Income tax benefit/(expense)                      86            (236)
Income/(loss) before equity method investments    60            (98)
and noncontrolling interests
Share of losses in equity investment affiliates   (71)          (193)
Net loss                                          (11)          (291)
Net loss/(income) attributable to noncontrolling  41            (75)
interests
Net income/(loss) attributable to ChinaNet Online 30            (366)
Holdings, Inc.
                                                              
Net loss                                          (11)          (291)
Foreign currency translation gain                 215           263
Comprehensive income/(loss)                       $204         $(28)
Comprehensive loss/(income) attributable to       38            (112)
noncontrolling interests
Comprehensive income/(loss) attributable to       $242        $(140)
ChinaNet Online Holdings, Inc.
                                                              
Earnings/(loss) per share                                      
Earnings/(loss) per common share                               
Basic                                             $0.00        $(0.02)
Diluted                                           $0.00        $(0.02)
                                                              
Weighted average number of common shares                       
outstanding:
Basic                                            22,186,540    22,182,584
Diluted                                          22,186,540    22,182,584

                                      

CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                                 Three Months Ended March 31,
                                                 2013          2012
                                                 (US $)        (US $)
                                                 (Unaudited)   (Unaudited)
Cash flows from operating activities                           
Net loss                                          $(11)        $(291)
Adjustments to reconcile net loss to net cash                  
provided by operating activities
Depreciation and amortization                    418           409
Share-based compensation expenses                11            17
Allowances for doubtful debts                     260           --
Share of losses in equity investment affiliates   71            193
Deferred taxes                                    (185)         (381)
Changes in operating assets and liabilities                    
Accounts receivable                              (1,297)       (3,154)
Other receivables                                (8)           261
Prepayment and deposit to suppliers              (406)         1,740
Due from related parties                         (49)          48
Other current assets                              (2)           (22)
Accounts payable                                 105           (56)
Advances from customers                          564           1,162
Accrued payroll and other accruals               (29)          (133)
Due to related parties                           --            (78)
Other payables                                   --            18
Taxes payable                                    127           630
Net cash (used in) provided by operating          (431)         363
activities
                                                              
Cash flows from investing activities                           
Purchases of vehicles and office equipment        (11)          (9)
Project development deposit to a third party      --            (2,452)
Payment for acquisition of VIEs                   (1,272)       --
Net cash used in investing activities             (1,283)       (2,461)
                                                              
Cash flows from financing activities                           
Dividend paid to convertible preferred            --            (5)
stockholders
Short-term loan borrowed from an equity           --            316
investment affiliate
Net cash provided by financing activities         --            311
                                                              
Effect of exchange rate fluctuation on cash and   23            56
cash equivalents
                                                              
Net decrease in cash and cash equivalents         (1,691)       (1,731)
                                                              
Cash and cash equivalents at beginning of the    5,483         10,695
period
Cash and cash equivalents at end of the period   $ 3,792  $ 8,964

CONTACT: MZ North America
         Ted Haberfield, President
         Direct: +1-760-755-2716
         Email: thaberfield@mzgroup.us
         Web: www.mzgroup.us
 
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