Restatement of 2007 Financial Statements
BEIJING, Oct. 14 /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 financial results for the full year ended December 31, 2008. In connection with the Company’s failure to file its Form 20-F by June 30, 2009, it failed to satisfy NASDAQ Marketplace Rule 5250(c)(1), which requires listed companies to file periodic financial reports with the Securities and Exchange Commission on or before the date they are required to be filed. As the Company’s July 15, 2009 press release anticipated, the Company received a notice of noncompliance from the NASDAQ Stock Market on October 7, 2009. After filing its annual report on October 13, 2009, the Company received confirmation from the NASDAQ Stock Market that the Company had regained compliance with NASDAQ Marketplace Rule 5250(c)(1).
As noted in previous press releases, the Company reviewed its accounting for certain matters in 2007 and 2008 and has determined that restatements of those years are appropriate. Accordingly, those reports should no longer be relied upon. Instead, investors should rely only on the audited financials contained in the Company’s Form 20-F filed on October 13, 2009.
The restatement of 2007 audited financials resulted in the following changes:
-- 2007 total revenues increased by RMB850,632;
-- 2007 gross profit increased by RMB493,280;
-- 2007 operating expenses increased by RMB873,541;
-- 2007 profit from operations decreased by RMB380,261; and
-- 2007 net loss decreased by RMB5,954,433.
Full Year 2008 Audited Financial Highlights:
-- Total revenues increased 64.7% year-over-year to RMB139.9 million
(US$20.5 million), from RMB84.9 million for the full year 2007.
- Revenue from software license sales increased 57.4% year-over-year to
RMB66.2 million (US$9.7 million), from RMB42.1 million in 2007.
- Revenue from hardware sales increased 64.6% year-over-year to RMB26.7
million (US$3.9 million), from RMB16.2 million in 2007.
- Service fee income increased 76.4% to RMB47.0 million (US$6.9
million), from RMB26.6 million in 2007.
-- Gross profit increased 49.7% year-over-year to RMB57.8 million (US$8.5
million), from RMB38.8 million in 2007. Gross margin was 41.3%,
compared to 45.4% in 2007.
-- Operating loss was RMB10.0 million (US$1.5 million), as compared to an
operating profit of RMB6.6 million in 2007.
-- Net loss was RMB4.5 million (US$0.7 million), compared to net loss of
RMB21.5 million in 2007.
-- Diluted loss per share was RMB1.39 (US$0.20), compared to diluted loss
per share of RMB8.01 in 2007.
-- Operating cash flow as of December 31, 2008 increased 82.5%
year-over-year to RMB31.0 million (US$4.6 million).
-- Cash and cash equivalents as of December 31, 2008 was RMB60.8 million
(US$8.9 million).
-- Adjusted net income (non-GAAP) was RMB15.6 million (US$2.3 million), an
increase of 315.9% from 2007.
-- Non-GAAP adjusted diluted earnings per share were RMB5.0 (US$0.73).
Ms. Ping Yu, Chief Financial Officer of eFuture, stated, "Through the re-audit process, we identified material weaknesses and deficiencies in our internal controls, and as a result we are in the process of strengthening our internal controls, systems and procedures. We believe that the conclusion of this process will enable us to ensure robust, consistent and accurate financial reporting moving forward. Despite the adjustments made to our 2007 results, we believe our 2008 financial results have shown that we maintained a healthy financial footing and remain well positioned, and we reaffirm the upward revision of our 2009 revenue guidance of US$28 million to US$29 million."
"Our 2008 results demonstrate our ability to deliver consistent growth through the focused execution of our strategy. Throughout the year, we made steady progress on a number of strategic and tactical initiatives, and our business remains fundamentally strong. In 2008, we solidified our core enterprise software business, grew value-added services revenues, and expanded the scope and depth of our eService offering, including our B2B service and SaaS service for SCM and B2C eShopping platform. We believe this progress was made possible by our continued execution, focused growth strategy consisting of both organic and acquisitive initiatives, affordable and flexible suite of solutions, a large and diversified install base, and the continued resilience of China’s retail and consumer goods industry. We will continue to focus on executing our growth strategy by investing in technology and business model innovations, expanding our client base within tier-2 and tier-3 cities in China, and actively pursuing domestic and international clients. Alongside each of these initiatives, we will strive to maximize our operational efficiency and enhance earnings growth to increase long-term shareholder returns," said Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture.
Full Year 2008 Audited Financial Results
Revenue
Total revenues increased 64.7% year-over-year to RMB139.9 million (US$20.5 million), from RMB84.9 million for 2007. Service fee income increased 76.4% to RMB47.0 million (US$6.9 million), from RMB26.6 million in 2007, as a result of increased contribution from our B2B and SaaS services, and as a result of our expanded customer base.
The overall increases in revenue are primarily attributable to the significant growth across all product lines including software license sales driven by the re-alignment of the software business into seven vertical strategic business units and improved operating efficiency.
Revenue Breakdown
2007 2008
FY FY
RMB RMB US$ Y-o-Y
‘000 ‘000 ‘000 change
Software license sales 42,076 66,216 9,705 57.4 %
Hardware sales 16,198 26,656 3,907 64.6 %
Service fee income 26,646 46,992 6,888 76.4 %
Total 84,921 139,864 20,500 64.7 %
Cost of Revenues
The cost of revenue for fiscal year 2008 increased 77.2% to RMB82.1 million (US$12.0 million) from RMB46.3 million in 2007.
Cost of Revenues Breakdown
2007 2008
FY FY
RMB RMB US$ Y-o-Y
‘000 ‘000 ‘000 change
Cost of software license
sales 15,648 22,929 3,361 46.5 %
Cost of hardware sales 12,601 21,989 3,223 74.5 %
Cost of service fees 6,965 20,248 2,968 190.7 %
Amortization of
acquired technology 8,231 13,308 1,951 61.7 %
Amortization of
software costs 2,889 3,633 532 25.7 %
Total 46,335 82,106 12,035 77.2 %
The increase in cost of revenue was primarily attributable to a proportionate increase in sales volume and, to a lesser extent, cost in hardware sales along with an increase in service fee income expenses. The increases in service fee income expenses were affected by several factors:
1. The Company added senior technical personnel to major accounts to
explore service expansion and additional opportunities to generate
revenues. eFuture devoted its senior technical personnel to its major
accounts according to the customers’ anticipated programming needs in
the next three years. The company expects these efforts will deliver
more value to these customers’ future operations, but devoting senior
personnel results in higher immediate expenses for the Company in
return for anticipated longer-term revenues for the Company.
2. eFuture increased its marketing efforts on major accounts to further
explore customers’ potential needs in their IT operating plans.
3. The Company changed its allocation on the basis of labor costs from the
previous method of allocating its costs of revenue based on
out-of-pocket expenses on projects to the current method of allocating
costs of revenue based on labor costs. The Company does not expect
this change to have a material impact for future projects.
Gross Profit
Gross profit increased 49.7% to RMB57.8 million (US$8.5 million) for the fiscal year 2008 from RMB38.6 million in 2007.
Consolidated gross margin for 2008 was 41.3%, compared to 45.4% in 2007. The year-over-year decrease in gross margin was a result of increased amortization of acquired technology as a result of acquisitions made in 2007 and 2008, and increases in cost of hardware and cost of service fee income.
Operating Expenses
Research and development expenses in 2008 were RMB6.5 million (US$1.0 million), or 4.7% of total revenues, compared to 1.0% in 2007.
The increase in research and development expenses is mainly due to our larger expenditures in software integration and upgrading. Management believes that these efforts to integrate multiple versions of similar software into full-featured single software versions will reduce eFuture’s R&D costs in the long term and reduce the future software implementation costs.
General and administrative expenses in 2008 were RMB40.5 million (US$5.9 million), or 28.9% of total revenues, compared to 22.6% in 2007.
The year-over-year increase was mainly due to a RMB1.5 million increase in salaries and a RMB3.0 million increase in the maintenance costs of eight new branches in 2008. In addition, the expenses associated with the compliance of auditing and Sarbanes-Oxley Act compliance contributed RMB1.6 million to the general and administration expenses.
Selling expenses in 2008 were RMB20.8 million (US$3.0 million), or 14.9% of total revenues, as compared to 14.1% in 2007. The year-over year increase was mainly due to an expansion of our sales force and a proportionate increase in sales volume in year-over-year.
Total share-based compensation expenses in 2008 were RMB2.7 million (US$0.4 million).
Operating Income/Loss
2008 operating loss was RMB10.0 million (US$1.5 million), as compared to an operating profit of RMB6.6 million in 2007. The decrease in operating profit is a result of four principal factors:
1. RMB5.7 million increase in spending for R&D expenses. We believe this
significant increase of 697.7% over our 2007 R&D expenses of RMB0.8
million is important for our continued competitiveness in our industry.
2. RMB4.2 million charge as a result of our decision to reflect our cost
of revenue through allocation on the basis of labor costs, as compared
to our previous method of allocating our costs of revenue based on
out-of-pocket expenses on projects. We believe this change will result
in more accurate estimates of costs of revenues by project going
forward.
3. RMB4.8 million charge due to an upward adjustment in our accounting for
a depository reserve we must maintain in China for employee social
security costs.
4. RMB1.7 million charge relating to impairment of intangible assets. In
2008, management identified impairment on certain internally generated
software as well as software acquired through acquisitions, as they are
not expected to generate future revenue, or be sellable to a third
party. These intangibles were significantly aged, and no further
capital investment for upgrades is planned.
Net Income/Loss and EBITDA
Net loss for the year ended December 31, 2008 was RMB4.51 million (US$0.7 million), improved significantly as compared to RMB21.5 million in 2007.
2008 basic and diluted losses per share were RMB1.39 (US$0.20) and RMB1.39 (US$0.20), respectively.
Adjusted net income (non-GAAP) for 2008 was RMB15.6 million (US$2.3 million), an increase of 315.9% from 2007.
2008 adjusted non-GAAP diluted earnings per share was RMB5.0 (US$0.73).
2008 EBITDA (non-GAAP) was RMB10.9 million (US$1.6 million), a decrease of 47.7% from 2007.
Balance Sheet and Cash Flow
In 2008, net cash generated from operating activities was RMB31.0 million (US$4.6 million), while net cash used in capital expenditures was RMB4.5 million (US$0.7 million).
As of December 31, 2008, cash and cash equivalents decreased 9.6% year-over-year to RMB60.8 million from RMB67.2 million in 2007, mainly due to the make-whole payments related to the conversion of US$4 million convertible notes, as well as payment for the acquisition obligations of Royalstone and Proadvancer in 2008.
Total accounts receivable as of December 31, 2008 increased 10.8% to RMB19.5 million (US$2.9 million) from RMB17.3 million as of December 31, 2007, mainly attributable to increases in total revenue.
Inventories as of December 31, 2008 decreased 49.9% to RMB2.9 million (US$0.4 million) from RMB5.7 million as of December 31, 2007. This decrease was mainly attributable to a change in allocation of the basis of labor costs from our previous method of allocating our costs of revenue based on out-of-pocket expenses on projects. This change resulted in lower inventories and the recognition of greater cost of revenues in the same period.
2009 Guidance
In 2009, eFuture plans to focus upon continued execution on its growth strategy, which consists of a combined organic and acquisitive approach. eFuture will continue to solidify its core enterprise software business and forge into new frontiers of eService and investing.
eFuture maintains its upward revision of guidance for 2009 and anticipates total revenues to be in the range of approximately US$28 million to US$29 million, representing annual growth of 38% to 40% over 2008. 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.
Currency Convenience Translation
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.8225 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2008 for cable transfers of RMB per US 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.
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, 2008 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 October 13, 2009, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
For more information, please contact:
Investor Contact:
Troe Wen, Company Secretary
eFuture Information Technology Inc.
Tel: +86-10-5165-0998 x8804
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, December 31,
2007 2008 2008
(Restated)
ASSETS
Current assets
Cash and cash equivalents 67,227,348 60,787,734 $8,909,891
Trade receivables, less allowance
for doubtful accounts of
RMB4,695,898 and
RMB4,743,679 ($695,299),
respectively 17,259,965 19,468,029 2,853,504
Refundable value added tax 3,691,035 2,755,702 403,914
Deposits 156,695 -- --
Advances to employees 3,576,947 3,205,953 469,909
Advances to suppliers 657,724 198,752 29,132
Notes receivable - related party 3,000,000 -- --
Other receivables 576,965 2,229,535 326,791
Prepaid expenses 862,653 735,083 107,744
Inventory and work in process 5,749,951 2,879,250 422,023
Total current assets 102,759,283 92,260,038 13,522,908
Non-current assets
Long-term investments 4,264,433 654,192 95,887
Deferred loan costs 7,557,383 1,182,588 173,336
Property and equipment, net of
accumulated depreciation of
RMB5,191,489 and
RMB3,020,838 ($442,776),
respectively 2,065,040 3,605,458 528,466
Intangible assets, net of
accumulated amortization of
RMB19,799,245 and
RMB34,704,373 ($5,086,753),
respectively 47,217,193 49,875,082 7,310,382
Goodwill 45,013,827 91,284,735 13,379,954
Total non-current assets 106,117,876 146,602,055 21,488,025
Total assets 208,877,159 238,862,093 $35,010,933
Chinese Yuan (Renminbi) U.S. Dollars
December 31, December 31,
2007 2008 2008
(Restated)
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities
Trade accounts payable 3,845,873 5,646,259 $827,594
Other payable 844,753 11,097,702 1,626,632
Accrued expenses 4,626,683 6,873,703 1,007,505
Accrued interest 278,420 -- --
Taxes payable 8,976,305 7,933,734 1,162,878
Advances from customers 13,025,978 22,839,530 3,347,678
Royalstone acquisition obligation 19,818,925 6,416,970 940,560
Health field acquisition obligation 3,300,000 594,000 87,065
Proadvancer System acquisition
obligation -- 29,958,518 4,391,135
BFuture acquisition obligation -- 392,877 57,585
Deferred tax, current portion 1,098,063 1,553,197 227,658
Total current liabilities 55,815,000 93,306,490 13,676,290
Long-term liabilities
3%-10% RMB6,822,500 ($1,000,000)
convertible note payable, net of
RMB6,796,432 ($996,179) of
unamortized discount 90,771 26,068 3,821
Derivative liabilities 46,521,310 5,111,417 749,200
Minority shareholder interests -- 204,414 29,962
Deferred tax 3,237,309 5,458,232 800,033
Total long-term liabilities 49,849,390 10,800,131 1,583,016
Shareholders’ equity
Ordinary shares, $0.0756 U.S.
dollars par value; 6,613,756
shares authorized; 2,924,702
shares and 3,362,241 shares
outstanding, respectively 1,811,589 2,039,196 298,893
Additional paid-in capital 137,261,443 173,054,651 25,365,284
Statutory reserves 3,084,020 3,084,020 452,037
Accumulated deficit (38,944,283) (43,422,395) (6,364,587)
Total shareholders’ equity 103,212,769 134,755,472 19,751,627
Total liabilities and shareholders’
equity 208,877,159 238,862,093 $35,010,933
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS
Chinese Yuan (Renminbi) U.S. Dollars
For the Year
Ended
For the Years Ended December 31, December 31,
2006 2007 2008 2008
Revenues (Restated)
Software sales 29,832,720 42,076,411 66,215,769 $9,705,499
Hardware sales 11,403,473 16,198,402 26,655,967 3,907,067
Service fee income 6,607,337 26,646,180 46,991,766 6,887,764
Total Revenues 47,843,530 84,920,993 139,863,502 20,500,330
Cost of revenues
Cost of software 7,665,866 15,648,282 22,928,605 3,360,733
Cost of hardware 10,548,649 12,601,230 21,989,087 3,223,025
Cost of service fee
income 1,887,676 6,965,367 20,247,922 2,967,816
Amortization of acquired
technology -- 8,231,375 13,308,030 1,950,609
Amortization of software
costs 2,727,198 2,889,118 3,632,744 532,465
Total Cost of Revenue 22,829,389 46,335,372 82,106,388 12,034,648
Gross Profit 25,014,141 38,585,621 57,757,114 8,465,682
Operating Expenses
Research and development 527,219 816,479 6,512,776 954,602
General and
administrative 7,298,980 19,192,286 40,488,964 5,934,623
Selling and distribution
expenses 9,210,975 12,014,601 20,792,618 3,047,654
Total Operating Expenses 17,037,174 32,023,366 67,794,358 9,936,879
Profit/(loss) from
operations 7,976,967 6,562,255 (10,037,244) (1,471,197)
Interest income 141,230 3,533,326 1,424,029 208,725
Interest expense (13,471) (2,813,489) (1,246,780) (182,744)
Interest expenses -
amortization of
discount on notes
payable -- (22,415) (33,212) (4,868)
Interest expenses -
amortization of
deferred loan costs -- (2,114,685) (978,204) (143,379)
Income/(loss) on
investments -- 985,085 (3,552,902) (520,763)
Gain on derivatives -- 10,324,874 33,122,465 4,854,887
Loss on extinguishment
of convertible notes -- (39,504,662) (22,529,233) (3,302,196)
Foreign currency
exchange gain -- 544,173 368,127 53,958
Profit/(loss) before tax 8,104,726 (22,505,538) (3,462,954) (507,577)
Income tax
expense/(benefit) -- 946,704 (810,744) (118,834)
Minority interest in
profit/(loss) of
consolidated subsidiary -- 32,520 (204,414) (29,962)
Net Income/(loss) 8,104,726 (21,526,314) (4,478,112) (656,374)
Other comprehensive
income/(loss)
Foreign currency
translation adjustment (491,079) 491,079 -- --
Comprehensive
Income/(loss) 7,613,647 (21,035,235) (4,478,112) $(656,374)
Earnings/(loss) per
ordinary share
Basic 4.80 (8.01) (1.39) $(0.20)
Diluted 4.43 (8.01) (1.39) $(0.20)
Basic Weighted-average
Shares Outstanding 1,689,434 2,687,380 3,214,466 3,214,466
Fully-Diluted Weighted-
average Shares
Outstanding 1,831,258 2,687,380 3,214,466 3,214,466
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
NON-GAAP MEASURES OF PERFORMANCE
December 31, 2007 December 31, 2008
RMB RMB US$
(Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME (LOSS) AND
ADJUSTED EBITDA
Operating income (loss) (GAAP Basis) 6,562,255 (10,037,244) (1,471,197)
Adjustments for non-GAAP measures of
performance:
Add back amortization of acquired
software technology 8,231,375 13,308,030 1,950,609
Add back amortization of intangibles 2,889,118 3,632,744 532,465
Add back share-based compensation
expenses 2,663,105 3,109,903 455,830
Adjusted non-GAAP operating income 20,345,853 10,013,433 1,467,707
Add back depreciation 500,633 891,183 130,624
Adjusted EBITDA (Earnings before
interest, taxes, depreciation and
amortization) 20,846,486 10,904,616 1,598,331
NON-GAAP OPERATING INCOME (LOSS) AND
ADJUSTED EBITDA, as a percentage of
revenue
Operating income (loss) (GAAP BASIS) 8% -7% -7%
Adjustments for non-GAAP measures of
performance:
Amortization of acquired software
technology 10% 10% 10%
Amortization of intangibles 3% 3% 3%
Share-based compensation expenses 3% 2% 2%
Adjusted non-GAAP operating income 24% 7% 7%
Depreciation 0.6% 0.6% 0.6%
Adjusted EBITDA (Earnings before
interest, taxes, depreciation and
amortization) 25% 8% 8%
NON-GAAP EARNINGS PER SHARE
Net Income(Loss) (21,035,235) (4,478,112) (656,374)
Amortization of acquired software
technology 8,231,375 13,308,030 1,950,609
Amortization of intangibles 2,889,118 3,632,744 532,465
Accretion on convertible notes 22,415 33,212 4,868
Share-based compensation expenses 2,663,105 3,109,903 455,830
Adjusted Net income (7,229,222) 15,605,777 2,287,398
Adjusted non-GAAP diluted earnings
per share (2.41) 4.99 0.73
Shares used to compute non-GAAP
diluted earnings per share 2,997,921 3,124,463 3,124,463
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Chinese Yuan (Renminbi) U.S. Dollars
For the Year
Ended
For the Years Ended December 31, December 31,
2006 2007 2008 2008
(Restated)
Cash flows from
operating activities:
Net income (loss) 8,104,726 (21,035,235) (4,478,112) $(656,374)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Depreciation 679,876 500,633 891,183 130,624
Amortization of
intangible assets 2,727,198 11,120,493 16,940,774 2,483,074
Impairment of
intangible assets -- -- 2,143,290 314,150
Amortization of
discount on notes
payable -- 22,413 33,212 4,868
Amortization of
deferred loan costs -- 2,114,685 978,204 143,379
Gain on derivatives -- (10,324,873) (33,122,465) (4,854,887)
Loss on extinguishment
of convertible notes -- 39,504,662 22,529,233 3,302,196
Investment
(income)/loss -- (985,085) 3,552,902 520,762
Loss on disposition of
property and equipment -- -- 385,995 56,577
Provision for doubtful
debt -- 2,585,988 2,340,706 343,086
Provision for loss in
inventory and work in
process -- -- 1,449,542 212,465
Compensation expense
for options issued to
employees -- 2,663,105 3,109,903 455,830
Deferred taxes -- (946,704) 481,774 70,615
Foreign exchange loss -- (652,397) (2,222,996) (325,833)
Minority interest -- (32,520) 204,414 29,962
Change in assets and
liabilities:
Accounts receivable (664,562) (13,788,696) (2,526,441) (370,310)
Refundable value added
tax 72,593 (1,220,094) 935,333 137,095
Deposits 466,458 (111,752) 156,695 22,967
Advances to employees (162,781) (2,378,346) 370,994 54,378
Advances to suppliers (334,840) (214,694) 991,888 145,385
Other receivables 60,552 537,784 136,565 20,017
Prepaid expenses (66,189) (291,548) 305,014 44,707
Inventories 25,277 265,645 1,421,159 208,305
Trade payables 208,096 1,827,696 1,230,861 180,412
Other payables -- (1,013,731) 7,269,063 1,065,454
Accrued expenses (101,711) 1,570,905 2,360,449 345,980
Accrued interest -- 278,420 (278,420) (40,809)
Taxes payable (482,309) 2,437,452 (1,084,826) (159,007)
Advances from customers 2,116,454 4,575,302 4,542,952 665,878
Net cash provided by
operating activities 12,648,838 17,009,508 31,048,845 $4,550,948
Cash flows from
investing activities:
Purchases of property
and equipment (537,340) (527,743) (1,618,331) (237,205)
Payments for intangible
assets (3,818,597) (7,151,309) (2,930,247) (429,498)
Long-term investments -- (4,475,216) -- --
Acquisition of business -- (53,188,175) (28,278,247) (4,144,851)
Loan to Guarantor 800,000 -- -- --
Amounts due from a
related party -- (3,000,000) -- --
Net cash used in
investing activities (3,555,937) (68,342,443) (32,826,825) $(4,811,554)
Chinese Yuan (Renminbi) U.S. Dollars
For the Years For the
Ended December 31, Year Ended
December 31,
2006 2007 2008 2008
(Restated)
Cash flows from
financing activities:
Issuance of ordinary
shares for cash, net
of
offering costs paid 47,128,495 -- -- --
Proceeds from exercise
of warrants -- 1,060,992 3,657,908 536,154
Issuance of convertible
notes -- 69,079,430 -- --
Payment of make-whole
obligation -- (10,015,958) (8,054,079) (1,180,517)
Repayment of short-term
loans (2,800,000) -- -- --
Net cash provided by
(used in) financing
activities 44,328,495 60,124,464 (4,396,171) (644,363)
Effect of exchange rate
changes on cash (791,476) (2,537,839) (265,463) (38,910)
Net increase (decrease)
in cash 52,629,920 6,253,690 (6,439,614) (943,879)
Cash and cash
equivalents at
beginning of year 8,834,817 61,464,737 67,227,348 9,853,770
Cash and cash
equivalents at end of
year 61,464,737 67,718,427 60,787,734 $8,909,891
Supplemental cash flow
information
Interest paid 66,593 510,282 1,525,200 $223,554
Non-cash Investing and
Financing Activities
Acquiring assets by
assuming payment
obligation -- 23,118,925 36,813,365 $5,395,876
Conversion of
convertible notes -- 36,473,000 27,273,200 $3,997,538
Issuance of common
stock for acquisition -- 8,555,961 14,310,115 $2,097,488
