Revenue increased 65.6% year-over-year to $6.9 million
SHENZHEN, China, April 2 /PRNewswire-Asia-FirstCall/ -- China Skyrise Digital Service Inc. (OTC Bulletin Board: CSKD) ("China Skyrise" or the "Company") yesterday announced financial results for the year ended December 31, 2009.
Fiscal 2009 Results
Revenue totaled approximately $6.9 million in 2009, a strong increase of 65.6%, versus $4.1 million for 2008. This rapid revenue growth was primarily driven by higher unit sales more than offsetting lower average selling prices.
"We are delighted to see that demand for our digital intercom products and solutions continued to experience robust growth in 2009 despite a challenging business environment," said Mr. Mingchun Zhou, Chairman and Chief Executive Officer of China Skyrise. "Revenues grew 65.6% in 2009, and our market share expanded to 12%. During the year, we earned nearly all of our revenue from digital intercom products and solutions, which we believe serves as an indicator that long-term industry trends are working in our favor. In terms of geographical contribution, we saw strength in the percentage of sales attributable to sales in Guangdong, our home province, which contributed 57.8% to our total sales during the period, compared to 31.3% in the previous year. Our product sales were also strong in Zhejiang, Hubei, and Jiangsu provinces and in Beijing, which together accounted for 32.1% of total sales."
"In September 2009, we went public in the U.S. through a share-exchange transaction, which represented another major milestone for China Skyrise," continued Mr. Zhou. "We are excited to be the one of the first companies in China's digital intercom sector to list publicly on a U.S. stock exchange. We believe that this represents an important step for us as we seek a higher platform to continue our geographic expansion and implement our strategic growth plans."
Cost of goods sold climbed by 157.6% to $4.7 million in 2009, or 68.5% of sales, from $1.8 million, or 44.1% of sales in the prior period. The Company reduced prices to maintain and continue to gain market share as customers became more price-sensitive in the global financial crisis. The cost of goods sold was also negatively affected by a moderate increase in raw materials cost due to an unfavorable supply-demand imbalance. In addition, some software-development cost in 2008 was recorded in cost of goods sold in 2009.
Gross profit for 2009 totaled $2.2 million, or 31.5% of sales, compared with $2.3 million, or 55.9% of sales, for 2008. The decrease in gross margin was largely attributable to a shift in customer demand towards standard products, versus high-end and luxury products, which were stronger in 2009.
Operating expenses totaled approximately $1.3 million for 2009, roughly flat with 2008. Total operating expenses amounted to 19.3% of sales in 2009, compared with 32.0% in 2008. Selling expenses decreased by 2.6% year over year to $0.5 million due to a contracted sales network. General and administrative expenses, though, grew 1.7% year over year to $0.8 million. Research and development expenses increased 8.9% to $418,177 in 2009 (amounting to 6.1% of sales) from $383,952 in 2008 (9.3% of sales), as the Company added more research and development employees.
Operating income was $0.8 million compared to $1.0 million in 2008.
The Company's net income in 2009 was $1.1 million, down 14.4% from $1.2 million in 2008. Earnings per basic and diluted share was $0.05 for 2009, compared to $0.07 for 2008.
Financial Condition
As of December 31, 2009, China Skyrise had $0.4 million in cash and cash equivalents and approximately $3.8 million in working capital. The Company had $0.4 million of short-term debt and no long-term liabilities. As of December 31, 2009, shareholders' equity was $4.4 million.
Business Outlook
China Skyrise maintains a positive outlook for China's security surveillance sector, and management estimates that the market for video surveillance is growing at an annual rate of 15% or greater. Management believes that the Company is well positioned to benefit from the continuing momentum of China's residential real estate industry. In the first quarter alone, the Company began shipping to six new intercom projects in Macau, Taiwan, Haikou (in Hainan Province), Ningbo (in Zhejiang Province) and Hefei (in Anhui Province).
While the Company continues to gain market share with its low-end digital solutions displacing competitors' high-end analog solutions, China Skyrise also stands to benefit from analog-to-digital upgrades of existing residential neighborhoods, a huge market. The Company is also developing a new cost-saving system-on-chip, and has initiated projects with two of China's leading 3G wireless communication service providers to test-launch standalone wireless intercom solutions. Wireless connectivity opens up potential markets for value-added services such as broadband access and home shopping, serving Chinese families. To maintain its technology leadership in the digital intercom segment, China Skyrise plans to maintain a healthy level of R&D investment, with R&D spending expected to grow by 30% annually from 2010 to 2012.
"With continuous product innovation and strong brand recognition, we are optimistic about our financial performance in 2010 and beyond. We believe our current backlog of approximately $2.2 million, together with continuing new business wins will generate revenue of approximately $10.2 million and net income of approximately $1.8 million in 2010," concluded Mr. Zhou.
The Company will continue to enjoy preferential tax treatment for the next three years starting in 2010, with an applicable tax rate of 11%.
About China Skyrise Digital Service Inc.
China Skyrise Digital Service Inc. ("China Skyrise" or the "Company") develops, sells, installs and maintains digital residential and video-surveillance products, as well as related software. The Company's customers are primarily urban and suburban residential communities and real-estate developers in China, and China Skyrise receives the majority of its revenues from packaged digital residential safety and video-surveillance systems. The Company is headquartered in Shenzhen, and its sales network focuses on the heavily populated areas of Guangdong Province. For more information, contact CCG Investor Relations directly or go to China Skyrise's website at http://www.szskyrise.com/ .
Safe Harbor Statements
This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of China Skyrise's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the residential digital safety and surveillance industry, the Company's ability to maintain its competitive position as well as other relevant risks, including but not limited to risks outlined in the Company's periodic filings with the U.S. Securities and Exchange Commission. China Skyrise does not assume any obligation to update the information contained in this press release.
For more information, please contact:
Company Contact:
Dustin Han, Vice President, Investor Relations
China Skyrise Digital Service Inc.
Email: xin.han@gmail.com
Tel: +1-408-857-8897
Web: http://www.szskyrise.com
Investor Relations Contact:
John Harmon, Senior Account Manager
CCG Investor Relations
Email: john.harmon@ccgir.com
Tel: +1-646-833-3424
Web: http://www.ccgir.com
(financial tables follow)
CHINA SKYRISE DIGITAL SERVICE INC.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008
2009 2008
Revenues $6,856,198 $4,140,682
Cost of goods sold 4,698,295 1,824,163
Gross profit 2,157,903 2,316,519
Selling and marketing
expenses (532,492) (546,846)
General and administrative
expenses (792,001) (778,515)
Net income from operations 833,410 991,158
Other Income (Expense)
Other income 3,672 76,665
Government grant 242,948 201,562
Interest expense (22,638) (39,511)
Total Other Income
(Expense) 223,982 238,716
Income before provision for
income taxes $1,057,392 $1,229,874
Provision for income taxes (4,301) (312)
Net income 1,053,091 1,229,562
Other comprehensive income 656 32,682
Foreign currency
translation gain -- --
Comprehensive income 1,053,747 1,262,244
Earnings Per Share
Basic $0.0541 $0.0723
Diluted $0.0541 $0.0723
Weighted Average Number of
Shares Outstanding
Basic $19,448,304 $17,004,800
Diluted $19,448,304 $17,004,800
CHINA SKYRISE DIGITAL SERVICE INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND DECEMBER 31, 2008
2009 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $409,718 $508,272
Accounts receivable, net of allowance
for doubtful accounts 3,089,672 2,049,356
Inventory 1,373,733 1,336,615
Deposit and prepaid expense 558,068 313,978
Other receivables 536,013 727,612
Tax recoverable -- 31,132
Total current assets 5,967,204 4,966,965
Property, plant and equipment, net of
accumulated depreciation 340,616 188,867
Other assets
Intangible assets, net of accumulated
amortization 122,650 103,115
Goodwill 193,754 193,754
Total other assets 316,404 296,869
TOTAL ASSETS $6,624,224 $5,452,701
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,005,679 $720,400
Unearned Revenue 81,009 58,692
Other payables and accrued expenses 541,767 1,309,071
Short term debt 440,100 623,475
Tax payable 73,160 --
2,141,715 2,711,638
Commitments and contingencies -- --
SHAREHOLDERS' EQUITY
Common stock: 0.001 par value
Authorized: 75,000,000 common shares
Issued and outstanding: 21,110,550
(2008: 17,004,800) common shares 21,111 17,005
Additional paid-in capital 2,207,072 1,523,479
Statutory reserves 2,791 2,791
Retained earnings 2,218,197 1,165,106
Accumulated other comprehensive income 33,338 32,682
Total shareholders' equity 4,482,509 2,741,063
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $6,624,224 $5,452,701
CHINA SKYRISE DIGITAL SERVICE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
DECEMBER 31, 2008
2009 2008
Cash flows from operating activities:
Net income for the period $1,053,091 $1,229,562
Adjustments to reconcile net loss to net
cash from operations:
Depreciation 65,896 64,012
Amortization of intangible assets 32,310 23,326
Changes in operating assets and
liabilities:
Increase in inventory (74,070) (1,336,615)
Increase in deposits and prepaid
expenses (207,138) (313,978)
Increase in accounts receivable (1,040,316) (2,049,356)
Decrease (increase) in other receivable 191,599 (727,612)
Increase in tax payable 73,160 --
Decrease (increase) in tax recoverable 31,132 (31,132)
Increase in accounts payable 285,279 720,400
Increase in unearned revenue 22,317 58,692
Increase in other payable and accruals (767,305) 1,310,403
Net cash generated from (provided by)
operating activities (334,045) (1,052,298)
Cash flows from investing activities
Purchases of property, plant and
equipment (217,685) (254,011)
Purchases of goodwill -- (193,754)
Net payment from acquisition of
subsidiary -- 295,395
Purchases of intangible assets (51,864) (126,854)
Net cash provided by investing
activities (269,549) (279,224)
Cash flows from financing activities
Proceeds from short term debt 440,100 1,114,920
Repayment of short term debt (623,475) (491,445)
Statutory reserve -- 2,791
Capital contributed by stockholders 683,593 1,472,739
Net cash (provided by) generated from
financing activities 500,218 2,099,005
Effects of exchange rate changes on cash 4,822 (259,211)
(Decrease) increase in cash and cash
equivalents (98,554) 508,272
Cash and cash equivalents, beginning of
period 508,272 --
Cash and cash equivalents, end of period $409,718 $508,272
Supplementary disclosures of cash flow
information:
Cash paid for interest $22,638 $39,511
Cash paid for income taxes $4,301 $312
Non cash transaction: shareholder
forgiveness of debts $-- $30,365
Common stock issued for services $4,106 $--
