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BEIJING, Nov. 19 /PRNewswire-Asia/ -- eFuture Information Technology Inc. (Nasdaq: EFUT, the "Company" or "eFuture"), a leading provider of software and services in China's rapidly growing retail and consumer goods industries, today announced its unaudited financial results for the fiscal quarter ended June 30, 2009 (the "Second Quarter") and restatement of unaudited financial results for the fiscal quarter ended March 31, 2009 (the "First Quarter").
As noted in previous press releases, the Company reviewed its accounting for certain matters in the First Quarter and has determined that a restatement of unaudited financial information for the First Quarter is appropriate. The Company previously released unaudited financial information for the First Quarter in a press release dated June 9, 2009 (the "Press Release"). Investors should no longer rely upon the financial information contained in the Press Release. Investors should rely solely upon the unaudited financial information for the First Quarter contained herein.
Second Quarter Financial Highlights:
RMB Unaudited Unaudited
Quarter Ended Quarter Ended
June 30, 2008 June 30, 2009
Reported Adjusted Reported
Profit and Loss
(selected)
Total Revenue 24,160,436 24,160,436 22,205,838
Total Cost of 10,368,762 10,368,762 12,387,931
Revenue
Gross profit 13,791,673 13,791,673 9,817,907
Total Expenses 12,560,484 12,698,084 19,568,210
Income (loss)
from operations 1,231,189 1,093,589 (9,750,303)
Net Income 2,814,162 969,364 (11,383,275)
(loss)
Comprehensive 0 0 0
Income/Loss
Net Income per
share
- Basic 0.94 0.32 (3.39)
- Diluted 0.94 0.32 (3.39)
-- Total revenues decreased 8.09% year-over-year to RMB22.21 million
(US$3.25 million).
- Revenue from software license sales increased 21.81%
year-over-year to RMB10.61 million (US$1.55 million).
- Revenue from hardware sales was nil, compared to RMB2.92
million in the second quarter of 2008.
- Service fee income decreased 7.49% year-over-year to
RMB11.59 million (US$1.70 million).
-- Gross profit decreased 28.81% year-over-year to RMB9.82 million
(US$1.44 million). Gross margin decreased to 44.21% from 57.08%
in the second quarter of 2008.
-- Operating loss was RMB9.75 million (US$1.43 million), compared
to net income of RMB1.09 million in the second quarter of 2008.
-- Net loss was RMB11.38 million (US$1.67 million), compared to
net income of RMB0.97 million in the second quarter of 2008.
-- Diluted net loss per share was RMB3.39 (US$0.50), as compared
to net income per share of RMB0.32 for the second quarter of 2008.
-- Operating cash flow was -RMB14.42 million (-US$2.11 million).
-- Adjusted net loss (non-GAAP) was RMB6.71 million (US$0.98 million),
compared to an adjusted net income of RMB4.52 million in the second
quarter of 2008.
-- Non-GAAP adjusted diluted loss per share was RMB1.98 (US$0.29).
Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, said,
"Our results for the second quarter reflect the challenges we have faced from the market slow-down, especially in our logistics and department store and shopping mall business. However, these challenges were mitigated somewhat by healthy software license revenues driven by a rebound in demand in our Supermarket, Specialty Store and Key Accounts SBUs. We have continued to execute on our strategic, business and operational imperatives, which are to solidify our core enterprise software business, grow value-added services revenues, expand the scope and depth of our eService offering, including our B2B service and SaaS service for SCM and B2C eShopping platform and invest in building our presence in the second and third tier cities. We believe our business remains fundamentally sound, and we continue to be well positioned to capitalize on the growth opportunities in the software market for retail and consumer goods industries."
Second Quarter Unaudited Financial Results
Revenue
Revenue for the Second Quarter decreased 8.09% to RMB22.21 million (US$3.25 million) from RMB24.16 million in the second quarter 2008 mainly due to a slow-down in hardware sales.
Software license revenues increased by 21.08% year-over-year to RMB10.6 million, primarily attributable to the recovery from Supermarket, Specialty Store and Key Account SBUs.
Service fee income decreased by 7.49% year-over-year, and as a percentage of revenue continued to increase and accounted for 55.21% of total revenue in the Second Quarter, as compared to 51.87% in the same period last year.
Revenue Breakdown
2008Q2 2009Q2
Restated
RMB '000 RMB '000 USD '000 Y-o-Y
Change
Software license
sales 8,712 10,611 1,554 21.80%
Hardware sales 2,916 -- -- --
Service fee income 12,533 11,595 1,698 (7.48%)
Total 24,160 22,206 3,251 (8.09%)
Cost of Revenues
The cost of revenue for the Second Quarter increased 19.47% to RMB12.39 million (US$1.81 million) from RMB10.37 million in the second quarter 2008.
Cost of Revenues Breakdown
2008Q2 2009Q2
Restated
RMB '000 RMB USD Y-o-Y
'000 '000 Change
Cost of software license
sales 2,040 3,526 516 72.84 %
Cost of hardware sales 2,549 -- -- --
Cost of service see 2,983 4,937 723 65.49 %
Amortization of acquired
technology 1,905 3,019 442 58.49 %
Amortization of software
costs 892 906 133 1.57 %
Total 10,369 12,388 1,814 19.47 %
The increase in cost of revenue was partially attributable to a one-time recognized cost from a few unprofitable projects and the amortization of acquired technology from Crownhead and Proadvancer.
Gross Profit
Second Quarter gross profit decreased 28.81% year-over-year to RMB9.82 million (US$1.44 million), from RMB13.79 million in the second quarter of 2008. Consolidated gross margin for the Second Quarter was 44.21% compared with 57.08% in the second quarter of 2008.
Operating Expenses
Research and development expenses for the Second Quarter decreased 58.81% year-over-year to RMB92,179 (US$13,496) compared with RMB223,792 in the second quarter of 2008. The year-over-year decrease was a result of cost reallocation to cost of revenue and to intangibles to be capitalised in future.
General and administrative expenses for the Second Quarter increased 22.35% year-over-year to RMB10.03 million (US$1.47 million), or 45.18% of total revenues, compared with RMB8.20 million, or 33.94% of total revenue in the second quarter of 2008 and RMB7.88 million, or 56.97% of total revenue in the First Quarter. The increase in general and administrative expenses as a percentage of revenues was primarily due to the RMB2.7 million bad debt provision from Wangku, our increased investment in the business expansion of bFuture.
Selling and distribution expenses for the Second Quarter increased 120.91% year-over-year to RMB9.44 million (US$1.38 million), or 42.53% of total revenues, compared with RMB4.27 million, or 17.69% of total revenue in second quarter 2008 and RMB5.58 million, or 40.33% of total revenue in the First Quarter. The significant increase was due to our continued investment in building our regional sales/marketing teams to enhance our presence in tier 2 and 3 cities.
Operating Income/Loss
Operating loss in the Second Quarter was RMB9.75 million (US$1.43 million), compared with an operating income of RMB1.09 million in the second quarter of 2008.
Net Income/Loss and EBITDA
As a result of the foregoing, Second Quarter net loss was RMB11.38 million (US$1.67 million) compared with a net income of RMB0.97 million in the second quarter of 2008.
Basic and diluted losses per share in the Second Quarter were both RMB3.39 (US$0.50), compared to basic and diluted net income per share of RMB0.32 in the second quarter of 2008. Adjusted net loss (non-GAAP) for the Second Quarter was RMB6.71 million (US$0.98 million), compared to an adjusted net income of RMB4.52 million in the second quarter of 2008.
Second quarter 2009 adjusted non-GAAP diluted loss per share was RMB1.98 (US$0.29).
EBITDA (non-GAAP) for the Second Quarter was -RMB4.79 million (-US$0.70 million), compared with RMB4.73 million in the second quarter of 2008.
Balance Sheet and Cash Flow
In the Second Quarter, net cash loss from operating activities was RMB14.42 million (US$2.11 million), while net cash used in investing activities was RMB7.20 million (US$1.05 million).
As of June 30, 2009, cash and cash equivalents decreased 7.82% from March 31, 2009 to RMB39.20 million (US$5.74 million), mainly due to normal seasonal patterns in which cash flow decreases in the first half while peaking in the second half of the fiscal year.
Total accounts receivable as of June 30, 2009 decreased 41.38% to RMB12.51million (US$1.83 million) from RMB21.33 million as of March 31, 2009. This decrease was mainly attributable to improvement in collection and Wangku's increase in write off.
Inventories as of June 30, 2009 increased 11.37% quarter-over-quarter to RMB7.65 million (US$1.12 million) due to the increase in work-in process.
Restatement of First Quarter 2009 Unaudited Financial Results
RMB Unaudited Unaudited
Quarter Ended Quarter Ended
March 31, 2008 March 31, 2009
Reported Adjusted Reported Restated
Profit and Loss
(selected)
Total Revenue 14,014,472 14,014,472 13,977,378 13,824,292
Total Cost of 9,300,139 9,300,139 8,992,326 9,315,216
Revenue
Gross profit 4,714,333 4,714,333 4,985,052 4,509,077
Total Expenses 11,797,143 11,797,143 11,726,713 13,544,747
Income (loss)
from operations (7,082,810) (7,082,810) (6,741,662) (9,035,671)
Net Income
(loss) (9,225,286) (6,340,016) (4,968,403) (7,469,813)
Other
Comprehensive
Income/Loss 0 0 0 0
Net income
(loss) per share
Basic (3.14) (2.16) (1.96) (2.22)
Diluted (3.14) (2.16) (1.96) (2.22)
The effects of the restatement on some of the key items of our unaudited results of the First Quarter are as follows:
-- Total revenue slightly decreased by 1.10% to RMB13.82 million
-- Total cost of revenue has increased by 3.59% to RMB9.32 million
-- Gross profit decreased by 9.55% to RMB4.51 million
-- Total expenses have increased by 15.50% to RMB13.54 million
-- Income loss has increased by 34.03% to RMB9.04 million
-- Recognized gains on derivatives of RMB1.30 million
-- Foreign exchange loss reduced by 93.69% to RMB0.06 million
-- Net Income loss has increased by 13.07% to RMB7.47 million
-- Minority shareholder income was restated from RMB1.97 million
to RMB0 million
-- Net loss per common share, basic and diluted was restated from
RMB1.96 to RMB2.22
-- Non-GAAP adjusted diluted loss per share was RMB0.82 (US$0.12).
-- Operating cash flow was restated from -RMB15.10 million to
-RMB15.30 million
The comparison of the restated unaudited results of the First Quarter against similarly calculated financial information for the results of the first quarter of 2008, is as follows :
-- Total revenues decreased slightly more to 1.36% year-over-year
to RMB13.82 million (US$2.02 million).
- Revenue from software license sales decreased 34.58%
year-over-year to RMB4.95 million (US$0.72 million).
- Revenue from hardware sales decreased 0.99% year-over-year
to RMB1.40 million (US$0.20 million).
- Service fee income was restated from an increase of 51.3% to
48.40% year-over-year to RMB7.48 million (US$1.09 million).
-- Gross profit decreased 4.35% year-over-year to RMB4.51 million
(US$0.66 million). Gross margin decreased to 32.62% from 33.64%
in the first quarter of 2008.
-- Operating loss was RMB9.04 million (US$1.32 million), compared
to an operating loss of RMB7.08 million in the first quarter of 2008.
-- Net loss increased to RMB7.47 million (US$1.09 million), compared
to a net loss of RMB6.34 million in the first quarter of 2008.
-- Diluted net loss per share was RMB2.22 (US$0.33), as compared to
net loss per share of RMB2.16 for the first quarter of 2008.
-- Adjusted net loss (non-GAAP) was RMB2.80 million (US$0.41 million),
compared to an adjusted net loss of RMB0.77 million in the first
quarter of 2008.
Miss Yu Ping, Chief Financial Officer of eFuture, said, " I am very pleased to report that the accounting adjustment process has been completed with the restatement of first quarter 2009 financial results. The intent is to ensure adequate reserve of social security benefits for our employees and to enhance the accurate recognition of our revenue and cost base that will enable us to better reflect our expanding business and operational performance. We believe we are emerging from this process in a more sound position than when we started and are better positioned to ensure accurate and consistent financial reporting moving forward."
Notes on Restatement of First Quarter Unaudited Financial Results
The Company identified several errors in its consolidated financial statements for the First Quarter. As a result, certain amounts in the consolidated financial statements were corrected from the amounts previously reported.
The nature of these errors included a net understatement of revenue on certain software maintenance contracts, failure to apply step acquisition accounting, improper timing of recognition for contingent acquisition payments, improper calculation of deferred tax liabilities, understatement of payroll accruals, and improper recording of convertible notes.
The convertible notes, issued on March 13, 2007, contained a beneficial conversion feature and a make-whole provision that were originally recorded at their intrinsic values according to EITF 00-27 "Application of Issue No. 98-5 to Certain Convertible Instruments." The Series A Warrants, Series B Warrants and Placement Agent Warrants issued in connection with these notes were recorded as equity instruments at their grant date fair value.
It was subsequently determined that the make-whole provision, beneficial conversion feature, and Series A and B warrants contained provisions that triggered derivative treatment under SFAS 133 "Accounting for Derivatives." Adjustments were subsequently made to record the make-whole provision, beneficial conversion feature, and optional early redemption right as a bundled derivative liability. The Series A Warrants, Series B Warrants and Placement Agent Warrants were considered separable instruments and recorded as a separate derivative liability. Changes in the fair values of these derivatives are recorded as gains and losses on derivatives in the consolidated statement of operations.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts in the restatement of the First Quarter financial results have been translated into US dollars at the rate of RMB6.8329 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2009 for cable transfers of RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.
And certain RMB amounts in the Second Quarter financial results have been translated into US dollars at the rate of RMB6.8302 to US$1.00, the noon buying rate for US dollars in effect on June 30, 2009 for cable transfers of RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.
Third Quarter 2009 Results and Conference Call
eFuture expects to release unaudited financial results for the third fiscal quarter of 2009 after the close of U.S. markets on Monday, December 7, 2009.
The earnings press release will be available on the investor relations page of its website at
http://www.e-future.com.cn/eng/newslist.asp?lm=36&lmname=LM2 .
Following the earnings announcement, eFuture's senior management will host a conference call on Tuesday, December 8, 2009 at 5:00 am (Pacific) / 8:00 am (Eastern) / 9:00 pm (China) to discuss its third quarter 2009 financial results and recent business activity. The conference call may be accessed by calling:
United States toll free 1-866-519-4004
China (Landline) 800-819-0121
China (Mobile) 400-620-8038
United Kingdom toll free 0808-234-6646
Hong Kong toll free 800-930-346
Conference ID 43021457
Please dial-in 10 minutes before the call is scheduled to begin.
A replay of the conference call may be accessed by phone at the following numbers until 11:00 pm (Eastern), December 15, 2009:
United States toll free 1-866-214-5335
China North 10-800-7140386
China South 10-800-1400386
United Kingdom toll free 0800-731-7846
Hong Kong toll free 800-901-596
Conference ID 43021457
Additionally, a live and archived webcast of the conference call will be available on the investor relations section of eFuture's website at http://www.e-future.com.cn/ENG/newshow.asp?id=513 .
Use of Non-GAAP Financial Measures
To supplement eFuture's unaudited consolidated financial results presented in accordance with U.S. GAAP, eFuture uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: adjusted EBITDA excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses, depreciation, adjusted net income excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes, adjusted basic and diluted earnings per share excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.
eFuture believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding expenses that may not be indicative of its operating performance from a cash perspective or be indicative of its operating performance. eFuture believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to eFuture's historical performance and liquidity. eFuture computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. The accompanying paragraphs have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
eFuture's management also believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization is a useful financial metric to assess its operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, eFuture's management believes that EBITDA is widely used by other companies in the software industry and may be used by investors as a measure of its financial performance. Given the significant investments that eFuture has made in property, equipment, depreciation and amortization expense comprises a meaningful portion of the Company's cost structure. eFuture's management believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains eFuture considers to be outside the ordinary course of its business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Further, share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of eFuture's financial results. The term EBITDA or adjusted EBITDA is not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing eFuture's operating and financial performance, you should not consider this data in isolation or as a substitute for its net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA and adjusted EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as eFuture does.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company's year-end financial statements, which could result in significant differences from this unaudited financial information.
About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ: EFUT - News) is a leading provider of software and services in China's rapidly growing retail and consumer goods industries. eFuture provides integrated software and services to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain (from factory to consumer) market, especially in the retail and fast moving consumer goods industries. eFuture currently serves over 15 Fortune 500 companies, over 1,000 retailers and over 5,000 suppliers operating in China. eFuture is one of IBM's premier business partners in Asia Pacific and is a strategic partner with Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture has more than 600 employees and 20 branch offices across China. For more information about eFuture, please visit http://www.e-future.com.cn/ .
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, 2009 financial outlook and quotations from management in this announcement, as well as strategic and operational plans, contain forward-looking statements. eFuture may also make written or oral forward-looking statements in periodic reports to the Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to second parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: eFuture's anticipated growth strategies; eFuture's future business development, results of operations and financial condition; expected changes in the Company's revenues and certain cost or expense items; eFuture's ability to attract customers and leverage its brand; trends and competition in the software industry; the Company's ability to control expenses and maintain profit margins; the Company's ability to hire, train and retain qualified managerial and other employees; the Company's ability to develop new software and pilot new business models at desirable locations in a timely and cost-effective manner; the performance of third parties under contracts with the Company; the expected growth of the Chinese economy software market in retail and consumer goods industries; and Chinese governmental policies relating to private managers and operators of software and applicable tax rates.
Further information regarding these and other risks is included in eFuture's annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of November 19, 2009, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
For more information, please contact:
Investor Contact:
Troe Wen, Company Secretary
eFuture Information Technology Inc.
Tel: +86-10-5293-7699
Email:
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Investor Relations (US):
Mahmoud Siddig
Taylor Rafferty
Tel: +1-212-889-4350
Email:
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Investor Relations (HK):
Ruby Yim
Taylor Rafferty
Tel: +852-3196-3712
Email:
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Media Contact:
Jason Marshall
Taylor Rafferty
Tel: +1-212-889-4350
Email:
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EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March March March March
31, 2009 31, 2009 31, 2008 31, 2008
(Reported) (Restated) (Reported) (Restated)
ASSETS
Current assets
Cash and cash RMB RMB RMB RMB
equivalents 42,460,982 42,524,982 59,283,677 59,283,677
Trade receivables,
less allowance for
doubtful accounts 23,184,359 21,333,449 13,845,503 13,845,503
Refundable value added
tax 1,677,975 1,578,129 2,351,243 2,351,243
Deposits -- -- 209,660 209,660
Advances to employees 3,957,154 4,778,897 2,815,950 2,815,950
Advances to suppliers 1,186,250 1,395,298 657,724 657,724
Notes receivable -
related party -- -- -- --
Other receivables 1,396,544 3,673,343 5,681,883 5,681,883
Prepaid expenses 993,138 455,515 880,875 880,875
Inventory 14,093,665 6,869,625 13,771,667 13,771,667
Total current assets 88,950,066 82,609,237 99,498,181 99,498,181
Non-current assets
Long-term investments 654,192 654,192 4,901,912 4,901,912
Long term deferred
expense -- 285,000 -- --
Deferred loan costs 673,888 1,097,696 4,539,826 7,252,043
Deferred assets 6,552,316 -- 171,583 171,583
Property and
equipment, net of
accumulated
depreciation 3,155,857 3,509,836 1,969,249 1,969,249
Intangible assets, net
of accumulated
amortization 57,915,045 48,988,255 42,288,011 42,288,011
Goodwill 69,595,844 91,284,735 46,814,929 46,814,929
Total non-current
assets 138,547,142 145,819,714 100,685,509 103,397,726
Total assets RMB RMB RMB RMB
227,497,208 228,428,951 200,183,690 202,895,907
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable RMB RMB RMB RMB
4,667,102 2,290,929 4,052,516 4,052,516
Other payable 3,454,587 12,784,897 2,209,216 2,209,216
Accrued expenses 3,893,034 4,708,929 3,566,471 3,566,471
Accrued interest -- (27,332) 76,619 69,872
Taxes payable 6,000,035 5,782,023 5,101,258 5,101,258
Deferred Revenues 7,228,517 -- -- --
Deferred Tax 4,698,487 -- 4,826,454 4,826,454
Advances from
customers 23,014,933 26,400,130 15,564,504 15,564,504
Royalstone acquisition
obligation, current
portion 6,415,374 6,426,752 15,860,198 15,860,198
Health Field
acquisition
obligation 552,855 553,908 3,175,318 3,175,318
Proadvancer System
acquisition
obligation 14,555,799 30,004,186 -- --
BFuture acquisition
obligation -- 392,877 -- --
Make-whole obligation,
current portion -- -- 707,312 --
Convertible note
payable, current
portion 322,397 -- 2,785,890 --
Deferred tax, current
portion -- 1,164,898 -- --
Total current
liabilities 74,803,120 90,482,197 57,925,757 54,425,808
Long-term liabilities
Royalstone acquisition
obligation, net of
current portion -- -- 6,093,683 6,093,683
Make-whole obligation,
net of current
portion 719,094 -- 9,290,082 --
3% - 10% convertible
note payable, net of
unamortized discount 674,517 31,073 6,770,666 135,076
Derivative liabilities -- 3,828,952 -- (3,776,075)
Deferred tax -- 5,458,232 -- --
Minority shareholder
interests 1,972,733 -- (375,070) (375,070)
Total long-term
liabilities 3,366,345 9,318,257 21,779,360 2,077,613
Shareholders' equity
Ordinary shares,
$0.0756 U.S. dollars
par value; 6,613,756
shares
authorized;3,362,241
shares outstanding 2,038,631 2,039,196 1,839,898 1,839,898
Additional paid-in
capital 224,849,534 173,819,877 169,131,602 197,548,234
Statutory reserves 3,084,020 3,084,020 3,084,020 3,084,020
Accumulated deficit (80,644,442) (50,314,596) (53,576,948) (56,079,667)
Total shareholders'
equity 149,327,743 128,628,497 120,478,573 146,392,486
Total liabilities and RMB RMB RMB RMB
shareholders' equity 227,497,208 228,428,951 200,183,690 202,895,907
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
March March 31, March March 31,
31, 2009 2009 31, 2008 2008
(Reported) (Restated) (Reported) (Restated)
Revenues
Software sales RMB RMB RMB RMB
4,956,292 4,949,335 7,565,110 7,565,110
Hardware sales 1,395,170 1,395,170 1,409,113 1,409,113
Service fee income 7,625,916 7,479,788 5,040,249 5,040,249
Total Revenues 13,977,378 13,824,292 14,014,472 14,014,472
Cost of Revenue
Cost of software 1,298,681 1,092,129 1,845,125 1,845,125
Cost of hardware 1,367,984 1,370,114 1,204,786 1,204,786
Cost of service fee income 2,311,579 2,952,121 1,493,129 1,493,129
Amortization of acquired
technology 3,110,375 2,996,500 3,860,243 3,860,243
Amortization of software
costs 903,707 904,352 896,856 896,856
Total Cost of Revenue 8,992,326 9,315,216 9,300,139 9,300,139
Gross Profit 4,985,052 4,509,077 4,714,333 4,714,333
Operating Expenses
Research and development 242,261 93,566 167,288 167,288
General and administrative 5,742,794 7,876,101 7,870,673 7,870,673
Selling and distribution
expenses 5,741,659 5,575,080 3,759,182 3,759,182
Total Operating Expenses 11,726,713 13,544,747 11,797,143 11,797,143
Profit from operations (6,741,662) (9,035,671) (7,082,810) (7,082,810)
Interest income 180,273 180,273 112,611 112,611
Interest expense (110,484) (145,097) (314,520) (307,773)
Interest expense-
amortization of discount
on notes payable (199,648) (6,648) (488,504) (29,348)
Interest expense-
amortization of deferred
loan costs (55,387) (86,062) (242,378) (403,212)
Income on investments -- -- (558,389) (558,389)
Gain on derivative
liabilities -- 1,290,861 -- 3,776,075
Loss on extinguishment of
convertible notes -- -- -- --
Foreign currency exchange
gain/(loss) (883,409) (55,769) (805,787) (2,001,661)
Outside business receives 6,320 -- -- --
Outside business disburses -- -- -- --
Loss before taxation (7,803,997) (7,858,113) (9,379,777) (6,494,507)
Income tax -- 388,299 -- --
Minority interest in loss
of consolidated
subsidiary 1,197,422 -- 154,491 154,491
Net loss RMB RMB RMB RMB
(6,606,575) (7,469,813) (9,225,286) (6,340,016)
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
June June June
30, 2009 30, 2008 30, 2008
(Reported) (Reported) (Restated)
ASSETS
Current assets
Cash and cash equivalents RMB RMB RMB
39,198,012 58,822,685 58,822,685
Trade receivables, less allowance
for doubtful accounts 12,506,545 22,261,041 22,261,041
Refundable value added tax 2,242,320 2,564,891 2,564,891
Deposits -- 209,660 209,660
Advances to employees 4,114,868 4,288,058 4,288,058
Advances to suppliers 1,082,244 817,830 817,830
Notes receivable - related party -- -- --
Other receivables 3,896,064 4,034,326 4,034,326
Prepaid expenses 2,147,132 1,098,565 1,098,565
Inventory 7,650,692 18,729,440 18,729,440
Total current assets 72,837,877 112,826,496 112,826,496
Non-current assets
Long-term investments 654,192 767,119 767,119
Long term deferred expense 817,382 -- --
Deferred loan costs 1,011,697 4,261,251 1,367,605
Deferred assets -- 171,083 171,083
Property and equipment, net of
accumulated depreciation 4,028,150 3,847,802 3,847,802
Intangible assets, net of
accumulated amortization 48,052,877 43,540,399 43,540,399
Goodwill 91,284,735 46,357,407 46,357,407
Total non-current assets 145,849,033 98,945,061 96,051,415
Total assets RMB RMB RMB
218,686,910 211,771,556 208,877,910
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Trade accounts payable RMB RMB RMB
2,601,091 4,433,913 4,433,913
Other payable 13,724,591 8,833,770 8,833,770
Accrued expenses 5,520,983 3,348,548 3,348,548
Accrued interest (27,321) 74,874 68,145
Taxes payable 5,965,735 4,817,410 4,817,410
Deferred Revenues -- 3,206,685 3,206,685
Deferred Tax -- 4,716,502 4,716,502
Advances from customers 23,617,532 20,819,237 20,819,237
Royalstone acquisition obligation,
current portion 6,424,213 15,360,066 15,360,066
Health Field acquisition obligation 553,689 3,102,981 3,102,981
Proadvancer System acquisition
obligation 29,992,330 -- --
BFuture acquisition obligation 392,877 -- --
Make-whole obligation, current
portion -- 479,561 --
Convertible note payable, current
portion -- 2,890,708 --
Deferred tax, current portion 776,599 -- --
Total current liabilities 89,542,319 72,084,256 68,707,259
Long-term liabilities
Royalstone acquisition obligation,
net of current portion -- 6,093,683 6,093,683
Make-whole obligation, net of
current portion -- 9,290,082 --
3% - 10% convertible note payable,
net of unamortized discount 31,238 6,770,666 27,134
Derivative liabilities 5,502,956 -- (7,552,150)
Deferred tax 5,458,232 -- --
Minority shareholder interests 359,045 (3,496,172) (3,496,172)
Total long-term liabilities 11,351,471 18,658,259 (4,927,505)
Shareholders' equity
Ordinary shares, $0.0756 U.S.
dollars par value; 6,613,756
shares authorized;3,362,241 shares
outstanding 2,039,196 1,849,061 1,849,061
Additional paid-in capital 174,572,189 170,675,900 199,092,532
Statutory reserves 3,084,020 3,084,020 3,084,020
Accumulated deficit (61,902,285) (54,579,940) (58,927,456)
Total shareholders' equity 117,793,120 121,029,041 145,098,157
Total liabilities and shareholders'
equity RMB RMB RMB
218,686,910 211,771,556 208,877,910
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
June 30,
June 30, 2009 2008 June 30, 2008
(Reported) (Reported) (Restated)
Revenues
Software sales RMB RMB RMB
10,611,112 8,711,537 8,711,537
Hardware sales -- 2,915,871 2,915,871
Service fee income 11,594,726 12,533,027 12,533,027
Total Revenues 22,205,838 24,160,436 24,160,436
Cost of Revenue
Cost of software 3,526,283 2,039,796 2,039,796
Cost of hardware -- 2,549,247 2,549,247
Cost of service fee income 4,937,353 2,983,426 2,983,426
Amortization of acquired technology 3,018,653 1,904,687 1,904,687
Amortization of software costs 905,642 891,606 891,606
Total Cost of Revenue 12,387,931 10,368,762 10,368,762
Gross Profit 9,817,907 13,791,673 13,791,673
Operating Expenses
Research and development 92,179 223,792 223,792
General and administrative 10,032,444 8,061,899 8,199,499
Selling and distribution expenses 9,443,587 4,274,793 4,274,793
Total Operating Expenses 19,568,210 12,560,484 12,698,084
Profit from operations (9,750,303) 1,231,189 1,093,589
Interest income 162,491 873,560 873,560
Interest expense (174,914) (504,649) (504,668)
Interest expense- amortization of
discount on notes payable (204) (857,519) (598)
Interest expense- amortization of
deferred loan costs (87,176) (278,575) (408,432)
Income on investments -- 47,802 47,802
Gain on derivative liabilities (1,673,706) -- 3,776,075
Loss on extinguishment of
convertible notes -- -- (22,529,228)
Foreign currency exchange
gain/(loss) 12,059 711,914 16,893,223
Outside business receives -- 23,400 --
Outside business disburses -- (161,000) --
Loss before taxation (11,511,752) 1,086,122 (758,676)
Income tax 283,108 (140,695) (140,695)
Minority interest in loss of
consolidated subsidiary (154,631) 1,868,735 1,868,735
Net loss RMB RMB RMB
(11,383,275) 2,814,162 969,364
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
March 31,2009 June 30,2009
RMB RMB US$
(Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA
Operating income (loss) (GAAP
Basis) (9,035,671) (9,750,303) (1,426,964)
Adjustments for non-GAAP
measures of performance:
Add back amortization of
acquired software technology 2,996,500 3,018,653 441,782
Add back amortization of
intangibles 904,352 905,642 132,541
Add back share-based
compensation expenses 765,226 752,311 110,101
Adjusted non-GAAP operating
income (4,369,593) (5,073,697) (742,540)
Add back depreciation 145,241 286,790 41,972
Adjusted EBITDA (Earnings before
interest, taxes, depreciation
and amortization) (4,224,353) (4,786,907) (700,567)
NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA, as
a percentage of revenue
Operating income (loss) (GAAP
BASIS) -65% -44% -44%
Adjustments for non-GAAP
measures of performance:
Amortization of acquired
software technology 22% 14% 14%
Amortization of intangibles 7% 4% 4%
Share-based compensation
expenses 6% 3% 3%
Adjusted non-GAAP operating
income -32% -23% -23%
Depreciation 1.1% 1.3% 1.3%
Adjusted EBITDA (Earnings before
interest, taxes, depreciation
and amortization) -31% -22% -22%
NON-GAAP EARNINGS PER SHARE
Net Income(Loss) (7,469,813) (11,383,275) (1,665,951)
Amortization of acquired
software technology 2,996,500 3,018,653 441,782
Amortization of intangibles 904,352 905,642 132,541
Accretion on convertible notes 6,648 204 30
Share-based compensation
expenses 765,226 752,311 110,101
Adjusted Net income (2,797,088) (6,706,465) (981,497)
Adjusted non-GAAP diluted
earnings per share (0.82) (1.98) (0.29)
Shares used to compute non-GAAP
diluted earnings per share 3,394,099 3,384,625 3,384,625
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, June 30, June 30,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income (loss) (4,478,112) (18,853,088) (2,760,254)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 891,183 432,031 63,253
Amortization of intangible assets 16,940,774 7,802,991 1,142,425
Impairment of intangible assets 2,143,290 -- --
Amortization of discount on notes
payable 33,212 6,852 1,003
Amortization of deferred loan costs 978,204 173,237 25,363
Gain on derivatives (33,122,465) 382,845 56,052
Loss on extinguishment of
convertible notes 22,529,233 -- --
Investment (income)/loss 3,552,902 -- --
Loss on disposition of property and
equipment 385,995 -- --
Provision for doubtful debt 2,340,706 (601,051) (87,999)
Provision for loss in inventory and
work in process 1,449,542 -- --
Compensation expense for options
issued to employees 3,109,903 1,517,537 222,181
Deferred taxes 481,774 (776,598) (113,701)
Foreign exchange loss (2,222,996) -- --
Minority interest 204,414 154,631 22,639
Change in assets and liabilities:
Accounts receivable (2,526,441) 7,562,535 1,107,220
Refundable value added tax 935,333 513,382 75,163
Deposits 156,695 -- --
Advances to employees 370,994 (1,138,969) (166,755)
Advances to suppliers 991,888 (883,492) (129,351)
Other receivables 136,565 (4,798,228) (702,502)
Prepaid expenses 305,014 (1,497,998) (219,320)
Inventories 1,421,159 (4,725,723) (691,886)
Trade payables 1,230,861 (3,086,149) (451,839)
Other payables 7,269,063 6,781,730 992,904
Accrued expenses 2,360,449 (1,351,672) (197,896)
Accrued interest (278,420) (27,321) (4,000)
Taxes payable (1,084,826) (2,781,130) (407,181)
Advances from customers 4,542,952 778,002 113,906
Net cash provided by operating
activities 31,048,845 (14,415,643) (2,110,574)
Cash flows from investing
activities:
Purchases of property and equipment (1,618,331) (861,635) (126,151)
Payments for intangible assets (2,930,247) (6,338,725) (928,044)
Long-term investments -- -- --
Acquisition of business (28,278,247) -- --
Loan to Guarantor -- -- --
Amounts due from a related party -- -- --
Net cash used in investing
activities (32,826,825) (7,200,360) (1,054,195)
Cash flows from financing
activities:
Issuance of ordinary shares for
cash, net of offering costs paid -- -- --
Proceeds from exercise of warrants 3,657,908 -- --
Issuance of convertible notes -- -- --
Payment of make-whole obligation (8,054,079) -- --
Repayment of short-term loans -- -- --
Net cash provided by (used in)
financing activities (4,396,171) -- --
Effect of exchange rate changes on
cash (265,463) 26,281 3,848
Net increase (decrease) in cash (6,439,614) (21,589,722) (3,160,921)
Cash and cash equivalents at
beginning of period 67,227,348 60,787,734 8,899,847
Cash and cash equivalents at end of
period 60,787,734 39,198,012 5,738,926
Supplemental cash flow information
Interest paid 1,525,200 210,130.87 30,765.00
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