eFuture Announces Third Quarter 2009 Unaudited Financial Results
(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 third fiscal quarter
ended
Financial Highlights - Third Quarter 2009
RMB Unaudited Unaudited
Quarter Ended Quarter Ended
September 30, 2008 September 30, 2009
Reported Restated
Profit and Loss
(selected)
Total Revenue 27,357,120 27,357,120 25,212,578
Total Cost of Revenue 14,265,327 14,265,327 15,570,716
Gross profit 13,091,793 13,091,793 9,641,862
Total Expenses 12,560,484 12,567,783 15,514,887
Income (loss) from
operations 531,309 524,010 (5,873,024)
Net Income (loss) (28,055,290) 7,559,384 (4,162,706)
Comprehensive Income/Loss 7,559,384 (4,162,706)
Net Income per share
Basic (8.93) 2.41 (1.24)
Diluted (8.93) 2.41 (1.24)
-- The significant change from net loss to net income for the third
quarter 2008 after the restatement of 2008 results was due to the
application of different accounting treatments on the Company's
convertible note.
-- Total revenues decreased 7.84% year-over-year to RMB25.21 million
(US$3.69 million).
-- Service fee income increased 30.84% year-over-year to RMB10.60
million (US$1.55 million).
-- Revenue from software license sales decreased 16.82% year-over-year
to RMB13.81 million (US$2.02 million).
-- Revenue from hardware sales decreased 69.83% year-over-year to
RMB0.80 million (US$0.12 million) in the third quarter of 2008.
-- Gross profit decreased 26.35% year-over-year to RMB9.64 million
(US$1.41 million). Gross margin decreased to 38.24% from 56.05% in the
third quarter of 2008.
-- Operating loss was RMB5.87 million (US$0.86 million), compared to
operating income of RMB0.52 million in the third quarter of 2008.
-- Net loss was RMB4.16 million (US$0.61 million), compared to net income
of RMB7.56 million in the third quarter of 2008.
-- Diluted net loss per share was RMB1.24 (US$0.18), compared to net
income per share of RMB2.41 for the third quarter of 2008.
-- Operating cash flow was -RMB15.22 million (-US$2.23 million).
-- Adjusted net income (non-GAAP) reduced 94.37% year-over-year to RMB0.71
million (US$0.10 million).
-- Non-GAAP adjusted diluted earnings per share was RMB0.21 (US$0.03).
Management Strategic Imperatives:
eFuture’s management initiated four key strategic priorities to build
shareholder value by strengthening financial reporting and management and
operational efficiency, realigning sales and marketing initiatives and
investing in R&D to expand the Company’s addressable markets.
Financial Enhancement - Restatement Completed
-- As announced on June 19, 2009, the Company determined to adjust its
financial results for 2007, 2008 and the first quarter of 2009. As of
November 19, 2009, the Company has completed its financial review and
restatement of results, and believes that all outstanding issues
regarding the periods in question have been satisfactorily rectified.
-- The adjustments were made in 3 specific areas: (i) establishing a
RMB7.02 million depository reserve for employees' social security; (ii)
correcting the timing of the Company's recognition of revenues upon
sales of some of its software products, and (iii) allocating costs of
revenues based on labor costs. Both (i) and (ii) have no material
change to the reporting of costs of revenues.
-- In conjunction with its financial review, management has implemented
decisive measures to improve eFuture's internal financial controls and
systems, including implementing an extensive review of its accounting
procedures that benchmark industry best practices. In addition, to
further bolster its financial controls, the company appointed Grant
Thornton as its independent registered accounting firm. Management
believes that its financial reporting and controls have been
significantly improved as a result of this process.
Management and Operational Enhancements
-- As announced on December 4, 2009, eFuture appointed Mr. Dehong Yang in
the newly created position of President.
-- Mr. Yang, who will officially enter into his new role on January 1,
2010, has upwards of 10 years experience in international business and
global best practices, as well as a proven track record of successfully
implementing and driving strategic initiatives. Mr. Yang brings to
eFuture extensive experience in the retail, e-commerce and distribution
markets having held senior roles at leading international IT companies
including Wincor Nixdorf and IBM.
-- In his new role as President of eFuture, Mr. Yang will be responsible
for company wide operations, and will support the development and
execution of eFuture's key strategic priorities, which include:
-- To review and implement a competitive cost base aligned with
industry-benchmarked companies to enhance profitability;
-- To review and develop eFuture's sales and marketing strategies to
effectively strengthen leadership positions and expand the Company's
market share and addressable markets;
-- To review and devise strategic plans designed to create a world-
class operational platform with systems that enhance the efficiency
in the evaluation of business potentials and sales performance,
deployment of resources and R&D investment to help eFuture
capitalize on the strong growth opportunities in China's rapidly
growing retail and consumer goods software and services industry.
Sales and Marketing restructuring
-- Currently, 80% of the Company's revenue come from clients in 8 out of
19 provinces in tier-one cities. In order to expand its addressable
markets geographically, the Company has initiated an extensive sales
and marketing campaign in early 2009 designed to reach into tier-two
and tier-three cities.
-- Since early 2009, the Company has redeployed approximately 35% of its
sales force to expand new client development in tier-two and tier-three
cities in China. Management deems this initiative as a critical
building block of the Company's growth strategy to significantly
increase the geographical reach for its services. The Company has made
solid progress in the following areas:
-- At the end of the second quarter 2009, the Company had expanded its
sales and marketing outreach efforts in two, one and 40 tier-two,
tier-three and tier-four cities, respectively, significantly
strengthening its pipeline.
-- At the end of the third quarter 2009, eFuture had further increased
its sales and marketing outreach in 4, 37 and 64 tier-two, tier-
three and tier-four cities, respectively, resulting in the
development of 1,287 new business leads.
-- In conjunction with its sales force redeployment, eFuture has
invested approximately RMB7.5 million in a new marketing initiative
plan. The goal of this plan is to support the expansion of the
Company's geographic coverage by deepening its penetration in
China's tier-two and tier-three cities, while providing seamless
support for its global and top accounts as they look to expand into
these regions in China.
-- As of December 7, 2009, the Company's pipeline has grown to over
1,000 clients with operations in 350 cities across China. Management
believes this deep pipeline will help to generate new contract
signings beginning in 2010.
-- As a component of its sales and marketing plan, and in addition to the
restructuring of its Small and Medium Businesses ("SMB") business unit,
the Company has also established a new specialized marketing team with
approximately 50 staff distributed across China in order to speed up
the sales cycle, bolster sales and increase eFuture's market share in
all the key markets in China.
Investment in R&D
Over the last nine months, management has increased investment in new
products and services to
existing clients and drive the expansion of eFuture’s addressable markets:
-- eFuture Business Intelligence ("BI") Solutions
-- eFuture's fully integrated suite of BI software solutions provide
retailers with the ability to better understand customer buying
behavior, to drive sales and profitability, to decrease supply chain
costs, and to reduce operational costs.
-- eFuture BI integrates data from across the customer's enterprise,
and provides easily accessible self-service reporting and analysis.
-- The Company developed and launched its BI solutions to address the
needs of its Key Account Strategic Business Unit ("SBU") in three
areas: marketing, operations and merchandizing.
-- The Company is currently conducting a trial with one client to
ascertain the market reception and potential of this product line.
-- eFuture ONE CRM
-- eFuture ONE CRM provides a robust platform for retail and consumer
clients to analyze customer and transactional data in order to
strategically profile and segment customers to predict their future
behavior.
-- Specific solutions offer profiling and segmentation of retail
outlets based on transaction history and trade area demographics;
market-basket analysis for determining which products are likely to
be purchased together; tracking of customer movement between
segments; analysis of customer behavior and price sensitivity; and
customized reports of customer data based on a variety of inputs.
-- The eFuture CRM system is specifically designed to cater to the
growing needs of customers in our Department Store SBU.
-- Thus far in 2009, the Company has successfully completed CRM pilot
programs with a few major Beijing-based department store groups,
with positive market reception.
Business and Operational Highlights:
Core Business (Software License, Hardware and Service Businesses)
-- The economic downturn had a significant impact on the Company's
hardware business in the second quarter of 2009, as customers,
especially in the Logistics, Department Store and Supermarket SBUs,
delayed new store openings. This sudden decrease in the Company's new
project pipeline in turn impacted revenue contribution from these SBUs
in the third quarter 2009.
-- However, customers maintained a solid level of investment in upgrading
systems in existing stores. As a result, the Company closed over 625
new contracts through the third quarter of 2009 for an aggregate of
approximately RMB93.7 million in the first three quarters of 2009. The
Company believes these new contracts reflect signs of a rebound in the
Department Store and Supermarket SBUs.
-- Despite the slowdown, revenue from existing clients remained relatively
stable with revenue reaching RMB20.45 million for the third quarter of
2009.
-- Management believes there are now positive signs of a market rebound,
as total new contracts for the third quarter 2009 increased by 84%
year-over-year to 285, representing RMB36.9 million, or a year-over-
year increase of 12.8%.
-- The Company entered into strategic relationships with Microsoft
Corporation ("Microsoft") to provide a standardized POS-ERP system for
retailers in China. This system will integrate Microsoft Windows
Embedded POSReady 2009 into eFuture's POS-ERP Store Operation System.
Management expects that leveraging eFuture's nationwide retail customer
base and Microsoft's worldwide reputation will allow eFuture to deliver
a reliable and seamlessly integrated POS solution to companies
throughout China.
eService Business
In line with eFuture’s organic growth strategy to expand its eService
offering, the Company is beginning to see growing interest from existing
clients to scale-up and expand their relationship with eFuture by utilizing
its eService applications.
-- The Company started to deploy the bundled package offering bFuture SCM
SaaS service with POS-ERP in two SBUs, the Department Store and
Shopping Mall SBU and the Grocery Business SBU.
-- The Company has installed and is currently serving three retailers and
their 3,000 suppliers with the bundled POS-ERP package. In addition,
over 10 retailers are in the process of deploying the package.
Following deployment, these retailers will be able to open SaaS
services with their suppliers. We expect to see more profitable growth
from this service as we increase the scale of the operation.
Mr.
results for the quarter were impacted by decreased sales from our Logistic,
Supermarket and Department Store customers, many of whom delayed plans for new
store openings in the second quarter of 2009 as result of the economic
downturn, which in turn affected the revenue contribution from these segments
in the third quarter. As both the Supermarket and Department Store SBUs
together accounted for just under half of our revenue for the third quarter,
this impact was significant. However, we see very encouraging signs of a
recovery, especially in our Logistics SBU, which secured new contracts valued
at approximately
“More importantly, we have continued to invest throughout the downturn in
our business with the goal of creating more stringent financial controls, a
more efficient operating platform, a more focused sales and marketing strategy,
and more robust R&D capabilities. Our efforts to achieve these goals began by
initiating four key strategic imperatives, beginning with the enhancement of
our internal financial controls and the restatement of our results for certain
periods; enhancement of our management team and operational structure with the
hiring of Mr.
sales and marketing efforts to build market share in all key markets in China
including tier-two and tier-three cities; and, continued investment in R&D
which has led to the introduction of a number of new products including our
eFuture BI Solution and eFuture ONE CRM.
“I am pleased to see progress made across all of our key strategic
imperatives to date. However, we recognize that a good deal of work lies
ahead of us. Despite recent challenges, we continue to believe that our
leading position in a fragmented market, growing nationwide coverage, robust
product and services portfolio, strong brand recognition among local and
international clients, partnership with leading global technology companies,
and large installed base of customers will continue to position us well to
capitalize on the strong growth catalysts within our industry. We will
continue to execute on our growth strategy to invest in innovation, expand our
customer base in tier-two and tier-three cities, and actively pursue domestic
and international clients, while maintaining an unwavering commitment to build
long-term shareholder value.”
Third Quarter 2009 Unaudited Financial Results
Revenue
Revenue for the third quarter decreased 7.84% to
million
slow-down in hardware and software sales.
Software license revenues decreased by 16.82% year-over-year to
million
Supermarkets, Logistics and Department Store and Shopping Mall SBUs, as
customers within these segments were affected by the economic slow-down.
Service fee income increased by 30.84% year-over-year, and as a percentage
of revenue continued to increase and accounted for 42.05% of total revenue in
the third quarter, as compared to 29.62% in the same period last year.
Revenue Breakdown
Unaudited Quarter Ended
September 30, 2008 Unaudited Quarter Ended
(as restated) September 30, 2009
RMB (thousands) RMB USD Year Over Year
(thousands) (thousands) Change
Software
license sales 16,602 13,810 2,023 -16.82%
Hardware sales 2,651 800 117 -69.83%
Service fee
income 8,104 10,603 1,553 30.84%
Total 27,357 25,213 3,694 7.84%
Cost of Revenues
The cost of revenue for the third quarter increased 9.15% to
million
Cost of Revenues Breakdown
Unaudited
Quarter Ended
September 30, 2008 Unaudited Quarter Ended
(as restated) September 30, 2009
RMB (thousands) RMB USD Year Over Year
(thousands)(thousands) Change
Cost of software
license sales 5,313 4,380 642 -17.56%
Cost of hardware
sales 2,026 650 95 -67.92%
Cost of service fee 2,698 6,450 945 139.03%
Amortization of
acquired technology 3,337 3,063 449 -8.20%
Amortization of
software costs 892 1,028 151 15.29%
Total 14,265 15,571 2,281 9.15%
The increase in cost of service fee income was primarily due to the
accounting adjustment made to the reallocation of work in progress from
inventory to cost of revenues.
Gross Profit
Third quarter 2009 gross profit decreased 26.35% year-over-year to
million
Consolidated gross margin for the third quarter of 2009 was 38.24% compared
with 56.05% in the third quarter of 2008.
Operating Expenses
Research and development expenses for the third quarter of 2009 increased
90.89% year-over-year to
the third quarter of 2008. The year-over-year increase was a result of
recognition of R&D expenses related to products which have not yet reached
feasibility.
General and administrative expenses for the third quarter of 2009
decreased 11.10% year-over-year to
28.45% of total revenues, compared with
revenue in the third quarter of 2008. The decrease in general and
administrative expenses as a percentage of revenues was primarily due to
increased office maintenance expenses.
Selling and distribution expenses for the third quarter increased 85.13%
year-over-year to
revenues, compared with
quarter 2008. The increase was due to our continued investment in building
our regional sales/marketing teams to enhance our presence in tier-two and
tier-three cities.
Operating Income/Loss
Operating loss in the third quarter was
compared with an operating income of
2008.
Net Income/Loss and EBITDA
As a result of the foregoing, third quarter net loss was
(
quarter of 2008.
Basic and diluted losses per share in the third quarter were both
the third quarter of 2008. Adjusted net income (non-GAAP) for the third
quarter decreased 94.37% year-over-year to
Adjusted net income excludes amortization of acquired software technology,
amortization of intangibles, share-based compensation expenses and accretion
on convertible notes.
Third quarter 2009 adjusted non-GAAP diluted earnings per share was
of acquired software technology, amortization of intangibles, share-based
compensation expenses and accretion on convertible notes.
EBITDA (non-GAAP) for the third quarter was -
million
Balance Sheet and Cash Flow
In the third quarter, net cash loss from operating activities was
million
As of
in cash inflow related to the economic slow down.
Total accounts receivable as of
Inventories as of
to
Business Outlook and Revision of 2009 Annual Guidance
While the operating environment remains challenging, we are beginning to
see positive signs of a recovery in our Logistics, Supermarket and Department
Store SBUs. As evidence, we closed a total of over 500 new contracts in our
Supermarket and Department Store SBUs in the third quarter, and our total
contracts in the third quarter showed significant growth year-over-year
As explained above, revenues from eFuture’s Supermarket and Department
Store SBUs were negatively impacted as a result of customers unexpectedly
delaying new store openings in the second half of 2009 in response to the
economic downturn. As these two SBUs accounted for over 43% of total revenue,
results have fallen well below management’s initial expectations. As a result,
the Company is revising its guidance for the full year 2009. Management
anticipates total revenues to be in the range of approximately
to US$18 million
of approximately breakeven to
preliminary view and is subject to change.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts in the third quarter
2009 financial results have been translated into US dollars at the rate of
customs purposes by the Federal Reserve Bank of
is made that any amounts were or could be transferred at such rates.
Third Quarter 2009 Results and Conference Call
Following the earnings announcement, eFuture’s senior management will host
a conference call on
(Eastern) /
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
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) 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
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
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: ir@e-future.com.cn
Investor Relations (HK):
Ruby Yim
Taylor Rafferty
Tel: +852-3196-3712
Email: eFuture@Taylor-Rafferty.com
Investor Relations (US):
Mahmoud Siddig
Taylor Rafferty
Tel: +1-212-889-4350
Email: eFuture@Taylor-Rafferty.com
Media Contact:
Jason Marshall
Taylor Rafferty
Tel: +1-212-889-4350
Email: eFuture@Taylor-Rafferty.com
-- FINANCIAL TABLES TO FOLLOW --
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, September 30, September 30,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 60,787,734 35,456,533 5,194,183
Trade receivables, less
allowance for doubtful
accounts of RMB4,743,679
and RMB5,108,221($748,326),
respectively 19,468,029 12,391,138 1,815,232
Refundable value added tax 2,755,702 2,651,527 388,434
Deposits -- -- --
Advances to employees 3,205,953 4,612,444 675,697
Advances to suppliers 198,752 422,139 61,841
Other receivables 2,229,535 3,952,932 579,082
Prepaid expenses 735,083 1,636,601 239,753
Inventory and work in process 2,879,250 8,508,900 1,246,506
Total current assets 92,260,038 69,632,214 10,200,729
Non-current assets
Long-term investments 654,192 654,192 95,835
Long term deferred expense -- 75,000 10,987
Deferred loan costs 1,182,588 924,587 135,447
Property and equipment, net
of accumulated depreciation
of RMB3,020,838 and
RMB3,852,569($564,380),
respectively 3,605,458 4,047,329 592,911
Intangible assets, net of
accumulated amortization of
RMB34,704,373 and
RMB46,117,730($6,755,989),
respectively 49,875,082 47,258,138 6,923,052
Goodwill 91,284,735 91,284,735 13,372,702
Total non-current assets 146,602,055 144,243,981 21,130,934
Total assets 238,862,093 213,876,195 31,331,663
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Trade accounts payable 5,646,259 1,695,975 248,451
Other payable 11,097,702 14,333,809 2,099,823
Accrued expenses 6,873,703 3,496,183 512,171
Accrued interest -- 92,154 13,500
Taxes payable 7,933,734 5,027,189 736,455
Advances from customers 22,839,530 27,151,634 3,977,562
Royalstone acquisition
obligation, net of current
portion 6,416,970 6,420,451 940,560
Health field acquisition
obligation 594,000 553,365 81,065
Proadvancer System
acquisition obligation 29,958,518 29,974,765 4,391,135
BFuture acquisition
obligation 392,877 392,877 57,554
Deferred tax, current portion 1,553,197 388,299 56,884
Total current liabilities 93,306,490 89,526,700 13,115,160
Long-term liabilities
Royalstone acquisition
obligation -- -- --
3%-10% RMB6,826,200
($1,000,000) convertible
note payable, net of
RMB6,794,147 ($995,304)
of unamortized discount 26,068 32,053 4,696
Derivative liabilities 5,111,417 5,655,029 828,430
Minority shareholder
interests 204,414 (16,750) (2,454)
Deferred tax 5,458,232 4,272,007 625,825
Total long-term liabilities 10,800,131 9,942,338 1,456,497
Shareholders' equity
Ordinary shares, $0.0756 U.S.
dollars par value; 6,613,756
shares authorized; 2,924,702
shares and 3,362,241 shares
outstanding, respectively 2,039,196 2,039,196 298,731
Additional paid-in capital 173,054,651 175,348,931 25,687,634
Statutory reserves 3,084,020 3,084,020 451,792
Accumulated deficit (43,422,395) (66,064,990) (9,678,150)
Total shareholders' equity 134,755,472 114,407,156 16,760,006
Total liabilities and
shareholders' equity 238,862,093 213,876,195 31,331,663
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended
September
30,2008 June 30,2009 September 30,2009
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Software sales 16,602,397 10,611,112 13,809,558 2,023,023
Hardware sales 2,650,771 -- 799,850 117,173
Service fee income 8,103,952 11,594,726 10,603,170 1,553,305
Total Revenues 27,357,120 22,205,838 25,212,578 3,693,501
Cost of revenues
Cost of software 5,312,887 3,526,283 4,379,759 641,610
Cost of hardware 2,025,567 -- 649,717 95,180
Cost of service fee
income 2,698,429 4,937,353 6,449,959 944,883
Amortization of acquired
technology 3,336,837 3,018,653 3,063,315 448,758
Amortization of software
costs 891,606 905,642 1,027,965 150,591
Total Cost of Revenue 14,265,327 12,387,931 15,570,716 2,281,022
Gross Profit 13,091,793 9,817,907 9,641,862 1,412,479
Operating Expenses
Research and development 223,792 92,179 427,195 62,582
General and
Administrative 8,069,198 10,032,444 7,173,665 1,050,902
Selling and distribution
expenses 4,274,793 9,443,587 7,914,027 1,159,361
Total Operating Expenses 12,567,783 19,568,210 15,514,887 2,272,844
Profit/(loss) from
operations 524,010 (9,750,303) (5,873,024) (860,365)
Interest income 353,665 162,491 153,454 22,480
Interest expense (32,793) (174,914) (176,753) (25,893)
Interest expenses -
amortization of discount
on notes payable (570) (204) (958) (140)
Interest expenses -
amortization of deferred
loan costs (82,744) (87,176) (88,301) (12,936)
Income/(loss) on
investments (130,681) -- -- --
Gain/(loss) on derivatives 9,005,331 (1,673,706) (158,449) (23,212)
Loss on extinguishment of
convertible notes -- -- -- --
Foreign currency exchange
gain (3,679,219) 12,059 31,006 4,542
Profit/(loss) before tax 5,956,999 (11,511,752) (6,113,025) (895,524)
Income tax expense/
(benefit) -- 283,108 1,574,525 230,659
Minority interest in
profit/(loss) of
consolidated subsidiary 1,602,385 (154,631) 375,795 55,052.00
Net Income/(loss) 7,559,384 (11,383,275) (4,162,706) (609,813)
Other comprehensive
income/(loss)
Foreign currency
translation
adjustment -- -- -- --
Comprehensive
Income/(loss) 7,559,384 (11,383,275) (4,162,706) (609,813)
Earnings per ordinary share
Basic 2.41 (3.39) (1.24) (0.18)
Diluted 2.41 (3.39) (1.24) (0.18)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
September
30,2008 June 30,2009 September 30,2009
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA
Operating income
(loss) (GAAP Basis) 524,010 (9,750,303) (5,873,024) (860,365)
Adjustments for
non-GAAP measures
of performance:
Add back amortization
of acquired software
technology 3,336,837 3,018,653 3,063,315 448,758
Add back amortization
of intangibles 891,606 905,642 1,027,965 150,591
Add back share-based
Compensation expenses 763,234 752,311 776,742 113,788
Adjusted non-GAAP
operating income 5,515,686 (5,073,697) (1,005,002) (147,228)
Add back depreciation 666,804 286,790 288,844 42,314
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 6,182,490 (4,786,907) (716,158) (104,913)
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA,
as a percentage of
revenue
Operating income
(loss) (GAAP BASIS) 2% -44% -23% -23%
Adjustments for
non-GAAP measures
of performance:
Amortization of
acquired software
technology 12% 14% 12% 12%
Amortization of
intangibles 3% 4% 4% 4%
Share-based compensation
expenses 3% 3% 3% 3%
Adjusted non-GAAP
operating income 20% -23% -4% -4%
Depreciation 2.4% 1.3% 1.1% 1.1%
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 23% -22% -3% -3%
NON-GAAP EARNINGS
PER SHARE
Net Income(Loss) 7,559,384 (11,383,275) (4,162,706) (609,813)
Amortization of
acquired software
technology 3,336,837 3,018,653 3,063,315 448,758
Amortization of
intangibles 891,606 905,642 1,027,965 150,591
Accretion on
convertible notes 570 204 958 140
Share-based
compensation
expenses 763,234 752,311 776,742 113,788
Adjusted Net income 12,551,631 (6,706,465) 706,274 103,464
Adjusted non-GAAP
diluted earnings
per share 4.00 (1.98) 0.21 0.03
Shares used to
compute non-GAAP
diluted earnings
per share 3,140,371 3,384,625 3,386,318 3,386,318
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, September 30, September 30,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income (loss) (4,478,112) (23,015,794) (3,371,685)
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating activities:
Depreciation 891,183 720,875 105,604
Amortization of intangible
assets 16,940,774 11,826,305 1,732,487
Impairment of intangible
assets 2,143,290 -- --
Amortization of discount
on notes payable 33,212 7,810 1,144
Amortization of deferred
loan costs 978,204 261,538 38,314
Gain on derivatives (33,122,465) 541,294 79,297
Loss on extinguishment of
convertible notes 22,529,233 -- --
Investment (income)/loss 3,552,902 -- --
Loss on disposition of
property and equipment 385,995 2,200 322.00
Provision for doubtful
debt 2,340,706 (656,452) (96,167)
Provision for loss in
inventory and work in
process 1,449,542 -- --
Compensation expense for
options issued to
employees 3,109,903 2,294,279 336,099
Deferred taxes 481,774 (2,351,123) (344,426)
Foreign exchange loss (2,222,996) -- --
Minority interest 204,414 (221,164) (32,399)
Change in assets and
liabilities:
Accounts receivable (2,526,441) 7,733,343 1,132,891
Refundable value added tax 935,333 104,175 15,261
Deposits 156,695 -- --
Advances to employees 370,994 (1,644,189) (240,864)
Advances to suppliers 991,888 (223,387) (32,725)
Other receivables 136,565 (2,094,564) (306,842)
Prepaid expenses 305,014 (976,373) (143,033)
Inventories 1,421,159 (5,460,834) (799,982)
Trade payables 1,230,861 (3,991,241) (584,694)
Other payables 7,269,063 4,611,114 675,502
Accrued expenses 2,360,449 (3,376,218) (494,597)
Accrued interest (278,420) 92,154 13,500
Taxes payable (1,084,826) (3,719,675) (544,912)
Advances from customers 4,542,952 4,312,104 631,699
Net cash provided by
operating activities 31,048,845 (15,223,823) (2,230,205)
Cash flows from investing
activities:
Purchases of property and
equipment (1,618,331) (1,290,055) (188,986)
Payments for intangible
assets (2,930,247) (8,836,167) (1,294,449)
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) (10,126,223) (1,483,435)
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) 18,843 2,760
Net increase (decrease) in
cash (6,439,614) (25,331,201) (3,710,879)
Cash and cash equivalents
at beginning of period 67,227,348 60,787,734 8,905,062
Cash and cash equivalents
at end of period 60,787,734 35,456,533 5,194,183
Supplemental cash flow
information
Interest paid 1,525,200 210,130.87 30,783.00
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Sep 30,2009 Sep 30,2008 Sep 30,2008
(Reported) (Reported) (Restated)
ASSETS
Current assets
Cash and cash equivalents RMB 35,456,533 RMB 32,654,311 RMB 32,654,311
Trade receivables, less
allowance for doubtful
accounts 12,391,138 21,649,789 21,649,789
Refundable value added tax 2,651,527 2,076,806 2,076,806
Deposits -- 209,660 209,660
Advances to employees 4,612,444 3,325,265 3,325,265
Advances to suppliers 422,139 1,272,190 1,272,190
Notes receivable - related
party -- -- --
Other receivables 3,952,932 2,957,441 2,957,441
Prepaid expenses 1,636,601 1,290,072 1,290,072
Inventory 8,508,900 28,583,119 28,583,119
Total current assets 69,632,214 94,018,652 94,018,652
Non-current assets
Long-term investments 654,192 636,438 636,438
Long term deferred expense 75,000 -- --
Deferred loan costs 924,587 845,952 1,283,729
Deferred assets -- 170,583 170,583
Property and equipment, net of
accumulated depreciation 4,047,329 3,816,169 3,816,169
Intangible assets, net of
accumulated amortization 47,258,138 55,721,160 55,721,160
Goodwill 91,284,735 62,091,498 62,091,498
Total non-current assets 144,243,981 123,281,801 123,719,578
Total assets RMB213,876,195 RMB217,300,453 RMB217,738,230
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Trade accounts payable RMB 1,695,975 RMB 7,641,533 RMB 7,641,533
Other payable 14,333,809 8,314,220 8,314,220
Accrued expenses 3,496,183 5,127,705 5,127,705
Accrued interest 92,154 129,180 (7,959,651)
Taxes payable 5,027,189 3,784,198 3,784,198
Deferred Revenues -- 3,824,101 3,824,101
Deferred Tax -- 4,688,447 4,688,447
Advances from customers 27,151,634 26,014,183 26,014,183
Royalstone acquisition
obligation, current portion 6,420,451 2,015,456 2,015,456
Health Field acquisition
obligation 553,365 1,027,791 1,027,791
Proadvancer System acquisition
obligation 29,974,765 21,853,524 21,853,524
BFuture acquisition obligation 392,877 -- --
Make-whole obligation, current
portion -- 366,453 --
Convertible note payable,
current portion -- -- --
Deferred tax, current portion 388,299 -- --
Total current liabilities 89,526,700 84,786,790 76,331,505
Long-term liabilities
Royalstone acquisition
obligation, net of current
portion -- 1,424,728 1,424,728
Make-whole obligation, net of
current portion -- 9,290,082 --
3% - 10% convertible note
payable, net of unamortized
discount 32,053 6,770,666 27,686
Derivative liabilities 5,655,029 -- (22,427,355)
Deferred tax (16,750) -- --
Minority shareholder interests 4,272,007 (5,098,557) (5,098,557)
Total long-term liabilities 9,942,338 12,386,919 (26,073,499)
Shareholders' equity
Ordinary shares, $0.0756 U.S.
dollars par value; 6,613,756
shares authorized;3,362,241
shares outstanding 2,039,196 1,957,580 1,957,580
Additional paid-in capital 175,348,931 198,574,086 214,660,407
Statutory reserves 3,084,020 3,084,020 3,084,020
Accumulated deficit (66,064,990) (83,488,941) (52,221,783)
Total shareholders' equity 114,407,156 120,126,745 167,480,223
Total liabilities and
shareholders' equity RMB213,876,195 RMB217,300,453 RMB217,738,230
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Sep 30,2009 Sep 30,2008 Sep 30,2008
(Reported) (Reported) (Restated)
Revenues
Software sales RMB 13,809,558 RMB 16,602,397 RMB 16,602,397
Hardware sales 799,850 2,650,771 2,650,771
Service fee income 10,603,170 8,103,952 8,103,952
Total Revenues 25,212,578 27,357,120 27,357,120
Cost of Revenue
Cost of software 4,379,759 5,312,887 5,312,887
Cost of hardware 649,717 2,025,567 2,025,567
Cost of service fee income 6,449,959 2,698,429 2,698,429
Amortization of acquired
technology 3,063,315 3,336,837 3,336,837
Amortization of software costs 1,027,965 891,606 891,606
Total Cost of Revenue 15,570,716 14,265,327 14,265,327
Gross Profit 9,641,862 13,091,793 13,091,793
Operating Expenses
Research and development 427,195 223,792 223,792
General and administrative 7,173,665 8,061,899 8,069,198
Selling and distribution
expenses 7,914,027 4,274,793 4,274,793
Total Operating Expenses 15,514,887 12,560,484 12,567,783
Profit from operations (5,873,024) 531,309 524,010
Interest income 153,454 353,665 353,665
Interest expense (176,753) (8,114,896) (32,793)
Interest expense- amortization
of discount on notes payable (958) (18,385,813) (570)
Interest expense- amortization
of deferred loan costs (88,301) (3,415,298) (82,744)
Income on investments -- (130,681) (130,681)
Gain on derivative liabilities (158,449) -- 9,005,331
Loss on extinguishment of
convertible notes -- -- --
Foreign currency exchange
gain/(loss) 31,006 (488,662) (3,679,219)
Outside business receives -- 528 --
Outside business disburses -- (7,827) --
Loss before taxation (6,113,025) (29,657,675) 5,956,999
Income tax 1,574,525 -- --
Minority interest in loss of
consolidated subsidiary 375,795 1,602,385 1,602,385
Net loss RMB (4,162,706) RMB(28,055,290) RMB 7,559,384
SOURCE eFuture Information Technology Inc.