ChinaNet Online Holdings Reports Second Quarter 2013 Financial Results

ChinaNet Online Holdings Reports Second Quarter 2013 Financial Results

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

 Management to host earnings conference call on Monday, August 19^th at 8:30
                                   a.m. ET

BEIJING, Aug. 15, 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
second quarter of 2013.

Summary Financials


Second quarter 2013 Results (USD) (Unaudited)
                                            Q2 2013      Q2 2012       CHANGE
Sales                                        $8.9 million $13.1 million -32%
Gross Profit                                 $3.6 million $3.8 million  -4%
Gross Margin                                 40.5%        28.7%         +41%
Net Income Attributable to Common            $0.4 million $0.9 million  -52%
Stockholders
EPS (Diluted)                                $0.02        $0.04         -50%

Second Quarter 2013 Financial Results

Revenues for the three months ended June 30, 2013 were $8.9 million compared
to $13.1 million for the three months ended June 30, 2012, representing a 32%
decrease. Low margin TV advertising fell by $3.6 million, accounting for the
majority of the year-over-year revenue decline.

Mr. George Chu, Chief Operating Officer of the Company stated, "Despite
ongoing challenges in China's economy, we remained profitable during the first
half of 2013. Equally important, we started to see some gradual improvement in
small business activity toward the end of the quarter as the Chinese
government took steps to reinvigorate the economy. While we are encouraged by
the increase in the number of customers of our internet advertising segment in
the second quarter, which has continued so far in the third quarter, we are
investing judiciously in new services such as mobile advertising and marketing
and Flying Cloud to position ourselves for a more robust upturn we anticipate
occurring in 2014."

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

                                    Q2 2013 %   Q2 2012 %    % Change
Internet Advertisement               $5,436  61% $5,358  41%  +1%
TV Advertisement                     $2,489  28% $6,144  47% -59%
Bank Kiosk                           $71     1%  $71     1%   --
Brand Mgmt. & Sales Channel Building $896    10% $1,554  12%  -42%

Revenue from internet advertisements for the three months ended June 30, 2013
increased by 1% to $5.4 million compared to the same period a year ago.
Excluding the business tax expenses, which were included in revenue for the
second quarter of 2012, internet advertising revenues were up 6%, reflecting
an increase in the number of internet advertising customers. TV advertising
revenues fell to $2.5 million in the second quarter of 2013 from $6.1 million
as the Company had significantly higher TV advertising activity in the second
quarter of 2012 related to the launch of its entrepreneurial reality show.
Brand management and sales channel building revenues fell by approximately
$0.7 million as a result of lower spending by customers in reaction to the
slowing Chinese economy.

Gross profit for the three months ended June 30, 2013 was $3.6 million, down
4% from $3.8 million in the same period one year ago. Gross margin was 40.5%,
up significantly from 28.7% in the second quarter of 2012. Gross margins
improved due to increased contribution from higher margin internet advertising
revenues and an improvement in TV advertising margins.

Operating expenses for the three months ended June 30, 2013 were approximately
$2.8 million, down 5% compared to $3.0 million in the same period in 2012. The
Company increased research and development expenses by 9% to support new
product investments. General and administrative expenses fell by 4% to $1.7
million in the second quarter of 2013.

The Company recorded $0.8 million of operating income in the three months
ended June 30, 2013, essentially flat from the same period one year ago.

Net income attributable to common stockholders for the three months ended June
30, 2013 was $0.4 million and earnings per share was $0.02, compared to $0.9
million and $0.04 for the three months ended June 30, 2012, respectively.


First Half 2013 Results (USD) (Unaudited)
                                           1H 2013       1H 2012       CHANGE
Sales                                       $15.9 million $28.1 million -43%
Gross Profit                                $6.2 million  $6.2 million  --
Gross Margin                                38.8%         22.0%         +76%
Net Income/(Loss) Attributable to Common    $0.5 million  $0.5 million  -12%
Stockholders
EPS (Diluted)                               $0.02         $0.02         --

Revenue for the six months ended June 30, 2013 was $15.9 million compared to
$28.1 million in the corresponding period a year ago. Internet advertising, TV
advertising, and brand management and sales channel building revenues were
$9.2 million, $5.1 million, and $1.4 million in the first half of 2013,
respectively.

Gross profit and gross margin for the first six months of 2013 were $6.2
million and 38.8% compared to $6.2 million and 22.0%, respectively, in the
same period a year ago.

Operating expenses increased by 4% to $5.4 million in the first half of 2013.
ChinaNet generated $0.7 million in operating income, down 22% from $0.9
million in the first half of 2012.

Net income attributable to ChinaNet common stockholders and net income per
share were $0.5 million and $0.02 in the first half of 2013 and 2012,
respectively. The weighted average diluted shares outstanding was essentially
flat year-over-year at 22.2 million shares.

Balance Sheet and Cash Flow

The Company had $3.4 million in cash and cash equivalents as of June 30, 2013,
compared to $5.5 million as of December 31, 2012, working capital of $25.7
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 $45.5 million at June 30, 2013 compared
to $44.2 million at December 31, 2012.

The Company had slight cash outflows from operations for the first six months
of 2013 compared to a $1.1 million of cash inflows for the first six months of
2012.

Guidance for 2013

The Company provides the following guidance for fiscal year 2013.

Revenues: $36 million
Net Income: $1.2 million

Business Updates

ChinaNet participated in the 2013 Omni-Channel Retailing Conference, one of
the premier retail industry events in Hong Kong, from June 4^th to June 6^th,
2013. The Company's Chief Operating Officer George Chu was a guest on the
Senior Executives' Panel, discussing the future of online and mobile
retailing.

The Company entered into a partnership agreement with China Business Journal
on July 16, 2013 to launch a contest to identify and launch businesses with
good growth potential. China Business Journal, a leading print publication
with over 920,000 weekly subscribers and over 3 million online readers, will
partner with ChinaNet, a leading online marketing and branding services
company, to help drive innovation in China's burgeoning small business
community.

Wahaha Commercial Co., Ltd. ("Wahaha"), a real estate development company with
plans to expand throughout key areas in China via shopping malls, supermarkets
and hypermarket chains, brand discount stores, kids and convenience stores,
engaged ChinaNet to help organize and host a franchise-related conference to
help promote Wahaha's expansion plans. The conference, held from July 25^th to
July 28^th, 2013 in Hangzhou, was attended by over 2,500 participants,
including key political, business and community leaders and entrepreneurs.

Conference Call

Date: Monday, August 19, 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: 10032880
Webcast: http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=1565

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 August
26, 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
10032880.

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 services for small and medium-sized enterprises and
entrepreneurial management and networking services 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)

                                                June 30,    December 31, 2012
                                                2013
                                                (US $)      (US $)
                                                (Unaudited) 
Assets                                                      
Current assets:                                             
Cash and cash equivalents                        $3,392    $5,483
Term deposit                                     3,426       3,357
Accounts receivable, net                         10,460      8,486
Other receivables, net                           3,080       3,103
Prepayment and deposit to suppliers              14,636      14,596
Due from related parties                         375         210
Other current assets                             104         136
Deferred tax assets-current                      23          50
Total current assets                             35,496      35,421
                                                           
Investment in and advance to equity investment   851         959
affiliates
Property and equipment, net                      1,417       1,636
Intangible assets, net                           6,782       7,167
Deposit for purchasing of software technology    808         --
Goodwill                                         11,312      11,083
Deferred tax assets-non current                  1,023       652
Total Assets                                     $57,689  $56,918
                                                           
Liabilities and Equity                                      
Current liabilities:                                        
Accounts payable *                               $257       $110
Advances from customers *                        810         1,065
Accrued payroll and other accruals *             947         904
Payable for acquisition *                        --          1,266
Taxes payable *                                  7,564       6,683
Other payables *                                 259         217
Total current liabilities                        9,837       10,245
                                                           
Long-term liabilities:                                      
Deferred tax liability-non current *             1,612       1,689
Long-term borrowing from director                141         139
Total Liabilities                                11,590      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                   
22,226,540 shares and 22,186,540 shares at June  22          22
30, 2013 and December 31, 2012)
Additional paid-in capital                       20,029      20,008
Statutory reserves                               2,296       2,296
Retained earnings                                19,969      19,505
Accumulated other comprehensive income           3,209       2,393
Total ChinaNet Online Holdings, Inc.'s           45,525      44,224
stockholders' equity
                                                           
Noncontrolling interests                         574         621
Total equity                                     46,099      44,845
Total Liabilities and Equity                     $57,689   $56,918



CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except for number of shares and per share data)

                        Six Months Ended June 30, Three Months Ended June 30,
                        2013          2012        2013          2012
                        (US $)        (US $)      (US $)        (US $)
                        (Unaudited)   (Unaudited) (Unaudited)   (Unaudited)
Sales                                                         
From unrelated parties   $15,767      $27,996    $8,777       $13,076
From related parties     174           66          115           51
                        15,941        28,062      8,892         13,127
                                                             
Cost of sales            9,757         21,902      5,290         9,364
Gross margin             6,184         6,160       3,602         3,763
                                                             
Operating expenses                                            
Selling expenses         1,390         1,402       602           713
General and              3,146         3,060       1,744         1,817
administrative expenses
Research and development 912           756         463           425
expenses
                        5,448         5,218       2,809         2,955
                                                             
Income from operations   736           942         793           808
                                                             
Other income (expenses)                                       
Interest income          64            121         32            116
Other (expenses)/income  (2)           --          (1)           1
                        62            121         31            117
                                                             
Income before income tax
expense, equity method   798           1,063       824           925
investments and
noncontrolling interests
Income tax benefit /    (268)         (14)        (354)         222
(expense)
Income before equity
method investments and   530           1,049       470           1,147
noncontrolling interests
Share of losses in
equity investment        (125)         (297)       (54)          (104)
affiliates
Net income               405           752         416           1,043
Net loss / (income)
attributable to          59            (223)       18            (148)
noncontrolling interests
Net income attributable
to ChinaNet Online       464           529         434           895
Holdings, Inc.
                                                             
Net income               405         752           416           1,043
Foreign currency         828         298           613           35
translation gain
Comprehensive Income     $1,233     $1,050       $1,029       $1,078
Comprehensive loss /
(income) attributable to 47          (266)         9             (154)
noncontrolling interests
Comprehensive income
attributable to ChinaNet $1,280     $784       $1,038       $924
Online Holdings, Inc.
                                                             
Earnings per share                                            
Earnings per common                                           
share
Basic                    $0.02     $0.02       $0.02       $0.04
Diluted                  $0.02     $0.02       $0.02       $0.04
                                                             
Weighted average number
of common shares                                              
outstanding:
Basic                   22,193,391  22,184,562    22,200,166    22,186,540
Diluted                 22,193,391  22,184,562    22,200,166    22,186,540

                                      


CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

                                                    Six Months Ended June 30,
                                                    2013          2012
                                                    (US $)        (US $)
                                                    (Unaudited)   (Unaudited)
Cash flows from operating activities                              
Net income                                           $405         $752
Adjustments to reconcile net income to net cash                   
(used in) / provided by operating activities
Depreciation and amortization                        840           818
Share-based compensation expenses                    21            27
Allowances for doubtful debts                        787           561
Share of losses in equity investment affiliates      125           297
Deferred taxes                                       (437)         (558)
Changes in operating assets and liabilities                       
Accounts receivable                                  (1,781)       (5,346)
Other receivables                                    (701)         226
Prepayment and deposit to suppliers                  258           1,983
Due from related parties                             (160)         43
Other current assets                                 32            26
Accounts payable                                     142           109
Advances from customers                              (274)         1,070
Accrued payroll and other accruals                   32            418
Due to related parties                               --            (162)
Other payables                                       (45)          45
Taxes payable                                        736           783
Net cash (used in) provided by operating activities  (20)          1,092
                                                                 
Cash flows from investing activities                              
Purchases of vehicles and office equipment           (60)          (46)
Deposit for purchasing of software technology        (800)         --
Project development deposit to a third party         --            (2,450)
Payment for acquisition of VIEs                      (1,280)       (553)
Net cash used in investing activities                (2,140)       (3,049)
                                                                
Cash flows from financing activities                             
Dividend paid to convertible preferred stockholders  --           (5)
Short-term loan borrowed from an equity investment   --           316
affiliate
Short-term loan repaid to an equity investment       --           (538)
affiliate
Net cash used in financing activities                --           (227)
                                                                
Effect of exchange rate fluctuation on cash and cash 69           61
equivalents
                                                                
Net decrease in cash and cash equivalents            (2,091)      (2,123)
                                                                
Cash and cash equivalents at beginning of the period 5,483        10,695
Cash and cash equivalents at end of the period       $ 3,392 $ 8,572

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