China Skyrise Announces Full-Year 2009 Results

China Skyrise Digital Service Inc.
2010-04-02 02:46 487

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 .

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.


Tel: +1-408-857-8897


Investor Relations Contact:

John Harmon, Senior Account Manager

CCG Investor Relations


Tel: +1-646-833-3424


(financial tables follow)




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



DECEMBER 31, 2009 AND DECEMBER 31, 2008

2009 2008



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



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 -- --


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


EQUITY $6,624,224 $5,452,701




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


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


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 $--

Source: China Skyrise Digital Service Inc.