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Kingtone Wirelessinfo Solution Holding Ltd Reports First Fiscal Quarter 2010 Unaudited Financial Results

2010-06-24

1QFY10 Revenue Up 43.7% to $3.0 Million

1QFY10 Gross Profits Up 44.1% to $2.5 Million

1QFY10 Net Income Up 63.6% to 1.76 Million

1QFY10 Diluted Earnings per ADS of $0.18

 

XI'AN, China, June 24 /PRNewswire-Asia-FirstCall/ -- Kingtone Wirelessinfo Solution Holding Ltd. (Nasdaq: KONE) ("Kingtone" or the "Company"), a leading China-based software and solutions developer focused on wirelessly enabling businesses and government agencies to more efficiently manage their operations, today announced unaudited financial results for the first quarter of fiscal year 2010. The Company will release its second fiscal quarter results in mid July and third fiscal quarter results in early August and will hold a conference call on both occasions.

    First Quarter 2010 Financial Highlights
    -- Revenue increased 43.7% to $3.0 million from $2.1 million in the prior
       year period.
    -- Gross profit increased 44.1% to $2.5 million from $1.8 million in the
       prior year period.
    -- Gross margin increased to 83.2% from 83.0% in the prior year period.
    -- Net income increased 63.6% to $1.76 million from $1.07 million in the
       prior year period.
    -- Diluted earnings per ADS was $0.18. Each ADS represents one ordinary
       share.

Mr. Peng Zhang, the Company's Chief Executive Officer, stated, "First fiscal quarter results continue to demonstrate our ability to deliver sustained growth and our strong presence in China's mobile enterprise industry. These encouraging results attest to the growing power of the Kingtone brand and our reputation as a high quality and premium value software developer and provider. Our performance also reflects growing demand for our products across all product lines, driven by our comprehensive product offering, lower cost base, and continuous product development. We look forward to building on this momentum as we broaden our product portfolio throughout fiscal 2010. We are confident that we'll capitalize on the opportunities created by intensified government efforts and the growing enterprise awareness of mobile solutions in China driven by the need for greater efficiency in a highly competitive environment. As demand continues to increase for mobile enterprise solutions, we are well-positioned with a uniquely scalable model in our sector to capture compelling market opportunities."

First Quarter of fiscal 2010 Financial Performance

Net Revenues. First quarter of fiscal 2010 revenue increased by 43.7% to $2.97 million from $2.07 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 23.1% to $2.15 million compared to $1.74 million a year ago, mainly due to increased demand for the Company's vertical industry mobile enterprise application in Emergency response and Insurance claim.

Revenue from wireless system solution increased by 154.5% to $0.83 million compared to $0.33 million in the prior year, as the Company expanded industrial automation projects to new customers. There was no related party transaction in the first quarter of fiscal 2010.

Gross Profit and Gross Margin. For the first quarter of fiscal 2010, gross profit increased by 44.1% to $2.48 million from $1.72 million in the prior year. Gross margin was 83.2%, slightly higher than 83.0% a year ago. Gross profit from software solutions increased by 28.8% to $2.00 million from $1.56 million with gross margin increasing to 93.3% from 89.2%. Gross profit from wireless system solution increased by 191.3% to $0.47 million from $0.16 million with gross margin increasing to 57.0% to from 49.7%. The slight increase in gross margin was mainly due to the increased gross margin from software solutions comparing to the prior year period.

Operating Expenses. Total operating expenses for the first quarter of fiscal 2010 were $0.27 million, slightly lower than $0.28 million in the prior year, representing a year-over-year decrease of 2.2%.

Selling and marketing expenses decreased by 5.1% year over year to $0.09 million in the first quarter of fiscal 2010 from $0.10 million for the same period prior year, and represented 3.1% and 4.7% of our revenues for the first quarter of fiscal 2010 and 2009, respectively. The company expects its selling and marketing expenses to increase in the near future as we increase our business development efforts, hire more sales personnel and initiate additional marketing programs to further build our brand.

General and administrative expenses were approximately $0.14 million in the first quarter of fiscal 2010, a decrease of 7.2% from $0.15 million a year ago, and represented 4.8% and 7.4% of our revenues for the first quarter of fiscal 2010 and 2009, respectively. The company expects its general and administrative expenses to increase in the near future as we incur costs to comply with the requirements imposed on a public company in the U.S. and to conduct financing and investor relations activities.

Research and development expenses were approximately $0.04 million in the first quarter of fiscal 2010, an increase of 35.7% from $0.03 million comparing to the same period prior year, and represented 1.3% and 1.4% of our revenues for the first quarter of fiscal 2010 and 2009, respectively. The company expects its research and development expenses to increase in both dollar amount and as a percentage of revenues as it plans to hire more engineers, upgrade its middleware platform and develop new software applications.

Income from Operations. Income from operations increased by 53.1% to $2.20 million in the first quarter of fiscal 2010 from $1.44 million in the comparable period of fiscal 2009, primarily due to the growth in net revenues.

Net Income. Net income was $1.76 million in the first quarter of fiscal 2010, compared to $1.07 million in the prior year's first quarter, an increase of 63.6%. Net income stood at 59.0% and 51.9% of total net revenues for the first quarters of fiscal 2010 and 2009, respectively. Basic and diluted earnings per share was $0.18 in the first quarter of fiscal 2010, compared to $0.11 in the first quarter of fiscal 2009. The Company had 10 million ordinary shares outstanding as of December 31, 2009 and 2008, respectively.

Cash and Cash Equivalents. As of December 31, 2009, the Company had cash and bank deposits of $0.99 million, compared to $0.34 million as of September 30, 2009(1). Cash flows used in operating activities for the period ended December 31, 2009 were approximately $0.15 million, compared to approximately $0.15 million cash flows provided by operating activities in the prior year period as a result of decreases in advances from customers. Depreciation and amortization expenses were $0.03 million for the first quarter of fiscal 2010 and 2009, respectively.

Financial Outlook

Ms Ying Yang, Chief Financial Officer, stated, "As we move forward through fiscal 2010, our competitive position remains strong and we are poised for future growth supported by our high-margin software applications and quality customer support services. With this in mind, we expect to generate total revenues for the full fiscal year of 2010 in the range of $15.6 million to $17.4 million, as compared to total revenues of $11.2 million for the full fiscal year of 2009, and net income for the full fiscal year of 2010 in the range of $7.6 million and $8.1 million, as compared to net income of $5.3 million for the full fiscal year of 2009." This forecast reflects the Company's current and preliminary view, which is subject to change.

    Note (1): On March 2010, our board of directors approved a change in our
              fiscal year end from November 30 to September 30 in order to
              coincide with the fiscal year end of Kingtone Information, our
              contractually-controlled subsidiary.

About Kingtone Wirelessinfo Solution Holding Ltd

Kingtone Wirelessinfo Solution Holding Ltd (Nasdaq: KONE) is a leading 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, which enables wireless interactivity across many protocols, devices, and platforms.

For more information, please visit Kingtone's website at http://www.kingtoneinfo.com .

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" and "future" 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 final prospectus, dated May 14, 2010, filed with the Securities and Exchange Commission, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth above is preliminary and subject to adjustments. Adjustments to the financial statements may be identified when audit work is performed for the year-end audit, which could result in significant differences from this preliminary unaudited financial information.

    Contact Information

    Kingtone Wirelessinfo Solution Holding Ltd.
     Ms. Ying Yang, Chief Financial Officer
     Tel:   +1-626-623-2575 (US)
            +86-134-6895-0909 (China)
     Email: yangying@kingtoneinfo.com

    Christensen
     Tip Fleming
     Tel:   +852-9212-0684
     Email: tfleming@christensenir.com

     Yuanyuan Chen
     Tel:   +86-10-5971-2001
     Email: ychen@christensenir.com

     Kathy Li
     Tel:   +1-480-614-3036
     Email: kli@christensenir.com



           KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES
                    CONSOLIDATED AND COMBINED BALANCE SHEETS
   (Expressed in thousands of U.S. Dollars, except shares and per share data)

                                                    As of             As of
                                                 December 31,      November 30,
                                                     2009              2009
    ASSETS
    Current assets
    Cash                                              $985              $344
    Accounts receivable, net of allowance            3,931             2,353
    Unbilled revenue                                    --               178
    Amounts due from related companies                   4                --
    Inventories                                        263               127
    Other receivables and prepayments                  925             1,012
    Total Current Assets                             6,108             4,014

    Deposit to purchase building                    12,200            12,200
    Property and Equipment, net                      1,665             1,693
                                                   $19,973           $17,907

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities
    Accounts payable                                $1,184            $1,409
    Advances from customers                            645             1,398
    Other payables and accruals                        561               559
    Taxes payable                                    1,091               601
    Amounts due to shareholder                       1,000               200
    Short-term bank loan                             3,437             3,437
    Dividend payable                                 1,177             1,177
    Total Current Liabilities                        9,095             8,781

    Commitments and contingencies

    KINGTONE WIRELESSINFO SOLUTION HOLDING LTD
     STOCKHOLDERS' EQUITY
    Common Stock ($.001 par value,
     100,000,000 shares authorized, and
     10,000,000 shares issued and outstanding)          10                10
    XI'AN KINGTONE INFORMATION TECHNOLOGY CO., LTD
     STOCKHOLDERS' EQUITY
    Paid-in capital                                     --             6,897
    Additional paid-in capital                       7,113               216
    Appropriated retained earnings                     843               231
    Unappropriated retained earnings                 1,800               657
    Accumulated other comprehensive income           1,112             1,115
                                                    10,868             9,116
    Total Stockholders' Equity                      10,878             9,126
                                                   $19,973           $17,907



           KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES
     CONSOLIDATED AND COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    (Expressed in thousands of U.S. Dollars, except shares and per share data)

                                            For the quarters ended December 31,
                                                2009                   2008
    Revenue
         Software solution                     $2,147                 $1,744
         Wireless system solution                 827                    325
         Total Net Revenue                      2,974                  2,069

    Cost of Sales
         Software solution                        143                    189
         Wireless system solution                 356                    163
         Total Cost of Sales                      499                    352

    Gross margin                                2,475                  1,717

    Operating expenses
         Selling and marketing expenses            93                     98
         General and administrative expenses      142                    153
         Research and development expenses         38                     28
                                                  273                    279

    Income from operations                      2,202                  1,438

    Other income(expense)
         Interest expense                         (72)                  (162)
         Other income                               7                     --
         Other expenses                           (54)                    --
                                                 (119)                  (162)

         Income before income tax expense       2,083                  1,276
         Income tax expense                       328                    203

    Net income                                  1,755                  1,073
    Other comprehensive income
          Foreign currency translation gain         0                      1

    Comprehensive income                       $1,755                 $1,074

    Net earnings per ordinary share
          Basic and diluted                     $0.18                  $0.11

    Weighted average number of
     ordinary shares outstanding
          Basic and diluted                10,000,000             10,000,000



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

                                                     For the quarters ended
                                                           December 31,
                                                      2009              2008
    Cash flows from operating activities
    Net income                                       1,755             1,138
      Depreciation and amortization                     32                34
      Disposal of fixed assets                          --                --
      Subsidy income recognized from
       deferred government grant                        --                --
    Changes in operating assets and liabilities
      Accounts receivable                           (1,578)             (125)
      Other receivables and prepayments                 88            (1,451)
      Unbilled revenue                                 177                --
      Inventories                                     (136)           (1,540)
      Accounts payable                                (225)            1,318
      Advances from customers                         (754)              610
      Other payables and accruals                        2                93
      Taxes payable                                    490               118
    Deferred government grant                           --               (50)
    Net cash provided by /(used in)
     operating activities                             (149)              145

    Cash flows from investing activities
    Purchases of property and equipment                 (4)               (3)
    Net cash used in investing activities               (4)               (3)

    Cash flows from financing activities
      Increase in short-term bank loan                  --                --
        Repayment of short-term bank loan               --               (73)
        Collection from due to related-
         party companies                                --                --
        Repayment of loan from non-
         related companies                              --                --
        Collection from loan to non
         related-party companies                        (4)               --
        Cash received from the capital
         contribution                                   --                --
        Amounts due to shareholder                     800                --
        Dividend paid                                   --                --
    Net cash provided by /(used in)
     financing activities                              796               (73)

    Effect of exchange rate fluctuation
     on cash and cash equivalents                       (2)               --

    Net increase in cash and cash equivalents          641                69
      Cash and cash equivalents at
       beginning of period                             344                 9
      Cash and cash equivalents at end of
       period                                          985                78

    Supplemental disclosure of cash flow
     information
      Interest paid                                     72               162
      Income taxes paid                               $ --              $ --

SOURCE Kingtone Wirelessinfo Solution Holding Ltd.

Source: PR Newswire (June 24, 2010 - 8:02 AM EDT)

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