Kingtone Wirelessinfo Solution Holding Ltd Reports Third Fiscal Quarter 2010 Unaudited Financial Results 3QFY10 Revenue Up 31.5% to $3.6 Million from the Prior Year Period

3QFY10 Gross Profits Up 73.0% to $3.0 Million from the Prior Year Period

3QFY10 Basic and Diluted Earnings per share of $0.17

XI'AN, China, Aug. 3 /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 third quarter of fiscal year 2010. The financial statements and other financial information included in this press release are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

    Third Quarter Financial Highlights
    -- Revenue increased 31.5% to $3.61 million from $2.74 million in the
       prior year period.
    -- Gross profit increased 73.0% to $3.02 million from $1.74 million in the
       prior year period.
    -- Gross margin increased to 83.6% from 63.6% in the prior year period.
    -- Net income increased 59.7% to $2.02 million from $1.27 million in the
       prior year period.
    -- Basic and diluted earnings per share were $0.17 as compared to $0.13 in
       the prior year period.

    Year-to-Date Financial Highlights
    -- Revenue increased 25.3% to $9.18 million from $7.32 million in the
       prior year period.
    -- Gross profit increased 48.0% to $7.52 million from $5.08 million in the
       prior year period.
    -- Gross margin increased to 81.9% from 69.4% in the prior year period.
    -- Net income increased 46.6% to $5.11 million from $3.49 million in the
       prior year period.
    -- Basic and diluted earnings per share were $0.48 as compared to $0.35 in
       the prior year period.

"The trends reflected in our third quarter results are in line with our strategic shift towards greater emphasis on software solutions as well as our efforts to diversify into new verticals and expand business geographically. Revenues for the quarter in the software solutions business almost tripled from a year ago while its higher margins helped our bottom line grow 59.7% despite a substantial reduction in wireless systems solutions revenues," said Mr. Peng Zhang, Chief Executive Officer. "We are particularly satisfied with our development and implementation in non-Mobile Police solutions such as solutions for Mobile Environmental Protection, Mobile News Media, Mobile Insurance and Mobile City Administration. This, coupled with a growing geographical footprint, positions us well for further growth."

Mr. Zhang concluded: "With net income for the nine months up 46.6% on a 25.3% increase in total revenues, we believe our strategic shift is paying off and we look confidently to the future and our ability to further increase shareholder value."

Third Quarter Financial Performance

Results of Operations - Three months ended June 30, 2010 compared to three months ended June 30, 2009.

Net Revenues. Third quarter of fiscal year 2010 revenue increased by 31.5% to $3.61 million from $2.74 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 182.0% to $3.0 million in the third quarter of fiscal year 2010 compared to $1.06 million in the third quarter of fiscal year 2009, mainly due to the recently completed software solutions in Mobile Environmental Protection, Mobile News Media, Mobile Insurance and Mobile City Administration. Revenue from wireless system solutions decreased by 63.8% to $0.61 million in the third quarter of fiscal year 2010 compared to $1.68 million in the prior year period, when the Company recognized approximately $1.15 million in revenue from two related party transactions in the prior year period. There were no related party transactions in the third fiscal quarter this year.

Gross Profit and Gross Margin. For the third quarter of fiscal year 2010, gross profit increased by 73.0% to $3.02 million from $1.74 million in the prior year period. Gross margin for the third quarter of fiscal year 2010 was 83.6% compared to 63.6% in the third quarter of fiscal year 2009. Gross profit from software solutions increased by 176.4% to $2.76 million from $1.00 million and gross margin decreased to 91.8% from 93.7% in the prior year period. Gross profit from wireless system solution decreased by 65.1% to $0.26 million from $0.75 million and gross margin decreased to 42.9% from 44.5% in the prior year period. The increase in total gross margin was mainly due to the increased gross profit from software solutions compared to the prior year period.

Operating Expenses. Total operating expenses for the third quarter of fiscal year 2010 were $0.55 million, compared to $0.23 million in the prior year period, representing an increase of 138.7%.

Selling and marketing expenses increased by 4.8% to $0.09 million in the third quarter of fiscal year 2010 from $0.08 million for the same period in the prior year, and represented 2.4% and 3.1% of revenues for the third quarter of fiscal year 2010 and 2009, respectively. The Company expects its selling and marketing expenses to increase in the future reporting periods as it increases its business development efforts, hires more sales personnel and initiates additional marketing programs to further build its brand.

General and administrative expenses were approximately $0.42 million in the third quarter of fiscal year 2010, an increase of 288.8% from $0.11 million as compared to the same period in the prior year, and represented 11.5% and 3.9% of revenues for the third quarter of fiscal year 2010 and 2009, respectively. The main reason for the increase is a $0.19 million share-based compensation expense in the third quarter of fiscal year 2010. 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 it as a public company in the U.S., to conduct investor relations activities and to motivate management and employees by granting additional equity awards under its 2010 incentive plan.

Research and development expenses were approximately $0.05 million in the third quarter of fiscal year 2010, an increase of 15.4% from $0.04 million as compared to the same period in the prior year, and represented 1.2% and 1.4% of revenues for the third quarter of fiscal year 2010 and 2009, respectively. The Company expects its research and development expenses to increase both in dollar amount and as a percentage of revenues as it hires more engineers, upgrades its middleware platform and develops new software applications.

Income from Operations. Income from operations increased by 63.0% to $2.47 million in the third quarter of fiscal year 2010 from $1.51 million in the comparable period of fiscal 2009, primarily due to increased sales of its higher-margin software solutions. Operating margins for the third quarter of fiscal year 2010 and 2009 were 68.4% and 55.2%, respectively.

Net Income. Net income was $2.02 million in the third quarter of fiscal year 2010, compared to $1.27 million in the prior year's third quarter, an increase of 59.7%. Net income as a percentage of total net revenues was 56.0% and 46.2% for the third quarter of fiscal year 2010 and 2009, respectively. Basic and diluted earnings per share was $0.17 in the third quarter of fiscal year 2010, compared to $0.13 in the prior year period. The number of weighted average common shares outstanding for the three months ended June 30, 2010 was 12.09 million, compared to 10 million a year ago.

Year-to-Date Financial Performance

Results of Operations - Nine months ended June 30, 2010 compared to nine months ended June 30, 2009.

Net Revenues. For the nine months ended June 30, 2010, total net revenues increased by 25.3% to $9.18 million from $7.32 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 114.5% to $7.18 million for the nine months ended June 30, 2010 compared to $3.35 million for the same period prior year, mainly due to increased projects in new mobile applications. Revenue from wireless system solution decreased by 49.8% to $2.0 million for the nine months ended June 30, 2010 compared to $3.98 million in the prior year period, as the Company shifted its focus to software applications in an effort to maintain sustainable profit margin.

Gross Profit and Gross Margin. For the nine months ended June 30, 2010, gross profit increased by 48.0 % to $7.52 million from $5.08 million in the prior year period. Gross margin for the nine months ended June 30, 2010 was 81.9%, compared to 69.4% for the same period in the period year. Gross profit from software solutions increased by 123.2% to $6.69 million from $3.00 million and gross margin increased to 93.2% from 89.6% in the prior year period. Gross profit from wireless system solution decreased by 60.2% to $0.83 million from $2.08 million with gross margin decreasing to 41.5% to from 52.4% in the prior year period.

Operating Expenses. Total operating expenses for the nine months ended June 30, 2010 were $1.27 million, comparing to $0.73 million in the prior year period, representing an increase of 74.6%.

Selling and marketing expenses decreased by 1.5% to $0.255 million for the nine months ended June 30, 2010 from $0.259 million for the same period prior year, and represented 2.8% and 3.5% of revenues for the nine months ended June 30, 2010 and 2009, respectively. As mentioned above, the Company expects its selling and marketing expenses to increase in the near future.

General and administrative expenses were approximately $0.88 million for the nine months ended June 30, 2010, an increase of 142.6% from $0.36 million compared to the same period prior year, and represented 9.6% and 5.0% of revenues for the nine months ended June 30, 2010 and 2009, respectively. As mentioned above, the Company expects its general and administrative expenses to increase further in the near future.

Research and development expenses were approximately $0.13 million for the nine months ended June 30, 2010, an increase of 26.0% from $0.10 million comparing to the same period prior year, and represented 1.4% and 1.4% of revenues for the nine months ended June 30, 2010 and 2009, respectively. As mentioned above, the Company expects its research and development expenses will increase both in dollar amount and as a percentage of revenues.

Income from Operations. Income from operations increased by 43.5% to $6.25 million for the nine months ended June 30, 2010 from $4.35 million in the comparable period of fiscal 2009, primarily due to the growth in net revenues. Operating margin for the nine months ended June 30, 2010 and 2009 were 68.1% and 59.4%, respectively.

Net Income. Net income was $5.11 million for the nine months ended June 30, 2010, compared to $3.49 million in the prior year, an increase of 46.6%. Net income as of total net revenues was 55.7% and 47.6% for the nine months ended June 30, 2010 and 2009, respectively. Basic and diluted earnings per share was $0.48 for the nine months ended June 30, 2010, compared to $0.35 for the same period prior year. The number of weighted average common shares outstanding for the nine months ended June 30, 2010 was 10.69 million, compared to 10 million a year ago.

Liquidity and Capital Resources.

Cash and Cash Equivalents. As of June 30, 2010, the Company had cash and cash equivalents of $16.0 million, compared to $0.34 million as of November 30, 2009, the Company's last fiscal year end. Cash flows provided by operating activities for the nine months ended June 30, 2010 were approximately $1.17 million, compared to approximately $2.86 million in the prior year period. Depreciation and amortization expenses were $0.10 million for the nine months ended June 30, 2010 and 2009, respectively. Cash flows provided by financing activities were approximately $14.49 million for the nine months ended June 30, 2010, compared to $1.25 million cash flows used in financing activities a year ago.

Financial Outlook

With the recent business shift to software solutions from wireless system solutions, the Company reaffirms its previously announced guidance of net income which is expected to be in the range of $7.6 million and $8.1 million for fiscal year 2010, compared to $5.3 million for fiscal year of 2009.

Conference Call

The Company will host a conference call to discuss its third quarter of fiscal year 2010 financial results at 9a.m. EDT on Tuesday, August 3, 2010. Mr. Tao Li, Chairman, Mr. Peng Zhang, Chief Executive Officer and 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) 407-9205
    International: (201) 689-8054

    Conference ID #: 354704

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 #: 354704

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




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

                                           As of June 30,    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                  $15,989              $344
      Accounts receivable, net of allowance        6,179             2,353
      Advance to suppliers                           491                --
      Unbilled revenue                                --               178
      Due from related companies                       4                --
      Inventories, net                               188               127
      Other receivables                              466             1,012
      Total Current Assets                        23,317             4,014
    Non-current assets
      Property and Equipment, net                  1,660             1,693
      Deposit to purchase building                12,252            12,200
      Total Assets                               $37,229           $17,907

      LIABILITIES AND STOCKHOLDER'S EQUITY

    Current liabilities
      Accounts payable                              $727            $1,409
      Advances from customers                        192             1,398
      Other payables and accruals                  1,287               559
      Taxes payable                                1,300               601
      Short-term loan                              3,452             3,437
      Deferred income                                 72                --
      Due to shareholders                             --               200
      Dividend payable                             1,182             1,177
      Total Current Liabilities                    8,212             8,781

      Commitments and contingencies

    Stockholders' equity
      Common stock ($.001 par value,
       100,000,000 shares authorized,
       and 14,000,000 shares issued and
       outstanding) (note e)                         $14               $10
      Paid in capital                                 --             6,897
      Additional paid in capital                  21,806               216
      Appropriated retained earnings                 843               231
      Unappropriated retained earnings             5,156               657
      Accumulated other comprehensive income       1,198             1,115
      Total Stockholders' Equity                  29,017             9,126

      Total Liabilities and Stockholders'
       Equity                                    $37,229           $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 June 30, 2010 of the
     Company, its wholly owned subsidiaries and its Variable Interest Entity
     ("VIE"), Kingtone Information, on a consolidated basis.)
    ( Note e - Includes 10,000,000 common shares and 4,000,000 ADS. Each ADS
     represents one ordinary share, par value $0.001 per share)



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

                                            For the three months ended June 30,
                                                   2010              2009
                                               (Unaudited)       (Unaudited)
                                           (see Note d below)(see Note c below)
    Revenues
        Software solution                           $3,001            $1,064
        Wireless system solution                       607             1,679
          - Related party                               --             1,148
          - Third Party                                607               531
        Total revenues                               3,608             2,743
    Cost of sales
        Software solution                              245                67
        Wireless system solution                       346               932
        Total cost of sales                            591               999
    Gross profit                                     3,017             1,744

    Operating expenses
        Selling and marketing expenses                  88                84
        General and administrative expenses            416               107
        Research and development expenses               45                39
                                                       549               230
    Income from operations                           2,468             1,514

    Other income(expense)
        Interest expense                               (69)              (88)
        Other income                                    16                64
                                                       (53)              (24)
    Income before income tax expenses                2,415             1,490
        Income tax expenses                            393               224
    Net income                                      $2,022            $1,266
    Other comprehensive income
        Foreign currency translation gain               70                13
    Comprehensive income                            $2,092            $1,279

    Earnings per common share:
        Basic and Diluted                            $0.17             $0.13

    Weighted average number of common
     shares outstanding
        Basic and Diluted (note f)              12,088,889        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.)
    ( Note f - No dilutive effect from options issued as the exercise price of
     these options was higher than the average market price during the period)



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

                                            For the nine months ended June 30,
                                                  2010              2009
                                              (Unaudited)       (Unaudited)
                                           (see Note d below)(see Note c below)
    Revenues
        Software                                    $7,177            $3,346
        Wireless system solution                     1,998             3,978
          - Related party                               --             1,148
          - Third Party                              1,998             2,830
        Total revenues                               9,175             7,324
    Cost of sales
        Software                                       490               350
        Wireless system solution                     1,169             1,894
        Total cost of sales                          1,659             2,244
    Gross profit                                     7,516             5,080

    Operating expenses
        Selling and marketing expenses                 255               259
        General and administrative expenses            883               364
        Research and development expenses              131               104
                                                     1,269               727
    Income from operations                           6,247             4,353

    Other expense
        Subsidy income                                  44                29
        Interest expense                              (209)             (329)
        Other expense                                    5                64
                                                      (160)             (236)
    Income before income tax expenses                6,087             4,117
        Income tax expenses                            975               630
    Net income                                      $5,112            $3,487
    Other comprehensive income
        Foreign currency translation gain               81                26
    Comprehensive income                            $5,193            $3,513

    Earnings per common share:
        Basic and Diluted                            $0.48             $0.35

    Weighted average number of common
     shares outstanding
        Basic and Diluted (note f)              10,691,176        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.)
    ( Note f - No dilutive effect from options issued as the exercise price of
     these options was higher than the average market price during the period)



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

                                             For the nine months ended June 30,
                                                   2010               2009
                                               (Unaudited)       (Unaudited)
    Cash flows from operating activities  (see Note d below) (see Note c below)
    Net income                                    $5,112            $3,487
    Adjustments to reconcile net income
     to net cash (used in)/provide by
     operating activities
      Depreciation and amortization                   98               103
      Provision for doubtful debts                    --                 9
      Share-based compensation expense               185

    Changes in operating assets and liabilities
     Accounts receivable                          (3,801)             (922)
     Unbilled revenue                                177                --
     Other receivables, net                         (142)             (143)
     Advance to suppliers                            201               116
     Inventories                                     (60)             (115)
     Tax payable                                     867               644
     Accounts payable                               (685)              556
     Advance from customers                       (1,207)             (886)
     Other payables and accruals                     501                64
     Deferred Income                                  72               (50)
    Net cash provided by operating
     activities                                    1,316             2,863

    Cash flows from investing activities
     Purchases of vehicles and office equipment      (58)              (21)
     Prepayment to purchase building                  --            (1,584)
    Net cash used in investing activities            (58)           (1,604)

    Cash flows from financing activities
     Short-term borrowing (Repayment of
      short-term loan)                                --               (73)
     Decrease in amounts due from
      related-party companies                         (4)           (1,472)
    (Decrease)/Increase in amounts due to
      shareholders                                  (200)              294
     Proceeds from issuance of shares             14,522                --
    Net cash provided by/(used
     in)financing activities                      14,318            (1,251)

    Effect of exchange rate changes on cash           69                 1

    Net increase in cash and cash equivalents     15,645                 9
      Cash and cash equivalents at
       beginning of year                             344                 9
      Cash and cash equivalents at end of
       year                                      $15,989               $18

    Supplemental disclosure of cash flow
     information
      Interest paid                                 $209              $328
      Income taxes paid                              $92              $175

    ( Note c - Represents solely the statements of cash flows of Kingtone
     Information.)
    ( Note d - Represents the statements of cash flows 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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http://www.kingtoneinfo.com
http://www.InvestorCalendar.com

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