The board of directors of China Digital Video Holdings Limited announced that, based on a preliminary review and analysis of the latest available unaudited consolidated management accounts of the Company, it is expected that the Group will record a net loss for the three months ended 31 March 2017 as compared to a net profit recorded by the Group for the three months ended 31 March 2016. The expected loss for the First Quarter 2017 was primarily attributable to the following factors: the non-cash share-based compensation expenses of RMB 31.2 million related to the shares of the Company granted by Mr. ZHENG Fushuang, the ultimate controlling shareholder of the Company, to Mr. LIU Baodong and Mr. GUO Langhua in January 2017; the gain of approximately RMB 66.6 million arising from fair value gain on redeemable convertible preferred shares for the First Quarter 2016; the decrease in the revenue from sales of solutions and products for the First Quarter 2017 as compared to that of the First Quarter 2016; the Group committed more investment in research and development expenses than in the past to strengthen the research and development capability of Group, which is in line with business objectives; and marketing expense for solutions and services increased significantly in the First Quarter 2017 as compared to that of the First Quarter 2016.