XI'AN, China, June 24 /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 first quarter of fiscal year 2010. The Company will release its second fiscal quarter results in mid July and third fiscal quarter results in early August and will hold a conference call on both occasions.
First Quarter 2010 Financial Highlights -- Revenue increased 43.7% to $3.0 million from $2.1 million in the prior year period. -- Gross profit increased 44.1% to $2.5 million from $1.8 million in the prior year period. -- Gross margin increased to 83.2% from 83.0% in the prior year period. -- Net income increased 63.6% to $1.76 million from $1.07 million in the prior year period. -- Diluted earnings per ADS was $0.18. Each ADS represents one ordinary share.
Mr. Peng Zhang, the Company's Chief Executive Officer, stated, "First fiscal quarter results continue to demonstrate our ability to deliver sustained growth and our strong presence in China's mobile enterprise industry. These encouraging results attest to the growing power of the Kingtone brand and our reputation as a high quality and premium value software developer and provider. Our performance also reflects growing demand for our products across all product lines, driven by our comprehensive product offering, lower cost base, and continuous product development. We look forward to building on this momentum as we broaden our product portfolio throughout fiscal 2010. We are confident that we'll capitalize on the opportunities created by intensified government efforts and the growing enterprise awareness of mobile solutions in China driven by the need for greater efficiency in a highly competitive environment. As demand continues to increase for mobile enterprise solutions, we are well-positioned with a uniquely scalable model in our sector to capture compelling market opportunities."
First Quarter of fiscal 2010 Financial Performance
Net Revenues. First quarter of fiscal 2010 revenue increased by 43.7% to $2.97 million from $2.07 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 23.1% to $2.15 million compared to $1.74 million a year ago, mainly due to increased demand for the Company's vertical industry mobile enterprise application in Emergency response and Insurance claim.
Revenue from wireless system solution increased by 154.5% to $0.83 million compared to $0.33 million in the prior year, as the Company expanded industrial automation projects to new customers. There was no related party transaction in the first quarter of fiscal 2010.
Gross Profit and Gross Margin. For the first quarter of fiscal 2010, gross profit increased by 44.1% to $2.48 million from $1.72 million in the prior year. Gross margin was 83.2%, slightly higher than 83.0% a year ago. Gross profit from software solutions increased by 28.8% to $2.00 million from $1.56 million with gross margin increasing to 93.3% from 89.2%. Gross profit from wireless system solution increased by 191.3% to $0.47 million from $0.16 million with gross margin increasing to 57.0% to from 49.7%. The slight increase in 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 first quarter of fiscal 2010 were $0.27 million, slightly lower than $0.28 million in the prior year, representing a year-over-year decrease of 2.2%.
Selling and marketing expenses decreased by 5.1% year over year to $0.09 million in the first quarter of fiscal 2010 from $0.10 million for the same period prior year, and represented 3.1% and 4.7% of our revenues for the first quarter of fiscal 2010 and 2009, respectively. 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 $0.14 million in the first quarter of fiscal 2010, a decrease of 7.2% from $0.15 million a year ago, and represented 4.8% and 7.4% of our revenues for the first quarter of fiscal 2010 and 2009, respectively. The company expects its general and administrative expenses to increase in the near future as we incur 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 $0.04 million in the first quarter of fiscal 2010, an increase of 35.7% from $0.03 million comparing to the same period prior year, and represented 1.3% and 1.4% of our revenues for the first quarter of fiscal 2010 and 2009, respectively. The company expects its research and development expenses to increase in both dollar amount and as a percentage of revenues as it plans to hire more engineers, upgrade its middleware platform and develop new software applications.
Income from Operations. Income from operations increased by 53.1% to $2.20 million in the first quarter of fiscal 2010 from $1.44 million in the comparable period of fiscal 2009, primarily due to the growth in net revenues.
Net Income. Net income was $1.76 million in the first quarter of fiscal 2010, compared to $1.07 million in the prior year's first quarter, an increase of 63.6%. Net income stood at 59.0% and 51.9% of total net revenues for the first quarters of fiscal 2010 and 2009, respectively. Basic and diluted earnings per share was $0.18 in the first quarter of fiscal 2010, compared to $0.11 in the first quarter of fiscal 2009. The Company had 10 million ordinary shares outstanding as of December 31, 2009 and 2008, respectively.
Cash and Cash Equivalents. As of December 31, 2009, the Company had cash and bank deposits of $0.99 million, compared to $0.34 million as of September 30, 2009(1). Cash flows used in operating activities for the period ended December 31, 2009 were approximately $0.15 million, compared to approximately $0.15 million cash flows provided by operating activities in the prior year period as a result of decreases in advances from customers. Depreciation and amortization expenses were $0.03 million for the first quarter of fiscal 2010 and 2009, respectively.
Ms Ying Yang, Chief Financial Officer, stated, "As we move forward through fiscal 2010, our competitive position remains strong and we are poised for future growth supported by our high-margin software applications and quality customer support services. With this in mind, we expect to generate total revenues for the full fiscal year of 2010 in the range of $15.6 million to $17.4 million, as compared to total 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." This forecast reflects the Company's current and preliminary view, which is subject to change.
Note (1): On March 2010, our board of directors approved a change in our fiscal year end from November 30 to September 30 in order to coincide with the fiscal year end of Kingtone Information, our contractually-controlled subsidiary.
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, which 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" and "future" 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.
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: email@example.com Christensen Tip Fleming Tel: +852-9212-0684 Email: firstname.lastname@example.org Yuanyuan Chen Tel: +86-10-5971-2001 Email: email@example.com Kathy Li Tel: +1-480-614-3036 Email: firstname.lastname@example.org 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 As of December 31, November 30, 2009 2009 ASSETS Current assets Cash $985 $344 Accounts receivable, net of allowance 3,931 2,353 Unbilled revenue -- 178 Amounts due from related companies 4 -- Inventories 263 127 Other receivables and prepayments 925 1,012 Total Current Assets 6,108 4,014 Deposit to purchase building 12,200 12,200 Property and Equipment, net 1,665 1,693 $19,973 $17,907 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $1,184 $1,409 Advances from customers 645 1,398 Other payables and accruals 561 559 Taxes payable 1,091 601 Amounts due to shareholder 1,000 200 Short-term bank loan 3,437 3,437 Dividend payable 1,177 1,177 Total Current Liabilities 9,095 8,781 Commitments and contingencies KINGTONE WIRELESSINFO SOLUTION HOLDING LTD STOCKHOLDERS' EQUITY Common Stock ($.001 par value, 100,000,000 shares authorized, and 10,000,000 shares issued and outstanding) 10 10 XI'AN KINGTONE INFORMATION TECHNOLOGY CO., LTD STOCKHOLDERS' EQUITY Paid-in capital -- 6,897 Additional paid-in capital 7,113 216 Appropriated retained earnings 843 231 Unappropriated retained earnings 1,800 657 Accumulated other comprehensive income 1,112 1,115 10,868 9,116 Total Stockholders' Equity 10,878 9,126 $19,973 $17,907 KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES CONSOLIDATED AND COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Expressed in thousands of U.S. Dollars, except shares and per share data) For the quarters ended December 31, 2009 2008 Revenue Software solution $2,147 $1,744 Wireless system solution 827 325 Total Net Revenue 2,974 2,069 Cost of Sales Software solution 143 189 Wireless system solution 356 163 Total Cost of Sales 499 352 Gross margin 2,475 1,717 Operating expenses Selling and marketing expenses 93 98 General and administrative expenses 142 153 Research and development expenses 38 28 273 279 Income from operations 2,202 1,438 Other income(expense) Interest expense (72) (162) Other income 7 -- Other expenses (54) -- (119) (162) Income before income tax expense 2,083 1,276 Income tax expense 328 203 Net income 1,755 1,073 Other comprehensive income Foreign currency translation gain 0 1 Comprehensive income $1,755 $1,074 Net earnings per ordinary share Basic and diluted $0.18 $0.11 Weighted average number of ordinary shares outstanding Basic and diluted 10,000,000 10,000,000 KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES CONSOLIDATED AND COMBINED STATEMENTS OF CASHFLOWS (Expressed in thousands of U.S. Dollars, except shares and per share data) For the quarters ended December 31, 2009 2008 Cash flows from operating activities Net income 1,755 1,138 Depreciation and amortization 32 34 Disposal of fixed assets -- -- Subsidy income recognized from deferred government grant -- -- Changes in operating assets and liabilities Accounts receivable (1,578) (125) Other receivables and prepayments 88 (1,451) Unbilled revenue 177 -- Inventories (136) (1,540) Accounts payable (225) 1,318 Advances from customers (754) 610 Other payables and accruals 2 93 Taxes payable 490 118 Deferred government grant -- (50) Net cash provided by /(used in) operating activities (149) 145 Cash flows from investing activities Purchases of property and equipment (4) (3) Net cash used in investing activities (4) (3) Cash flows from financing activities Increase in short-term bank loan -- -- Repayment of short-term bank loan -- (73) Collection from due to related- party companies -- -- Repayment of loan from non- related companies -- -- Collection from loan to non related-party companies (4) -- Cash received from the capital contribution -- -- Amounts due to shareholder 800 -- Dividend paid -- -- Net cash provided by /(used in) financing activities 796 (73) Effect of exchange rate fluctuation on cash and cash equivalents (2) -- Net increase in cash and cash equivalents 641 69 Cash and cash equivalents at beginning of period 344 9 Cash and cash equivalents at end of period 985 78 Supplemental disclosure of cash flow information Interest paid 72 162 Income taxes paid $ -- $ --
SOURCE Kingtone Wirelessinfo Solution Holding Ltd.