omniture

CNIT Cuts 2015 Net Loss to $7.5 Million from $29.2 Million in 2014; Gross Margin Rises to 37.96% from 27.15%

SHENZHEN, China, April 22, 2016 /PRNewswire/ -- China Information Technology, Inc. (Nasdaq:CNIT), a leading provider of internet-based platforms and digital advertising technologies and services in China, today said that, for the year ended December 31, 2015, the company had a net loss of ($7,504,262), or ($.22) per basic share, on revenue of $10,284,868 compared to a net loss of ($29,231,347), or ($.96) per basic share, on revenue of $38,634,747 for the year ended December 31, 2014.

These figures, said CNIT, are the result of the company's business transition, beginning in 2014, from an IT system integrations provider to the government sector to an internet-based solutions and services provider to private enterprises -- a role that enables higher sales margins and greater potential profitability. This transition included certain financial adjustments during 2015, including write-offs of receivables and intangible assets associated with the company's discontinued government business as well as the disposal of certain traditional IT businesses and real estate assets, in order to reduce debt and improve working capital.

The company's decrease in 2015 revenue was primarily due to a continued shifting of hardware production from its own factory over to OEM partners, resulting in hardware revenue decreasing to $4.95 million as compared to $22.63 million in 2014. Overall 2015 revenue was also reduced as a result of CNIT's strategic transformation from a traditional IT business to a cloud-based business, producing a decrease in revenue for software and system integration services to $3.20 million and $1.01 million, respectively, in 2015, from $10.37 million and $4.82 million, respectively, in 2014.

However, during 2015 CNIT increased its gross margin to 37.96%, from 27.15% in 2014. This increase primarily resulted from the company's aforementioned shift from a hardware to a cloud-based technology business model.

The company's net loss total for 2015 included a non-operating gain of $29,994,037 derived from the sale of Fuyong Industrial Park, a real estate property no longer vital to CNIT due to the company's shift away from hardware production. CNIT utilized the proceeds from this sale to significantly reduce its short-term debt to $15.27 million at year-end, down from $51.82 million at the end of 2014, as well as to improve its working capital.

In the fourth quarter of 2015, the company disposed of the equity interests in Geo and Zhongtian, two subsidiaries of CNIT's variable interest entity, iASPEC Geo Information Technology Company Limited. As a result, the operations of Geo and Zhongtian have been presented as discontinued operations for all periods in CNIT's consolidated financial statements.

"We believe our 2015 results provide ample evidence that our transition to a leading cloud-based digital advertising provider is well underway," said CNIT CEO and chairman, Mr. Jianghuai Lin. This transition, he said, has not only produced increased margins, reduced debt, eliminated unnecessary assets and increased working capital, but has also included several major agreements for sales of the company's elevator-based digital advertising terminals.

The latest such agreements, announced on April 12, called for the sale of a minimum of 8,500 terminals to be installed in elevators in 20 major cities across China and will net CNIT at least $5.2 million in 2016, said Mr. Lin.

In addition, he said, these terminals are now penetrating new markets including educational software and conference training, expected to contribute meaningful high-margin revenue for CNIT this year and beyond.

Not only does the company receive sales revenue from its terminals, said Mr. Lin, it also collects recurring monthly maintenance and safety service revenue for the life of each unit.

On top of this, he said, the company can receive additional terminal-related revenue through customers' use of CNIT's Yunfa Net advertising delivery system.

Yunfa Net enables advertisers -- usually smaller companies or their advertising agencies -- to design ads on their PC or mobile app and transmit them automatically to the digital ad terminals of their choice across China. The system, which has proven to both cut the cost of advertising by as much as 50 percent and enable these ads to be easily targeted to a customer's most likely customers, won the 2016 Golden Peacock Excellent Award as China's leading innovation in digital advertising technology.

"We believe Yunfa Net, now acknowledged as among our country's most efficient digital ad technologies, will continue to make a very important, high-margin revenue contribution for us -- and we expect this contribution to grow with each successive quarter."

In addition, said Mr. Lin, the company will continue in 2016 to emphasize four other strategies, including tightly controlling company costs, reinforcing cash collection policies to shorten the company's days of sales outstanding, streamlining purchase order management in order to reduce inventory, and obtaining new government subsidies to be used for developing and marketing additional high-margin cloud-based software solutions.

These measures, he said, combined with the company's steadily increasing sales, should enable CNIT to become profitable by the fourth quarter of 2016.

Mr. Lin added that he believes the company's current cash and cash equivalents, anticipated cash flows from operations in 2016, and additional availability under its borrowing facilities will be sufficient to meet CNIT's operating and financial obligations for the remainder of the calendar year.

About China Information Technology, Inc.

China Information Technology, Inc. (NASDAQ: CNIT) is a leading Internet service company that provides integrated cloud-based solutions enabling innovation and smart living in the fields of new media, city safety management, education, etc. Through continuous innovation, CNIT is aiming to leverage its proprietary Cloud-Application-Terminal technology to level the competitive landscape in the new media industry and deliver value for its shareholders, employees, customers, and the community. To learn more, please visit http://www.en.chinacnit.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China Information Technology, Inc., and its subsidiaries and other consolidated entities. All statements, other than statements of historical fact included herein, are "forward-looking statements" in nature within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, often identified by the use of forward-looking terminologies such as "believes", "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company and its subsidiaries and other consolidated entities or persons acting on their behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For further information, please contact:
China Information Technology, Inc.
Iris Yan
Tel: +86-755-8370-4767
Email: IR@chinacnit.com
http://www.en.chinacnit.com

or

Asia IR-PR
Jimmy Caplan
Tel: +512-329-9505
Email: jimmy@asia-irpr.com
or
Media Relations: Asia IR-PR
Rick Eisenberg
Tel: +212-496-6828
Email: rick@asia-irpr.com

CHINA INFORMATION TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

DECEMBER 31, 2015 AND 2014

Expressed in U.S. dollars (Except for share amounts)




December 31


December 31



2015


2014

ASSETS










CURRENT ASSETS





Cash and cash equivalents

$

3,786,846

$

6,689,848

Restricted cash


868,317


11,153,170

Accounts receivable, net


3,180,138


6,786,596

Bills receivable


-


358,273

Advances to suppliers


2,526,607


1,174,148

Inventories


2,141,093


3,959,031

Other current assets


5,412,720


10,773,310

Assets held for sale-current


-


13,032,000

Current assets from discontinued operations


13,272,186


30,349,676

TOTAL CURRENT ASSETS


31,187,907


84,276,052






Assets held for sale-noncurrent


-


20,270,434

Deposit for purchase of land use rights


14,020,901


14,799,874

Property, plant and equipment, net


8,372,961


8,921,397

Intangible assets, net


2,530,103


3,494,014

Goodwill


4,753,454


12,118,817

Deferred tax assets


460,237


4,270,042

Other non-current assets


4,766,141


-

Non-current assets from discontinued operations


-


31,255,179

TOTAL ASSETS

$

66,091,704

$

179,405,809






LIABILITIES AND EQUITY










CURRENT LIABILITIES





Short-term bank loans

$

15,272,986

$

51,823,869

Accounts payable


6,943,248


9,440,296

Bills payable


1,322,912


23,732,737

Advances from customers


2,651,156


1,183,733

Accrued payroll and benefits


396,026


938,086

Deposit for assets held for sale


-


13,032,000

Other payables and accrued expenses


4,570,298


6,952,957

Amounts due to related parties


141,972


851,262

Income tax payable


3,083,792


3,374,658

Derivative Liability - Warrants


1,156,386


-

Current liabilities from discontinued operations


-


28,989,570

TOTAL CURRENT LIABILITIES


35,538,776


140,319,168






Long-term bank loans


-


214,630

Amounts due to related parties


12,359


13,065

Deferred tax liabilities


86,332


66,951

Non-current liabilities from discontinued operations


-


213,186

TOTAL LIABILITIES


35,637,467


140,827,000

COMMITMENTS AND CONTINGENCIES





Ordinary shares, par $0.01; shares issued and outstanding, 2015; 120,000 shares; 2014: 475,000 shares


360,000


1,425,000






EQUITY





Ordinary shares, par $0.01; authorized capital 100,000,000 shares; shares issued and outstanding, 2015: 39,211,364 shares; 2014: 31,768,875 shares


416,546


335,271

Treasury stock, 2015: 1,402,448 shares; 2014: 717,448 shares


(7,117,500)


(4,290,000)

Additional paid-in capital


144,000,767


126,862,049

Reserve


13,812,095


14,755,946

Deficit earnings


(154,979,095)


(142,910,476)

Accumulated other comprehensive income


24,551,707


24,755,457

Total equity of the Company


20,684,520


19,508,247

Non-controlling interest


9,409,717


17,645,562

Total equity


30,094,237


37,153,809






TOTAL LIABILITIES AND EQUITY

$

66,091,704

$

179,405,809

CHINA INFORMATION TECHNOLOGY, INC.


CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)


YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013


Expressed in U.S. dollars (Except for share amounts)


















2015



2014



2013


Revenue - Hardware



$

4,953,139


$

22,628,612


$

46,114,109


Revenue - Software




3,200,905



10,366,560



2,923,397


Revenue - System integration




1,012,088



4,822,003



5,422,151


Revenue - Others




1,118,736



817,572



960,174


TOTAL REVENUE




10,284,868



38,634,747



55,419,831














Cost - Hardware




2,910,334



18,769,338



38,829,515


Cost - Software




1,267,834



4,086,717



1,559,861


Cost - System integration




1,745,647



4,480,388



4,733,815


Cost - Others




457,390



809,947



743,972


TOTAL COST




6,381,205



28,146,390



45,867,163














GROSS PROFIT




3,903,663



10,488,357



9,552,668


























Administrative expenses




11,223,502



20,837,181



88,699,489


Research and development expenses




3,446,867



1,477,246



2,190,074


Selling expenses




2,661,545



4,240,097



4,893,234


Impairment of property, plant and equipment




4,616,679



827,319



29,976,990


Impairment of intangible assets and goodwill




8,918,427



7,015,727



2,008,249


LOSS FROM OPERATIONS




(26,963,357)



(23,909,213)



(118,215,368)














Subsidy income




501,404



676,159



1,491,280


Gain on sale of assets




29,994,037



-



-


Other income (loss), net




776,233



(407,616)



1,241,666


Interest income




76,716



408,121



447,586


Interest expense




(3,116,777)



(5,858,770)



(4,934,479)


Warrant expense




(5,657,988)



-



-














Loss from continuing operations before income taxes




(4,389,732)



(29,091,319)



(119,969,315)














Income tax (expense ) benefit




(4,305,028)



4,599,559



(1,731,145)














Loss from continuing operations




(8,694,760)



(24,491,760)



(121,700,460)


Less: Net (income) loss attributable to the non-controlling interest




(308,473)



404,662



3,188,700


NET LOSS ATTRIBUTABLE TO THE COMPANY - continuing operations



$

(9,003,233)



(24,087,098)


$

(118,511,760)


Discontinued operations (Note 15)

Income (loss) from discontinued operations before income taxes (including pretax gain on sale of Geo: $7.0 million in 2015 and pretax loss on sale of Zhongtian: $3.3 million in 2015)




1,667,853



(5,049,880)



(340,167)


Income tax expense




(168,882)



(210,658)



(165,400)


Income (loss) from discontinued operations




1,498,971



(5,260,538)



(505,567)


Less: Net (income) loss attributable to the non-controlling interest




-



116,289



(219,496)


NET INCOME ( LOSS) ATTRIBUTABLE TO THE COMPANY-discontinued operations



$

1,498,971



(5,144,249)


$

(725,063)


NET LOSS



$

(7,195,789)



(29,752,298)


$

(122,206,027)


NET LOSS ATTRIBUTABLE TO THE COMPANY



$

(7,504,262)



(29,231,347)


$

(119,236,823)


























(Loss) earnings per share - Basic and Diluted












CONTINUING OPERATIONS












Basic



$

(0.26)


$

(0.79)


$

(4.33)


Diluted



$

(0.26)


$

(0.79)


$

(4.33)


DISCONTINUED OPERATIONS












Basic



$

0.04


$

(0.17)


$

(0.03)


Diluted



$

0.04


$

(0.17)


$

(0.03)














NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY












Basic



$

(0.22)


$

(0.96)


$

(4.36)


Diluted



$

(0.22)


$

(0.96)


$

(4.36)














CHINA INFORMATION TECHNOLOGY, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013


Expressed in U.S. dollars














2015



2014



2013


OPERATING ACTIVITIES










Net loss

$

(7,195,789)


$

(29,752,298)


$

(122,206,027)


Adjustments to reconcile net loss to net cash used in operating activities from continuing operations:










(Income) loss from discontinued operations, net of income taxes

$

(1,498,971)


$

5,260,538


$

505,567


Provision for losses on accounts receivable and other current assets


2,659,499



6,398,463



67,038,645


Impairment of intangible assets and goodwill


8,918,427



7,015,727



2,008,249


Provision for obsolete inventories


274,663



3,808,307



881,916


Depreciation


1,665,257



2,135,644



7,839,674


Amortization of intangible assets and land use rights


876,237



917,780



1,227,743


(Gain) loss on sale of property and equipment and land use rights


(30,005,007)



(6,550)



79,197


Loss on disposal of inventories


-



476,597



-


Stock-based payment compensation for consulting services


98,483



120,167



-


Stock-based compensation


102,282



81,615



6,900,000


Impairment of property, plant and equipment


4,616,679



827,319



29,976,990


Change in deferred income tax


3,761,084



(4,603,763)



1,836,586


Warrant expense


5,657,988



-



-


Changes in operating assets and liabilities, net of effects of

business acquisitions and dispositions:










(Increase) decrease in accounts receivable


2,914,918



(1,497,285)



3,957,348


Decrease in inventories


1,546,570



6,019,174



657,081


Decrease (increase) in other receivables and prepaid expenses


(1,089,481)



(3,435,388)



(3,759,271)


Decrease (increase) in advances to suppliers


(1,708,552)



5,781,743



(2,209,123)


(Increase) decrease in restricted cash


9,566,303



(1,515,573)



1,013,285


Increase (decrease) in amounts due to/from related parties


(1,088,001)



1,126,768



538,537


(Decrease) increase in other payables and accrued expenses


(2,736,926)



(3,808,563)



3,150,366


(Decrease) increase in advances from customers


1,598,944



(2,017,504)



315,628


(Decrease) increase in accounts payable and bills payable


(24,134,831)



(6,018,929)



(10,354,585)


Increase (decrease) in income tax payable


(118,973)



171,552



(41,816)


Net cash used in continuing operations


(25,319,197)



(12,514,459)



(10,644,010)


Net cash provided by (used in) operating activities from discontinued operations


(595,404)



(115,066)



(733,530)


Net cash used in operating activities


(25,914,601)



(12,629,525)



(11,377,540)












INVESTING ACTIVITIES










Deposit (paid) received for assets held-for sale


(20,717)



13,024,000



-


Deposit refunded of land use rights


-



3,355,088



1,437,368


Cash acquired in Biznest acquisition


-



67,506



-


Proceeds from sale of property and equipment


55,101



6,561



226,109


Consideration paid for acquisition of Biznest


(1,488,969)



(5,951,968)



-


Investment in Geo


-



(128,901)



-


Capitalized and purchased software development costs


(66,870)



(1,353,028)



(95,162)


Purchases of property and equipment


(3,004,209)



(529,053)



(1,721,113)


Investment in Zhongtian


-



(638,723)



(378,144)


Cash received for sale of assets held for sale


45,052,000



-



-


Net cash provided by (used in) investing activities from continuing operations


40,526,336



7,851,482



(530,942)


Net cash provided by (used in) investing activities from discontinued operations


1,558,581



(1,530,773)



(2,697,359)


Net cash provided by (used in) investing activities


42,084,917



6,320,709



(3,228,301)






















FINANCING ACTIVITIES










Borrowings under short-term loans


44,584,103



58,862,064



92,580,008


Common stock issued for cash


12,786,353



3,683,028



9,000,000


Decrease (increase) in restricted cash in relation to bank borrowings


543,300



256,427



(610,153)


Borrowings under long-term loans


-



-



350,534


Repayment of short-term loans


(79,952,564)



(56,153,075)



(87,876,246)


Repurchase of ordinary shares


(1,310,184)



(1,290,000)



(3,000,000)


Repayment of long-term loans


(97,751)



(94,279)



(147,923)


Cash paid to warrant holders


(542,806)



-



-


Net cash provided by (used in) financing activities from continuing operations


(23,989,549)



5,264,165



10,296,220


Net cash provided by (used in) financing activities from discontinued operations


(147,237)



1,131,223



4,422,085


Net cash (used in) provided by financing activities


(24,136,786)



6,395,388



14,718,305


Effect of exchange rate changes on cash and cash equivalents


564,125



19,027



223,130












NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(7,402,345)



105,599



335,594


CASH AND CASH EQUIVALENTS, BEGINNING


11,189,191



11,083,592



10,747,998


CASH AND CASH EQUIVALENTS, ENDING

$

3,786,846


$

11,189,191


$

11,083,592


Less cash and cash equivalents from discontinued operations

$

-


$

4,499,343


$

5,038,900


CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period

$

3,786,846


$

6,689,848


$

6,044,692












Supplemental disclosure of cash flow information:










Cash paid during the year










Income taxes

$

188,932


$

382,741


$

405,948


Interest

$

3,769,498


$

6,593,549


$

5,537,477


To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cnit-cuts-2015-net-loss-to-75-million-from-292-million-in-2014-gross-margin-rises-to-3796-from-2715-300255957.html

Source: China Information Technology, Inc.
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