Subaye Announces Revenues and Earnings for the First Quarter of the Fiscal Year 2010 Ending September 30, 2010
GUANGZHOU CITY, China, Feb. 17 /PRNewswire-Asia/ — Subaye, Inc. (OTC Bulletin Board: SBAY) (“Subaye” or the “Company”) announced its financial results for the first quarter of the fiscal year ending September 30, 2010. For the three months ended December 31, 2009, the Company reported revenues of $12.7 million, an increase of 29% from revenues of $9.8 million reported for the three months ended December 31, 2008. Net income before income taxes for the three months ended December 31, 2009 was $3.8 million as compared to $2.9 million for the same period in 2008. Net income was $2.9 million for the three months ended December 31, 2009 as compared to $2.9 million for the same period in 2008. The Company continued to expand its video advertising membership base and generated a 49% increase in its trade services business segment as the Company’s trade services business segment continued to recover from the 2008 global economic crisis. Net income for 2009 was also impacted by income taxes of $0.8 million. The three months ended December 31, 2009 represented the first reporting period since 2006 where the Company’s video advertising business operations in China did not benefit from a tax free holiday. Taxes are being calculated using a blended rate based on assumptions associated with certain operations of the Company being taxed within mainland China and other operations being taxed outside of mainland China.
Revenues Increased by $2.9 Million:
Revenues totaled $12.7 million for the three months ended December 31, 2009 compared to $9.8 million for the three months ended December 31, 2008. The increase of $2.9 million is due primarily to 21% and 49% growth in the online membership services and trading services business segments for the three months ended December 31, 2009 as compared to the three months ended December 31, 2008, respectively. During the three months ended December 31, 2009, Subaye will focus on further developing its online video advertising business. Our third Asian motion picture investment, Dayoucun, generated only minimal revenues for the period from release, December 22, 2009 through December 31, 2009. Dayoucun was released in theatres at the same time as certain other major motion pictures and faced very strong competition. We expect Dayoucun will produce more significant revenues in the next few months as the audiences in Asia begin to choose other motion pictures to view, in addition to the several extremely successful motion pictures currently playing in theatres.
Costs of Sales increased by $1 Million:
Costs of sales were $7.1 million for the three months ended December 31, 2009 compared to $6.1 million for the three months ended December 31, 2008. Costs of sales for the online membership services business segment decreased by 54% for the three months ended December 31, 2009 as compared to the three months ended December 31, 2008. The Company’s www.subaye.com website was fully amortized as of September 30, 2009. As a result, costs of sales for the three months ended December 31, 2009 included amortization of the Company’s secondary websites, SaaS software and related hardware and amortization of stock based compensation related to the two new merchant service provider contracts. Also, cost of sales of the trading services segment increased by $1.3 million due to increased sales and the entertainment media segment experienced a large increase in cost of sales, for advertising related to the release of a movie, in the amount of $1.3 million.
Operating expenses increased by $1 Million:
For the three months ended December 31, 2009, we incurred operating expenses of $1.8 million as compared to $0.8 for the three months ended December 31, 2008. Advertising expense was $0.4 million and $0.1 million for the three months ended December 31, 2009 and 2008, respectively. Stock-based compensation expense included in operating expenses totaled $0.8 million and $0.3 million for the three months ended December 31, 2009 and 2008, respectively. Certain significant stock based compensation was issued in the three months ended December 31, 2009 and in the fiscal year ended September 30, 2009. As a result, amortization of stock based compensation for the three months ended December 31, 2009 was significant. The full value of the stock issuances will be amortized over the term of the related contracts, many of which are for two or three years in length.
Net income increased by $0.02 Million:
Subaye generated net income of $2.9 million for the three months ended December 31, 2009 as compared to $2.9 million for the three months ended December 31, 2008. The Company was not subject to income taxes of any significant amount for the three months ended December 31, 2008 as a result of the PRC tax holidays granted to the Company for the years ended September 30, 2009 and 2008, respectively. During the three months ended December 31, 2009, the Company generated 29.9% net income growth as compared to the three months ended December 31, 2008, when excluding the effect of income taxes of $0.8 million for the three months ended December 31, 2009.
Liquidity and Capital Resources
As of December 31, 2009, we had a cash balance of $2.7 million, consisting of money held in banks in mainland China and Hong Kong banks and cash in hand. We currently have no cash positions in the United States of America. We have been funding our operations through receipts from customers and equity-based financing such as the sale of our common stock, when needed.
Management has invested substantial time evaluating and considering numerous proposals for possible investments, acquisitions or business combinations, either sought out by management or presented to management by investment professionals, the Company’s advisers and others. We continue to consider acquisitions, business combinations, or start up proposals, which could be advantageous to our shareholders. No assurance can be given that any such project, acquisition or combination will be concluded, or that all these actions will be approved by our Board of Directors.
Net cash provided by operations for the three months ended December 31, 2009 was $0.3 million. We generated $2.9 million in net income for the three months ended December 31, 2009. A total of $1.3 million in depreciation and amortization was recorded for the three months ended December 31, 2009. We recorded $0.8 million in amortization expense related to stock based compensation. Accounts receivable decreased by $2.2 million. The net additional investments in copyrights for the three months ended December 31, 2009 totaled $6.8 million.
Net cash provided by financing activities for the three months ended December 31, 2009 was $2.1 million. The Company raised $2.1 million from bank loans with one year terms during the three months ended December 31, 2009.
Financial Outlook for 2010
Management has previously provided fiscal year 2010 financial results guidance. Revenues for the year ending September 30, 2010 were projected at $70.7 million and net income was projected at $16.7 million. This guidance was provided prior to the acquisition of the minority interest of Subaye.com, Inc. on November 6, 2009. As a result of the minority interest acquisition, which resulted in a large issuance of common stock and the timeline for the launch of Subaye’s web shopping mall, management is revising its 2010 forecast and will release its revised guidance as soon as possible.
About Subaye, Inc.
Subaye, Inc. (“Subaye” or the “Company”), is a leading video advertising and entertainment media provider in China. Subaye’s platform includes production, upload, storage, sharing and publishing onto more than 33 main video sharing portal websites. Subaye also offers SaaS business solutions and is in the process of developing what Subaye believes is the first online shopping mall in the world that will utilize 3D imaging throughout the online customer interface. Subaye’s video sharing services, SaaS solutions and its online shopping mall will be fully integrated in 2010. Subaye’s members will use Subaye’s SaaS online content management software to manage their online video and graphic showcases, maintain customer data and to manage operations within their webshops at the online shopping mall. These showcases offer a cost-effective venue for small to mid-size enterprises (“SMEs”) to advertise their products and services and establish and enhance their corporate brands. The visitors of Subaye’s websites, namely www.subaye.com, view the video showcases for Subaye’s members in order to select products or services they wish to purchase. Additional services such as general education and basic online media promotions are provided through the Company’s websites or through licensing arrangements.
Subaye also utilizes its experience and contacts within the entertainment media industry in Asia to produce and place advertisements on behalf of its customers. Subaye’s management also routinely invests the Company’s funds in entertainment productions in Asia. Typically, these investments consist of the purchase of the full or partial copyrights to an entertainment production. On December 22, 2009, “Dayoucun,” the Company’s third significant motion picture investment in Asia was released nationwide in over 1,000 cinemas as well as in Hong Kong and Taiwan. The Company invested in “The Pye-Dog” and “Big Movie,” both of which are motion pictures previously released in Asia in 2007 and 2005, respectively.
Subaye’s trade services are offered to customers based in Asia, North America and Europe. These customers order products through Subaye and ship products both domestically within China and internationally. Subaye’s trade services provide solutions for both importing and exporting transactions.
For further information on Subaye, Inc., please visit www.subaye.net. You may also register to receive Subaye’s future press releases or request to be added to the Company’s distribution list by contacting James Crane by email at firstname.lastname@example.org.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for the disclosure of earnings before interest, taxes, depreciation and amortization, otherwise known as “EBITDA.” The Company believes that its non-GAAP financial measures are useful to investors because they exclude non-cash charges that our management excludes when evaluating the Company’s business and makes operating decisions, prepares and revises financial forecasts, measures business performance, and because providing these Non-GAAP financial measures allows for comparison to historical periods. Accordingly, management provides EBITDA and financial ratios associated with EBITDA to its investors. The Company believes its investors can utilize non-GAAP measures for a number of reasons. Non-GAAP measures provide a consistent basis for investors to understand the Company’s financial performance in comparison to historical periods. In addition, it allows investors to potentially understand and evaluate the Company’s performance using the same methodology and information our management utilizes. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses or adjustments included under GAAP and because they involve the exercise of judgment of which expenses or adjustments are excluded from the non-GAAP financial measures we make available to investors. However, we believe we are compensating for these limitations by providing the relevant disclosure of the items excluded.
Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Subaye, Inc.’s industry, management’s beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Subaye, Inc.’s operations are conducted in the People’s Republic of China (“PRC”) and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.
James Crane, Chief Financial Officer P.R.C. Cell +86 186 0125 0891 U.S. Office +1 617 699 6325
Financial Tables Follow SUBAYE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS December 31, 2009 September 30, 2009 ----------------- ------------------ (In Thousands) -------------- (Unaudited) (Audited) Assets Current Assets: Cash $2,668 $321 Accounts Receivable, Net of Allowance for Doubtful Accounts of $363 as of December 31, 2009 and September 30, 2009 13,523 15,706 Prepaid Expenses 3,742 1,902 Deposit for Purchase of Inventoriable Assets 8,147 8,152 Other Current Assets 1,311 1,843 ----- ----- Total Current Assets 29,391 27,924 Property Plant and Equipment, Net of Accumulated Depreciation of $21,473 and $20,198 as of December 31, 2009 and September 30, 2009 9,338 10,626 Intangible Assets, Net Copyrights, Net of Accumulated Amortization of $1,738 and $1,674 as of December 31, 2009 and September 30, 2009 24,386 17,623 Goodwill 557 557 --- --- Total Intangible Assets, Net 24,943 18,180 ------- ------- Total Assets $63,672 $56,730 ======= ======= Liabilities and Equity Current Liabilities Accounts Payable and Accrued Expenses $5,906 $4,978 Short Term Debt 2,972 863 ----- --- Total Current Liabilities 8,878 5,841 Total Liabilities 8,878 5,841 Commitments and Contingencies Shareholders' Equity Preferred Stock, $0.001 Par Value, 50,000,000 Shares Authorized, 0 Shares Issued and Outstanding as of December 31, 2009 and September 30, 2009 - - Common Stock, $0.001 Par Value; 150,000,000 Shares Authorized; 6,664,131 and 2,479,243 Shares Issued and Outstanding as of December 31, 2009 and September 30, 2009 7 3 Additional Paid in Capital 48,021 32,452 Deferred Stock Based Compensation (6,789) (2,908) Accumulated Other Comprehensive Income (27) 54 Retained Earnings 13,582 11,108 ------ ------ Total Shareholders' Equity 54,794 40,709 Noncontrolling Interest in Subsidiaries - 10,180 --- ------ Total Equity 54,794 50,889 ------ ------ Total Liabilities and Equity $63,672 $56,730 ======= ======= SUBAYE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME For the Three Months Ended December 31, ------------------------ 2009 2008 ---- ---- (In Thousands, Except Per Share Data) --------------- (Unaudited) (Unaudited) Net Sales $12,714 $9,856 Cost of Sales 7,111 6,139 ----- ----- Gross Profit 5,603 3,717 Operating Expenses Advertising 427 108 Other General and Administrative Expenses 1,347 663 ----- --- Total Operating Expenses 1,774 771 ----- --- Operating Income 3,829 2,946 Income Tax Expense (883) (2) ---- --- Net Income 2,946 2,944 Net Income Attributable to the Noncontrolling Interest (472) (471) ---- ---- Net Income Attributable to the Controlling Interest $2,474 $2,473 ====== ====== Earnings per Common Share Basic $0.47 $1.53 ===== ===== Diluted $0.47 $1.53 ===== ===== Weighted Average Common Shares Outstanding Basic 5,209,013 1,617,627 ========= ========= Diluted 5,231,013 1,617,627 ========= ========= Comprehensive Income Net Income $2,946 $2,944 Other Comprehensive (Loss) Income, Net of Tax Foreign Currency Translation Adjustment, Net of Tax (81) 19 --- --- Total Other Comprehensive Income, Net of Tax 2,865 2,963 ----- ----- Comprehensive Income Attributable to the Noncontrolling Interest 401 477 --- --- Comprehensive Income Attributable to Controlling Interest $2,464 $2,486 ====== ====== SUBAYE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS December 31, ----------- 2009 2008 ---- -- (In Thousands) -------------- (Unaudited) (Unaudited) Cash Flows From Operating Activities: Net Income $2,946 $2,944 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities- Depreciation and Amortization 1,347 1,670 Amortization of Stock Based Compensation 1,040 311 (Increase) Decrease in Assets- Accounts Receivable 2,183 (1,196) Prepaid Expenses (1,840) (2,577) Other Current Assets 532 262 Copyrights (6,828) - Increase (Decrease) in Liabilities - Accounts Payable and Accrued Expenses 934 (1,009) --- ------ Net Cash Provided By Operating Activities 314 405 --- --- Cash Flows From Investing Activities: Purchase of Equipment - (5) --- --- Net Cash Used in Investing Activities - (5) --- --- Cash Flows From Financing Activities: Proceeds From Short Term Debt 2,109 123 ----- --- Net Cash Provided By Financing Activities 2,109 123 Effect of Exchange Rate Changes in Cash (76) (32 ) Increase in Cash 2,347 491 Cash, Beginning of Period 321 303 --- --- Cash, End of Period $2,668 $794 ====== ==== Supplemental Cash Flow Information: Cash Paid During the Period for Interest, Net of Amounts Capitalized $- $- Income Taxes $6 $2 Supplemental Schedule of Noncash Investing and Financing Activities: Issuance of Stock for Services, Deferred Compensation $4,920 $350 Adjustment of additional paid- in-capital and non-controlling interests from investment in Subaye Inc, by non-controlling interests $10,652 $-
SOURCE Subaye, Inc.