EX-99.1 2 v208544_ex99-1.htm Unassociated Document
Kingtone Wirelessinfo Solution Holding Ltd Reports
Fourth Quarter and Fiscal Year 2010 Financial Results; Provides Fiscal Year
2011 Revenue and Net Income Guidance
4QFY10 Revenues Up 36.1% to $5.3 Million from the Prior Year Period
4QFY10 Gross Profit Up 104.7% to $4.6 Million  from the Prior Year Period
4QFY10 Basic and Diluted Earnings per share of $0.22
FY10 Revenues Up 29.1% to $14.5 Million from the Prior Year
FY10 Gross Profit Up 65.5% to $12.2 Million from the Prior Year
FY10 Basic and Diluted Earnings per share of $0.71

Xi’an, China, January 20, 2011 — Kingtone Wirelessinfo Solution Holding Ltd (NASDAQ: KONE) (“Kingtone”,  or the “Company”), a leading China-based software and solutions developer focused on wirelessly enabling businesses and government agencies to more efficiently manage their operations, today announced financial results for the fourth quarter and fiscal year 2010. The financial statements and other financial information included in this press release are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Fourth Quarter Financial Highlights

·  
Revenues increased 36.1% to $5.33 million from $3.92 million in the prior year period.

·  
Gross profit increased 104.7% to $4.64 million from $2.27 million in the prior year period.

·  
Gross margin increased to 87.0% from 57.9% in the prior year period.

·  
Net income increased 72. 9% to $3.13 million from $1.81 million in the prior year period.

·  
Basic and diluted earnings per share were $0.22 as compared to $0.18 in the prior year period with weighted average shares outstanding of 14,000,000 as compared to 10,000,000 in the prior year period.

Fiscal Year 2010 Financial Highlights

·  
Revenues increased 29.1% to $14.51 million from $11.24 million in the prior year period.

·  
Gross profit increased 65.5% to $12.15 million from $7.35 million in the prior year period.

·  
Gross margin increased to 83.8% from 65.4% in the prior year period.

·  
Net income increased 55.5% to $8.24 million from $5.3 million in the prior year period.

·  
Basic and diluted earnings per share were $0.71 as compared to $0.53 in the prior year period with weighted average shares outstanding of 11,527,473 as compared to 10,000,000 in the prior year period.

“We are pleased with our strong performance in 2010 which demonstrates our ability to expand revenues and profits as we capitalize on our first mover advantage, highly competitive suite of products and renowned customer service quality.  Our results also benefited from our strategic shift towards software solutions which enjoy much higher margins than wireless systems solutions” commented Mr. Peng Zhang, Chief Executive Officer of Kingtone. “During the year, we reached several milestones in our corporate history. We became publicly traded on Nasdaq and raised US$ 16 million in equity capital to strengthen our financial position and support our growth strategy. Our geographic footprint expanded, creating further opportunities to build a stronger business pipeline and we continued to build our scalable infrastructure on the back of targeted cost controls, selective investments and productivity improvements.  All these steps enabled us to conclude fiscal 2010 with the strongest growth prospects in our company history.”
 
 
 

 
 
“As we move forward, we believe that we are ideally positioned to capture the growing opportunities in front of us as our clients continue to strive for greater efficiency in their business. We will continue to carefully evaluate each new business opportunity on its own merits in the best interest of the company and its shareholders” concluded Mr. Peng.

Fourth Quarter Financial Performance

Results of Operations - Three months ended September 30, 2010 compared to three months ended September 30, 2009.

Revenues. For the fourth quarter of fiscal year 2010, revenues increased by 36.1% to $5.33 million from $3.92 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 124.5% to $4.1 million in the fourth quarter of fiscal year 2010 compared to $1.82 million in the fourth quarter of fiscal year 2009. Revenue from wireless system solutions decreased by 40.9% to $1.24 million in the fourth quarter of fiscal year 2010 compared to $2.09 million in the prior year period.

Gross Profit and Gross Margin. For the fourth quarter of fiscal year 2010, gross profit increased by 104.7 % to $4.64 million from $2.27 million in the prior year period. Gross margin for the fourth quarter of fiscal year 2010 was 87.0% compared to 57.9% in the fourth quarter of fiscal year 2009.

Income from Operations. Income from operations increased by 90.8% to $3.75 million in the fourth quarter of fiscal year 2010 from $1.97 million in the comparable period of fiscal 2009. Operating margins for the fourth quarter of fiscal year 2010 and 2009 were 70.4% and 50.2%, respectively.

Net Income and EPS. Net income was $3.13 million in the fourth quarter of fiscal year 2010, compared to $1.81 million in the prior year’s fourth quarter, an increase of 72.9%. Net income as a percentage of total net revenues was 58.6% and 46.2% for the fourth quarter of fiscal year 2010 and 2009, respectively. Basic and diluted earnings per share were $0.22 in the fourth quarter of fiscal year 2010, compared to $0.18 in the prior year period. The number of weighted average common shares outstanding for the three months ended September 30, 2010 was 14 million, compared to 10 million a year ago.

Fiscal Year 2010 Financial Performance

Results of Operations - The year ended September 30, 2010 compared to the year ended September 30, 2009.

Revenues. For the year ended September 30, 2010, total revenues increased by 29.1% to $14.51 million from $11.24 million in the comparable period of fiscal 2009. Revenue from software solutions increased by 118% to $11.27 million for the year ended September 30, 2010 compared to $5.17 million for the prior year, mainly driven by mobile enterprise applications in police and emergency agencies in new geographic areas. Revenue from wireless system solution decreased by 46.7% to $3.23 million for the year ended September 30, 2010 compared to $6.07 million in the prior year. This decrease was due primarily to two factors: (1) we had smaller contract value and less recognizable revenue with one major customer in the oil refinery industry this year, even though the number of contracts with its different subsidiaries had increased; and (2) we completed two related party transactions in the prior year with Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd.. As a result, the third-party revenue from wireless system solution sales decreased 34.3% from a year ago without the $1.1 million revenue from these two related party transactions from the prior year.

Gross Profit and Gross Margin. For the year ended September 30, 2010, gross profit increased by 65.5 % to $12.15 million from $7.35 million in the prior year period. Gross margin for the year ended September 30, 2010 was 83.8%, compared to 65.4% for the same period in the prior year.

Income from Operations. Income from operations increased by 58.2% to $10 million for the year ended September 30, 2010 from $6.32 million in fiscal 2009, primarily due to the growth in revenues. Operating margin for the year ended September 30, 2010 and 2009 were 68.9% and 56.2%, respectively.

Net Income and EPS. Net income increased by 55.5% to $8.2 million for the year ended September 30, 2010 from $5.3 million in the fiscal 2009. The growth of net income was mainly attributed to the growth in our revenue. Basic and diluted earnings per share were $0.71 in the fiscal year 2010, compared to $0.53 in the prior year. The number of weighted average common shares outstanding for the year ended September 30, 2010 was 11.5 million, compared to 10 million a year ago.
 
 
 

 
 
Liquidity and Capital Resources.

Cash and Cash Equivalents. As of September 30, 2010, the Company had cash and cash equivalents of $14.9 million, compared to $0.34 million as of November 30, 2009, the Company’s last fiscal year end. Cash flows provided by operating activities for the year ended September 30, 2010 were approximately $4.3 million, compared to approximately $4 million in the prior year period. Depreciation and amortization expenses were $0.23 million and $0.13 million for the years ended September 30, 2010 and 2009, respectively. Cash flows provided by financing activities were approximately $10.32 million and $8.55 million for the years ended September 30, 2010 and 2009, respectively.

Financial Outlook

For the fiscal year ending September 30, 2011, management expects revenues of $18.8 million to $20.2 million and net income of $10.2 million to $11.6 million. This guidance reflects management’s anticipated increase in sales resulting from the Company's existing solution offerings and the increasing demand driven by the on-going adoption of 3G in the PRC.

Conference Call
 
The Company will host a conference call to discuss its fourth quarter and fiscal year 2010 financial results at 9:00 a.m. ET on Thursday, January 20, 2011. Mr. Tao Li, Chairman, Mr. Peng Zhang, Chief Executive Officer, Ms. Ying Yang, Chief Financial Officer, will be on the call. The Company plans to release its fourth quarter and fiscal year 2010 financial results before the conference call.
 
To participate in the conference call, please dial any of the following numbers:
 
    USA Toll Free: (877) 407-9205
 
    International: (201) 689-8054
 
    Conference ID #: 364788
 
A replay of the call will be available until 11:59 PM ET on January 20, 2011.
 
To access the replay, please dial any of the following numbers:
 
    USA Toll Free: (877)-660-6853
 
    International: (201) 612-7415
 
Replay Passcodes (both required for playback):
 
    Account #: 286
    Conference ID #: 364788
 
The conference call will be webcast live by Vcall and can be accessed http://www.InvestorCalendar.com.
 
 
 

 
 
About Kingtone Wirelessinfo Solution Holding Ltd
 
Kingtone Wirelessinfo Solution Holding Ltd (Nasdaq: KONE) is a leading China-based software and solutions developer focused on wirelessly enabling businesses and government agencies to more efficiently manage their operations. The Company's products, known as mobile enterprise solutions, extend a company's or enterprise's information technology systems to include mobile participants. The Company develops and implements mobile enterprise solutions for customers in a broad variety of sectors and industries, to improve efficiencies by enabling information management in wireless environments. At the core of its many diverse packaged solutions is proprietary middleware that enables wireless interactivity across many protocols, devices and platforms.
 
For more information, please visit Kingtone’s website at www.kingtoneinfo.com. The Company routinely posts important information on its website.
 
Safe Harbor Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. These forward-looking statements may include, but are not limited to, statements containing words such as “may,” “could,” “would,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “expects,” “intends”, “future” and “guidance” or similar expressions. These forward-looking statements speak only as of the date of this press release and are subject to change at any time. These forward-looking statements are based upon management’s current expectations and are subject to a number of risks, uncertainties and contingencies, many of which are beyond the Company’s control that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company’s actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading “Risk Factors” in the Company’s prospectus, dated May 14, 2010 filed with the Securities and Exchange Commission (the “SEC”), and in documents subsequently filed by the Company from time to time with the SEC including the Company’s Transition Report for the transition period from December 1, 2009 to September 30, 2010 to be filed with the SEC. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law.

Contact Information

Kingtone WirelessInfo Solution Holding Ltd
Ms. Ying Yang, Chief Financial Officer
Tel: +1-626-623-2575 (US)
        +86-187-1040-4571 (China)
Email: yangying@kingtoneinfo.com

Christensen
Tip Fleming
Tel:   +852-9212-0684
Email: tfleming@christensenir.com

Kathy Li
Tel:   +1-480-614-3036
Email: kli@christensenir.com

 
 

 
 
KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(Express in thousands of U.S. Dollars, except shares and per share data)
 
             
             
   
As of September 30,
   
As of November 30,
 
   
2010
   
2009
 
   
(see note below)
       
             
ASSETS
           
Current assets
           
Cash and cash equivalents
  $ 14,909     $ 344  
Accounts receivable, net of allowance
    6,650       2,353  
Unbilled revenue
    973       178  
Due from related companies
    120       -  
Inventories, net
    383       127  
Other receivables and prepayments
    771       1,012  
Total Current Assets
    23,806       4,014  
Non-current assets
               
Property and Equipment, net
    13,637       1,693  
Deposit to purchase building
    -       12,200  
Intangible assets
    630       -  
Total Assets
  $ 38,073     $ 17,907  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
         
                 
Current liabilities
               
Accounts payable
  $ 575     $ 1,409  
Advances from customers
    371       1,398  
Other payables and accruals
    167       559  
Taxes payable
    3,421       601  
Short-term loan
    -       3,437  
Amounts due to shareholder
    -       200  
Deferred government grant
    -       -  
Dividend payable
    772       1,177  
Total Current Liabilities
    5,306       8,781  
                 
Commitments and contingencies
               
                 
Stockholders' equity
               
Ordinary share ($.001 par value, 100,000,000 shares authorized,
  $ 14     $ 10  
and 10,000,000 shares and 14,000,000 shares issued and outstanding)
 
Paid in capital
    -       6,897  
Additional paid in capital
    21,915       216  
Appropriated retained earnings
    844       231  
Unappropriated retained earnings
    8,281       657  
Accumulated other comprehensive income
    1,713       1,115  
Total Stockholders' Equity
    32,767       9,126  
                 
Total Liabilities and Stockholders' Equity
  $ 38,073     $ 17,907  
 
Note: In March 2010, the Company changed its fiscal year-end from November 30th to September 30th, so that it would have the same fiscal year end as its variable interest entity (“VIE”), Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”).
 
 
 

 

KINGTONG WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Express in thousands of U.S. Dollars, except shares and per share data)
 
                         
   
For the quarters ended September 30,
   
For the years ended September 30,
 
   
2010
   
2009
   
2010
   
2009
 
   
(Unaudited)
   
(Unaudited)
             
                     
(see note below)
 
                         
Revenues
                       
Software
  $ 4,095     $ 1,824     $ 11,272     $ 5,170  
Wireless system solution
    1,236       2,092       3,234       6,070  
Total revenues
    5,331       3,916       14,506       11,240  
Cost of sales
                               
Software
    413       126       903       476  
Wireless system solution
    280       1,524       1,449       3,418  
Total cost of sales
    693       1,650       2,352       3,894  
Gross profit
    4,638       2,266       12,154       7,346  
                                 
Operating expenses
                               
Selling and marketing expenses
    85       92       341       350  
General and administrative expenses
    752       172       1,635       537  
Research and development expenses
    48       35       179       139  
Total Operating expenses
    885       299       2,155       1,026  
Income from operations
    3,753       1,967       9,999       6,320  
                                 
Other income(expense)
                               
Subsidy income
    -       278       44       307  
Interest expense
    (9 )     (11 )     (218 )     (340 )
Other income (expense)
    14       (121 )     20       (55 )
Total other income (expense)
    5       146       (154 )     (88 )
Income before income tax expenses
    3,758       2,113       9,845       6,232  
Income tax expenses
    633       305       1,608       935  
Net income
  $ 3,125     $ 1,808     $ 8,237     $ 5,297  
Other comprehensive income
                               
Foreign currency translation gain
    517       (4 )     598       22  
Comprehensive income
  $ 3,642     $ 1,804     $ 8,835     $ 5,319  
                                 
Earnings per ordinary share:
                               
Basic and Diluted
  $ 0.22     $ 0.18     $ 0.71     $ 0.53  
                                 
Weighted average number of ordinary shares outstanding
                         
Basic and Diluted
    14,000,000       10,000,000       11,527,473       10,000,000  

 
Note: In March 2010, the Company changed its fiscal year-end from November 30th to September 30th, so that it would have the same fiscal year end as its VIE, Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”). There were no operations in the Company other than in its VIE, Kingtone Information from October 1, 2009 to November 30, 2009. In addition, the consolidated and combined statements of income and comprehensive income for the year ended November 30, 2009 included Kingtone Information for the year ended September 30, 2009. Therefore the Company is presenting its consolidated and combined statements of income and comprehensive income for the years ended September 30, 2010 and 2009 instead of for the ten months ended September 30, 2010 and the year ended November 30, 2009.
 
 
 

 
 
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Express in thousands of U.S. Dollars, except shares and per share data)
 
             
   
For the years ended September 30,
 
   
2010
   
2009
 
Cash flows from operating activities
       
(see note below)
 
 
  $ 8,237     $ 5,297  
                 
Depreciation and amortization
    225       129  
Disposal of fixed assets
    -       -  
Subsidiary income recognized from deferred government grant
    -       (50 )
Share-based compensation expense
    302       -  
                 
Changes in operating assets and liabilities
               
Accounts receivable
    (4,170 )     (1,851 )
Unbilled revenue
    (778 )     (177 )
Other receivables and prepayments
    257       (234 )
Inventories
    (249 )     150  
Tax payable
    2,756       601  
Accounts payable
    (848 )     1,092  
Advance from customers
    (1,037 )     (1,424 )
Other payables and accruals
    (394 )     467  
Deferred government grant
    -       -  
Net cash provided by operating activities
    4,301       4,000  
                 
Cash flows from investing activities
               
Purchases of vehicles and office equipment
    (308 )     (24 )
Prepayment to purchase building
    -       (12,186 )
Net cash used in investing activities
    (308 )     (12,210 )
                 
Cash flows from financing activities
               
Proceeds in short-term bank loan
    -       3,432  
Repayment of short-term bank loan
    (3,445 )     (3,681 )
(Payment)/Collection in amounts due from related-party companies
    (118 )     11,335  
Repayment of loan from non-related companies
               
Collection from loan to non-related companies
               
Receipt/(Repayment) in amounts due to shareholders
    (200 )     200  
Proceeds from issuance of shares
    14,503       10  
Dividend paid to shareholders
    (422 )     (2,751 )
Net cash provided by financing activities
    10,318       8,545  
                 
Effect of exchange rate changes on cash and cash equivalents
    254       -  
                 
Net increase in cash and cash equivalents
    14,565       335  
Cash and cash equivalents at beginning of year
    344       9  
Cash and cash equivalents at end of year
  $ 14,909     $ 344  
                 
Supplemental disclosure of cash flow information
               
Interest paid
  $ 218     $ 340  
Income taxes paid
  $ 92     $ 215  

Note: in March 2010, the Company changed its fiscal year-end from November 30th to September 30th, so that it would have the same fiscal year end as its VIE, Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”). There were no operations in the Company other than in its VIE, Kingtone Information from October 1, 2009 to November 30, 2009. In addition, the consolidated and combined statements of cash flows for the year ended November 30, 2009 included Kingtone Information for the year ended September 30, 2009. Therefore the Company is presenting its consolidated and combined statements of cash flows for the years ended September 30, 2010 and 2009 instead of for the ten months ended September 30, 2010 and the year ended November 30, 2009.

 
 

 
 
KINGTONE WIRELESSINFO SOLUTION HOLDING LTD AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Express in thousands of U.S. Dollars, except shares and per share data)
 
 
                                                 
   
Ordinary shares
   
Paid-in capital
   
Additional paid-in capital
   
Appropriated Retained earnings
   
Unappropriated Retained earnings
   
Comprehensive income
   
Total stockholders’ equity
 
   
No. of share
   
Amount
                                     
                                                 
Balance at November 30, 2007
    -     $ -     $ 6,034     $ -     $ 30     $ (1,527 )   $ 549     $ 5,086  
Net income for the year
    -       -       -       -       -       1,015       -       1,015  
Share contribution
    -       -       863       216       -       -       -       1,079  
Transfer to statutory reserves
    -       -       -       -       32       (32 )     -       -  
Foreign currency translation gain
    -       -       -       -       -       -       544       544  
                                                                 
Balance as of November 30, 2008
    -     $ -     $ 6,897     $ 216     $ 62     $ (544 )   $ 1,093     $ 7,724  
Share contribution
    10,000,000       10       -                                       10  
Net income for the year
    -       -       -       -       -       5,297       -       5,297  
Payment of dividends
    -       -       -       -       -       (4,096 )     -       (4,096 )
Transfer to statutory reserves
    -       -       -       -       169               -       169  
Foreign currency translation gain
    -       -       -       -       -       -       22       22  
                                                                 
Balance as of November 30, 2009
    10,000,000       10       6,897       216       231       657       1,115       9,126  
Issuance of ordinary shares in form of American Depositary Shares
    4,000,000       4       -       14,500                               14,504  
Share-based compensation
                            302                               302  
Net income for the year
    -       -       -       -       -       8,237       -       8,237  
Effect of reorganization
    -       -       (6,897 )     6,897       -               -       -  
Transfer to statutory reserves
    -       -       -       -       613       (613 )     -       -  
Foreign currency translation gain
    -       -       -       -       -       -       598       598  
                                                                 
Balance as of September 30, 2010
    14,000,000     $ 14     $ -     $ 21,915     $ 844     $ 8,281     $ 1,713     $ 32,767