BEIJING, Nov. 19, 2012 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2012.
Third Quarter 2012 Financial Highlights
- Total revenue decreased 10% year-over-year to RMB37.5 million (US$6.0 million).
- Gross profit increased 5% year-over-year to RMB16.1 million (US$2.6 million).
- Adjusted EBITDA was minus RMB1.0 million (US$0.2 million), compared to adjusted EBITDA of RMB1.1 million in the third quarter 2011.
- Operating loss was RMB3.9 million (US$0.6 million), compared to an operating loss of RMB3.2 million in the third quarter 2011.
- Net loss was RMB2.1 million (US$0.3 million), compared to a net loss of RMB2.5 million in the third quarter 2011.
- Adjusted net income decreased 82% year-over-year to RMB0.3 million (US$47,415).
- Basic and diluted loss per share was RMB0.52 (US$0.08), as compared to basic and diluted loss per share of RMB0.62 in the third quarter 2011.
- Adjusted diluted earnings per share was RMB0.07 (US$0.01), as compared to adjusted diluted earnings per share of RMB0.39 in the third quarter 2011.
Mr. Adam Yan, Chairman and Chief Executive Officer of eFuture, commented on the results. "eFuture achieved the mid-range of the guidance we set last quarter and recorded a satisfactory gross margin. These performances for the third quarter 2012 were fully in-line with our expectations as we continued to execute on our strategic objectives to enhance profitability through product upgrades and revenue mix changes in a challenging macroeconomic environment.
"Following the trends we have seen in previous quarters, we continue to experience steady year over year order growth for our customized IT solutions services from grocery and department store clients in big cities as well as in tier two and three cities. However, we have also seen signs of a persistently soft China consumer market, leading to stagnant growth in the retail and consumer sector.
Mr. Yan concluded, "eFuture was named China's number one retail industry IT service provider measured by market share in the International Data Corporation's China Retail Industry IT Solution 2012-2016 Forecast and Analysis Report. We believe our leading market position and the combination of innovative products and customized services we now offer in the marketplace will equip eFuture with a sustainable model to outgrow the market, as we continue to gain market share and position ourselves for the eventual economic recovery."
Mr. Sean Zheng, Chief Financial Officer, added, "We have secured two important contracts for our customized IT solution services in the quarter and we expect to recognize revenue from these projects early next year. As such, we are expecting more evenly distributed revenue over the next four quarters of the next fiscal year.
"Looking ahead to 2013, we are optimistic that we will see continued momentum, along with a strengthened revenue stream throughout the year. Our new operational initiatives and strategic objectives should enable us to build on our relationships with existing customers and place us in a prime position to realize solid growth for the future."
THIRD QUARTER 2012 FINANCIAL RESULTS
Revenue
Total revenue for the third quarter 2012 decreased 10% to RMB37.5 million (US$6.0 million) from RMB41.9 million in the third quarter 2011.
Revenue Breakdown
| 3Q11 | 3Q12 | |||
| RMB '000 | RMB '000 | USD '000 | Y-o-Y Change | |
| Software license sales | 13,544 | 13,264 | 2,111 | (2%) |
| Hardware sales | 3,010 | 5,867 | 933 | 95% |
| Service fee income | 25,304 | 18,353 | 2,920 | (27%) |
| Total | 41,858 | 37,484 | 5,964 | (10%) |
Software license revenue for the third quarter 2012 decreased 2% year-over-year to RMB13.3 million (US$2.1 million) from RMB13.5 million in the third quarter 2011. The decrease was primarily attributable to the decline of third-party software license revenue.
Hardware revenue in the third quarter 2012 increased 95% year-over-year to RMB5.9 million (US$0.9 million) from RMB3.0 million in the third quarter 2011. The increase was due to the completion of some large contracts from the grocery and logistics industry in the third quarter 2012.
Service fee income for the third quarter 2012 decreased 27% year-over-year to RMB18.4 million (US$2.9 million) from RMB25.3 million in the third quarter 2011, which was primarily attributable to decreased customization service fee income in fast moving consumer goods ("FMCG") and grocery industries in the third quarter 2012, as a result of the completion of two large contracts in the same period last year.
Cost of Revenue
Cost of revenue for the third quarter 2012 decreased 19% to RMB21.4 million (US$3.4 million) from RMB26.5 million in the third quarter 2011.
Cost of Revenue Breakdown
| 3Q11 | 3Q12 | |||
| RMB '000 | RMB '000 | USD '000 | Y-o-Y Change | |
| Cost of software license sales | 3,783 | 3,876 | 617 | 2% |
| Cost of hardware sales | 2,133 | 4,816 | 766 | 126% |
| Cost of service fee | 17,963 | 11,310 | 1,799 | (37%) |
| Amortization of acquired technology | 1,736 | 686 | 109 | (61%) |
| Amortization of software costs | 928 | 683 | 109 | (26%) |
| Total | 26,543 | 21,371 | 3,400 | (19%) |
Gross Profit and Gross Margin
Gross profit increased 5% year-over-year to RMB16.1 million (US$2.6 million) from RMB15.3 million in the third quarter 2011, and consolidated gross margin for the third quarter 2012 was 43%, compared with 37% in the third quarter 2011. The improvement in gross margin was mainly due to an increased margin on service fee income. The Company continued to improve the sales portfolio to focus on more profitable projects, which reflects a higher proportion of high-margin maintenance and consulting service fee income in the third quarter 2012.
Operating Expenses
Research and development ("R&D") expenses for the third quarter 2012 increased 76% year-over-year to RMB0.6 million (US$97,215), or 2% of total revenue, compared with RMB0.3 million, or 1% of total revenue in the third quarter 2011. The increase was primarily attributable to an increase of share-based compensation expenses, as a new grant under the share incentive plan started its vesting period in the second quarter 2012.
General and administrative expenses ("G&A") for the third quarter 2012 decreased 26% year-over-year to RMB8.0 million (US$1.3 million), representing 21% of total revenue, compared with RMB10.7 million, or 26% of total revenue in the third quarter 2011. The decrease was primarily attributable to better debt reserve in the third quarter 2012 compared with the same period in 2011. In addition, the interim bonus and share-based compensation for senior management also decreased in the third quarter 2012.
Selling and distribution ("S&D") expenses for the third quarter 2012 increased 55% year-over-year to RMB11.5 million (US$1.8 million), representing 31% of total revenue, compared with RMB7.4 million, or 18% of total revenue in the third quarter 2011. The increase was primarily attributable to the rise of sales commissions for the newly-signed contracts during the third quarter 2012. In the third quarter 2012, the amount of new contracts increased nearly 40% compared with the third quarter 2011. In addition, more expenditure on the business development was incurred for seed businesses in the third quarter 2012.
Operating Loss
Operating loss in the third quarter 2012 was RMB3.9 million (US$0.6 million), compared with an operating loss of RMB3.2 million in the third quarter 2011.
Net Loss/Adjusted Net Income and Loss Per Share/Adjusted Earnings Per Share
As a result of the aforementioned loss, third quarter 2012 net loss was RMB2.1 million (US$0.3 million), compared with a net loss of RMB2.5 million in the third quarter 2011. Adjusted net income for the third quarter 2012 was RMB0.3 million (US$47,415), compared with an adjusted net income of RMB1.6 million in the third quarter 2011.
Basic and diluted loss per share in the third quarter 2012 was RMB0.52 (US$0.08), compared to basic and diluted loss per share of RMB0.62 in the third quarter 2011. Adjusted diluted earnings per share was RMB0.07 (US$0.01), compared to an adjusted diluted earnings per share of RMB0.39 in the third quarter 2011.
EBITDA
Adjusted EBITDA for the third quarter 2012 was minus RMB1.0 million (US$0.2 million), compared to adjusted EBITDA of RMB1.1 million in the third quarter 2011.
Balance Sheet and Cash Flow
As of September 30, 2012, cash and cash equivalents amounted to RMB39.1 million (US$6.2 million), a decrease of RMB18.1 million from RMB57.2 million as of December 31, 2011. The decrease was primarily attributable to the expenditures on customization projects and capitalized R&D projects.
Total accounts receivable as of September 30, 2012 increased 14% to RMB22.6 million (US$3.6 million) from RMB19.9 million as of December 31, 2011. The increase was primarily attributable to the increase of revenue recognition from some large contracts in 2012; meanwhile the cash collection was partially impacted by the recent uncertain economic environment.
Inventory and work in process as of September 30, 2012 increased 26% to RMB35.1 million (US$5.6 million) from RMB28.0 million as of December 31, 2011. The increase was primarily attributable to an increase in the number of on-going projects which had not reached the point of revenue recognition, and also related to the amount of hardware to be delivered to customers.
For the quarter ended September 30, 2012, net cash provided by operating activities was RMB12.4 million (US$2.0 million). Net cash used in investing activities was RMB5.5 million (US$0.9 million).
Share Repurchase Program
On December 22, 2011, the Company announced a share repurchase program to repurchase up to US$2 million worth of its ordinary shares over the next 12 months. During the third quarter of 2012, eFuture repurchased approximately 16 thousand shares with an average price of US$3.75 per share.
FOURTH QUARTER 2012 GUIDANCE
eFuture expects total revenue for the fourth quarter 2012 to be in the range of RMB65 million (US$10.3 million) to RMB70 million (US$11.1 million). Adjusted EBITDA for the fourth quarter 2012 is expected to be in the range of RMB3 million (US$0.5 million) to RMB4.5 million (US$0.7 million). The year-over-year decrease in guidance for the fourth quarter is mainly due to the exceptionally strong results from Hardware revenue in the fourth quarter 2011.
CONFERENCE CALL INFORMATION
eFuture's management will host a conference call on Tuesday, November 20, 2012 at 5:00 am (US Pacific) / 8:00 am (US Eastern) / 9:00 pm (Beijing) to discuss the Company's 2012 third quarter and recent business activities. The conference call may be accessed by dialing:
| To access the conference call, please dial: | |
| Toll Free: | |
| U.S. | 1-866-519-4004 |
| Hong Kong | 800-930-346 |
| Toll: | |
| International | 65-6723-9381 |
| China | 400-620-8038 / 800-819-0121 |
| Hong Kong | 852-2475-0994 |
| U.S. | 1-718-354-1231 |
| 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: | |
| Toll Free: | |
| U.S. | 1-866-214-5335 |
| China North | 1080-0714-0386 |
| China South | 1080-0140-0386 |
| Hong Kong | 800-901-596 |
| International Toll: | 61-2-8235-5000 |
| Replay Passcode: | 57311154 |
| Available Time: | 11:00 a.m. November 20, 2012 EST – 07:59 a.m. November 28, 2012 EST |
The Company will also broadcast a live audio webcast of the conference call. The webcast will be available at http://ir.e-future.com.cn.
CURRENCY CONVENIENCE TRANSLATION
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.2848 to US$1.00, the noon buying rate for US dollars in effect on September 30, 2012 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 U.S. Securities and Exchange Commission: (i) adjusted EBITDA excluding amortization of acquired software technology, amortization of intangibles, impairment of intangible assets, share-based compensation expenses and depreciation; (ii) adjusted net income excluding amortization of acquired software technology, amortization of intangibles, impairment of intangible assets, share-based compensation expenses and accretion on convertible notes; and (iii) 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. 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, 2012 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 revenue and certain cost or expense items; eFuture's ability to attract clients 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 will be 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 November 19, 2012, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.
– FINANCIAL TABLES TO FOLLOW
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2848 | ||||
| CONDENSED CONSOLIDATED INCOME STATEMENTS | ||||||
| Nine months ended | Three months ended | |||||
| Chinese Yuan (Renminbi) | U.S. Dollars | Chinese Yuan (Renminbi) | U.S. Dollars | |||
| September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |
| 2011 | 2012 | 2012 | 2011 | 2012 | 2012 | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Revenues | ||||||
| Software revenue | 25,305,494 | 37,224,364 | 5,922,919 | 13,543,576 | 13,264,366 | 2,110,547 |
| Hardware revenue | 13,296,651 | 11,304,164 | 1,798,652 | 3,010,218 | 5,867,089 | 933,536 |
| Service fee revenue | 49,112,642 | 51,529,510 | 8,199,069 | 25,304,521 | 18,353,121 | 2,920,239 |
| Total Revenues | 87,714,787 | 100,058,038 | 15,920,640 | 41,858,315 | 37,484,576 | 5,964,322 |
| Cost of revenues | ||||||
| Cost of software revenue | 6,784,449 | 13,188,019 | 2,098,399 | 3,782,726 | 3,876,244 | 616,765 |
| Cost of hardware revenue | 11,183,763 | 9,662,676 | 1,537,468 | 2,132,978 | 4,815,972 | 766,289 |
| Cost of service fee revenue | 32,837,763 | 32,242,590 | 5,130,249 | 17,963,219 | 11,309,683 | 1,799,529 |
| Amortization of acquired technology | 6,096,678 | 4,042,853 | 643,275 | 1,736,300 | 685,832 | 109,126 |
| Amortization of software costs | 2,578,528 | 1,921,139 | 305,680 | 927,949 | 683,348 | 108,730 |
| Total Cost of Revenues | 59,481,181 | 61,057,277 | 9,715,071 | 26,543,172 | 21,371,079 | 3,400,439 |
| Gross Profit | 28,233,606 | 39,000,761 | 6,205,569 | 15,315,143 | 16,113,497 | 2,563,883 |
| Operating Expenses | ||||||
| Research and development expenses | 3,502,758 | 2,432,592 | 387,060 | 348,126 | 610,975 | 97,215 |
| General and administrative expenses | 28,958,159 | 23,236,929 | 3,697,322 | 10,736,293 | 7,971,294 | 1,268,345 |
| Selling and distribution expenses | 16,964,897 | 27,903,231 | 4,439,796 | 7,419,445 | 11,478,353 | 1,826,367 |
| Total Operating Expenses | 49,425,814 | 53,572,752 | 8,524,178 | 18,503,864 | 20,060,622 | 3,191,927 |
| Loss from operations | (21,192,208) | (14,571,991) | (2,318,609) | (3,188,721) | (3,947,125) | (628,044) |
| Other income (expenses) | ||||||
| Interest income | 153,705 | 354,349 | 56,382 | 25,259 | 60,581 | 9,639 |
| Interest expenses | (486,540) | -- | -- | (159,648) | -- | -- |
| Interest expenses - amortization of discount on convertible notes payable | (345,826) | -- | -- | (263,418) | -- | -- |
| Interest expenses - amortization of deferred loan costs | (271,665) | -- | -- | (79,651) | -- | -- |
| Gains on derivative liabilities | 348,876 | 3,168 | 504 | 9,355 | -- | -- |
| Other expenses | 554,698 | 802,455 | 127,682 | 554,698 | 803,559 | 127,858 |
| Foreign currency exchange loss | 32,499 | 15,906 | 2,531 | (21,464) | 8,227 | 1,309 |
| Loss from continuing operations before income tax | (21,206,461) | (13,396,113) | (2,131,510) | (3,123,590) | (3,074,758) | (489,238) |
| Less: Income tax benefit | (4,169,382) | (5,852,627) | (931,235) | (581,414) | (937,151) | (149,114) |
| Loss from continuing operations | (17,037,079) | (7,543,486) | (1,200,275) | (2,542,176) | (2,137,607) | (340,124) |
| Less: Net loss attributable to the non-controlling interest | (511,423) | -- | -- | -- | -- | -- |
| Net loss from continuing operations attributable to eFuture Information Technology Inc. | (16,525,656) | (7,543,486) | (1,200,275) | (2,542,176) | (2,137,607) | (340,124) |
| Discontinued operations | ||||||
| Gain from discontinued operations (including gain on disposal of ¥6,701,170 and nil, respectively) | 5,609,352 | -- | -- | -- | -- | -- |
| Less: Income tax expenses | -- | -- | -- | -- | -- | -- |
| Gain from discontinued operations | 5,609,352 | -- | -- | -- | -- | -- |
| Net loss | (10,916,304) | (7,543,486) | (1,200,275) | (2,542,176) | (2,137,607) | (340,124) |
| Loss per share | ||||||
| Basic | (2.64) | (1.84) | (0.29) | (0.62) | (0.52) | (0.08) |
| - Continuing operations | (4.00) | (1.84) | (0.29) | (0.62) | (0.52) | (0.08) |
| - Discontinued operations | 1.36 | -- | -- | -- | -- | -- |
| Diluted | (2.64) | (1.84) | (0.29) | (0.62) | (0.52) | (0.08) |
| - Continuing operations | (4.00) | (1.84) | (0.29) | (0.62) | (0.52) | (0.08) |
| - Discontinued operations | 1.36 | -- | -- | -- | -- | -- |
| Basic Weighted-average Shares Outstanding | 4,130,221 | 4,109,188 | 4,109,188 | 4,130,221 | 4,082,729 | 4,082,729 |
| Fully-Diluted Weighted-average Shares Outstanding | 4,132,035 | 4,109,188 | 4,109,188 | 4,130,221 | 4,153,046 | 4,153,046 |
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2848 | |
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||
| Chinese Yuan (Renminbi) | U.S. Dollars | ||
| December 31, | September 30, | September 30, | |
| 2011 | 2012 | 2012 | |
| (Audited) | (Unaudited) | (Unaudited) | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 57,157,078 | 39,065,725 | 6,215,906 |
| Trade receivables, net of allowance for doubtful accounts of ¥3,559,207 and ¥3,996,384($635,881), respectively | 19,904,642 | 22,599,281 | 3,595,863 |
| Refundable value added tax | 6,950,923 | 1,902,669 | 302,741 |
| Advances to employees | 1,749,427 | 1,681,963 | 267,624 |
| Advances to suppliers | 331,040 | 4,688 | 746 |
| Other receivables due from previously consolidated entities | 1,067,000 | 555,000 | 88,308 |
| Other receivables | 2,021,053 | 6,523,509 | 1,037,983 |
| Prepaid expenses | 1,465,219 | 1,811,684 | 288,264 |
| Inventory and work in process, net of inventory provision of ¥4,507,846 and ¥3,140,328($499,670), respectively | 28,001,490 | 35,146,226 | 5,592,258 |
| Total current assets | 118,647,872 | 109,290,745 | 17,389,693 |
| Non-current assets | |||
| Long-term investments, net of impairment of ¥240,000 and ¥240,000($38,187), respectively | -- | -- | -- |
| Property and equipment, net of accumulated depreciation of ¥5,748,528 and ¥7,240,973($1,152,141), respectively | 3,930,974 | 4,693,350 | 746,778 |
| Intangible assets, net of accumulated amortization of ¥65,846,644 and ¥71,381,635($11,357,821), respectively | 17,190,976 | 21,978,170 | 3,497,036 |
| Goodwill | 80,625,667 | 80,625,667 | 12,828,677 |
| Deferred tax assets | -- | 4,890,972 | 778,222 |
| Total non-current assets | 101,747,617 | 112,188,159 | 17,850,713 |
| Total assets | 220,395,489 | 221,478,904 | 35,240,406 |
| LIABILITIES AND EQUITY | |||
| Current liabilities | |||
| Trade payables | 12,500,602 | 13,430,724 | 2,137,017 |
| Other payables | 12,525,300 | 10,847,875 | 1,726,049 |
| Accrued expenses | 14,464,113 | 8,601,310 | 1,368,589 |
| Taxes payable | 4,205,734 | 1,159,692 | 184,523 |
| Advances from customers | 49,653,714 | 64,457,695 | 10,415,241 |
| Deferred tax liabilities, current portion | 623,600 | 75,075 | 11,945 |
| Total current liabilities | 93,973,063 | 99,572,371 | 15,843,364 |
| Long-term liabilities | |||
| Derivative liabilities | 3,168 | -- | -- |
| Deferred tax liabilities | 413,130 | -- | -- |
| Total long-term liabilities | 416,298 | -- | -- |
| Equity | |||
| Ordinary shares, $0.0756 U.S. dollars par value; 6,613,756 shares authorized; 3,937,221 shares and 3,883,076 shares issued and outstanding, respectively | 2,353,068 | 2,327,207 | 370,291 |
| Additional paid-in capital | 225,411,222 | 228,880,974 | 36,418,179 |
| Statutory reserves | 3,305,527 | 3,305,527 | 525,956 |
| Accumulated deficits | (105,063,689) | (112,607,175) | (17,917,384) |
| Total equity | 126,006,128 | 121,906,533 | 19,397,042 |
| Total liabilities and equity | 220,395,489 | 221,478,904 | 35,240,406 |
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2848 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| Nine months ended | Three months ended | |||||
| Chinese Yuan (Renminbi) | U.S. Dollars | Chinese Yuan (Renminbi) | U.S. Dollars | |||
| September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |
| 2011 | 2012 | 2012 | 2011 | 2012 | 2012 | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| Cash flows from operating activities: | ||||||
| Net loss | (10,916,304) | (7,543,486) | (1,200,275) | (2,542,176) | (2,137,607) | (340,124) |
| Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||
| Depreciation of property and equipment | 1,410,508 | 1,492,445 | 237,469 | 406,585 | 501,814 | 79,846 |
| Amortization of intangible assets | 8,723,303 | 5,963,992 | 948,955 | 2,664,248 | 1,369,180 | 217,856 |
| Amortization of discount on convertible notes payable | 345,826 | -- | -- | 263,418 | -- | -- |
| Amortization of deferred loan costs | 271,665 | -- | -- | 79,651 | -- | -- |
| Gains on extinguishment of debt | (382,889) | -- | -- | (382,889) | -- | -- |
| Gains on derivative liabilities | (348,876) | (3,168) | (504) | (9,335) | -- | -- |
| Investment income | (6,701,170) | -- | -- | -- | -- | -- |
| Loss on disposal of property and equipment | 72,844 | -- | -- | 52,400 | -- | -- |
| Allowance for doubtful accounts | 2,638,516 | 2,300,859 | 366,099 | 1,550,631 | 663,829 | 105,625 |
| Provision (Reversal) for loss in inventory and work in process | 1,041,943 | 1,410,854 | 224,487 | (85,909) | -- | -- |
| Compensation expenses | 4,008,380 | 4,798,568 | 763,520 | 1,235,739 | 1,066,424 | 169,683 |
| Deferred income taxes | (4,169,381) | (5,852,628) | (931,235) | (581,414) | (937,152) | (149,114) |
| Foreign exchange gain | (235,644) | (15,405) | (2,451) | (9,640) | (8,083) | (1,286) |
| Non-controlling interest | (511,423) | -- | -- | -- | -- | -- |
| Changes in assets and liabilities: | ||||||
| Trade receivables | (6,008,807) | (4,995,498) | (794,854) | (3,646,831) | (943,505) | (150,125) |
| Refundable value added tax | (1,421,511) | 5,048,254 | 803,248 | (1,360,298) | 596,027 | 94,836 |
| Advances to employees | 64,431 | 67,464 | 10,734 | 47,275 | 4,313 | 686 |
| Advances to suppliers | 2,009,294 | 57,340 | 9,124 | 4,826,730 | -- | -- |
| Other receivables | 823,165 | (3,990,456) | (634,938) | 1,566,827 | 667,012 | 106,131 |
| Prepaid expenses | (685,046) | (346,465) | (55,127) | 266,120 | 981,058 | 156,100 |
| Inventory and work in process | (33,476,906) | (8,555,589) | (1,361,314) | (9,677,303) | (3,228,678) | (513,728) |
| Trade payables | 9,085,873 | 930,122 | 147,995 | 3,243,626 | 1,565,713 | 249,127 |
| Other payables | (2,268,859) | (1,677,425) | (266,902) | (772,495) | (733,900) | (116,774) |
| Accrued expenses | (5,401,833) | (5,862,803) | (932,854) | 416,885 | 745,474 | 118,615 |
| Taxes payable | (7,334,790) | (3,046,042) | (484,668) | (848,576) | (281,831) | (44,843) |
| Advances from customers | 26,500,299 | 15,803,981 | 2,514,634 | 3,358,299 | 12,510,960 | 1,990,670 |
| Net cash provided by (used in) operating activities | (22,867,392) | (4,015,086) | (638,857) | 61,548 | 12,401,048 | 1,973,181 |
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (1,314,446) | (1,985,809) | (315,970) | (1,059,594) | (361,195) | (57,471) |
| Payments for intangible assets | (4,561,032) | (10,751,186) | (1,710,665) | (2,141,717) | (3,805,291) | (605,475) |
| Cash paid for share repurchase | -- | (1,354,677) | (215,548) | -- | (1,354,677) | (215,548) |
| Cash received from disposal of property and equipment | 3,000 | -- | -- | 3,000 | -- | -- |
| Disposal of investments | 5,895,999 | -- | -- | -- | -- | -- |
| Net cash provided by (used in) investing activities | 23,521 | (14,091,672) | (2,242,183) | (3,198,311) | (5,521,163) | (878,494) |
| Cash flows from financing activities: | ||||||
| Net cash provided by financing activities | -- | -- | -- | -- | -- | -- |
| Effect of exchange rate changes on cash and cash equivalents | 105,449 | 15,045 | 2,452 | (98,985) | 8,083 | 1,286 |
| Net increase (decrease) in cash and cash equivalents | (22,738,422) | (18,091,353) | (2,878,588) | (3,235,721) | 6,887,968 | 1,095,973 |
| Change in cash and cash equivalents included in the current assets of discontinued operations | 516,322 | -- | -- | -- | -- | -- |
| Cash and cash equivalents at beginning of period | 73,250,856 | 57,157,078 | 9,094,494 | 54,264,477 | 32,177,757 | 5,119,933 |
| Cash and cash equivalents at end of period | 51,028,756 | 39,065,725 | 6,215,906 | 51,028,756 | 39,065,725 | 6,215,906 |
| Supplemental cash flow information | ||||||
| Interest paid | 323,175 | -- | -- | -- | -- | -- |
| EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES | Exchange rate | 6.2848 | ||||
| NON-GAAP MEASURES OF PERFORMANCE | ||||||
| Nine months ended | Three months ended | |||||
| Chinese Yuan (Renminbi) | U.S. Dollars | Chinese Yuan (Renminbi) | U.S. Dollars | |||
| September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |
| 2011 | 2012 | 2012 | 2011 | 2012 | 2012 | |
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA | ||||||
| Operating loss (GAAP Basis) | (21,192,208) | (14,571,991) | (2,318,609) | (3,188,721) | (3,947,125) | (628,044) |
| Adjustments for non-GAAP measures of performance: | ||||||
| Add back amortization of acquired software technology | 6,096,678 | 4,042,853 | 643,275 | 1,736,300 | 685,832 | 109,126 |
| Add back amortization of intangibles | 2,578,528 | 1,921,139 | 305,680 | 927,949 | 683,348 | 108,730 |
| Add back share-based compensation expenses | 4,008,449 | 4,798,568 | 763,520 | 1,235,739 | 1,066,424 | 169,683 |
| Adjusted non-GAAP operating income/(loss) | (8,508,553) | (3,809,431) | (606,134) | 711,267 | (1,511,521) | (240,505) |
| Add back depreciation | 1,362,168 | 1,492,445 | 237,469 | 406,585 | 501,814 | 79,846 |
| Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) | (7,146,385) | (2,316,986) | (368,665) | 1,117,852 | (1,009,707) | (160,659) |
| NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA, as a percentage of revenue | ||||||
| Operating loss (GAAP BASIS) | -24% | -15% | -15% | -8% | -11% | -11% |
| Adjustments for non-GAAP measures of performance: | ||||||
| Amortization of acquired software technology | 7% | 4% | 4% | 4% | 2% | 2% |
| Amortization of intangibles | 3% | 2% | 2% | 2% | 2% | 2% |
| Share-based compensation expenses | 5% | 5% | 5% | 3% | 3% | 3% |
| Adjusted non-GAAP operating loss | -10% | -4% | -4% | 2% | -4% | -4% |
| Depreciation | 2% | 1% | 1% | 1% | 1% | 1% |
| Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) | -8% | -2% | -2% | 3% | -3% | -3% |
| NON-GAAP EARNINGS PER SHARE | ||||||
| Net loss from continuing operations | (16,525,656) | (7,543,486) | (1,200,275) | (2,542,176) | (2,137,607) | (340,124) |
| Amortization of acquired software technology | 6,096,678 | 4,042,853 | 643,275 | 1,736,300 | 685,832 | 109,126 |
| Amortization of intangibles | 2,578,528 | 1,921,139 | 305,680 | 927,949 | 683,348 | 108,730 |
| Share-based compensation expenses | 4,008,449 | 4,798,568 | 763,520 | 1,235,739 | 1,066,424 | 169,683 |
| Accretion on convertible notes | 345,826 | -- | -- | 263,418 | -- | -- |
| Adjusted Net Income/(Loss) | (3,496,175) | 3,219,074 | 512,200 | 1,621,230 | 297,997 | 47,415 |
| Adjusted non-GAAP diluted earnings/(loss) per share | (0.85) | 0.78 | 0.12 | 0.39 | 0.07 | 0.01 |
| Shares used to compute non-GAAP diluted earnings per share | 4,130,221 | 4,109,188 | 4,109,188 | 4,130,221 | 4,153,046 | 4,153,046 |