Upward Revision of 2009 Revenue Guidance to US$28-$29 Million, Representing
Annual Revenue Growth of 38% to 40%
Service Fee Income Increased 51.3% and Net Loss Improved 28.4% Year-Over-Year
Acquired Lianhua Supermarket as a New Client
BEIJING, June 10 /PRNewswire-Asia/ -- eFuture Information Technology Inc. (Nasdaq: EFUT, the "Company" or "eFuture"), a leading provider of software and services in China's rapidly growing retail and consumer goods industries, today announced its unaudited financial results for the first quarter ended March 31, 2009.
First Quarter 2009 Financial Highlights:
-- Total revenues decreased 0.3% year-over-year to RMB14.0 million (US$2.0
million).
-- Revenue from software license sales decreased 34.5% year-over-year
to RMB5.0 million (US$0.7 million).
-- Revenue from hardware sales decreased 1.0% year-over-year to
RMB1.4million (US$0.2 million).
-- Service fee income increased 51.3% year-over-year to RMB7.6 million
(US$1.1 million).
-- Gross profit increased 5.7% year-over-year to RMB5.0 million (US$0.7
million). Gross margin increased to 35.7% from 33.6% in the first
quarter of 2008.
-- Operating loss decreased 2.0% year-over-year to RMB6.7 million (US$1.0
million).
-- Net loss improved 28.4% year-over-year to RMB6.6 million (US$1.0
million).
-- Diluted net loss per share was RMB1.96 (US$0.29), as compared to net
loss per share of RMB3.14 the first quarter of 2008.
-- Operating cash flow was -RMB15.1 million (-US$2.2 million).
-- Adjusted net loss (non-GAAP) was RMB1.6 million (US$0.2 million),
compared to an adjusted net loss of RMB3.2 million in the first quarter
of 2008.
-- Non-GAAP adjusted diluted loss per share was RMB0.48 (US$0.07).
Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, said, "We continued to make steady progress in what has historically been our seasonally low quarter. During the first quarter, two of our strategic business units ("SBUs"), including Logistics and Department Store and Shopping Mall, faced headwinds from ongoing softness in the broader economy as our retail clients in these segments delayed new store openings. However, the performance of the other four SBUs remained solid. In fact, our Key Accounts SBU has signed a number of large contracts with several key clients, including Lianhua Supermarket, one of the largest supermarket players in China. The associated revenues from these contracts were not fully reflected in the first quarter revenue, rather they were recorded as unrecognized revenue due to their relatively longer project completion time. In addition, our service fee revenue increased 51.3%, which demonstrates that our strategy to mitigate the impact of future seasonality by growing our eService and value-added service fee income gained strong momentum in the first quarter. We expect this trend to continue, and believe that our eServices, including SaaS (Software-as-a-Service), represent key growth drivers for the mid- to long-term.
"The recently announced launch of our T+1 Supply Chain Financing ("T+1 SCF") service represents another key achievement in the quarter, further diversifying our revenue base and SaaS offering, while helping our clients to cut costs and increase efficiency. This new service bolsters our industry leading suite of end-to-end software and services, and demonstrates our commitment to technological and business model innovation.
"While the macroeconomic environment in China remains uncertain, recent statistics indicate a healthy increase in consumer spending during the first quarter. As a result, we believe eFuture remains well positioned to extend its track record of growth throughout 2009. Our focus for the year will remain on executing our growth strategy through investment in innovation, expanding our customer base within tier-2 and tier-3 cities in China, and actively pursuing domestic and international clients."
First Quarter 2009 Operational Highlights:
Core Business (Software License, Hardware, and Service Fee excluding eServices)
While the Logistics, Department Store and Shopping Mall SBUs have experienced some softness due to the economic downturn, which has caused some retail clients to delay new store openings, the performance of the other 4 SBUs remained solid. The Company continued to see strong demand for its solutions in both fast moving consumer goods and the grocery market during the quarter. As evidence of this, the Company continued to win almost every significant account that it competed for in the grocery industry. Among the major new accounts won were Lianhua Supermarket, one of the largest supermarket players in China, with nationwide chain stores and a full range of retail segments.
In addition, management took advantage of the seasonally slower first half of the year to refine its business strategies, implement structural adjustments and provide staff training, in order to further enhance operating efficiency and competitive positioning to capture potential business opportunities in the second half of the year. To this end, during the first quarter of 2009, the Company dissolved its Small-to-Medium Business ("SMB") unit and transferred the resources among the other vertical strategic business units ("SBU"), as the majority of the clients targeted by the marketing strategy to further penetrate the second- and third-tier cities in China are SMBs. Management believes the modification in its SBUs will help to accelerate the speed of business development in these regions in China.
eService Business
In line with eFuture's organic growth strategy to expand its eService offering, the Company is beginning to see growing interest from existing clients to scale-up and expand their relationship with eFuture by utilizing its eService applications.
The Company completed development of the bundled package offering bFuture SCM SaaS service with POS-ERP in 2 SBUs, including the Department Store and Shopping Mall Business Unit and the Grocery Business Unit.
The Company is currently serving 4 of Wangfujing Group's 17 stores and over 2,000 of their 15,000 suppliers. In addition, two retailers are deploying the package. We expect to see more profitable growth from this service as we increase the scale of the operation.
The Company recently launched a pilot T+1 SCF program through its subsidiary Beijing bFuture Information Technology Co., Ltd. ("bFuture"). The program is designed to shorten the payment cycle between retailers and their small- to medium-sized suppliers by providing short-term loans to retailers with good credit, therefore allowing suppliers to receive payment the day following a transaction. This program complements bFuture's existing suite of SaaS services geared towards facilitating the flow of goods and services in a cost- and time-efficient manner.
Research and Development
eFuture's research lab launched two new solutions, (i) a Customer ECG (electrocardiogram) solution, which is an effective tool for retailers to manage customer loyalty through examining and tracking consumer spending patterns and habits, and (ii) a second generation of the Just-in-Time Visual Supply Chain Process Management solution based on service oriented architecture ("SOA"), which was first launched in 2007. Management believes these solutions will enable eFuture to significantly broaden its technology offering, increase penetration with leading retailers and strengthen its competitive positioning.
Sales & Marketing Initiatives
Further to the success of its ongoing marketing initiative in the mega cities and tier one cities, and its strategy to become the partner of choice for global companies in China, eFuture has invested approximately RMB7.5 million in a new marketing initiative plan. The aim of the plan is to expand the Company's geographic coverage by deepening its penetration in China's second- and third-tier cities, while providing seamless support for its global and top accounts as they look to expand into these regions in China.
As part of the plan, besides restructuring its SMB business unit, the Company also established a new specialized marketing team with approximately 50 staff distributed across China in order to bolster sales in all the key markets in China. This group has been dedicated to further speed up the sales cycle from pre-pipeline to pipeline to order, with the aim to dramatically increase eFuture's market share in China's retail and consumer goods industries.
Furthermore, the Company recently announced the appointment of a new Chief Marketing Officer, Mr. James Mu, who brings to eFuture over twenty years of experience in the retail and consumer goods industries. Mr. Mu will be responsible for overall marketing strategy and brand building initiatives. In addition, he will be in charge of the re-organization and integration of eFuture's marketing and promotional materials and tools, to streamline and strengthen marketing initiatives.
Finally, the Company has established dedicated vertical accounts sales teams with extensive sector experience within each of eFuture's six SBUs to provide specialized support in generating new business for each vertical industry that the Company services.
Convertible Notes
As of March 31, 2009, we had US$1 million in convertible notes remaining, which will be amortized over the life of the notes. In the past quarter, we recognized an expense of RMB0.26 million against profit as a result of these notes.
First Quarter 2009 Financial Results
Revenue
Revenue for the first quarter 2009 decreased 0.3% to RMB14.0 million (US$2.0 million) from RMB14.01 million in the first quarter 2008.
The decrease in software license revenues is primarily attributable to normal seasonality, the effects of the economic downturn on the Logistics, Department Store and Shopping Mall SBUs, as well as the accounting of some of the large contracts signed during the first quarter as unrecognized revenues due to their longer project completion time.
Service fee income increased 51.3% year-over-year, and as a percentage of revenue continued to increase and accounted for 54.6% of total revenue in the first quarter 2009, as compared to 28.0% in the same period a year earlier, signifying that efforts to mitigate revenue seasonality through the Company's SaaS business model are successfully gaining momentum.
Revenue Breakdown
2008Q1 2009Q1
Y-o-Y
RMB '000 RMB '000 USD '000 Change
Software license sales 7,565 4,956 725 (34.5%)
Hardware sales 1,409 1,395 204 (1.0%)
Service fee income 5,040 7,625 1,116 51.3%
Total 14,014 13,977 2,046 (0.3%)
Cost of Revenues
The cost of revenue for the first quarter 2009 decreased 3.3% to RMB9.0 million (US$1.3million) from RMB9.3 million in the first quarter 2008.
Cost of Revenues Breakdown
2008Q1 2009Q1
Y-o-Y
RMB '000 RMB '000 USD '000 Change
Cost of software license sales 1,845 1,299 190 (29.6%)
Cost of hardware sales 1,205 1,368 200 13.5%
Cost of service see 1,493 2,311 338 54.8 %
Amortization of acquired technology 3,860 3,110 455 (19.0%)
Amortization of software costs 897 904 132 0.8%
Total 9,300 8,992 1,316 (3.3%)
The decrease in cost of revenue was primarily attributable to decreased software license sales and amortization of acquired technologies.
Gross Profit
First quarter 2009 gross profit increased 5.7% year-over-year to RMB5.0 million (US$0.7 million), from RMB4.7 million in the first quarter 2008.
Consolidated gross margin for the first quarter of 2009 was 35.7% compared with 33.6% in the first quarter of 2008, primarily due to decreased amortization of acquired technologies.
Operating Expenses
Research and development expenses for the first quarter 2009 increased 44.8% year-over-year to RMB242,260 (US$35,455), or 1.7% of total revenues, compared with RMB167,288, or 1.2% of total revenues in the first quarter 2008 and RMB5.0 million, or 7.0% of total revenues in the fourth quarter 2008. Research and development expenses as a percentage of revenues increased slightly year-over-year, but down sequentially due to eFuture's strengthened commitment to standardized products and advanced technologies.
General and administrative expenses for the first quarter 2009 decreased 27% year-over-year to RMB5.2 million (US$0.8 million), or 37.5% of total revenues, compared with RMB7.9 million, or 56.2% of total revenue in the first quarter 2008 and RMB11.0 million, or 15.3% of total revenue in the fourth quarter 2008. General and administrative expenses as a percentage of revenues decreased noticeably year-over-year, the improvement was primarily due to the adoption of a more rationalized bad debt provision policy, while the sequential increase in general administration expenses is mainly a result of the lower revenue stream in a seasonally slow first quarter.
Selling and distribution expenses for the first quarter 2009 increased 52.7% year-over-year to RMB5.7 million (US$0.8 million), or 41.1% of total revenues, compared with RMB3.8 million, or 26.9% of total revenue in first quarter 2008 and RMB4.8 million, or 6.7% of total revenue in the fourth quarter 2009. The year-over-year changes were due to the consolidation of Wangku, as eFuture has increased its shares from 20% to 51%.
Operating Loss
Operating loss in the first quarter 2009 was RMB6.7 million (US$0.7 million), compared with an operating loss of RMB7.1 million in the first quarter 2008. The improvement was mainly attributable to decreased amortization of acquired technologies and improved bad debt expenses.
Net Loss and EBITDA
As a result of the foregoing, first quarter 2009 net loss was RMB6.6 million (US$1.0 million) compared with a net loss of RMB9.2 million in the first quarter 2008, an improvement of 28.4%.
Basic and diluted losses per share in the first quarter 2009 were both RMB1.96 (US$0.29), compared to RMB3.14 in the first quarter 2008.
Adjusted net loss (non-GAAP) for the quarter was RMB1.6 million (US$0.2 million), compared to an adjusted net loss of RMB3.2 million in the first quarter 2008.
First quarter 2009 adjusted non-GAAP diluted loss per share was RMB0.48 (US$0.07).
EBITDA (non-GAAP) for the first quarter 2009 was -RMB1.8 million (-US$0.3 million), compared with -RMB1.4 million in the first quarter 2008.
Balance Sheet and Cash Flow
In the first quarter 2009, net cash loss from operating activities was RMB15.1 million (US$2.2 million), while net cash used in investing activities was RMB3.9 million (US$0.6 million).
As of March 31, 2009, cash and cash equivalents decreased 30.1% from December 31, 2008 to RMB42.5 million (US$6.2 million), mainly due to normal seasonal patterns in which cash flow decreases in the first half while peaking in the second half of the fiscal year.
Total accounts receivable as of March 31, 2009 increased 67.5% to RMB23.2 million (US$3.4 million) from RMB13.8 million as of March 31, 2008. This increase was mainly attributable to the consolidation of Wangku after increasing eFuture's shares from 20% to 51%, and the bad debt adjustment of RMB2.5 million.
Inventories as of March 31, 2009 were flat year-over-year at RMB13.7 million (US$2.0 million) as a few of our contracts are still classified as works-in-process which will become cost when they reach the point of revenue recognition.
2009 Outlook and Guidance
As of March 31, 2009, eFuture's unrecognized revenue base was approximately US$9.2 million, of which 90% is expected to be recognized within 2009.
To better reflect its strong sales pipeline to date, particularly as a result of a rebound in its Logistics SBU, eFuture revised up 2009 revenue guidance to be in the range of US$28 million to US$29 million, representing annual growth of 38% to 40% over 2008 total revenues. Adjusted EBITDA (non-GAAP) is expected to be in the range of approximately US$5.1 million to US$6.1 million. This forecast is a current and preliminary view and is subject to change.
Conference Call Information
eFuture's management will host a conference call on Wednesday, June 10, 2009 at 5:00 am (Pacific) / 8:00 am (Eastern) / 8:00 pm (China) to discuss its first quarter 2009 financial results and recent business activity. The conference call may be accessed by calling:
United States toll free: +1-866-586-2813
China North: 10-800-611-0127
China South: 10-800-361-0079
United Kingdom toll free: 0800-056-9662
Hong Kong toll free: 800-965-808
Passcode: eFuture
Please dial-in 10 minutes before the call is scheduled to begin.
A replay of the conference call may be accessed by phone at the following numbers until Tuesday, June 16, 2009:
United States toll free +1-866-214-5335
China North 10-800-714-0386
China South 10-800-140-0386
United Kingdom toll free: 0800-731-7846
Hong Kong toll free 800-901-596
Passcode 99188365
Additionally, a live and archived webcast of the conference call will be available on the investor relations section of eFuture's website at http://www.e-future.com.cn/ENG/newshow.asp?id=513 .
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.8329 to US$1.00, the noon buying rate for US dollars in effect on March 31, 2009 for cable transfers of RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.
Use of Non-GAAP Financial Measures
To supplement eFuture's unaudited consolidated financial results presented in accordance with U.S. GAAP, eFuture uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: adjusted EBITDA excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses, depreciation, adjusted net income excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes, adjusted basic and diluted earnings per share excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.
eFuture believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding expenses that may not be indicative of its operating performance from a cash perspective or be indicative of its operating performance. eFuture believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to eFuture's historical performance and liquidity. eFuture computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. The accompanying paragraphs have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
eFuture's management also believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization is a useful financial metric to assess its operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, eFuture's management believes that EBITDA is widely used by other companies in the software industry and may be used by investors as a measure of its financial performance. Given the significant investments that eFuture has made in property, equipment, depreciation and amortization expense comprises a meaningful portion of the Company's cost structure. eFuture's management believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains eFuture considers to be outside the ordinary course of its business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Further, share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of eFuture's financial results. The term EBITDA or adjusted EBITDA is not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing eFuture's operating and financial performance, you should not consider this data in isolation or as a substitute for its net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA and adjusted EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as eFuture does.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company's year-end financial statements, which could result in significant differences from this unaudited financial information.
About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ: EFUT) is a leading provider of software and services in China's rapidly growing retail and consumer goods industries. eFuture provides integrated software and services to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain (from factory to consumer) market, especially in the retail and fast moving consumer goods industries. eFuture currently serves over 15 Fortune 500 companies, over 1,000 retailers and over 5,000 suppliers operating in China. eFuture is one of IBM's premier business partners in Asia Pacific and is a strategic partner with Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture has more than 600 employees and 20 branch offices across China. For more information about eFuture, please visit http://www.e-future.com.cn/ .
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, 2009 financial outlook and quotations from management in this announcement, as well as strategic and operational plans, contain forward-looking statements. eFuture may also make written or oral forward-looking statements in periodic reports to the Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to second parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: eFuture's anticipated growth strategies; eFuture's future business development, results of operations and financial condition; expected changes in the Company's revenues and certain cost or expense items; eFuture's ability to attract customers and leverage its brand; trends and competition in the software industry; the Company's ability to control expenses and maintain profit margins; the Company's ability to hire, train and retain qualified managerial and other employees; the Company's ability to develop new software and pilot new business models at desirable locations in a timely and cost-effective manner; the performance of third parties under contracts with the Company; the expected growth of the Chinese economy software market in retail and consumer goods industries; and Chinese governmental policies relating to private managers and operators of software and applicable tax rates.
Further information regarding these and other risks is included in eFuture's annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of June 9, 2009, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
For further information, please contact:
Investor Contact:
Troe Wen, Company Secretary
eFuture Information Technology Inc.
Tel: +86-10-5293-7699
Email: ir@e-future.com.cn
Investor Relations (US):
Mahmoud Siddig
Taylor Rafferty
Tel: +1-212-889-4350
Email: eFuture@Taylor-Rafferty.com
Investor Relations (HK):
Ruby Yim
Taylor Rafferty
Tel: +852-3196-3712
Email: eFuture@Taylor-Rafferty.com
Media Contact:
Jason Marshall
Taylor Rafferty
Tel: +1-212-889-4350
Email: eFuture@Taylor-Rafferty.com
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, March 31, March 31,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 60,723,734 42,460,982 6,214,196
Trade receivables, less allowance
for doubtful accounts of
RMB2,109,910, RMB4,695,898, and
RMB7,539,546 respectively 18,185,221 23,184,359 3,393,048
Refundable value added tax 2,859,018 1,677,975 245,573
Deposits -- -- --
Advances to employees 2,978,844 3,957,154 579,132
Advances to suppliers 847,831 1,186,250 173,609
Other receivables 852,191 1,396,544 204,385
Prepaid expenses 1,177,396 993,138 145,347
Inventory 10,406,711 14,093,665 2,062,618
Total current assets 98,030,946 88,950,066 13,017,908
Non-current assets
Long-term investments 654,192 654,192 95,741
Deferred loan costs, net of
RMB6,700,671 of amortization 642,744 673,888 98,624
Deferred assets 2,809,201 6,552,316 958,936
Property and equipment, net of
accumulated depreciation of
RMB4,690,856, RMB5,191,489, and
RMB5,858,293 respectively 3,202,286 3,155,857 461,862
Intangible assets, net of
accumulated amortization of
RMB8,678,751, RMB19,799,245 and
RMB31,481,989 respectively 59,261,346 57,915,045 8,475,910
Goodwill 63,506,496 69,595,844 10,185,404
Total non-current assets 130,076,265 138,547,142 20,276,477
Total assets 228,107,211 227,497,208 33,294,386
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Trade accounts payable 8,393,534 4,667,102 683,034
Other payable 3,574,142 3,454,587 505,581
Accrued expenses 6,946,751 3,893,034 569,748
Accrued interest -- -- --
Taxes payable 8,124,009 6,000,035 878,110
Deferred Revenues 8,073,981 7,228,517 1,057,899
Deferred Tax 4,691,336 4,698,487 687,627
Advances from customers 16,502,902 23,014,933 3,368,253
Royalstone acquisition obligation,
current portion 6,405,610 6,415,374 938,895
Health Filed acquisition obligation 592,948 552,855 80,911
Proadvancer System acquisition
obligation 14,533,644 14,555,799 2,130,252
Make-whole obligation, current
portion 426,734 322,397 47,183
Convertible note payable, current
portion 899,826 -- --
Total current liabilities 79,165,416 74,803,120 10,947,492
Long-term liabilities
Royalstone acquisition obligation,
net of current portion -- -- --
Make-whole obligation, net of
current portion 718,000 719,094 105,240
12% RMB75,108,000 ($10,000,000)
convertible note payable, net of
RMB53,379,624 unamortized discount
based on an imputed interest rate
of 28.9%, net of current portion 64,998 674,517 98,716
Minority shareholder interests 4,318,148 1,972,733 288,711
Total long-term liabilities 5,101,146 3,366,345 492,667
Shareholders' equity
Ordinary shares, $0.0756 U.S.
dollars (RMB0.6257) par value;
6,613,756 shares authorized;
2,633,500 shares and 2,633,500
shares outstanding (2,833,580
shares pro forma), respectively 2,038,631 2,038,631 298,355
Additional paid-in capital 222,849,091 224,849,534 32,906,897
Statutory reserves 3,084,020 3,084,020 451,349
Accumulated foreign currency
translation adjustment (8,231,428) -- --
Accumulated deficit (75,899,664) (80,644,442) (11,802,374)
Total shareholders' equity 143,840,650 149,327,743 21,854,226
Total liabilities and shareholders'
equity 228,107,211 227,497,208 33,294,386
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Three Months Ended
December
March 31,2008 31, 2008 March 31,2009
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Software sales 7,565,110 31,830,223 4,956,292 725,357
Hardware sales 1,409,113 19,685,341 1,395,170 204,184
Service fee income 5,040,249 20,180,605 7,625,916 1,116,058
Total Revenues 14,014,472 71,696,169 13,977,378 2,045,600
Cost of revenues
Cost of software 1,845,125 8,819,265 1,298,681 190,063
Cost of hardware 1,204,786 17,486,295 1,367,984 200,206
Cost of service fee
income 1,493,129 8,475,719 2,311,579 338,301
Amortization of
acquired
technology 3,860,243 2,409,791 3,110,375 455,206
Amortization of
software costs 896,856 929,118 903,707 132,258
Total Cost of
Revenue 9,300,139 38,120,187 8,992,326 1,316,034
Gross Profit 4,714,333 33,575,982 4,985,052 729,566
Expenses
Research and
development 167,288 5,044,572 242,261 35,455
General and
administrative 7,870,673 11,020,454 5,742,794 840,462
Selling and
distribution
expenses 3,759,182 4,804,225 5,741,659 840,296
Total Expenses 11,797,143 20,869,250 11,726,713 1,716,213
Profit from
operations (7,082,810) 12,706,732 (6,741,662) (986,647)
Interest income 112,611 70,936 180,273 26,383
Interest expense (314,520) 8,437,618 (110,484) (16,169)
Amortization of
discount on notes
payable (488,504) (7,469,551) (199,648) (29,219)
Amortization of
loan costs (242,378) 298,644 (55,387) (8,106)
Income (loss) on
investments (558,389) 17,754 -- --
Foreign currency
exchange loss (805,787) 566,316 (883,409) (129,288)
Outside business
receives -- 27,824 6,320 925
Outside business
disburses -- (855,746) -- --
Impairment of
intangible assets -- (2,014,634) --
Income tax expense -- (199,490) -- --
Prior to the annual
adjustment of
profit and loss -- -- -- --
Minority interest 154,491 (2,522,638) 1,197,422 175,244
Net loss (9,225,286) 9,063,764 (6,606,575) (966,877)
Earnings per
ordinary share
Basic (3.14) 2.70 (1.96) (0.29)
Diluted (3.14) 2.67 (1.96) (0.29)
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
December
31, 2008 March 31, 2008 March 31, 2009
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA
Operating income
(loss) (GAAP
Basis) 12,706,732 (7,082,810) (6,741,662) (986,647)
Adjustments for
non-GAAP measures
of performance:
Add back
amortization of
acquired software
technology 2,409,791 3,860,243 3,110,375 455,206
Add back
amortization of
intangibles 929,118 896,856 903,707 132,258
Add back share-
based
compensation
expenses 765,657 785,699 765,226 111,991
Adjusted non-GAAP
operating income 16,811,298 (1,540,011) (1,962,355) (287,192)
Add back
depreciation (14,765) 150,246 194,867 28,519
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 16,796,532 (1,389,765) (1,767,487) (258,673)
NON-GAAP OPERATING
INCOME (LOSS) AND
ADJUSTED EBITDA,
as a percentage
of revenue
Operating income
(loss) (GAAP
BASIS) 18% -51% -48% -48%
Adjustments for
non-GAAP measures
of performance:
Amortization of
acquired software
technology 3% 28% 22% 22%
Amortization of
intangibles 1% 6% 6% 6%
Share-based
compensation
expenses 1% 6% 5% 5%
Adjusted non-GAAP
operating income 23% -11% -14% -14%
Depreciation -0.02% 1% 1.4% 1.39%
Adjusted EBITDA
(Earnings before
interest, taxes,
depreciation and
amortization) 23% -10% -13% -13%
NON-GAAP EARNINGS
PER SHARE
Net Income(Loss) 9,063,764 (9,225,286) (6,606,575) (966,877)
Amortization of
acquired software
technology 2,409,791 3,860,243 3,110,375 455,206
Amortization of
intangibles 929,118 896,856 903,707 132,258
Accretion on
convertible notes 7,469,551 488,504 199,648 29,219
Share-based
compensation
expenses 765,657 785,699 765,226 111,991
Adjusted Net
income 20,637,882 (3,193,983) (1,627,619) (238,203)
Adjusted non-GAAP
diluted earnings
per share 6.08 (1.09) (0.48) (0.07)
Shares used to
compute non-GAAP
diluted earnings
per share 3,394,099.19 2,934,419.00 3,394,099.19 3,394,099.19
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, March 31, March 31,
2008 2009 2009
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income (loss) (30,132,466) (6,606,575) (966,877)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 839,266 205,374 30,057
Amortization of intangible assets 15,135,140 4,014,581 587,537
Amortization of discount on notes
payable 27,201,387 199,648 29,219
Amortization of deferred loan costs 3,637,607 55,387 8,106
Investment income -- -- --
Interest on notes payable
contributed by shareholders -- -- --
Compensation expense for options
issued to employees 3,110,891 765,226 111,991
Foreign Exchange Loss -- (1) --
Minority interest (1,102,973) (1,197,422) (175,244)
Change in assets and liabilities:
Accounts receivable (1,881,912) (302,544) (44,278)
Refundable value added tax 981,435 1,181,043 172,847
Deposits -- -- --
Advances to employees 1,131,108 (978,229) (143,165)
Advances to suppliers 246,730 36,271 5,308
Other receivables (2,792,879) (2,678,102) (391,942)
Prepaid expenses (125,414) 184,665 27,026
Inventories (4,656,761) (3,686,953) (539,588)
Trade payables 4,162,135 (4,064,595) (594,857)
Other payables 3,070,343 1,081,581 158,290
Accrued expenses 4,751,875 (3,049,435) (446,287)
Accrued interest -- -- --
Taxes payable (560,508) (2,123,974) (310,845)
Deferred Tax -- -- --
Deferred revenue 3,650,622 (845,464) (123,734)
Decrease in accrued make-whole
obligations -- -- --
Advances from customers 1,511,210 2,674,600 391,430
Other non-cash expenditures 3,477,926 30,454 4,457
Net cash provided by operating
activities 31,654,762 (15,104,463) (2,210,549)
Cash flows from investing
activities:
Purchases of property and equipment (1,384,465) (107,545) (15,739)
Payments for software (5,034,421) (3,835,015) (561,257)
Long-term investments (1,105,450) -- --
Payment to purchase net assets of
Acquirees (22,135,101) -- --
Loan to Guarantor -- -- --
Amounts due from a related party -- -- --
Net cash used in investing
activities (29,659,437) (3,942,560) (576,997)
Cash flows from financing
activities:
Issuance of ordinary shares for
cash, net of offering costs paid 3,614,764 -- --
Issue convertible notes -- -- --
Repayment of short term loan -- -- --
Payment of make-whole obligation (9,296,824) (104,988) (15,365)
Net cash provided by (used in)
financing activities (5,682,060) (104,988) (15,365)
Effect of exchange rate changes on
cash (2,816,878) 889,257 130,143
Net increase in cash (6,503,614) (18,262,753) (2,672,767)
Cash and cash equivalents at
beginning of period 67,227,348 60,723,734 8,886,964
Cash and cash equivalents at end of
period 60,723,734 42,460,982 6,214,196
Supplemental cash flow information
Interest paid 542,813 110,484 16,169
