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Kingtone Wirelessinfo Solution Holding Ltd Reports Fiscal Year 2011 Financial Results; Provides Fiscal Year 2012 Revenue and Net Income Guidance

2012-01-05

XI'AN , China , Jan. 4, 2012 /PRNewswire-Asia-FirstCall/ -- Kingtone Wirelessinfo Solution Holding Ltd (Nasdaq: KONE - News) ("Kingtone", or the "Company"), a China -based developer and provider of mobile enterprise solutions, today announced financial results for its fiscal year ended September 30, 2011 . The financial statements and other financial information included in this press release are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Fiscal Year 2011 Financial Highlights

  • Revenues decreased by 56.3% to approximately $6.3 million from approximately $14.5 million in the prior year period.
  • Gross profit decreased by 75.9% to approximately $2.9 million from approximately $12.2 million in the prior year period.
  • Gross margin decreased to 46.2% from 83.8% in the prior year period.
  • Net loss of approximately $1.0 million as compared to net income of approximately $8.2 million in the prior year period.
  • Basic and diluted loss per share were $0.07 as compared to earnings per share of $0.71 in the prior year period with weighted average shares outstanding of 14,050,000 as compared to 11,527,473 in the prior year period.


 

"We had a difficult fiscal year as business conditions continue to deteriorate and competition in the software solution business became very harsh," said Mr. Peng Zhang , Chief Executive Officer of the Company. "We saw a growing number of small service providers compete very aggressively on price and this negatively affected our ability to win new contracts. We believe that this situation may be temporary and hope our investors can be more patient with our business and capital market performance. In the meantime, we have taken a number of measures to improve our performance and strengthen our business model to achieve sustainable growth."

Fiscal Year 2011 Financial Performance

Results of Operations - The year ended September 30 , 2011 compared to the year ended September 30 , 2010.

Revenues. For the year ended September 30, 2011 , total revenues decreased by 56.3% to approximately $6.3 million from approximately $14.5 million in the year ended September 30, 2010 . Revenue from software solution sales decreased by 78.6% to approximately $2.4 million in the year ended September 30, 2011 from approximately $11.3 million in the year ended September 30, 2010 . As a percentage of total revenue, software solution sales decreased from 77.7% to 38.0%. The significant decrease in our software solution revenue was mainly due to increased competition from a number of smaller competitors in this industry, which resulted in our inability to continue to win large projects. Another contributing factor was that our new contracts were of substantially smaller value than our contracts in the prior year period. Revenue from wireless system solution sales increased by 21.5% to approximately $3.9 million in the year ended September 30, 2011 from approximately $3.2 million in the year ended September 30, 2010 . As a percentage of total revenue, wireless system solution sales increased from 22.3% to 62.0% of our total revenue. Given the competitive circumstances in the software solution industry during the period, we devoted more resources to wireless system solution sales and we continually provided wireless system solution services to certain major customers, including Shaanxi Yanchang Petroleum (Group) CO., LTD.

Cost of Sales. Cost of sales increased by 44.9% to approximately $3.4 million in the year ended September 30, 2011 from approximately $2.4 million in the year ended September 30, 2010 . As a percentage of our total revenues, our cost of sales increased to 53.8% of revenues in the year ended September 30, 2011 from 16.2% of our total revenues in the year ended September 30, 2010 . The increase in cost of sales was primarily attributable to the increase in revenue from higher-cost wireless system solution sales. In addition, higher inflation also increased labor costs.

Cost of sales for software solution increased by 33.4% to approximately $1.2 million in the year ended September 30, 2011 from approximately $0.9 million in the year ended September 30, 2010 , representing 35.4% and 38.4% of the total cost of sales and 50.0% and 8.0% of our software solution revenue in the fiscal years ended September 30, 2011 and 2010, respectively. Cost of sales for wireless system solutions increased by 52.0% to approximately $2.2 million in the year ended September 30, 2011 from approximately $1.4 million in the year ended September 30, 2010 , representing 64.6% and 61.6% of the total cost of sales and 56.1% and 44.8% of wireless system solution revenues in the fiscal years ended September 2011 and 2010, respectively.

Gross Profit and Gross Margin. For the year ended September 30, 2011 , gross profit decreased by 75.9% to approximately $2.9 million in the year ended September 30, 2011 from approximately $12.2 million in the year ended September 30, 2010 . Gross margin was 46.2% and 83.8% in the years ended September 30, 2011 and 2010, respectively. Gross profit for software solution sales decreased by 88.4% to approximately $1.2 million in the year ended September 30, 2011 from approximately $10.4 million in the year ended September 30, 2010 . Gross margin for software solutions sales decreased to 50.0% in the year ended September 30, 2011 from 92.0% in the year ended September 30, 2010 .  This decrease of gross profit and gross margin was primarily due to the significant decrease of the value of new contracts and the higher compensation costs we incurred to attract and retain software technicians. Gross profit for wireless system solution sales decreased by 3.4% to approximately $1.7 million in the year ended September 30, 2011 from approximately $1.8 million in the year ended September 30, 2010 . Our gross margin for wireless system solution sales decreased to 43.9% in the year ended September 30, 2011 from 55.2% in the year ended September 30, 2010 .

(Loss) Income from Operations. (Loss) Income from operations decreased by 112.9% to approximately a loss of $1.3 million in the year ended September 30, 2011 from income of approximately $10.0 million in the year ended September 30, 2010 . The decrease of income from operations was mainly due to significantly lower revenues from software solutions compounded by increased operating expenses.

Net (Loss) Income and EPS. We incurred a net loss of $1.0 million in the year ended September 30, 2011 as compared to net income of approximately $8.2 million in the year ended September 30, 2010 , representing a decrease of 112.6%. Basic and diluted loss per share was $0.07 in the year ended September 30, 2011 , compared to earnings per share of $0.71 in the prior year period. The number of weighted average common shares outstanding for the year ended September 30, 2011 was 14,050,000, compared to 11,527,473 a year ago.

Liquidity and Capital Resources.

Cash and Cash Equivalents. As of September 30, 2011 , the Company had cash and cash equivalents of $8.7 million , compared to $14.9 million in the prior year period. Cash flows used in operating activities for the year ended September 30, 2011 were approximately $5.1 million , as compared to net cash provided by operating activities of approximately $4.3 million for the year ended September 30, 2010 . Depreciation and amortization expenses were $0 .53 million and $0.23 million for the years ended September 30, 2011 and 2010, respectively. Net cash used in financing activities for the year ended September 30, 2011 totaled approximately $1.19 million as compared to net cash provided by financing activities of approximately $10.3 million in the prior year period.  

Financial Outlook.

For the fiscal year ending September 30, 2012 , management expects revenues of $12.0 million to $15.0 million and net income of $0.85 million to $2.13 million . This guidance reflects management's anticipated increase in sales resulting from the Company's existing solution offerings and the increasing demand driven by the on-going adoption of 3G mobile networks in the PRC.

Conference Call

The Company will host a conference call to discuss its fiscal year 2011 financial results at 8:00 a.m. ET on Thursday, January 5, 2012 . Mr. Tao Li, Chairman, Mr. Peng Zhang , Chief Executive Officer, Ms. Li Wu , Chief Financial Officer and Ms. Yao Ti , Assistant to the Chief Financial Officer, will be on the call.

To participate in the conference call, please dial any of the following numbers:

USA Toll Free: 877-407-9205
International: 201-689-8054
Conference ID #: 385476


 
 
   


 

A replay of the call will be available until 11:59 PM ET on Jan 7, 2012 .

To access the replay, please dial any of the following numbers:

USA Toll Free: 877-660-6853
International: 201-612-7415
Replay Passcodes (both required for playback):
Account #: 286
Conference ID #: 385476


 
 
   


 

The conference call will be webcast live by Vcall and can be accessed at http://www.InvestorCalendar.com.

About Kingtone Wirelessinfo Solution Holding Ltd

Kingtone Wirelessinfo Solution Holding Ltd (Nasdaq: KONE - News) is a China-based software and solutions developer focused on wirelessly enabling businesses and government agencies to more efficiently manage their operations. The Company's products, known as mobile enterprise solutions, extend a company's or enterprise's information technology systems to include mobile participants. The Company develops and implements mobile enterprise solutions for customers in a broad variety of sectors and industries, to improve efficiencies by enabling information management in wireless environments. At the core of its many diverse packaged solutions is proprietary middleware that enables wireless interactivity across many protocols, devices and platforms.

For more information, please visit Kingtone's website at http: www.kingtoneinfo.com. The Company routinely posts important information on its website.

Safe Harbor Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. These forward-looking statements may include, but are not limited to, statements containing words such as "may," "could," "would," "plan," "anticipate," "believe," "estimate," "predict," "potential," "expects," "intends", "future" and "guidance" or similar expressions. These forward-looking statements speak only as of the date of this press release and are subject to change at any time. These forward-looking statements are based upon management's current expectations and are subject to a number of risks, uncertainties and contingencies, many of which are beyond the Company's control that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's prospectus, dated May 14, 2010 filed with the Securities and Exchange Commission (the "SEC"), and in documents subsequently filed by the Company from time to time with the SEC including the Company's Transition Report for the transition period from December 1, 2009 to September 30, 2010 filed with the SEC. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law.

For investor and media inquiries, please contact:

 


Chief Financial Officer Assistant

 

Yao Ti

 

Tel:  +86-29-8826-6383

 

Email: tiyao@kingtoneinfo.com

 
 


 

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Express in thousands of U.S. Dollars, except shares and per share data)

 

 

 

 

 

 

 
 

 

 

 

As of September 30,

 

 

 

 

2011


 

2010

 

 

 

 

 

 

 
 

ASSETS


 

 

 

 
 

Current assets


 

 

 

 
 

 

Cash and cash equivalents

$

8,749


 

14,909

 

 

Accounts and notes Receivable, net of allowance


 

9,418


 

6,650

 

 

Unbilled revenue


 

169


 

973

 

 

Amounts due from related companies


 

118


 

120

 

 

Inventories, net


 

230


 

383

 

 

Other receivables and prepayments


 

1,057


 

771

 

 

Current portion of net investment in sales-type leases


 

724


 

-

 

 

Total Current Assets


 

20,465


 

23,806

 

Non-current assets


 

 

 

 
 

 

Property and Equipment, net


 

13,482


 

13,637

 

 

Intangible assets


 

629


 

630

 

 

Long-term other receivables


 

1,247


 

-

 

 

Net investment in sales-type leases, less current portion


 

696


 

-

 

 

Total Assets


 

36,519


 

38,073

 

 

 

 

 

 

 
 

LIABILITIES AND SHAREKHOLDERS’ EQUITY


 

 

 

 
 

Current liabilities


 

 

 

 
 

 

Accounts payable


 

942


 

575

 

 

Advances from customers


 

368


 

371

 

 

Other payables and accruals


 

155


 

167

 

 

Taxes payable


 

1,542


 

3,421

 

 

Amounts due to shareholder


 

2


 

-

 

 

Dividend payable


 

788


 

772

 

 

Total Current Liabilities


 

3,797


 

5,306

 

 

 

 

 

 

 
 

 

Commitments and contingencies


 

 

 

 
 

 

 

 

 

 

 
 

Shareholders' equity


 

 

 

 
 

 

Ordinary share ($.001 par value, 100,000,000 shares authorized, 14,050,000 shares and 14,000,000 shares issued and outstanding as of September 30, 2011 and 2010, respectively)


 

14


 

14

 

 

Additional paid in capital


 

22,231


 

21,915

 

 

Appropriated retained earnings


 

1,615


 

844

 

 

Unappropriated retained earnings


 

6,473


 

8,281

 

 

Accumulated other comprehensive income


 

2,389


 

1,713

 

 

Total Shareholders' Equity


 

32,722


 

32,767

 

 

Total Liabilities and Shareholders' Equity


 

36,519


 

38,073

 
           


 

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Express in thousands of U.S. Dollars, except shares and per share data)

 

 

 

 

 

 

 

 
 

 

 

For the year ended September 30,

 

 

 

2011


 

2010


 

2009

 

 

 

 

 

(see note below)


 

(see note below)

 

Revenues


 

 

 

 

 
 

 

Software

2,409


 

11,272


 

5,170

 

 

Wireless system solution

3,928


 

3,234


 

6,070

 

 

- Related party

131


 

-


 

1,148

 

 

-Third Party

3,797


 

3,234


 

4,922

 

 

Total revenues

6,337


 

14,506


 

11,240

 

 

 

 

 

 

 

 
 

Cost of sales


 

 

 

 

 
 

 

Software

1,205


 

903


 

476

 

 

Wireless system solution

2,203


 

1,449


 

3,418

 

 

Total cost of sales

3,408


 

2,352


 

3,894

 

 

 

 

 

 

 

 
 

Gross profit

2,929


 

12,154


 

7,346

 

 

 

 

 

 

 

 
 

Operating expenses


 

 

 

 

 
 

 

Selling and marketing expenses

629


 

341


 

350

 

 

General and administrative expenses

3,276


 

1,635


 

537

 

 

Research and development expenses

311


 

179


 

139

 

 

Total Operating expenses

4,216


 

2,155


 

1,026

 

(Loss) Income from operations

(1,287)


 

9,999


 

6,320

 

 

 

 

 

 

 

 
 

Other income (expense)


 

 

 

 

 
 

 

Subsidy income

-


 

44


 

307

 

 

Interest expense

-


 

(218)


 

(340)

 

 

Interest income

162


 

-


 

-

 

 

Other income (expense), net

120


 

20


 

(55)

 

 

Total other income (expense), net

282


 

(154)


 

(88)

 

 

 

 

 

 

 

 
 

(Loss) Income before income tax expenses

(1,005)


 

9,845


 

6,232

 

 

Income tax expenses

32


 

1,608


 

935

 

Net (loss) income

(1,037)


 

8,237


 

5,297

 

Other comprehensive income


 

 

 

 

 
 

 

Foreign currency translation gain

676


 

598


 

22

 

Comprehensive (loss) income

(361)


 

8,835


 

5,319

 

 

 

 

 

 

 

 
 

(loss) Earnings per share:


 

 

 

 

 
 

 

Basic and Diluted

(0.07)


 

0.71


 

0.53

 

 

 

 

 

 

 

 
 

Weighted average number of ordinary shares outstanding


 

 

 

 

 
 

 

Basic and Diluted

14,050,000


 

11,527,473


 

10,000,000

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 
 

Note: In March 2010, the Company changed its fiscal year-end from November 30th to September 30th, so that it would have the same fiscal year end as its VIE, Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”). There were no operations in the Company other than in its VIE, Kingtone Information from October 1, 2009 to November 30, 2009. A ccordingly, the Company is presenting its consolidated statements of operations and comprehensive income (loss) for the year ended September 30, 2011, consolidated and combined statements of income and comprehensive income for the years ended September 30, 2010 and 2009.

 
             


 

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

Express in thousands of U.S. Dollars, except shares and per share data)

 

 

 

 

 

 

 

 

 
 

 

 

 

For the year ended September 30,

 

 

 

 

2011


 

2010


 

2009

 

 

 

 

 

 

(see note below)


 

(see note below)

 

Cash flows from operating activities


 

 

 

 

 

 
 

Net (loss) income

$

(1,037)


 

8,237


 

5,297

 

 

Depreciation and amortization


 

530


 

225


 

129

 

 

Loss on disposal of office equipment


 

3


 

-


 

-

 

 

Bad debt provision


 

402


 

-


 

-

 

 

Subsidiary income recognized from deferred government grant


 

-


 

-


 

(50)

 

 

Share-based compensation expense


 

316


 

302


 

-

 

 

 

 

 

 

 

 

 
 

Changes in operating assets and liabilities


 

 

 

 

 

 
 

 

Accounts receivable


 

(3,004)


 

(4,170)


 

(1,851)

 

 

Unbilled revenue


 

818


 

(778)


 

(177)

 

 

Other receivables and prepayments


 

(278)


 

257


 

(234)

 

 

Inventories


 

161


 

(249)


 

150

 

 

Tax payable


 

(1,934)


 

2,756


 

601

 

 

Accounts payable


 

351


 

(848)


 

1,092

 

 

Advance from customers


 

(12)


 

(1,037)


 

(1,424)

 

 

Other payables and accruals


 

(13)


 

(394)


 

467

 

 

Net investment in sales-type leases


 

(1,407)


 

-


 

-

 

Net cash (used in) provided by operating activities


 

(5,104)


 

4,301


 

4,000

 

 

 

 

 

 

 

 

 
 

Cash flows from investing activities


 

 

 

 

 

 
 

 

Payment to purchase property and equipment


 

(75)


 

(308)


 

24

 

 

Proceeds from disposal of office equipment


 

-


 

-


 

(12,186)

 

Net cash used in investing activities


 

(75)


 

(308)


 

(12,210)

 

 

 

 

 

 

 

 

 
 

Cash flows from financing activities


 

 

 

 

 

 
 

 

Proceeds in short-term bank loan


 

-


 

-


 

3,432

 

 

Repayment of short-term bank loan


 

-


 

(3,446)


 

(3,681)

 

 

Collection (payment) in amounts due from related-party companies


 

5


 

(118)


 

11,335

 

 

Proceeds in amounts due to related-party companies


 

2


 

-


 

-

 

 

Collection in amounts due from shareholders


 

11


 

-


 

-

 

 

Receipt in loan from non-related companies


 

3,000


 

-


 

-

 

 

Payment in loan to non-related companies


 

(4,208)


 

-


 

-

 

 

(Repayment) Proceeds in amounts due to shareholders


 

-


 

(200)


 

200

 

 

Proceeds from issuance of shares


 

-


 

14,504


 

10

 

 

Dividend paid to shareholders


 

-


 

(422)


 

(2,751)

 

Net cash (used in) provided by financing activities


 

(1,190)


 

10,318


 

8,545

 

 

 

 

 

 

 

 

 
 

Effect of exchange rate changes on cash and cash equivalents


 

209


 

254


 

-

 

 

 

 

 

 

 

 

 
 

Net (decrease) increase in cash and cash equivalents


 

(6,160)


 

14,565


 

335

 

 

Cash and cash equivalents at beginning of year


 

14,909


 

344


 

9

 

 

Cash and cash equivalents at end of year

$

8,749


 

14,909


 

344

 

 

 

 

 

 

 

 

 
 

Supplemental disclosure of cash flow information


 

 

 

 

 

 
 

 

Interest paid

$

-


 

218


 

340

 

 

Income taxes paid

$

1,608


 

92


 

215

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 
 

 

Note: In March 2010, the Company changed its fiscal year-end from November 30th to September 30th, so that it would have the same fiscal year end as its VIE, Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”). There were no operations in the Company other than in its VIE, Kingtone Information from October 1, 2009 to November 30, 2009. Accordingly, the Company is presenting its consolidated statements of operations and comprehensive income (loss) for the year ended September 30, 2011, consolidated and combined statements of income and comprehensive income for the years ended September 30, 2010 and 2009.

 
               


 

KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Express in thousands of U.S. Dollars, except shares and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

Ordinary Shares


 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

No. of Share


 

Amount


 

Paid-in
Capital


 

Additional
Paid-in
Capital


 

Appropriated
Retained
Earnings


 

Unappropriated
Retained
Earnings


 

Comprehensive
Income


 

Total
Shareholders'
Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

  Balance   as   of   November   30,   2008  

-

$

-

$

6,897

$

216

$

62

$

(544)

$

1,093

$

7,724

 

 

  Share   contribution  

10,000,000


 

10


 

-


 

-


 

-


 

-


 

-


 

10

 

 

  Net   income   for   the   year  

-


 

-


 

-


 

-


 

-


 

5,297


 

-


 

5,297

 

 

  Payment   of   dividends  

-


 

-


 

-


 

-


 

-


 

(4,096)


 

-


 

(4,096)

 

 

  Transfer   to   statutory   reserves  

-


 

-


 

-


 

-


 

169


 

 

 

-


 

169

 

 

  Foreign   currency   translation   gain  

-


 

-


 

-


 

-


 

-


 

-


 

22


 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

  Balance   as   of   November   30,   2009  

10,000,000

$

10

$

6,897

$

216

$

231

$

657

$

1,115

$

9,126

 

 

  Issuance   of   ordinary   shares   in   form   of
   American   Depositary   Shares  

4,000,000


 

4


 

-


 

14,500


 

-


 

-


 

-


 

14,504

 

 

  Share-based   compensation  

-


 

-


 

-


 

302


 

-


 

-


 

-


 

302

 

 

  Net   income   for   the   year  

-


 

-


 

-


 

-


 

-


 

8,237


 

-


 

8,237

 

 

  Payment   of   dividends  

-


 

-


 

-


 

-


 

-


 

-


 

-


 

-

 

 

  Effect   of   reorganization   

-


 

-


 

(6,897)


 

6,897


 

-


 

-


 

-


 

-

 

 

  Transfer   to   statutory   reserves  

-


 

-


 

-


 

-


 

613


 

(613)


 

-


 

-

 

 

  Foreign   currency   translation   gain  

-


 

-


 

-


 

-


 

-


 

-


 

598


 

598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

  Balance   as   of   September   30,   2010  

14,000,000

$

14

$

-

$

21,915

$

844

$

8,281

$

1,713

$

32,767

 

 

  Issuance   of   ordinary   shares   in   form   of

   American   Depositary   Shares  

50,000


 

-


 

-


 

-


 

-


 

-


 

-


 

-

 

 

  Share-based   compensation  

-


 

-


 

-


 

316


 

-


 

-


 

-


 

316

 

 

  Net   loss   for   the   year  

-


 

-


 

-


 

-


 

-


 

(1,037)


 

-


 

(1,037)

 

 

  Transfer   to   statutory   reserves  

-


 

-


 

-


 

-


 

771


 

(771)


 

-


 

-

 

 

  Foreign   currency   translation   gain  

-


 

-


 

-


 

-


 

-


 

-


 

676


 

676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

  Balance   as   of   September   30,   2011  

14,050,000

$

14

$

-

$

22,231

$

1,615

$

6,473

$

2,389

$

back