BEIJING, Dec. 7 /PRNewswire-Asia/ -- eFuture Information Technology
Inc. (Nasdaq: EFUT, the "Company" or "eFuture"), a leading provider
of software and services in China's rapidly growing retail and
consumer goods industries, today announced its unaudited financial
results for the third fiscal quarter ended September 30, 2009.
Financial Highlights - Third Quarter 2009 RMB Unaudited Unaudited
Quarter Ended Quarter Ended September 30, 2008 September 30, 2009
Reported Restated Profit and Loss (selected) Total Revenue
27,357,120 27,357,120 25,212,578 Total Cost of Revenue 14,265,327
14,265,327 15,570,716 Gross profit 13,091,793 13,091,793 9,641,862
Total Expenses 12,560,484 12,567,783 15,514,887 Income (loss) from
operations 531,309 524,010 (5,873,024) Net Income (loss)
(28,055,290) 7,559,384 (4,162,706) Comprehensive Income/Loss
7,559,384 (4,162,706) Net Income per share Basic (8.93) 2.41 (1.24)
Diluted (8.93) 2.41 (1.24) -- The significant change from net loss
to net income for the third quarter 2008 after the restatement of
2008 results was due to the application of different accounting
treatments on the Company's convertible note. -- Total revenues
decreased 7.84% year-over-year to RMB25.21 million (US$3.69
million). -- Service fee income increased 30.84% year-over-year to
RMB10.60 million (US$1.55 million). -- Revenue from software
license sales decreased 16.82% year-over-year to RMB13.81 million
(US$2.02 million). -- Revenue from hardware sales decreased 69.83%
year-over-year to RMB0.80 million (US$0.12 million) in the third
quarter of 2008. -- Gross profit decreased 26.35% year-over-year to
RMB9.64 million (US$1.41 million). Gross margin decreased to 38.24%
from 56.05% in the third quarter of 2008. -- Operating loss was
RMB5.87 million (US$0.86 million), compared to operating income of
RMB0.52 million in the third quarter of 2008. -- Net loss was
RMB4.16 million (US$0.61 million), compared to net income of
RMB7.56 million in the third quarter of 2008. -- Diluted net loss
per share was RMB1.24 (US$0.18), compared to net income per share
of RMB2.41 for the third quarter of 2008. -- Operating cash flow
was -RMB15.22 million (-US$2.23 million). -- Adjusted net income
(non-GAAP) reduced 94.37% year-over-year to RMB0.71 million
(US$0.10 million). -- Non-GAAP adjusted diluted earnings per share
was RMB0.21 (US$0.03). Management Strategic Imperatives: eFuture's
management initiated four key strategic priorities to build
shareholder value by strengthening financial reporting and
management and operational efficiency, realigning sales and
marketing initiatives and investing in R&D to expand the
Company's addressable markets. Financial Enhancement - Restatement
Completed -- As announced on June 19, 2009, the Company determined
to adjust its financial results for 2007, 2008 and the first
quarter of 2009. As of November 19, 2009, the Company has completed
its financial review and restatement of results, and believes that
all outstanding issues regarding the periods in question have been
satisfactorily rectified. -- The adjustments were made in 3
specific areas: (i) establishing a RMB7.02 million depository
reserve for employees' social security; (ii) correcting the timing
of the Company's recognition of revenues upon sales of some of its
software products, and (iii) allocating costs of revenues based on
labor costs. Both (i) and (ii) have no material change to the
reporting of costs of revenues. -- In conjunction with its
financial review, management has implemented decisive measures to
improve eFuture's internal financial controls and systems,
including implementing an extensive review of its accounting
procedures that benchmark industry best practices. In addition, to
further bolster its financial controls, the company appointed Grant
Thornton as its independent registered accounting firm. Management
believes that its financial reporting and controls have been
significantly improved as a result of this process. Management and
Operational Enhancements -- As announced on December 4, 2009,
eFuture appointed Mr. Dehong Yang in the newly created position of
President. -- Mr. Yang, who will officially enter into his new role
on January 1, 2010, has upwards of 10 years experience in
international business and global best practices, as well as a
proven track record of successfully implementing and driving
strategic initiatives. Mr. Yang brings to eFuture extensive
experience in the retail, e-commerce and distribution markets
having held senior roles at leading international IT companies
including Wincor Nixdorf and IBM. -- In his new role as President
of eFuture, Mr. Yang will be responsible for company wide
operations, and will support the development and execution of
eFuture's key strategic priorities, which include: -- To review and
implement a competitive cost base aligned with industry-benchmarked
companies to enhance profitability; -- To review and develop
eFuture's sales and marketing strategies to effectively strengthen
leadership positions and expand the Company's market share and
addressable markets; -- To review and devise strategic plans
designed to create a world- class operational platform with systems
that enhance the efficiency in the evaluation of business
potentials and sales performance, deployment of resources and
R&D investment to help eFuture capitalize on the strong growth
opportunities in China's rapidly growing retail and consumer goods
software and services industry. Sales and Marketing restructuring
-- Currently, 80% of the Company's revenue come from clients in 8
out of 19 provinces in tier-one cities. In order to expand its
addressable markets geographically, the Company has initiated an
extensive sales and marketing campaign in early 2009 designed to
reach into tier-two and tier-three cities. -- Since early 2009, the
Company has redeployed approximately 35% of its sales force to
expand new client development in tier-two and tier-three cities in
China. Management deems this initiative as a critical building
block of the Company's growth strategy to significantly increase
the geographical reach for its services. The Company has made solid
progress in the following areas: -- At the end of the second
quarter 2009, the Company had expanded its sales and marketing
outreach efforts in two, one and 40 tier-two, tier-three and
tier-four cities, respectively, significantly strengthening its
pipeline. -- At the end of the third quarter 2009, eFuture had
further increased its sales and marketing outreach in 4, 37 and 64
tier-two, tier- three and tier-four cities, respectively, resulting
in the development of 1,287 new business leads. -- In conjunction
with its sales force redeployment, eFuture has invested
approximately RMB7.5 million in a new marketing initiative plan.
The goal of this plan is to support the expansion of the Company's
geographic coverage by deepening its penetration in China's
tier-two and tier-three cities, while providing seamless support
for its global and top accounts as they look to expand into these
regions in China. -- As of December 7, 2009, the Company's pipeline
has grown to over 1,000 clients with operations in 350 cities
across China. Management believes this deep pipeline will help to
generate new contract signings beginning in 2010. -- As a component
of its sales and marketing plan, and in addition to the
restructuring of its Small and Medium Businesses ("SMB") business
unit, the Company has also established a new specialized marketing
team with approximately 50 staff distributed across China in order
to speed up the sales cycle, bolster sales and increase eFuture's
market share in all the key markets in China. Investment in R&D
Over the last nine months, management has increased investment in
new products and services to RMB6.90 million to increase revenue
potential from existing clients and drive the expansion of
eFuture's addressable markets: -- eFuture Business Intelligence
("BI") Solutions -- eFuture's fully integrated suite of BI software
solutions provide retailers with the ability to better understand
customer buying behavior, to drive sales and profitability, to
decrease supply chain costs, and to reduce operational costs. --
eFuture BI integrates data from across the customer's enterprise,
and provides easily accessible self-service reporting and analysis.
-- The Company developed and launched its BI solutions to address
the needs of its Key Account Strategic Business Unit ("SBU") in
three areas: marketing, operations and merchandizing. -- The
Company is currently conducting a trial with one client to
ascertain the market reception and potential of this product line.
-- eFuture ONE CRM -- eFuture ONE CRM provides a robust platform
for retail and consumer clients to analyze customer and
transactional data in order to strategically profile and segment
customers to predict their future behavior. -- Specific solutions
offer profiling and segmentation of retail outlets based on
transaction history and trade area demographics; market-basket
analysis for determining which products are likely to be purchased
together; tracking of customer movement between segments; analysis
of customer behavior and price sensitivity; and customized reports
of customer data based on a variety of inputs. -- The eFuture CRM
system is specifically designed to cater to the growing needs of
customers in our Department Store SBU. -- Thus far in 2009, the
Company has successfully completed CRM pilot programs with a few
major Beijing-based department store groups, with positive market
reception. Business and Operational Highlights: Core Business
(Software License, Hardware and Service Businesses) -- The economic
downturn had a significant impact on the Company's hardware
business in the second quarter of 2009, as customers, especially in
the Logistics, Department Store and Supermarket SBUs, delayed new
store openings. This sudden decrease in the Company's new project
pipeline in turn impacted revenue contribution from these SBUs in
the third quarter 2009. -- However, customers maintained a solid
level of investment in upgrading systems in existing stores. As a
result, the Company closed over 625 new contracts through the third
quarter of 2009 for an aggregate of approximately RMB93.7 million
in the first three quarters of 2009. The Company believes these new
contracts reflect signs of a rebound in the Department Store and
Supermarket SBUs. -- Despite the slowdown, revenue from existing
clients remained relatively stable with revenue reaching RMB20.45
million for the third quarter of 2009. -- Management believes there
are now positive signs of a market rebound, as total new contracts
for the third quarter 2009 increased by 84% year-over-year to 285,
representing RMB36.9 million, or a year-over- year increase of
12.8%. -- The Company entered into strategic relationships with
Microsoft Corporation ("Microsoft") to provide a standardized
POS-ERP system for retailers in China. This system will integrate
Microsoft Windows Embedded POSReady 2009 into eFuture's POS-ERP
Store Operation System. Management expects that leveraging
eFuture's nationwide retail customer base and Microsoft's worldwide
reputation will allow eFuture to deliver a reliable and seamlessly
integrated POS solution to companies throughout China. eService
Business In line with eFuture's organic growth strategy to expand
its eService offering, the Company is beginning to see growing
interest from existing clients to scale-up and expand their
relationship with eFuture by utilizing its eService applications.
-- The Company started to deploy the bundled package offering
bFuture SCM SaaS service with POS-ERP in two SBUs, the Department
Store and Shopping Mall SBU and the Grocery Business SBU. -- The
Company has installed and is currently serving three retailers and
their 3,000 suppliers with the bundled POS-ERP package. In
addition, over 10 retailers are in the process of deploying the
package. Following deployment, these retailers will be able to open
SaaS services with their suppliers. We expect to see more
profitable growth from this service as we increase the scale of the
operation. Mr. Adam Yan, Chairman and Chief Executive Officer of
eFuture, said, "Our results for the quarter were impacted by
decreased sales from our Logistic, Supermarket and Department Store
customers, many of whom delayed plans for new store openings in the
second quarter of 2009 as result of the economic downturn, which in
turn affected the revenue contribution from these segments in the
third quarter. As both the Supermarket and Department Store SBUs
together accounted for just under half of our revenue for the third
quarter, this impact was significant. However, we see very
encouraging signs of a recovery, especially in our Logistics SBU,
which secured new contracts valued at approximately RMB20 million
during the third quarter of 2009. "More importantly, we have
continued to invest throughout the downturn in our business with
the goal of creating more stringent financial controls, a more
efficient operating platform, a more focused sales and marketing
strategy, and more robust R&D capabilities. Our efforts to
achieve these goals began by initiating four key strategic
imperatives, beginning with the enhancement of our internal
financial controls and the restatement of our results for certain
periods; enhancement of our management team and operational
structure with the hiring of Mr. Dehong Yang as President; a
realignment and refocusing of our sales and marketing efforts to
build market share in all key markets in China including tier-two
and tier-three cities; and, continued investment in R&D which
has led to the introduction of a number of new products including
our eFuture BI Solution and eFuture ONE CRM. "I am pleased to see
progress made across all of our key strategic imperatives to date.
However, we recognize that a good deal of work lies ahead of us.
Despite recent challenges, we continue to believe that our leading
position in a fragmented market, growing nationwide coverage,
robust product and services portfolio, strong brand recognition
among local and international clients, partnership with leading
global technology companies, and large installed base of customers
will continue to position us well to capitalize on the strong
growth catalysts within our industry. We will continue to execute
on our growth strategy to invest in innovation, expand our customer
base in tier-two and tier-three cities, and actively pursue
domestic and international clients, while maintaining an unwavering
commitment to build long-term shareholder value." Third Quarter
2009 Unaudited Financial Results Revenue Revenue for the third
quarter decreased 7.84% to RMB25.21 million (US$3.69 million) from
RMB27.36 million in the third quarter 2008 mainly due to a
slow-down in hardware and software sales. Software license revenues
decreased by 16.82% year-over-year to RMB13.81 million (US$2.02
million), primarily attributable to decreased sales in our
Supermarkets, Logistics and Department Store and Shopping Mall
SBUs, as customers within these segments were affected by the
economic slow-down. Service fee income increased by 30.84%
year-over-year, and as a percentage of revenue continued to
increase and accounted for 42.05% of total revenue in the third
quarter, as compared to 29.62% in the same period last year.
Revenue Breakdown Unaudited Quarter Ended September 30, 2008
Unaudited Quarter Ended (as restated) September 30, 2009 RMB
(thousands) RMB USD Year Over Year (thousands) (thousands) Change
Software license sales 16,602 13,810 2,023 -16.82% Hardware sales
2,651 800 117 -69.83% Service fee income 8,104 10,603 1,553 30.84%
Total 27,357 25,213 3,694 7.84% Cost of Revenues The cost of
revenue for the third quarter increased 9.15% to RMB15.57 million
(US$2.28 million) from RMB14.27 million in the third quarter 2008.
Cost of Revenues Breakdown Unaudited Quarter Ended September 30,
2008 Unaudited Quarter Ended (as restated) September 30, 2009 RMB
(thousands) RMB USD Year Over Year (thousands)(thousands) Change
Cost of software license sales 5,313 4,380 642 -17.56% Cost of
hardware sales 2,026 650 95 -67.92% Cost of service fee 2,698 6,450
945 139.03% Amortization of acquired technology 3,337 3,063 449
-8.20% Amortization of software costs 892 1,028 151 15.29% Total
14,265 15,571 2,281 9.15% The increase in cost of service fee
income was primarily due to the accounting adjustment made to the
reallocation of work in progress from inventory to cost of
revenues. Gross Profit Third quarter 2009 gross profit decreased
26.35% year-over-year to RMB9.64 million (US$1.41 million), from
RMB13.09 million in the third quarter of 2008. Consolidated gross
margin for the third quarter of 2009 was 38.24% compared with
56.05% in the third quarter of 2008. Operating Expenses Research
and development expenses for the third quarter of 2009 increased
90.89% year-over-year to RMB427,195 (US$62,582) compared with
RMB223,792 in the third quarter of 2008. The year-over-year
increase was a result of recognition of R&D expenses related to
products which have not yet reached feasibility. General and
administrative expenses for the third quarter of 2009 decreased
11.10% year-over-year to RMB7.17 million (US$1.05 million), or
28.45% of total revenues, compared with RMB8.07 million, or 29.50%
of total revenue in the third quarter of 2008. The decrease in
general and administrative expenses as a percentage of revenues was
primarily due to increased office maintenance expenses. Selling and
distribution expenses for the third quarter increased 85.13%
year-over-year to RMB7.91 million (US$1.16 million), or 31.39% of
total revenues, compared with RMB4.27 million, or 15.63% of total
revenue in third quarter 2008. The increase was due to our
continued investment in building our regional sales/marketing teams
to enhance our presence in tier-two and tier-three cities.
Operating Income/Loss Operating loss in the third quarter was
RMB5.87 million (US$0.86 million), compared with an operating
income of RMB0.52 million in the third quarter of 2008. Net
Income/Loss and EBITDA As a result of the foregoing, third quarter
net loss was RMB4.16 million (US$0.61 million) compared with a net
income of RMB7.56 million in the third quarter of 2008. Basic and
diluted losses per share in the third quarter were both RMB1.24
(US$0.18), compared to basic and diluted net income per share of
RMB2.41 in the third quarter of 2008. Adjusted net income
(non-GAAP) for the third quarter decreased 94.37% year-over-year to
RMB0.71 million (US$0.10 million). Adjusted net income excludes
amortization of acquired software technology, amortization of
intangibles, share-based compensation expenses and accretion on
convertible notes. Third quarter 2009 adjusted non-GAAP diluted
earnings per share was RMB0.21 (US$0.03). Non-GAAP diluted earnings
per share excludes amortization of acquired software technology,
amortization of intangibles, share-based compensation expenses and
accretion on convertible notes. EBITDA (non-GAAP) for the third
quarter was -RMB0.72 million (-US$0.10 million), compared with
RMB6.18 million in the third quarter of 2008. Balance Sheet and
Cash Flow In the third quarter, net cash loss from operating
activities was RMB15.22 million (US$2.23 million), while net cash
used in investing activities was RMB10.13 million (US$1.48
million). As of September 30, 2009, cash and cash equivalents
decreased 9.55% from June 30, 2009 to RMB35.46 million (US$5.19
million), mainly due to a decrease in cash inflow related to the
economic slow down. Total accounts receivable as of September 30,
2009 decreased 0.92% to RMB12.39 million (US$1.82 million) from
RMB12.51 million as of June 30, 2009. Inventories as of September
30, 2009 decreased 23.78% quarter-over-quarter to RMB8.51 million
(US$1.25 million) due to the decrease in work-in process. Business
Outlook and Revision of 2009 Annual Guidance While the operating
environment remains challenging, we are beginning to see positive
signs of a recovery in our Logistics, Supermarket and Department
Store SBUs. As evidence, we closed a total of over 500 new
contracts in our Supermarket and Department Store SBUs in the third
quarter, and our total contracts in the third quarter showed
significant growth year-over-year As explained above, revenues from
eFuture's Supermarket and Department Store SBUs were negatively
impacted as a result of customers unexpectedly delaying new store
openings in the second half of 2009 in response to the economic
downturn. As these two SBUs accounted for over 43% of total
revenue, results have fallen well below management's initial
expectations. As a result, the Company is revising its guidance for
the full year 2009. Management anticipates total revenues to be in
the range of approximately US$17 million to US$18 million. Adjusted
EBITDA (non-GAAP) is expected to be in the range of approximately
breakeven to US$0.7 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 in
the third quarter 2009 financial results have been translated into
US dollars at the rate of RMB6.8262 to US$1.00, the noon buying
rate for US dollars in effect on September 30, 2009 for cable
transfers of RMB per U.S. dollar as certified for customs purposes
by the Federal Reserve Bank of New York. No representation is made
that any amounts were or could be transferred at such rates. Third
Quarter 2009 Results and Conference Call Following the earnings
announcement, eFuture's senior management will host a conference
call on Tuesday, December 8, 2009 at 5:00 am (Pacific) / 8:00 am
(Eastern) / 9:00 pm (China) to discuss its third quarter 2009
financial results and recent business activity. The conference call
may be accessed by calling: United States toll free 1-866-519-4004
China (Landline) 800-819-0121 China (Mobile) 400-620-8038 United
Kingdom toll free 0808-234-6646 Hong Kong toll free 800-930-346
Conference ID 43021457 Please dial-in 10 minutes before the call is
scheduled to begin. A replay of the conference call may be accessed
by phone at the following numbers until 11:00 pm (Eastern),
December 15, 2009: United States toll free 1-866-214-5335 China
North 10-800-7140386 China South 10-800-1400386 United Kingdom toll
free 0800-731-7846 Hong Kong toll free 800-901-596 Conference ID
43021457 Additionally, a live and archived webcast of the
conference call will be available on the investor relations section
of eFuture's website at
http://www.e-future.com.cn/ENG/newshow.asp?id=513 . Use of Non-GAAP
Financial Measures To supplement eFuture's unaudited consolidated
financial results presented in accordance with U.S. GAAP, eFuture
uses the following non-GAAP measures defined as non-GAAP financial
measures by the SEC: adjusted EBITDA excluding amortization of
acquired software technology, amortization of intangibles,
share-based compensation expenses, depreciation, adjusted net
income excluding amortization of acquired software technology,
amortization of intangibles, share-based compensation expenses and
accretion on convertible notes, adjusted basic and diluted earnings
per share excluding amortization of acquired software technology,
amortization of intangibles, share-based compensation expenses and
accretion on convertible notes. The presentation of these non-GAAP
financial measures is not intended to be considered in isolation or
as a substitute for the financial information prepared and
presented in accordance with U.S. GAAP. eFuture believes that these
non-GAAP financial measures provide meaningful supplemental
information regarding its performance and liquidity by excluding
expenses that may not be indicative of its operating performance
from a cash perspective or be indicative of its operating
performance. eFuture believes that both management and investors
benefit from referring to these non-GAAP financial measures in
assessing the Company's performance and when planning and
forecasting future periods. These non-GAAP financial measures also
facilitate management's internal comparisons to eFuture's
historical performance and liquidity. eFuture computes its non-GAAP
financial measures using the same consistent method from quarter to
quarter. The Company believes these non-GAAP financial measures are
useful to investors in allowing for greater transparency with
respect to supplemental information used by management in its
financial and operational decision-making. The accompanying
paragraphs have more details on the reconciliations between GAAP
financial measures that are most directly comparable to non-GAAP
financial measures. eFuture's management also believes that EBITDA,
defined as earnings before interest, income tax expense,
depreciation and amortization is a useful financial metric to
assess its operating and financial performance before the impact of
investing and financing transactions and income taxes. In addition,
eFuture's management believes that EBITDA is widely used by other
companies in the software industry and may be used by investors as
a measure of its financial performance. Given the significant
investments that eFuture has made in property, equipment,
depreciation and amortization expense comprises a meaningful
portion of the Company's cost structure. eFuture's management
believes that EBITDA will provide investors with a useful tool for
comparability between periods because it eliminates depreciation
and amortization expense attributable to capital expenditures. The
presentation of EBITDA should not be construed as an indication
that the Company's future results will be unaffected by other
charges and gains eFuture considers to be outside the ordinary
course of its business. The use of EBITDA and adjusted EBITDA has
certain limitations. Depreciation and amortization expense for
various long-term assets, income tax expense, interest expense and
interest income have been and will be incurred and are not
reflected in the presentation of EBITDA. Further, share-based
compensation expenses have been and will be incurred and are not
reflected in the presentation of adjusted EBITDA. Each of these
items should also be considered in the overall evaluation of
eFuture's financial results. The term EBITDA or adjusted EBITDA is
not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a
measure of net income, operating income, operating performance or
liquidity presented in accordance with U.S. GAAP. When assessing
eFuture's operating and financial performance, you should not
consider this data in isolation or as a substitute for its net
income, operating income or any other operating performance measure
that is calculated in accordance with U.S. GAAP. In addition, the
Company's EBITDA and adjusted EBITDA may not be comparable to
EBITDA or similarly titled measures utilized by other companies
since such other companies may not calculate EBITDA in the same
manner as eFuture does. Statement Regarding Unaudited Financial
Information The unaudited financial information set forth above is
subject to adjustments that may be identified when audit work is
performed on the Company's year-end financial statements, which
could result in significant differences from this unaudited
financial information. About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ:EFUT) is a leading
provider of software and services in China's rapidly growing retail
and consumer goods industries. eFuture provides integrated software
and services to manufacturers, distributors, wholesalers, logistics
companies and retailers in China's front-end supply chain (from
factory to consumer) market, especially in the retail and fast
moving consumer goods industries. eFuture currently serves over 15
Fortune 500 companies, over 1,000 retailers and over 5,000
suppliers operating in China. eFuture is one of IBM's premier
business partners in Asia Pacific and is a strategic partner with
Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture
has more than 600 employees and 20 branch offices across China. For
more information about eFuture, please visit
http://www.e-future.com.cn/ . Safe Harbor This announcement
contains forward-looking statements. These statements are made
under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes,"
"estimates" and similar statements. Among other things, 2009
financial outlook and quotations from management in this
announcement, as well as strategic and operational plans, contain
forward-looking statements. eFuture may also make written or oral
forward-looking statements in periodic reports to the Securities
and Exchange Commission (the "SEC"), in its annual report to
shareholders, in press releases and other written materials and in
oral statements made by its officers, directors or employees to
second parties. Statements that are not historical facts, including
statements about the Company's beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the
following: eFuture's anticipated growth strategies; eFuture's
future business development, results of operations and financial
condition; expected changes in the Company's revenues and certain
cost or expense items; eFuture's ability to attract customers and
leverage its brand; trends and competition in the software
industry; the Company's ability to control expenses and maintain
profit margins; the Company's ability to hire, train and retain
qualified managerial and other employees; the Company's ability to
develop new software and pilot new business models at desirable
locations in a timely and cost-effective manner; the performance of
third parties under contracts with the Company; the expected growth
of the Chinese economy software market in retail and consumer goods
industries; and Chinese governmental policies relating to private
managers and operators of software and applicable tax rates.
Further information regarding these and other risks is included in
eFuture's annual report on Form 20-F and other documents filed with
the SEC. All information provided in this press release and in the
attachments is as of November 19, 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: +86-10-5293-7699
Email: Investor Relations (HK): Ruby Yim Taylor Rafferty Tel:
+852-3196-3712 Email: Investor Relations (US): Mahmoud Siddig
Taylor Rafferty Tel: +1-212-889-4350 Email: Media Contact: Jason
Marshall Taylor Rafferty Tel: +1-212-889-4350 Email: -- FINANCIAL
TABLES TO FOLLOW -- E-FUTURE INFORMATION TECHNOLOGY INC. AND
SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS Chinese Yuan
(Renminbi) U.S. Dollars December 31, September 30, September 30,
2008 2009 2009 (Unaudited) (Unaudited) (Unaudited) ASSETS Current
assets Cash and cash equivalents 60,787,734 35,456,533 5,194,183
Trade receivables, less allowance for doubtful accounts of
RMB4,743,679 and RMB5,108,221($748,326), respectively 19,468,029
12,391,138 1,815,232 Refundable value added tax 2,755,702 2,651,527
388,434 Deposits -- -- -- Advances to employees 3,205,953 4,612,444
675,697 Advances to suppliers 198,752 422,139 61,841 Other
receivables 2,229,535 3,952,932 579,082 Prepaid expenses 735,083
1,636,601 239,753 Inventory and work in process 2,879,250 8,508,900
1,246,506 Total current assets 92,260,038 69,632,214 10,200,729
Non-current assets Long-term investments 654,192 654,192 95,835
Long term deferred expense -- 75,000 10,987 Deferred loan costs
1,182,588 924,587 135,447 Property and equipment, net of
accumulated depreciation of RMB3,020,838 and
RMB3,852,569($564,380), respectively 3,605,458 4,047,329 592,911
Intangible assets, net of accumulated amortization of RMB34,704,373
and RMB46,117,730($6,755,989), respectively 49,875,082 47,258,138
6,923,052 Goodwill 91,284,735 91,284,735 13,372,702 Total
non-current assets 146,602,055 144,243,981 21,130,934 Total assets
238,862,093 213,876,195 31,331,663 LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities Trade accounts payable 5,646,259
1,695,975 248,451 Other payable 11,097,702 14,333,809 2,099,823
Accrued expenses 6,873,703 3,496,183 512,171 Accrued interest --
92,154 13,500 Taxes payable 7,933,734 5,027,189 736,455 Advances
from customers 22,839,530 27,151,634 3,977,562 Royalstone
acquisition obligation, net of current portion 6,416,970 6,420,451
940,560 Health field acquisition obligation 594,000 553,365 81,065
Proadvancer System acquisition obligation 29,958,518 29,974,765
4,391,135 BFuture acquisition obligation 392,877 392,877 57,554
Deferred tax, current portion 1,553,197 388,299 56,884 Total
current liabilities 93,306,490 89,526,700 13,115,160 Long-term
liabilities Royalstone acquisition obligation -- -- -- 3%-10%
RMB6,826,200 ($1,000,000) convertible note payable, net of
RMB6,794,147 ($995,304) of unamortized discount 26,068 32,053 4,696
Derivative liabilities 5,111,417 5,655,029 828,430 Minority
shareholder interests 204,414 (16,750) (2,454) Deferred tax
5,458,232 4,272,007 625,825 Total long-term liabilities 10,800,131
9,942,338 1,456,497 Shareholders' equity Ordinary shares, $0.0756
U.S. dollars par value; 6,613,756 shares authorized; 2,924,702
shares and 3,362,241 shares outstanding, respectively 2,039,196
2,039,196 298,731 Additional paid-in capital 173,054,651
175,348,931 25,687,634 Statutory reserves 3,084,020 3,084,020
451,792 Accumulated deficit (43,422,395) (66,064,990) (9,678,150)
Total shareholders' equity 134,755,472 114,407,156 16,760,006 Total
liabilities and shareholders' equity 238,862,093 213,876,195
31,331,663 E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS Three Months Ended
September 30,2008 June 30,2009 September 30,2009 RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues Software
sales 16,602,397 10,611,112 13,809,558 2,023,023 Hardware sales
2,650,771 -- 799,850 117,173 Service fee income 8,103,952
11,594,726 10,603,170 1,553,305 Total Revenues 27,357,120
22,205,838 25,212,578 3,693,501 Cost of revenues Cost of software
5,312,887 3,526,283 4,379,759 641,610 Cost of hardware 2,025,567 --
649,717 95,180 Cost of service fee income 2,698,429 4,937,353
6,449,959 944,883 Amortization of acquired technology 3,336,837
3,018,653 3,063,315 448,758 Amortization of software costs 891,606
905,642 1,027,965 150,591 Total Cost of Revenue 14,265,327
12,387,931 15,570,716 2,281,022 Gross Profit 13,091,793 9,817,907
9,641,862 1,412,479 Operating Expenses Research and development
223,792 92,179 427,195 62,582 General and Administrative 8,069,198
10,032,444 7,173,665 1,050,902 Selling and distribution expenses
4,274,793 9,443,587 7,914,027 1,159,361 Total Operating Expenses
12,567,783 19,568,210 15,514,887 2,272,844 Profit/(loss) from
operations 524,010 (9,750,303) (5,873,024) (860,365) Interest
income 353,665 162,491 153,454 22,480 Interest expense (32,793)
(174,914) (176,753) (25,893) Interest expenses - amortization of
discount on notes payable (570) (204) (958) (140) Interest expenses
- amortization of deferred loan costs (82,744) (87,176) (88,301)
(12,936) Income/(loss) on investments (130,681) -- -- --
Gain/(loss) on derivatives 9,005,331 (1,673,706) (158,449) (23,212)
Loss on extinguishment of convertible notes -- -- -- -- Foreign
currency exchange gain (3,679,219) 12,059 31,006 4,542
Profit/(loss) before tax 5,956,999 (11,511,752) (6,113,025)
(895,524) Income tax expense/ (benefit) -- 283,108 1,574,525
230,659 Minority interest in profit/(loss) of consolidated
subsidiary 1,602,385 (154,631) 375,795 55,052.00 Net Income/(loss)
7,559,384 (11,383,275) (4,162,706) (609,813) Other comprehensive
income/(loss) Foreign currency translation adjustment -- -- -- --
Comprehensive Income/(loss) 7,559,384 (11,383,275) (4,162,706)
(609,813) Earnings per ordinary share Basic 2.41 (3.39) (1.24)
(0.18) Diluted 2.41 (3.39) (1.24) (0.18) E-FUTURE INFORMATION
TECHNOLOGY INC. AND SUBSIDIARY NON-GAAP MEASURES OF PERFORMANCE
September 30,2008 June 30,2009 September 30,2009 RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited) NON-GAAP OPERATING
INCOME (LOSS) AND ADJUSTED EBITDA Operating income (loss) (GAAP
Basis) 524,010 (9,750,303) (5,873,024) (860,365) Adjustments for
non-GAAP measures of performance: Add back amortization of acquired
software technology 3,336,837 3,018,653 3,063,315 448,758 Add back
amortization of intangibles 891,606 905,642 1,027,965 150,591 Add
back share-based Compensation expenses 763,234 752,311 776,742
113,788 Adjusted non-GAAP operating income 5,515,686 (5,073,697)
(1,005,002) (147,228) Add back depreciation 666,804 286,790 288,844
42,314 Adjusted EBITDA (Earnings before interest, taxes,
depreciation and amortization) 6,182,490 (4,786,907) (716,158)
(104,913) NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA, as
a percentage of revenue Operating income (loss) (GAAP BASIS) 2%
-44% -23% -23% Adjustments for non-GAAP measures of performance:
Amortization of acquired software technology 12% 14% 12% 12%
Amortization of intangibles 3% 4% 4% 4% Share-based compensation
expenses 3% 3% 3% 3% Adjusted non-GAAP operating income 20% -23%
-4% -4% Depreciation 2.4% 1.3% 1.1% 1.1% Adjusted EBITDA (Earnings
before interest, taxes, depreciation and amortization) 23% -22% -3%
-3% NON-GAAP EARNINGS PER SHARE Net Income(Loss) 7,559,384
(11,383,275) (4,162,706) (609,813) Amortization of acquired
software technology 3,336,837 3,018,653 3,063,315 448,758
Amortization of intangibles 891,606 905,642 1,027,965 150,591
Accretion on convertible notes 570 204 958 140 Share-based
compensation expenses 763,234 752,311 776,742 113,788 Adjusted Net
income 12,551,631 (6,706,465) 706,274 103,464 Adjusted non-GAAP
diluted earnings per share 4.00 (1.98) 0.21 0.03 Shares used to
compute non-GAAP diluted earnings per share 3,140,371 3,384,625
3,386,318 3,386,318 E-FUTURE INFORMATION TECHNOLOGY INC. AND
SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Chinese
Yuan (Renminbi) U.S. Dollars December 31, September 30, September
30, 2008 2009 2009 (Unaudited) (Unaudited) (Unaudited) Cash flows
from operating activities: Net income (loss) (4,478,112)
(23,015,794) (3,371,685) Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation 891,183 720,875 105,604 Amortization of intangible
assets 16,940,774 11,826,305 1,732,487 Impairment of intangible
assets 2,143,290 -- -- Amortization of discount on notes payable
33,212 7,810 1,144 Amortization of deferred loan costs 978,204
261,538 38,314 Gain on derivatives (33,122,465) 541,294 79,297 Loss
on extinguishment of convertible notes 22,529,233 -- -- Investment
(income)/loss 3,552,902 -- -- Loss on disposition of property and
equipment 385,995 2,200 322.00 Provision for doubtful debt
2,340,706 (656,452) (96,167) Provision for loss in inventory and
work in process 1,449,542 -- -- Compensation expense for options
issued to employees 3,109,903 2,294,279 336,099 Deferred taxes
481,774 (2,351,123) (344,426) Foreign exchange loss (2,222,996) --
-- Minority interest 204,414 (221,164) (32,399) Change in assets
and liabilities: Accounts receivable (2,526,441) 7,733,343
1,132,891 Refundable value added tax 935,333 104,175 15,261
Deposits 156,695 -- -- Advances to employees 370,994 (1,644,189)
(240,864) Advances to suppliers 991,888 (223,387) (32,725) Other
receivables 136,565 (2,094,564) (306,842) Prepaid expenses 305,014
(976,373) (143,033) Inventories 1,421,159 (5,460,834) (799,982)
Trade payables 1,230,861 (3,991,241) (584,694) Other payables
7,269,063 4,611,114 675,502 Accrued expenses 2,360,449 (3,376,218)
(494,597) Accrued interest (278,420) 92,154 13,500 Taxes payable
(1,084,826) (3,719,675) (544,912) Advances from customers 4,542,952
4,312,104 631,699 Net cash provided by operating activities
31,048,845 (15,223,823) (2,230,205) Cash flows from investing
activities: Purchases of property and equipment (1,618,331)
(1,290,055) (188,986) Payments for intangible assets (2,930,247)
(8,836,167) (1,294,449) Long-term investments -- -- -- Acquisition
of business (28,278,247) -- -- Loan to Guarantor -- -- -- Amounts
due from a related party -- -- -- Net cash used in investing
activities (32,826,825) (10,126,223) (1,483,435) Cash flows from
financing activities: Issuance of ordinary shares for cash, net of
offering costs paid -- -- -- Proceeds from exercise of warrants
3,657,908 -- -- Issuance of convertible notes -- -- -- Payment of
make-whole obligation (8,054,079) -- -- Repayment of short-term
loans -- -- -- Net cash provided by (used in) financing activities
(4,396,171) -- -- Effect of exchange rate changes on cash (265,463)
18,843 2,760 Net increase (decrease) in cash (6,439,614)
(25,331,201) (3,710,879) Cash and cash equivalents at beginning of
period 67,227,348 60,787,734 8,905,062 Cash and cash equivalents at
end of period 60,787,734 35,456,533 5,194,183 Supplemental cash
flow information Interest paid 1,525,200 210,130.87 30,783.00
E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY CONDENSED
CONSOLIDATED BALANCE SHEETS Sep 30,2009 Sep 30,2008 Sep 30,2008
(Reported) (Reported) (Restated) ASSETS Current assets Cash and
cash equivalents RMB 35,456,533 RMB 32,654,311 RMB 32,654,311 Trade
receivables, less allowance for doubtful accounts 12,391,138
21,649,789 21,649,789 Refundable value added tax 2,651,527
2,076,806 2,076,806 Deposits -- 209,660 209,660 Advances to
employees 4,612,444 3,325,265 3,325,265 Advances to suppliers
422,139 1,272,190 1,272,190 Notes receivable - related party -- --
-- Other receivables 3,952,932 2,957,441 2,957,441 Prepaid expenses
1,636,601 1,290,072 1,290,072 Inventory 8,508,900 28,583,119
28,583,119 Total current assets 69,632,214 94,018,652 94,018,652
Non-current assets Long-term investments 654,192 636,438 636,438
Long term deferred expense 75,000 -- -- Deferred loan costs 924,587
845,952 1,283,729 Deferred assets -- 170,583 170,583 Property and
equipment, net of accumulated depreciation 4,047,329 3,816,169
3,816,169 Intangible assets, net of accumulated amortization
47,258,138 55,721,160 55,721,160 Goodwill 91,284,735 62,091,498
62,091,498 Total non-current assets 144,243,981 123,281,801
123,719,578 Total assets RMB213,876,195 RMB217,300,453
RMB217,738,230 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities Trade accounts payable RMB 1,695,975 RMB 7,641,533 RMB
7,641,533 Other payable 14,333,809 8,314,220 8,314,220 Accrued
expenses 3,496,183 5,127,705 5,127,705 Accrued interest 92,154
129,180 (7,959,651) Taxes payable 5,027,189 3,784,198 3,784,198
Deferred Revenues -- 3,824,101 3,824,101 Deferred Tax -- 4,688,447
4,688,447 Advances from customers 27,151,634 26,014,183 26,014,183
Royalstone acquisition obligation, current portion 6,420,451
2,015,456 2,015,456 Health Field acquisition obligation 553,365
1,027,791 1,027,791 Proadvancer System acquisition obligation
29,974,765 21,853,524 21,853,524 BFuture acquisition obligation
392,877 -- -- Make-whole obligation, current portion -- 366,453 --
Convertible note payable, current portion -- -- -- Deferred tax,
current portion 388,299 -- -- Total current liabilities 89,526,700
84,786,790 76,331,505 Long-term liabilities Royalstone acquisition
obligation, net of current portion -- 1,424,728 1,424,728
Make-whole obligation, net of current portion -- 9,290,082 -- 3% -
10% convertible note payable, net of unamortized discount 32,053
6,770,666 27,686 Derivative liabilities 5,655,029 -- (22,427,355)
Deferred tax (16,750) -- -- Minority shareholder interests
4,272,007 (5,098,557) (5,098,557) Total long-term liabilities
9,942,338 12,386,919 (26,073,499) Shareholders' equity Ordinary
shares, $0.0756 U.S. dollars par value; 6,613,756 shares
authorized;3,362,241 shares outstanding 2,039,196 1,957,580
1,957,580 Additional paid-in capital 175,348,931 198,574,086
214,660,407 Statutory reserves 3,084,020 3,084,020 3,084,020
Accumulated deficit (66,064,990) (83,488,941) (52,221,783) Total
shareholders' equity 114,407,156 120,126,745 167,480,223 Total
liabilities and shareholders' equity RMB213,876,195 RMB217,300,453
RMB217,738,230 E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS Sep 30,2009 Sep 30,2008
Sep 30,2008 (Reported) (Reported) (Restated) Revenues Software
sales RMB 13,809,558 RMB 16,602,397 RMB 16,602,397 Hardware sales
799,850 2,650,771 2,650,771 Service fee income 10,603,170 8,103,952
8,103,952 Total Revenues 25,212,578 27,357,120 27,357,120 Cost of
Revenue Cost of software 4,379,759 5,312,887 5,312,887 Cost of
hardware 649,717 2,025,567 2,025,567 Cost of service fee income
6,449,959 2,698,429 2,698,429 Amortization of acquired technology
3,063,315 3,336,837 3,336,837 Amortization of software costs
1,027,965 891,606 891,606 Total Cost of Revenue 15,570,716
14,265,327 14,265,327 Gross Profit 9,641,862 13,091,793 13,091,793
Operating Expenses Research and development 427,195 223,792 223,792
General and administrative 7,173,665 8,061,899 8,069,198 Selling
and distribution expenses 7,914,027 4,274,793 4,274,793 Total
Operating Expenses 15,514,887 12,560,484 12,567,783 Profit from
operations (5,873,024) 531,309 524,010 Interest income 153,454
353,665 353,665 Interest expense (176,753) (8,114,896) (32,793)
Interest expense- amortization of discount on notes payable (958)
(18,385,813) (570) Interest expense- amortization of deferred loan
costs (88,301) (3,415,298) (82,744) Income on investments --
(130,681) (130,681) Gain on derivative liabilities (158,449) --
9,005,331 Loss on extinguishment of convertible notes -- -- --
Foreign currency exchange gain/(loss) 31,006 (488,662) (3,679,219)
Outside business receives -- 528 -- Outside business disburses --
(7,827) -- Loss before taxation (6,113,025) (29,657,675) 5,956,999
Income tax 1,574,525 -- -- Minority interest in loss of
consolidated subsidiary 375,795 1,602,385 1,602,385 Net loss RMB
(4,162,706) RMB(28,055,290) RMB 7,559,384 DATASOURCE: eFuture
Information Technology Inc. CONTACT: Investor Contact, Troe Wen,
Company Secretary of eFuture Information Technology Inc.,
+86-10-5293-7699, or ; or Investor Relations (HK), Ruby Yim,
+852-3196-3712, or eFuture@Taylor- Rafferty.com, or Investor
Relations (US), Mahmoud Siddig, +1-212-889-4350, or , or Media
Contact, Jason Marshall, +1-212-889-4350, or , all of Taylor
Rafferty, for EFUT Web Site:
http://www.e-future.com.cn/ENG/newshow.asp?id=513
http://www.e-future.com.cn/
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