ChinaNet Online Holdings Reports First Quarter 2014 Financial Results

ChinaNet Online Holdings Reports First Quarter 2014 Financial Results

Projects $39 Million Revenue for Full Year 2014

BEIJING, July 18, 2014 (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 and filing
of its quarterly report with the Securities and Exchange Commission (the
"SEC") for the first fiscal quarter of 2014.

Summary Financials

First Quarter 2014 Results (USD) (Unaudited)
                                          Q1 2014        Q1 2013      CHANGE
Sales                                      $5.2 million   $7.0 million -26%
Gross Profit                               $1.4 million   $2.6 million -47%
Gross Margin                               26.3%          36.6%        -28%
Net (Loss)/Income Attributable to ChinaNet ($0.7) million 0.03 million --
EPS (Diluted)                              ($0.03)        $0.00        --

First Quarter 2014 Financial Results

Revenues for the three months ended March 31, 2014 were $5.2 million compared
to $7.0 million for the three months ended March 31, 2013, representing a 26%
decrease. Low margin TV advertising revenue fell by $1.5 million, or 55%,
accounting for the majority of the year-over-year revenue decline.

First Quarter 2014 Revenue Breakdown by Business Unit (USD in thousands)
                                                           
                                     Q1 2014  %    Q1 2013 %   % Change
Internet Advertisement                $3,580   69%  $3,811  54% -6%
TV Advertisement                      $1,182   23%  $2,638  37% -55%
Bank Kiosks                           $71      1%   $69     1%  -3%
Brand Mgmt. & Sales Channel Building  $350     7%   $531    8%  -34%

Revenue from internet advertisements and the related technical services for
the three months ended March 31, 2014 decreased by 6% to $3.6 million compared
to the same period a year ago, resulting from a decrease in number of
customers during the period as compared to the same period of last year. The
decrease in number of customers during the period was primarily due to the
internal loophole on technical management incurred in the fourth fiscal
quarter of 2013, which adversely affected the confidenceof our customersin
the effectiveness of our online advertising portals. Management has taken
immediate remedial measures to regain and strengthen customer confidence.
Management believes that this is an infrequent event in its ordinary course of
business and that sales performance will be able to gradually recover in
further periods of the year.

TV advertising revenue decreased by 55% to $1.2 million for the three months
ended March 31, 2014 from $2.6 million for the same period in 2013. The
decrease in TV advertising revenue was primarily due to the adoption of a
restrictions notice to TV shopping infomercials broadcasted in provincial
satellite television stations, issued by the State Administration of Press,
Publication, Radio, Film and Television of the People's Republic of China (the
"SARFT") in October 2013, which further restricts the content, air time and
duration of these infomercials. In response to these restrictions, management
plans to cooperate with the television stations to develop and producenew
forms of TV program which will replace TV shopping infomercials to help
clients raise their brand and product awareness, and to develop non-TV
shopping advertising customers.

Gross profit for the three months ended March 31, 2014 was $1.4 million
compared to $2.6 million for the same period in 2013. Gross margin was 26%,
down from 37% in the first quarter of 2013. This decrease is a direct result
of the decrease in the gross margin of the internet advertising and related
technical services segment to 29% from 57% for the same period of last year.

The Company incurred an operating loss of $0.7 million for the three months
ended March 31, 2014 compared to an operating loss of $0.1 million in the same
period a year ago.

Net loss attributable to ChinaNet for the three months ended March 31, 2014
was $0.7 million and loss per share was $0.03, compared to a net income of
$0.03 million in the first quarter of 2013.

Balance Sheet and Cash Flow

The Company had $1.7 million in cash and cash equivalents as of March 31,
2014, compared to $3.4 million as of December 31, 2013, working capital of
$22.6 million, compared to $24.0 million as of December 31, 2013, and a
current ratio of 3.1 to 1, compared to 3.3 to 1 as of December 31, 2013. Total
shareholders' equity of ChinaNet was $44.2 million at March 31, 2014 compared
to $45.1 million at December 31, 2013.

The Company had a $1.4 million of cash outflows from operations in the first
quarter of 2014 compared to a $0.4 million of cash outflows for the first
three months of 2013.

Guidance for 2014

The Company is forecasting revenues of approximately $39 million for the
fiscal year 2014.

Business Updates

Liansuo.com, one of ChinaNet's online advertising portals, has successfully
signed fifty-five new customers in the second fiscal quarter of 2014 with a
strong and active marketing program that includes traditional and online
advertising, trade shows and referrals. Liansuo.com provides a full suite of
advertising, marketing and brand management services to small and medium sized
businesses in China. New clients include Pure Fishing Inc., a leading provider
of fishing equipment, and a subsidiary of Jarden Corporation and O.C.T. Mami,
a leading retail apparel brand owned by Shanghai Uki Company. Liansuo.com will
continue to pursue new clients as well as opportunities to expand services to
existing clients.

Executives of ChinaNet participated in international brands curriculum
"Systematic Creates Wealth" in Anhui Province, China on June 17th and 18th,
2014 to help train and promote entrepreneurs and franchise owners in the food
industry. This activity was jointly organized by the Restaurant Association
and "Discover China's Good Projects". The Company created "Discover China's
Good Projects" in March 2013 to promote and support new projects and
businesses.

ChinaNet filed its quarterly report on Form 10-Q for the quarter ended March
31, 2014 with the SEC on July 17, 2014. ChinaNet expects the filing of the
report will enable the Company to regain compliance with NASDAQ's filing
requirements set forth in Listing Rules 5250(c)(1).

About ChinaNet Online Holdings, Inc.

The Company, a parent company of ChinaNet Online Media Group Ltd.,
incorporated in the BVI ("ChinaNet"), is a leading B2B (business to business)
Internet technology company focusing on providing O2O (online to offline)
sales channel expansion service for small and medium-sized enterprises (SMEs)
and entrepreneurial management and networking service for entrepreneurs in
China. The Company, through certain contractual arrangements with operating
companies in the PRC, provides Internet advertising and other services for
Chinese SMEs via its portal websites, 28.com and Liansuo.com, TV commercials
and program production via China-Net TV, and offline brand management and
sales channel building services. 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)
                                                                
                                                     March 31,   December 31,
                                                     2014        2013
                                                     (US $)      (US $)
                                                     (Unaudited) 
Assets                                                           
Current assets:                                                  
Cash and cash equivalents                             $1,660   $3,442
Term deposit                                          3,439       3,467
Accounts receivable, net                              7,094       7,673
Other receivables, net                                3,870       4,299
Prepayment and deposit to suppliers                   16,647      14,692
Due from related parties                              381         502
Other current assets                                  104         27
Deferred tax assets-current                           155         153
Total current assets                                  33,350      34,255
                                                                
Investment in and advance to equity investment        824         845
affiliates
Property and equipment, net                           965         1,057
Intangible assets, net                                5,703       6,015
Deposit and prepayment for purchasing of software     3,277       2,453
technology
Goodwill                                              11,356      11,450
Deferred tax assets-non current                       825         759
Total Assets                                          $56,300   $56,834
Liabilities and Equity                                           
Current liabilities:                                             
Short-term bank loan                                  $811      $818
Accounts payable                                      584         421
Advances from customers                               1,120       995
Accrued payroll and other accruals                    637         676
Due to noncontrolling interest of VIE                 195         --
Taxes payable                                         7,123       7,029
Other payables                                        322         288
Total current liabilities                             10,792      10,227
Long-term liabilities:                                           
Deferred tax liability-non current                    1,371       1,439
Long-term borrowing from director                     142         143
Total Liabilities                                     12,305      11,809
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  22         22
shares at March 31, 2014 and December 31, 2013)
Additional paid-in capital                            19,878      19,870
Statutory reserves                                    2,602       2,602
Retained earnings                                     18,297      18,965
Accumulated other comprehensive income                3,364       3,689
Total ChinaNet Online Holdings, Inc.'s stockholders'  44,163      45,148
equity
Noncontrolling interests                              (168)       (123)
Total equity                                          43,995      45,025
Total Liabilities and Equity                          $56,300   $56,834


CHINANET ONLINE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME
(In thousands, except for number of shares and per share data)
                                                               
                                                 Three Months Ended March 31,
                                                 2014           2013
                                                 (US $)         (US $)
                                                 (Unaudited)    (Unaudited)
Sales                                                           
From unrelated parties                            $5,182        $6,990
From related parties                              1              59
                                                 5,183          7,049
Cost of sales                                     3,822          4,467
Gross margin                                      1,361          2,582
Operating expenses                                              
Selling expenses                                  589            788
General and administrative expenses               987            1,402
Research and development expenses                 450            449
                                                 2,026          2,639
                                                               
Loss from operations                              (665)          (57)
Other income (expenses)                                         
Interest income                                   31             32
Interest expense                                  (16)           --
Other expenses                                    (1)            (1)
                                                 14             31
Loss before income tax expense, equity method     (651)          (26)
investments and noncontrolling interests
Income tax (expense)/benefit                      (48)           86
(Loss)/income before equity method investments    (699)          60
and noncontrolling interests
Share of losses in equity investment affiliates   (15)           (71)
Net loss                                          (714)          (11)
Net loss attributable to noncontrolling interests 46             41
Net (loss)/income attributable to ChinaNet Online (668)          30
Holdings, Inc.
(Loss)/earnings per share                                       
(Loss)/earnings per common share                                
Basic                                             $(0.03)       $0.00
Diluted                                           $(0.03)       $0.00
Weighted average number of common shares                        
outstanding:
Basic                                             22,376,540     22,186,540
Diluted                                           22,376,540     22,186,540


CHINANET ONLINE HOLDINGS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands)
                                                               
                                                 Three Months Ended March 31,
                                                 2014           2013
                                                 (US $)         (US $)
                                                 (Unaudited)    (Unaudited)
Cash flows from operating activities                            
Net loss                                          $(714)       $(11)
Adjustments to reconcile net loss to net cash                   
used in operating activities
Depreciation and amortization                     360            418
Share-based compensation expenses                 8              11
Allowances for doubtful debts                     --             260
Share of losses in equity investment affiliates   15             71
Deferred taxes                                    (132)          (185)
Changes in operating assets and liabilities                     
Accounts receivable                               520            (1,297)
Other receivables                                 152            (8)
Prepayment and deposit to suppliers               (2,089)        (406)
Due from related parties                          118            (49)
Other current assets                              (78)           (2)
Accounts payable                                  168            105
Advances from customers                           134            564
Accrued payroll and other accruals                (36)           (29)
Other payables                                    71             --
Taxes payable                                     152            127
Net cash used in operating activities             (1,351)        (431)
Cash flows from investing activities                            
Purchases of vehicles and office equipment        (13)           (11)
Payment for acquisition of VIEs                   --             (1,272)
Repayment of short-term loan from unrelated       250            --
entities
Prepayment for purchasing of software technology  (850)          --
Net cash used in investing activities             (613)          (1,283)
Cash flows from financing activities                            
Short-term loan from noncontrolling interest of   197            --
VIE
Net cash provided by financing activities         197            --
Effect of exchange rate fluctuation on cash and   (15)           23
cash equivalents
Net decrease in cash and cash equivalents         (1,782)        (1,691)
Cash and cash equivalents at beginning of the     3,442          5,483
period
Cash and cash equivalents at end of the period    $1,660       $3,792

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