Chinese Government Triples Commitment to Tengtu International; Boosts Backlog to More Than $30 Million in Education Software.

Business & Technology Editors

TORONTO--(BUSINESS WIRE)--Feb. 21, 2001

Company Sees Improved Revenue Recognition as Bottleneck Eases

Tengtu International Corporation (OTC BB:TNTU) announced today that its joint venture Tengtu United is the beneficiary of an agreement with an arm of the Ministry of Education of the People's Republic of China to roll out the second phase of Operation Morning Sun, an ambitious undertaking to bring the benefits of Information Technology to K-12 schools throughout China.

Tengtu Chairman and CEO Pak K. Cheung said that the agreement ending December 31, 2002 calls for the addition of 10,000 to 15,000 schools to the 4,020 schools already contracted by Tengtu for installation of its Tengtu Total Solution interactive classroom software package in cooperation with Microsoft China (Nasdaq NMS: MSFT). Cheung estimated revenue to Tengtu from each school installation at approximately $1,800, indicating a potential backlog of more than $30 million.

"Our agreement acknowledges that the first phase of Operation Morning Sun has achieved very good results in many respects to date," Cheung reported. The second phase, he noted, will again promote and popularize Information Technology in K-12 schools as well as begin to develop an infrastructure for distance learning, another key objective of the Ministry of Education. "We are delighted and honored by the continuing confidence of the PRC in Tengtu's ability to build China's youth into competitive players in the new world of Information Technology," he added.

Under the agreement, Tengtu has an obligation to work with Microsoft China and Legend Digital China Company to train system administrators for each of the 10,000 to 15,000 new schools. A dearth of training personnel has to date limited the ability of Tengtu to complete the installation of its software in the 4,020 schools under the first phase of Operation Morning Sun.

As a result, Cheung reported that Tengtu, under US GAAP accounting rules, could record only the revenue from approximately 200 school installations in the quarter ended December 31. Until school system administrators and classroom teachers have been trained, the software, even though shipped and installed, may not be recorded as a sale.

Cheung was optimistic that the logjam in revenue recognition could begin to clear in the next two quarters. "We are mounting a two-pronged attack on this frustrating bottleneck which is common where technology meets an emerging market," he said. "The Ministry of Education as well as Microsoft and Legend are working with us to develop conference centers at the provincial level where training of teachers and administrators alike may be done more efficiently and effectively." Cheung emphasized that battling the bottleneck would be initially expensive for the company but a wise investment going forward.

For the three months ended December 31, 2000, Tengtu reported revenues rose by 275% to $359,379 from $95,724 in the three months ended December 31, 1999. A net loss of $1,566,746 or six cents per share for the period compared with a net loss of $1,337,348 or seven cents per share in the 1999 period. Contributing to the larger loss in the 2000 period were one-time non-cash charges totalling approximately $700,000.

Note: All dollar amounts are in US dollars.

About Tengtu International Corp.

Tengtu International Corp. is a developer and distributor of multimedia educational and entertainment software and related services, operating through a joint venture and subsidiaries in Hong Kong and the People's Republic of China.

The company's primary operating unit, Tengtu United Electronics Development Co. Ltd. ("Tengtu United"), is a 57% owned joint venture with Beijing Tengtu Culture & Education Development Co. Ltd. ("Tengtu China"), the Chinese state enterprise mandated to develop a comprehensive information technology solution for the national K-12 school system and to serve as the country's gateway for electronic publishing. Tengtu China is owned by three of China's largest computer companies, Legend Computer Group, Great Wall Computer Group and Taiji Computer Corporation, and Chinese technology firm Beijing Oriental Lianfa Company Ltd. Its strategic partners include the China unit of Microsoft Corporation (Nasdaq: MSFT); People's Education Press, the sole source of materials authorized for use in Chinese schools, and Netopia, Inc.

Tengtu International's other units include wholly owned e-business portal e-bizTengtu.com, Inc.; wholly owned animation and television production studio TIC Beijing Digital Pictures Co., Ltd.; and 61.3% owned software marketer Edsoft Platforms (Hong Kong) Ltd.

Note: This press release for Tengtu International Corp. may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934, regarding events, conditions and financial trends that may affect the company's operating results and financial position. Prospective investors are cautioned that forward-looking statements are not guarantees of future performance. Actual events or results may differ from the company's expectations, which are subject to various risks and uncertainties, some of which are listed in the company's SEC filings.

This press release was prepared by The Cavior Organization, Inc., a public relations firm, based on information supplied by its client, Tengtu International Corp. The information contained herein is believed to be reliable, but has not been independently verified by The Cavior Organization, Inc. None of the information contained in this press release should be construed as an offer to buy or sell securities, either directly or indirectly. The Cavior Organization, Inc. or its officers or employees may from time to time acquire, hold or sell a position in the securities of Tengtu International Corp.

Neither Tengtu International Corp. nor The Cavior Organization, Inc. undertakes any obligation to publicly release revisions to these forward-looking statements, which may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.