ChinaNet Online Holdings Reports Fiscal Year 2013 Financial Results Expects to File Its 10-Q for the First Quarter of 2014 in July BEIJING, June 17, 2014 (GLOBE NEWSWIRE) -- ChinaNet Online Holdings, Inc. ("ChinaNet" or the "Company") (Nasdaq:CNET), 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 fiscal year 2013. Summary Financials Full Year 2013 Results (USD) FY 2013 FY 2012 CHANGE Sales $30.3 million $46.6 million -35% Gross Profit $13.7 million $15.0 million -9% Gross Margin 45.2% 32.2% +40.4% Net (Loss)/ Income Attributable to Common ($0.2) million $3.0 million -- Stockholders EPS (Diluted) ($0.01) $0.14 -- Revenue for the fiscal year ended December 31, 2013 was $30.3 million compared to $46.6 million for the fiscal year ended December 31, 2012. Internet advertising, TV advertising, and brand management and sales channel building revenues were $20.7 million, $6.8 million, and $2.6 million in fiscal year 2013, respectively. Year Ended December 31, 2013 Revenue Breakdown by Business Unit (USD in thousands) FY 2013 % FY 2012 % % Change Internet Advertisement $20,672 68% $21,366 46% -3% TV Advertisement $6,801 22% $20,454 44% -67% Bank Kiosk $251 1% $282 1% -11% Brand Mgmt. & Sales Channel Building $2,569 9% $4,498 10% -43% Gross profit and gross margin for the fiscal year ended December 31, 2013 were $13.7 million and 45.2% compared to $15.0 million and 32.2%, respectively, for the fiscal year ended December 31, 2012. The primary reason for the year-over-year increase in the gross margin was lower margin TV advertising revenues declining from 44% of total revenues in fiscal year 2012 to 22% in fiscal year 2013. Operating expenses increased by 17% to $12.3 million for the fiscal year ended December 31, 2013. General and administrative expenses and research and development expenses increased by 28% and 10% to $7.7 million and $2.0 million, respectively. ChinaNet generated $1.5 million in operating income in 2013, down from $4.5 million in 2012. Net income attributable to ChinaNet common stockholders and net income per share were -$0.2 million and -$0.01 for the fiscal year ended December 31, 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 $3.4 million in cash and cash equivalents as of December 31, 2013, compared to $5.5 million as of December 31, 2012, working capital of $24.0 million, compared to $25.2 million as of December 31, 2012, and a current ratio of 3.3 to 1, compared 3.5 to 1 as of December 31, 2012. Total shareholders' equity of ChinaNet was $45.0 million at December 31, 2013 compared to $44.2 million at December 31, 2012. The Company generated approximately $2.8 million of cash flows from operations for the year ended December 31, 2013 compared to a $5.0 million of cash inflows for the year ended December 31, 2012. Guidance for 2014 Management anticipates releasing the revenues and net income guidance for fiscal year 2014 in July 2014. Business Updates The Company's brand consulting subsidiary, Quanzhou Zhilang Company ("Zhilang"), signed a brand promotion agreement with Beijing Daisy Corporation Ltd. ("Daisy") in March 2014, pursuant to which Zhilang agreed to offer comprehensive advertising, branding and marketing services to Daisy and its subsidiaries. Daisy is dedicated in providing solutions and recommendations to parents on child caring problems and has established a high reputation among Chinese consumers. It owns multiple brands and sells a variety of products and services including clothing, postpartum recovery center, baby haircut, toys, baby shampoo and baby photography. ChinaNet's subsidiary 28.com received a high credit rating by the Beijing Zhongguancun Enterprises Credit Promotion Association (ECPA) for 2014. Beijing Zhongguancun Enterprises Credit Promotion Association is an independent entity established by various high-tech enterprises in 2003 to promote members complying with the laws and regulations and national policies and to strengthen cooperation between members. The credit audit is conducted by Beijing Credit Ratings Co., Ltd, which is certified by the Beijing Zhongguancun government and covers the areas of internal controls, financial statements and credit and working capital management. This is the second consecutive year 28.com received this prestigious recognition from the ECPA. The Company was unable to file its Form 10-K for fiscal 2013 until June 16, 2014 due to the following facts and circumstances: (1) Mr. George Chu, its Chief Operating Officer and primary member of management responsible for the organization, coordination and supervision of its SEC reporting processes was hospitalized; (2) the Company had material balances and transactions, incurred during the year or carried forward from prior year, which its independent auditors needed additional time to verify; and (3) the additional audit procedures that were performed, as discussed above, resulted in an increase of internal documentation that needed to be generated by the Company and reviewed by the independent auditors in order to complete the related internal review procedures in accordance with the standards of the Public Company Accounting Oversight Board. Due to the significant amount of time and resources the Company needed to dedicate to complete the Form 10-K filing, it was unable to timely finalize its financial results as well as the disclosure requirements of the Form 10-Q for the three months ended March 31, 2014. The Company submitted to the NASDAQ Stock Market LLC a compliance plan with respect to the delinquent Form 10-Q on June 16, 2014. The Company is continuing to work diligently to complete and finalize the Form 10-Q. Based on discussions with the independent auditors, management expects to finalize and file the Form 10-Q in July 2014. 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. -- FINANCIAL TABLES – CHINANET ONLINE HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except for number of shares and per share data) As of December 31, 2013 2012 (US $) (US $) Assets Current assets: Cash and cash equivalents $3,442 $5,483 Term deposit 3,467 3,357 Accounts receivable, net 7,673 8,486 Other receivables, net 4,299 3,103 Prepayment and deposit to suppliers 14,692 14,596 Due from related parties 502 210 Other current assets 27 136 Deferred tax assets-current 153 50 Total current assets 34,255 35,421 Investment in and advance to equity investment affiliates 845 959 Property and equipment, net 1,057 1,636 Intangible assets, net 6,015 7,167 Deposit for purchasing of software technology 2,453 -- Goodwill 11,450 11,083 Deferred tax assets-non current 759 652 Total Assets $56,834 $56,918 Liabilities and Equity Current liabilities: Short-term bank loan $818 $-- Accounts payable 421 110 Advances from customers 995 1,065 Accrued payroll and other accruals 676 904 Payable for acquisition -- 1,266 Taxes payable 7,029 6,683 Other payables 288 217 Total current liabilities 10,227 10,245 Long-term liabilities: Deferred tax liability-non current 1,439 1,689 Long-term borrowing from director 143 139 Total Liabilities 11,809 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 22 22,186,540 shares at December 31, 2013 and 2012, respectively) Additional paid-in capital 19,870 20,008 Statutory reserves 2,602 2,296 Retained earnings 18,965 19,505 Accumulated other comprehensive income 3,689 2,393 Total ChinaNet Online Holdings, Inc.'s stockholders' equity 45,148 44,224 Noncontrolling interests (123) 621 Total equity 45,025 44,845 Total Liabilities and Equity $56,834 $56,918 CHINANET ONLINE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except for number of shares and per share data) Year Ended December 31, 2013 2012 (US $) (US $) Sales From unrelated parties $29,932 $46,403 From related parties 361 197 30,293 46,600 Cost of sales 16,563 31,558 Gross margin 13,730 15,042 Operating expenses Selling expenses 2,574 2,683 General and administrative expenses 7,691 6,030 Research and development expenses 1,995 1,819 12,260 10,532 Income from operations 1,470 4,510 Other income (expenses) Interest income 125 186 Interest expense (26) -- Change in fair value of contingent consideration -- (160) receivables Loss on disposal of intangible asset (315) -- Loss on disposal of subsidiaries (543) -- Other income (expenses) 5 (150) (754) (124) Income before income tax expense, equity method investments and noncontrolling interests 716 4,386 Income tax expense (816) (529) Loss/income before equity method investments and (100) 3,857 noncontrolling interests Share of losses in equity investment affiliates (183) (449) Net loss/income (283) 3,408 Net loss/(income) attributable to noncontrolling 49 (412) interests Net loss/income attributable to ChinaNet Online $(234) $2,996 Holdings, Inc. Loss/earnings per share Loss/earnings per common share Basic $(0.01) $0.14 Diluted $(0.01) $0.14 Weighted average number of common shares outstanding: Basic 22,284,485 22,185,556 Diluted 22,284,485 22,185,556 CHINANET ONLINE HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2013 2012 (US $) (US $) Cash flows from operating activities Net loss/income $(283) $3,408 Adjustments to reconcile net loss/income to net cash provided by operating activities Depreciation and amortization 1,617 1,637 Share-based compensation expenses 125 48 Change in fair value ofcontingent consideration -- 160 receivable Allowances for doubtful debts 2,702 1,141 Share of losses in equity investment affiliates 183 449 Loss on disposal of property and equipment 3 2 Loss on disposal of subsidiaries 543 -- Loss on disposal of intangible assets 315 -- Deferred taxes (486) (828) Changes in operating assets and liabilities Accounts receivable (3,676) (5,516) Other receivables 98 1,400 Prepayment and deposit to suppliers 380 882 Due from related parties (282) 117 Other current assets 106 (5) Accounts payable 301 (158) Advances from customers (104) 335 Accrued payroll and other accruals (242) 285 Due to related parties -- (4) Other payables (69) 72 Taxes payable 1,525 1,603 Net cash provided by operating activities 2,756 5,028 Cash flows from investing activities Purchases of vehicles and office equipment (79) (314) Deposit for purchasing of software technology (2,420) -- Short-term loan to unrelated entities (790) (475) Long-term investment in and advance to equity (40) -- investment affiliates Payment for acquisition of VIEs (2,258) (5,775) Cash effect on disposal of VIEs (146) -- Project development deposit to a third party -- (2,453) Refund of project development deposit from a third -- 2,453 party Placement of term deposit -- (3,355) Net cash used in investing activities (5,733) (9,919) Cash flows from financing activities Proceeds from short-term bank loan 807 -- 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 Repayment to legal (nominal) shareholders of Shanghai -- (158) Jing Yang Net cash provided by (used in) financing activities 807 (385) Effect of exchange rate fluctuation on cash and cash 129 64 equivalents Net decrease in cash and cash equivalents (2,041) (5,212) Cash and cash equivalents at beginning of the year 5,483 10,695 Cash and cash equivalents at end of the year $3,442 $5,483 CONTACT: MZ North America Ted Haberfield, President Direct: +1-760-755-2716 Email: email@example.com Web: www.mzgroup.us
ChinaNet Online Holdings Reports Fiscal Year 2013 Financial Results
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