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ChinaNet Online Holdings Reports Third Quarter 2013 Financial Results



ChinaNet Online Holdings Reports Third Quarter 2013 Financial Results

 Projects $30 Million Revenue and $1.2 Million Net Income for Full Year 2013

 Management to Host Earnings Conference Call on Wednesday, November 20^th at
                                 8:30 a.m. ET

BEIJING, Nov. 19, 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
third quarter of 2013.

Summary Financials
 
Third Quarter 2013 Results (USD) (Unaudited)
                                             Q3 2013      Q3 2012       CHANGE
Sales                                        $7.5 million $10.3 million -27%
Gross Profit                                 $4.1 million $4.1 million  --
Gross Margin                                 55.0%        40.1%         +37%
Net Income Attributable to Common            $1.2 million $1.2 million  -5%
Stockholders
EPS (Diluted)                                $0.05        $0.05         --

Third quarter 2013 Financial Results

Revenues for the three months ended September 30, 2013 were $7.5 million
compared to $10.3 million for the three months ended September 30, 2012,
representing a 27% decrease. Low margin TV advertising fell by $2.7 million,
or 83%, accounting for the majority of the year-over-year revenue decline.
Internet advertising revenues increased by 7% to $6.1 million.

Mr. George Chu, Chief Operating Officer of the Company stated, "We generated
solid growth in our operating cash flows so far this year. While our customers
remain cautious with their spending, we were able to increase our internet
advertising revenues 7% in the third quarter. We continue to invest in new
services and technologies that will further improve our competitive position."

Third quarter 2013 Revenue Breakdown by Business Unit (USD in thousands)
                                      Q3 2013  %    Q3 2012 %   % Change
Internet Advertisement                $6,071   80%  $5,650  55% +7%
TV Advertisement                      $560     8%   $3,238  32% -83%
Bank Kiosk                            $71      1%   $72     1%  --
Brand Mgmt. & Sales Channel Building  $779     10%  $1,327  13% -41%

Revenue from internet advertisements for the three months ended September 30,
2013 increased by 7% to $6.1 million compared to the same period a year ago.
TV advertising revenues fell to $0.6 million in the third quarter of 2013 from
$3.3 million in the same period in 2012 as the Company had significantly
higher TV advertising activity in the third quarter of 2012 related to the
launch of its entrepreneurial reality show and the promotion of its
entrepreneurial website, 28.com and Chuangye.com. Brand management and sales
channel building revenues fell by approximately $0.5 million as a result of
lower spending by customers in reaction to the slowing Chinese economy.

Gross profit for the three months ended September 30, 2013 was $4.1 million,
essentially unchanged from the third quarter of 2012. Gross margin was 55%, up
significantly from 40.1% in the third 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 September 30, 2013 were
approximately $2.7 million, up 21% compared to $2.3 million in the same period
in 2012. The Company increased research and development expenses by 62% to
support new product investments. Selling expenses fell by 4% to $0.6 million
in the third quarter of 2013.

The Company recorded $1.4 million of operating income in the three months
ended September 30, 2013 compared to $1.9 million in the same period one year
ago.

Net income attributable to common stockholders for the three months ended
September 30, 2013 was $1.2 million and earnings per share was $0.05 for the
third quarter of 2013 and 2012.

 
First Nine months 2013 Results (USD) (Unaudited)
                                            YTD 2013      YTD 2012      CHANGE
Sales                                       $23.4 million $38.3 million -39%
Gross Profit                                $10.3 million $10.3 million --
Gross Margin                                44.0%         26.8%         +64%
Net Income/(Loss) Attributable to Common    $1.6 million  $1.7 million  -7%
Stockholders
EPS (Diluted)                               $0.07         $0.08         -13%

Revenue for the nine months ended September 30, 2013 was $23.4 million
compared to $38.3 million in the corresponding period a year ago. Internet
advertising, TV advertising, and brand management and sales channel building
revenues were $15.3 million, $5.7 million, and $2.2 million in the first nine
months of 2013, respectively.

Gross profit and gross margin for the first nine months of 2013 were $10.3
million and 44% compared to $10.3 million and 26.8%, respectively, in the same
period a year ago.

Operating expenses increased by 10% to $8.2 million in the first nine months
of 2013. ChinaNet generated $2.1 million in operating income, down 25% from
$2.8 million in the first nine months of 2012.

Net income attributable to ChinaNet common stockholders and net income per
share were $1.6 million and $0.07 in the first nine months of 2013. The
weighted average diluted shares outstanding was essentially flat
year-over-year at 22.3 million shares.

Balance Sheet and Cash Flow

The Company had $4.9 million in cash and cash equivalents as of September 30,
2013, compared to $5.5 million as of December 31, 2012, working capital of
$24.6 million, compared to $25.2 million as of December 31, 2012, and a
current ratio of 3.0 to 1, compared 3.5 to 1 as of December 31, 2012. Total
shareholders' equity of ChinaNet was $46.8 million at September 30, 2013
compared to $44.2 million at December 31, 2012.

The Company generated approximately $2.8 million of cash flows from operations
in the first nine months of 2013 compared to a $2.5 million of cash inflows
for the first nine months of 2012.

Guidance for 2013

The Company provides the following guidance for fiscal year 2013.

Revenues: $30 million
Net Income: $1.2 million

Business Updates

ChinaNet hosted its 10-year Anniversary and Customer Sharing Conference ("the
Conference") in Zhengjie Palace Hot Spring Hotel in Beijing, China from August
17th to 18th, 2013. The Company secured over $1 million of new contract
signings during the 2-day conference. At the Conference, the Company
celebrated its achievements over the past decade and introduced the latest
services, including "366 value added service platform", to its customers. Over
250 guests and employees participated in the Conference. Executives
from ChinaNet's close business partners, such as Baidu, Qihu (360), China
Business Journal, Source for Enterprise Group, Skylife Group, and Guangfa
Technology Co., Ltd also attended the event.

ChinaNet launched a fall promotional campaign in October 2013 to help
entrepreneurs and franchisees securing funding and services for their
businesses. The three month campaign attracted hundreds of clients and
funders.

The Company continued to establish closer ties with local communities and
businesses through various initiatives. In October 2013, ChinaNet began a
marketing awareness campaign to help promote Joy Paradise, one of the largest
retail shopping centers under construction in Hebei Province. The new
state-of-the-art complex will house close to 300 retail and entertainment
shops and restaurants – all prospective clients of ChinaNet - when it opens in
August 2014. Separately, Company executives met with local government
officials from Quanzhou to discuss various cultural and creative projects that
could help promote local businesses in Fujian Province.

In early November 2013, ChinaNet's subsidiary Liansuo.com signed an agreement
with Beijing Origus Food Co. Ltd. ("Origus") to help them expand their
franchise in China and internationally. Origus, a pioneer of the pizza buffet
concept in China, has hundreds of locations in more than 20 provinces.
Liansuo.com will help Origus promote their brand and attract potential
franchise partners.

ChinaNet participated in the inaugural China Franchise Exhibition to be held
at the Chengdu Century International Convention Center, located in Chengdu,
China from November 14th to 16th, 2013. ChinaNet representatives will network
with franchise owners and local government representatives to discuss
Liansuo.com and other ChinaNet products and services.

Conference Call

Date: Wednesday, November 20, 2013
Time: 8:30 a.m. Eastern Time
Conference Line (U.S.): 1-877-941-4774
International Dial-In: 1-480-629-9760
Conference ID: 4651460
Webcast: http://public.viavid.com/index.php?id=106961

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 11:59 pm Eastern Time on
November 27, 2013. To listen, call 1-877-870-5176 within the United States or
1-858-384-5517 when calling internationally. Please use the replay pin number
4651460.

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)
                                                                   
                                                   September 30,  December 31,
                                                   2013           2012
                                                   (US $)         (US $)
                                                   (Unaudited)     
Assets                                                             
Current assets:                                                    
Cash and cash equivalents                          $4,933         $5,483
Term deposit                                       3,446          3,357
Accounts receivable, net                           10,772         8,486
Other receivables, net                             2,285          3,103
Prepayment and deposit to suppliers                15,115         14,596
Due from related parties                           443            210
Other current assets                               47             136
Deferred tax assets-current                        35             50
Total current assets                               37,076         35,421
Investment in and advance to equity investment     845            959
affiliates
Property and equipment, net                        1,280          1,636
Intangible assets, net                             6,559          7,167
Deposit for purchasing of software technology      2,438          --
Goodwill                                           11,380         11,083
Deferred tax assets-non current                    1,220          652
Total Assets                                       $60,798        $56,918
Liabilities and Equity                                             
Current liabilities:                                               
Short-term bank loan                               $813           $ --
Accounts payable                                   402            110
Advances from customers                            1,485          1,065
Accrued payroll and other accruals                 833            904
Payable for acquisition                            488            1,266
Taxes payable                                      8,190          6,683
Other payables                                     263            217
Total current liabilities                          12,474         10,245
Long-term liabilities:                                             
Deferred tax liability-non current                 1,566          1,689
Long-term borrowing from director                  142            139
Total Liabilities                                  14,182         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
22,376,540 shares and 22,186,540 shares at                         
September 30, 2013 and December 31, 2012,
respectively)
                                                                   
                                                   22             22
Additional paid-in capital                         19,860         20,008
Statutory reserves                                 2,296          2,296
Retained earnings                                  21,128         19,505
Accumulated other comprehensive income             3,462          2,393
Total ChinaNet Online Holdings, Inc.'s             46,768         44,224
stockholders' equity
Noncontrolling interests                           (152)          621
Total equity                                       46,616         44,845
                                                                   
Total Liabilities and Equity                       $60,798        $56,918

 
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except for number of shares and per share data)
                                                                    
                           Nine Months Ended September Three Months Ended
                           30,                         September 30,
                           2013          2012          2013        2012
                           (US $)        (US $)        (US $)      (US $)
                           (Unaudited)   (Unaudited)   (Unaudited) (Unaudited)
Sales                                                               
 From unrelated parties    $23,108       $38,232       $7,341      $10,236
 From related parties      314           117           140         51
                           23,422        38,349        7,481       10,287
Cost of sales              13,123        28,065        3,366       6,163
Gross margin               10,299        10,284        4,115       4,124
Operating expenses                                                  
Selling expenses           2,007         2,042         617         640
General and administrative 4,690         4,320         1,544       1,260
expenses
Research and development   1,490         1,112         578         356
expenses
                           8,187         7,474         2,739       2,256
Income from operations     2,112         2,810         1,376       1,868
                                                                    
Other income (expenses)                                             
Interest income            94            123           30          2
Interest expense           (10)          --            (10)        --
Other expenses             (12)          (148)         (10)        (148)
                           72            (25)          10          (146)
                                                                    
Income before income tax
expense, equity method     2,184         2,785         1,386        1,722
investments and
noncontrolling interests 
Income tax expense         (469)         (196)         (201)       (182)
Income before equity
method investments and      1,715         2,589         1,185       1,540
noncontrolling interests 
Share of losses in equity  (170)         (394)         (45)        (97)
investment affiliates
Net income                 1,545         2,195         1,140       1,443
Net loss / (income)
attributable to            78            (446)         19          (223)
noncontrolling interests
Net income attributable to
ChinaNet Online Holdings,   $1,623        $1,749        $1,159      $1,220
Inc.
                                                                    
Net income                 1,545         2,195         1,140       1,443
Foreign currency           1,076         159           248         (139)
translation gain
Comprehensive Income       $2,621        $2,354        $1,388      $1,304
Comprehensive loss/
(income) attributable to   71            (450)         24          (184)
noncontrolling interests
Comprehensive income
attributable to ChinaNet   $2,692        $1,904        $1,412      $1,120
Online Holdings, Inc.
                                                                    
Earnings per share                                                  
Earnings per common share                                           
Basic                      $0.07         $0.08         $0.05       $0.05
Diluted                    $0.07         $0.08         $0.05       $0.05
Weighted average number of                                          
common shares outstanding:
Basic                      22,253,463    22,185,226    22,371,649  22,186,540
Diluted                    22,253,463    22,185,226    22,371,649  22,186,540

 
CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                                                
                                               Nine Months Ended September 30,
                                               2013            2012
                                               (US $)          (US $)
                                               (Unaudited)     (Unaudited)
Cash flows from operating activities                            
Net income                                     $1,545          $2,195
Adjustments to reconcile net income to net                      
cash provided by operating activities
Depreciation and amortization                  1,252           1,223
Share-based compensation expenses              114             38
Allowances for doubtful debts                  1,024           561
Share of losses in equity investment           170             394
affiliates
Loss on disposal of property and equipment     --              2
Deferred taxes                                 (696)           (749)
Changes in operating assets and liabilities                     
Accounts receivable                            (2,269)         (5,712)
Other receivables                              101             198
Prepayment and deposit to suppliers            (127)           3,401
Due from related parties                       (225)           4
Other current assets                           89              34
Accounts payable                               284             (172)
Advances from customers                        388             111
Accrued payroll and other accruals             (84)            (134)
Due to related parties                         --              (162)
Other payables                                 (67)            25
Taxes payable                                  1,313           1,210
Net cash provided by operating activities      2,812           2,467
                                                                
Cash flows from investing activities                            
Purchases of vehicles and office equipment     (65)            (185)
Deposit for purchasing of software technology  (2,411)         --
Long-term investment in and advance to equity  (32)            --
investment affiliates
Project development deposit to a third party   --              (2,450)
Cash effect on deconsolidation of VIEs         --              (15)
Payment for acquisition of VIEs                (1,768)         (1,817)
Net cash used in investing activities          (4,276)         (4,467)
                                                                
Cash flows from financing activities                            
Proceeds from short-term bank loan             804             --
Dividend paid to convertible preferred         --              (5)
stockholders
Short-term loan borrowed from an equity        --              316
investment affiliate
Short-term loan repaid to an equity investment --              (537)
affiliate
Net cash provided by (used in) financing       804             (226)
activities
                                                                
Effect of exchange rate fluctuation on cash    110             44
and cash equivalents
                                                                
Net decrease in cash and cash equivalents      (550)           (2,182)
                                                                
Cash and cash equivalents at beginning of the  5,483           10,695
period
Cash and cash equivalents at end of the period $4,933          $8,513
                                                                
Supplemental disclosure of cash flow                            
information
                                                                
Income taxes paid                              $39             $74
                                                                
Non-cash transactions:                                          
Restricted stock and options granted for       $11             $53
future service

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