Kingtone Wirelessinfo Solution Holding Ltd Reports Second Fiscal Quarter 2010 Unaudited Financial Results 2QFY10 Revenue Up 3.2% to $2.6 Million from the Prior Year Period

2QFY10 Gross Profits Up 25.1% to $2.0 Million from the Prior Year Period

2QFY10 Basic and Diluted Earnings per share of $0.13

XI'AN, China, July 22 /PRNewswire-Asia-FirstCall/ -- Kingtone Wirelessinfo Solution Holding Ltd (Nasdaq: KONE) ("Kingtone" or the "Company"), a leading China-based software and solutions developer focused on wirelessly enabling businesses and government agencies to more efficiently manage their operations, today announced unaudited financial results for the second quarter of fiscal year 2010. The financial statements and other information included in this press release are prepared primarily in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company will release the third quarter of fiscal year 2010 in early August along with a conference call.

    Second Quarter Financial Highlights

    -- Revenue increased 3.2% to $2.6 million from $2.5 million in the prior
       year period.
    -- Gross profit increased 25.1% to $2.0 million from $1.6 million in the
       prior year period.
    -- Gross margin increased to 78.1% from 64.5% in the prior year period.
    -- Net income increased 16.2% to $1.33 million from $1.15 million in the
       prior year period.
    -- Basic and diluted earnings per share were $0.13 as compared to $0.11 in
       the prior year period.

    Year-to-Date Financial Highlights

    -- Revenue increased 21.5% to $5.6 million from $4.6 million in the prior
       year period.
    -- Gross profit increased 34.9% to $4.5 million from $3.3 million in the
       prior year period.
    -- Gross margin increased to 80.9% from 72.8% in the prior year period.
    -- Net income increased 39.0% to $3.09 million from $2.22 million in the
       prior year period.
    -- Basic and diluted earnings per share were $0.31 as compared to $0.22 in
       the prior year period.

In December 2009, the Company through one of its subsidiaries, Xi'an Softech Co., Ltd. ("Softech"), entered into a series of agreements with Xi'an Kingtone Information Technology Co., Ltd. ("Kingtone Information") for it to qualify as a Variable Interest Entity ("VIE"). Therefore subsequent financial statements will present Kingtone Information on a consolidated basis.

On March 23, 2010, the board has reached a resolution to change the fiscal year end of the Company and its wholly owned subsidiaries, Topsky Info-tech Holdings Pte Ltd. and Softech, from November 30 to September 30 so they have the same fiscal year end as Kingtone Information, the Company's controlled operating subsidiary, or VIE.

"We are pleased with our performance during the second quarter," said Mr. Peng Zhang, Chief Executive Officer of the Company. "We continue to shift our focus from wireless system solutions to software solutions which carry much higher margins. Revenues from this business grew 276.4% in the quarter as we continued to implement mobile police applications in Jilin, Sichuan and Shaanxi provinces, confirming our ability to grow in this sector. While the shift has temporarily slowed down growth in our top line, the impact on gross profit and overall gross margin, the latter reaching 78.1%, has been quite significant. We are confident that we can expand our top line in the future, particularly in software solutions, and further increase shareholder return."

Second Quarter Financial Performance

Net Revenues. Second quarter of fiscal year 2010 revenue increased by 3.2% to $2.59 million from $2.51 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 276.4% to $2.03 million in the second quarter of fiscal year 2010 compared to $0.54 million in the second quarter of fiscal year 2009, mainly due to the increased number of completed mobile police projects. Revenue from wireless system solution decreased by 71.4% to $0.56 million in the second quarter of fiscal year 2010 compared to $1.97 million in the prior year period, as the Company completed a relatively large project in the prior year period.

Gross Profit and Gross Margin. For the second quarter of fiscal year 2010, gross profit increased by 25.1% to $2.03 million from $1.62 million in the prior year period. Gross margin for the second quarter of fiscal year 2010 was 78.1% compared to 64.5% in the second quarter of fiscal year 2009. Gross profit from software solutions increased by 333.3% to $1.93 million from $0.44 million and gross margin increased to 95.0% from 82.6% in the prior year period. Gross profit from wireless system solution decreased by 91.7% to $0.10 million from $1.17 million and gross margin decreased to 17.3% from 59.5% in the prior year period. The increase in total gross margin was mainly due to the increased gross margin from software solutions comparing to the prior year period.

Operating Expenses. Total operating expenses for the second quarter of fiscal year 2010 were $0.45 million, compared to $0.22 million in the prior year period, represented an increase of 105.5%.

Selling and marketing expenses decreased by 4.0% to $0.07 million in the second quarter of fiscal year 2010 from $0.08 million for the same period in the prior year, and represented 2.9% and 3.1% of our revenues for the second quarter of fiscal year 2010 and 2009, respectively. We expect our selling and marketing expenses to increase in the near future as we increase our business development efforts, hire more sales personnel and initiate additional marketing programs to further build our brand.

General and administrative expenses were approximately $0.33 million in the second quarter of fiscal year 2010, an increase of 210.5% from $0.11 million as compared to the same period in the prior year, and represented 12.6% and 4.2% of our revenues for the second quarter of fiscal year 2010 and 2009, respectively. The Company expects its general and administrative expenses to increase further in the near future as it incurs costs to comply with the requirements imposed on a public company in the U.S. and to conduct financing and investor relations activities.

Research and development expenses were approximately $0.05 million in the second quarter of fiscal year 2010, an increase of 33.3% from $0.04 million as compared to the same period in the prior year, and represented 1.9% and 1.4% of our revenues for the second quarter of fiscal year 2010 and 2009, respectively. The Company expects its research and development expenses will increase in both dollar amount and as a percentage of revenues as it plans to hire more engineers, upgrade our middleware platform and develop new software applications.

Income from Operations. Income from operations increased by 12.6% to $1.58 million in the second quarter of fiscal year 2010 from $1.40 million in the comparable period of fiscal 2009, primarily due to the growth in gross profit. Operating margin for the second quarter of fiscal year 2010 and 2009 were 60.9% and 55.8%, respectively.

Net Income. Net income was $1.33 million in the second quarter of fiscal year 2010, compared to $1.15 million in the prior year's second quarter, an increase of 16.2%. Net income as of total net revenues was 51.5% and 45.7% for the second quarter of fiscal year 2010 and 2009, respectively. Basic and diluted earnings per share were $0.13 in the second quarter of fiscal year 2010, compared to $0.11 in the prior year period.

Year-to-Date Financial Performance

Net Revenues. For the six months ended March 31, 2010, total net revenues increased by 21.5% to $5.57 million from $4.58 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 82.9% to $4.18 million for the six months ended March 31, 2010 compared to $2.28 million for the same period prior year, mainly due to increased projects in mobile police application. Revenue from wireless system solution decreased by 39.5% to $1.39 million for the six months ended March 31, 2010 compared to $2.30 million in the prior year period, as the Company shifted more focus on software applications in an effort to maintain sustainable profit margin.

Gross Profit and Gross Margin. For the six months ended March 31, 2010, gross profit increased by 34.9% to $4.50 million from $3.34 million in the prior year period. Gross margin for the six months ended March 31, 2010 was 80.9%, compared to 72.8% for the same period in the period year. Gross profit from software solutions increased by 96.6% to $3.93 million from $2.00 million and gross margin increased to 94.2% from 87.6% in the prior year period. Gross profit from wireless system solution decreased by 57.4% to $0.57 million from $1.34 million with gross margin decreased to 40.9% to from 58.2% in the prior year period.

Operating Expenses. Total operating expenses for the six months ended March 31, 2010 were $0.72 million, comparing to $0.50 million in the prior year period, representing an increase of 45.1%.

Selling and marketing expenses decreased by 4.6% to $0.17 million for the six months ended March 31, 2010 from $0.18 million for the same period prior year, and represented 3.0% and 3.8% of our revenues for the six months ended March 31, 2010 and 2009, respectively. As mentioned above, the Company expects its selling and marketing expenses to increase in the near future as we increase our business development efforts, hire more sales personnel and initiate additional marketing programs to further build our brand.

General and administrative expenses were approximately $0.47 million for the six months ended March 31, 2010, an increase of 81.4% from $0.26 million comparing to the same period prior year, and represented 8.4% and 5.6% of our revenues for the six months ended March 31, 2010 and 2009, respectively. As mentioned above, the Company expects its general and administrative expenses to increase further in the near future as it incurs costs to comply with the requirements imposed on a public company in the U.S. and to conduct financing and investor relations activities.

Research and development expenses were approximately $0.09 million for the six months ended March 31, 2010, an increase of 34.4% from $0.06 million comparing to the same period prior year, and represented 1.5% and 1.4% of our revenues for the six months ended March 31, 2010 and 2009, respectively. As mentioned above, the Company expects its research and development expenses will increase in both dollar amount and as a percentage of revenues as it plans to hire more engineers, upgrade our middleware platform and develop new software applications.

Income from Operations. Income from operations increased by 33.1% to $3.78 million for the six months ended March 31, 2010 from $ 2.84 million in the comparable period of fiscal 2009, primarily due to the growth in net revenues. Operating margin for the six months ended March 31, 2010 and 2009 were 67.9% and 62.0%, respectively.

Net Income. Net income was $3.09 million for the six months ended March 31, 2010, compared to $2.22 million in the prior year, an increase of 39.0%. Net income as of total net revenues was 55.5% and 48.5% for the six months ended March 31, 2010 and 2009, respectively. Basic and diluted earnings per share was $0.31 for the six months ended March 31, 2010, compared to $0.22 for the same period prior year.

Cash and Cash Equivalents. As of March 31, 2010, the Company had cash and cash equivalents of $0.55 million, compared to $0.34 million as of November 30, 2009, our last fiscal year end. Cash flows used in operating activities for the six months ended March 31, 2010 were approximately $0.69 million, compared to approximately $1.54 million cash flows provided by operating activities in the prior year period. Depreciation and amortization expenses were $0.07 million for the six months ended March 31, 2010 and 2009, respectively. Cash flows provided by financing activities were approximately $0.90 million for the six months ended March 31, 2010, compared to $1.40 million cash flows used by financing activities a year ago.

Financial Outlook

The Company reaffirms the guidance of total net revenues for the full fiscal year of 2010 in the range of $15.6 million to $17.4 million, as compared to total net revenues of $11.2 million for the full fiscal year of 2009, and net income for the full fiscal year of 2010 in the range of $7.6 million and $8.1 million, as compared to net income of $5.3 million for the full fiscal year of 2009.

Conference Call

The Company will host a conference call to discuss its second quarter of fiscal year 2010 financial results at 8:30a.m. EDT on Thursday, July 22, 2010. Mr. Tao Li, Chairman, Mr. Peng Zhang, Chief Executive Officer, Ms. Ying Yang, Chief Financial Officer, will be on the call.

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

    USA Toll Free: (877) 407-8035
    International: (201) 689-8035
    Conference ID #: 354334

A replay of the call will be available until 11:59 PM EDT on August 4, 2010.

    To access the replay, please dial any of the following numbers:
    USA Toll Free: (877)-660-6853
    International: (201) 612-7415
    Replay Passcodes (both required for playback):
    Account #: 286
    Conference ID #: 354334
    The conference call will be webcast live by Vcall and can be accessed
    http://www.InvestorCalendar.com .

About Kingtone Wirelessinfo Solution Holding Ltd

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

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

Safe Harbor Statements

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

Statement Regarding Unaudited Financial Information

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

    Contact Information

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

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

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

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



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



                                          As of  March 31,  As of November 30,
                                                2010              2009
                                            (Unaudited)
                                                           (Consolidated and
                                           (Consolidated)      combined)
                                         (see Note b below)(see Note a below)
                      ASSETS
    Current assets
          Cash and cash equivalents                   $545              $344
          Accounts receivable, net of
           allowance                                 5,463             2,353
          Advance to suppliers                         442                --
          Unbilled revenue                              --               178
          Due from related companies                     4                --
          Inventories, net                              91               127
          Other receivables                            427             1,012
          Total Current Assets                       6,972             4,014
    Non-current assets
          Property and Equipment, net                1,646             1,693
          Deposit to purchase building              12,203            12,200
          Total asset                              $20,821           $17,907

          LIABILITIES AND STOCKHOLDER'S
           EQUITY

    Current liabilities
          Accounts payable                            $895            $1,409
          Advances from customers                      106             1,398
          Other payables and accruals                  962               559
          Taxes payable                                896               601
          Short-term loan                            3,437             3,437
          Deferred income                               21                --
          Due to shareholders                        1,100               200
          Dividend payable                           1,177             1,177
          Total Current Liabilities                  8,594             8,781

          Commitments and contingencies

    Stockholders' equity
          Common stock ($.001 par value,
           100,000,000 shares authorized,              $10               $10
          and 10,000,000 shares issued
           and outstanding)
          Paid in capital                               --             6,897
          Additional paid in capital                 7,113               216
          Appropriated retained earnings               843               231
          Unappropriated retained
           earnings                                  3,135               657
          Accumulated other comprehensive
           income                                    1,126             1,115
          Total Stockholders' Equity                12,227             9,126

          Total liabilities and
           stockholders' Equity                    $20,821           $17,907

    ( Note a - Represents the balance sheets as of November 30, 2009 of the
    Company and its wholly owned subsidiaries on a consolidated
    basis which are combined with the balance sheet as of September 30, 2009
    of the Company's affiliate, Kingtone Information)

    ( Note b -  Represents the balance sheets as of March 31, 2010 of the
    Company, its wholly owned subsidiaries and its Variable Interest
    Entity ("VIE"), Kingtone Information, on a consolidated basis.)



           KINGTONG WIRELESSINFO SOLUTON HOLDING LTD AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    (Express in thousands of U.S. Dollars, except shares and per share data)


                                           For the three months ended March 31,
                                                     2010              2009
                                                (Unaudited)        (Unaudited)
                                         (see Note d below)  (see Note c below)

    Revenues
              Software solution                     $2,029              $539
              Wireless system solution                 564             1,974
              Total revenues                         2,593             2,513
    Cost of sales
              Software solution                        101                94
              Wireless system solution                 466               799
              Total cost of sales                      567               893
    Gross profit                                     2,026             1,620

    Operating expenses
              Selling and marketing
               expenses                                 74                77
              General and administrative
               expenses                                326               105
              Research and development
               expenses                                 48                36
                                                       448               218
    Income from operations                           1,578             1,402

    Other income(expense)
              Subsidy income                            44                29
              Interest expense                         (68)              (79)
              Other income                              35                --
                                                        11               (50)
    Income before income tax expenses                1,589             1,352
              Income tax expenses                      254               203
    Net income                                      $1,335            $1,149
    Other comprehensive income
              Foreign currency
               translation gain                         11                12
    Comprehensive income                            $1,346            $1,161

    Earnings per common share:
              Basic and Diluted                      $0.13             $0.11

    Weighted average number of common
     shares outstanding
              Basic and Diluted                 10,000,000        10,000,000



    ( Note c - Represents solely the statements of income and comprehensive
     income of Kingtone Information.)

    ( Note d - Represents the statements of income and comprehensive income of
     the Company, its wholly owned subsidiaries and its VIE, Kingtone
     Information, on a consolidated basis.)



           KINGTONG WIRELESSINFO SOLUTON HOLDING LTD AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    (Express in thousands of U.S. Dollars, except shares and per share data)

                                           For the six months ended March 31,
                                                     2010              2009
                                                (Unaudited)        (Unaudited)
                                         (see Note d below)  (see Note c below)

    Revenues
          Software                                  $4,176            $2,283
          Wireless system solution                   1,391             2,299
          Total revenues                             5,567             4,582
    Cost of sales
          Software                                     244               283
          Wireless system solution                     822               962
          Total cost of sales                        1,066             1,245
    Gross profit                                     4,501             3,337

    Operating expenses
          Selling and marketing expenses               167               175
          General and administrative
           expenses                                    468               258
          Research and development
           expenses                                     86                64
                                                       721               497
    Income from operations                           3,780             2,840

    Other expense
          Subsidy income                                44                29
          Interest expense                            (140)             (241)
          Other expense                                (12)               --
                                                      (108)             (212)
    Income before income tax expenses                3,672             2,628
          Income tax expenses                          582               406
    Net income                                      $3,090            $2,222
    Other comprehensive income
          Foreign currency translation
           gain                                         11                13
    Comprehensive income                            $3,101            $2,235

    Earnings per common share:
          Basic and Diluted                          $0.31             $0.22

    Weighted average number of common
     shares outstanding
          Basic and Diluted                     10,000,000        10,000,000

    ( Note c - Represents solely the statements of income and comprehensive
    income of Kingtone Information.)
    ( Note d - Represents the statements of income and comprehensive income
    of the Company, its wholly owned subsidiaries and its VIE, Kingtone
    Information, on a consolidated basis.)



              KINGTONG WIRELESSINFO SOLUTON HOLDING LTD AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASHFLOWS
     (Express in thousands of U.S. Dollars, except shares and per share data)

                                             For the six months ended March 31,
                                                   2010               2009
                                                (Unaudited)       (Unaudited)
                                           (see Note d below)(see Note c below)

    Cash flows from operating activities
    Net income                                      $3,090            $2,222
    Adjustments to reconcile net income
     to net cash (used in)/provide by
     operating activities
      Depreciation and amortization                     65                68
      Provision for doubtful debts                      --                 9

    Changes in operating assets and
     liabilities
     Accounts receivable                            (3,109)             (807)
     Unbilled revenue                                  177                --
     Other receivables, net                           (105)             (111)
     Advance to suppliers                              248              (642)
     Inventories                                        36              (979)
     Accrued payroll                                     2                 0
     Tax payable                                       294               574
     Accounts payable                                 (515)            1,200
     Advance from customers                         (1,293)               82
     Other payable                                     401               (24)
     Deferred Income                                    21               (50)
    Net cash (used in)/provided by
     operating activities                             (688)            1,543

    Cash flows from investing activities
     Purchases of vehicles and office
      equipment                                        (18)               (7)
    Net cash used in investing activities              (18)               (7)

    Cash flows from financing activities
     Short-term borrowing (Repayment of
      short-term loan)                                                   (73)
     Decrease in amounts due to related-
      party companies                                   (4)           (1,619)
     Increase in amounts due to
      shareholders                                     900               294
    Net cash provided by/(used
     in)financing activities                           896            (1,398)

    Effect of exchange rate changes on
     cash                                                8                (1)

    Net increase in cash and cash
     equivalents                                       201               137
      Cash and cash equivalents at
       beginning of year                               344                 9
      Cash and cash equivalents at end of
       year                                           $545              $146

    Supplemental disclosure of cash flow
     information
      Interest paid                                   $139              $240
      Income taxes paid                                $92              $175

    ( Note c - Represents solely the statements of cashflows of Kingtone
    Information.)
    ( Note d - Represents the statements of cashflows of the Company, its
    wholly owned subsidiaries and its VIE, Kingtone Information, on a
    consolidated basis.)

SOURCE Kingtone Wirelessinfo Solution Holding Ltd



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