XI'AN, CHINA / ACCESSWIRE / July 31, 2018 / Kingtone Wirelessinfo Solution Holding Ltd (NASDAQ: KONE) ("Kingtone", "we" or the "Company"), a China-based developer and provider of mobile enterprise solutions, today announced the financial results for the six months ended March 31, 2018. 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").
Financial Highlights for the Six Months Ended March 31, 2018:
Revenues decreased 56.7% to $0.09 million from $0.22 million for the six months ended March 31, 2017;
Gross profit increased to $0.08 million from gross loss of $0.07 million for the six months ended March 31, 2017;
Gross margin increased to 81.7% from negative 30.7% for the six months ended March 31, 2017;
Net loss of $0.68 million as compared to net loss of $0.24 million for the six months ended March 31, 2017.
Basic and diluted loss per share was $0.48 for the six months ended March 31, 2018 compared to basic and diluted loss per share of $0.17 for the six months ended March 31, 2017. Weighted average shares outstanding for the six months ended March 31, 2018 remained unchanged at 1,405,000.
"For the first half of the fiscal year, due to deteriorated business conditions and strong competition, our revenue decreased. However, we are pleased with our improved cost-controls, which led to increased profit during the first half of the fiscal year, compared to the same period last year," said Mr. Peng Zhang, Chief Executive Officer, "We will continue to improve our operational efficiency by laying a solid foundation for future growth. In furtherance of this goal, the Company entered into an Asset Exchange Agreement with C Media Limited ("C Media") on January 25, 2018 and is waiting for NASDAQ approval on the proposals passed by the shareholders related to the asset exchange with C Media. As we progress through the remaining fiscal year 2018, we will continue our efforts to streamline our cost structure to better adapt to the unfavorable market conditions, which may persist in the near term. Management endeavors to continue the operation of the Company regardless of the result of the assets exchange with C Media."
Results of Operations - For the Six Months Ended March 31, 2018 Compared to the Six Months Ended March 31, 2017
Net Revenues
We are a China-based developer and provider of mobile enterprise solutions. We generate revenue in two ways, from customized software middleware and applications for various public and private service agencies, which we identify as software solution sales, and from packaged solutions that include both software and hardware in automation telematics for clients mainly in the manufacturing sector, which we identify as wireless system solution sales. For the first six months ended March 31, 2018, we experienced a significant decline in both our software solution business and our wireless system solution business. Business conditions deteriorated rapidly because we face strong competition in our wireless system solution business. There is also a growing number of small service providers competing very aggressively on price, which negatively affected our ability to successfully acquire new contracts. Consequently, we have no revenue from software solutions for the six months ended March 31, 2018. All our revenues were contributed by wireless system solutions, which decreased by 56.7% to approximately $0.09 million for the six months ended March 31, 2018 from approximately $0.22 million for the six months ended March 31, 2017.
Cost of Sales
Cost of sales decreased by 94% to approximately $0.02 million for the six months ended March 31, 2018 from approximately $0.28 million for the six months ended March 31, 2017. As a percentage of our total revenues, cost of sales decreased to 18.3% of our total revenues for the six months ended March 31, 2018 from 130.7% of our total revenues for the six months ended March 31, 2017.
Gross Profit and Gross Margin
For the six months ended March 31, 2018, gross profit increased 215.2% to $76,000 from gross loss of $66,000 for the six months ended March 31, 2017. Gross margin for the six months ended March 31, 2018 was 81.7%, compared to negative 30.7% in the six months ended March 31, 2017.
Operating Expenses
Total operating expenses for the six months ended March 31, 2018were $1.5 million, compared to $0.8 million for the six months ended March 31, 2017, representing an increase of 88.6%.
Selling expenses increased by 25.9% to $0.07 million for the six months ended March 31, 2018, compared to $0.05 million for the six months ended March 31, 2017, and represented 73.1% and 25.1% of revenues for the six months ended March 31, 2018 and 2017, respectively. Our sales personnel increased their efforts to communicate with our current clients and potential clients, however, their efforts did not result in increased revenue.
General and administrative expenses were approximately $1.4 million for the six months ended March 31, 2018, an increase of 93.2% from $0.7 million for the six months ended March 31, 2017. General and administrative expenses consist primarily of compensation and benefit expenses relating to personnel other than our engineers and our sales and marketing team, depreciation and amortization expenses and overhead expenses. General and administrative expenses also include legal and other professional fees, share-based compensation and other miscellaneous administrative costs. The increase in general and administrative expenses was mainly due to the increased bad debt expense caused by certain aged receivables for the six months ended March 31, 2018.
Loss from Operations
The Company had loss from operations of $1.4 million for the six months ended March 31, 2018, compared to loss from operations of $0.9 million for the six months ended March 31, 2017, an increase of $0.5 million in loss, which was primarily due to the higher general and administrative expenses for the six months ended March 31, 2018, compared to the same period last year.
Net Loss and LPS
Net loss was $0.68 million for the six months ended March 31, 2018, compared to net loss of $0.24 million for the six months ended March 31, 2017. Basic and diluted loss per share was $0.48 in the six months ended March 31, 2018, compared to basic and diluted loss per share of $0.17 for the six months ended March 31, 2017. The number of weighted average common shares outstanding for the six months ended March 31, 2018 remained unchanged at 1,405,000.
Liquidity and Capital Resources
Cash and Cash Equivalents
As of March 31, 2018, the Company had cash and cash equivalents of $7.7 million, compared to $0.9 million as of September 30, 2017, the Company's last fiscal year end. The increase was due to the related party companies' repayment of their loans to the Company as of March 31, 2018. Net cash used in operating activities for the six months ended March 31, 2018 was approximately $0.5 million, compared to approximately $0.04 million provided in operating activities for the six months ended March 31, 2017, primarily comprised of net loss of $0.7 million and bad debt of $0.5 million, partially offset by a decreased in account receivable of $0.27 million. Net cash provided by investing activities for the six months ended March 31, 2018 was approximately $0.06 million. The cash provided by investing activities for the six months ended March 31, 2018 was mainly a result of the sale of certain property and equipment. Net cash provided by financing activities for the six months ended March 31, 2018 was approximately $7 million, compared to approximately $4.4 million for the six months ended March 31, 2017, which was due to the related party companies' repayment of their loans to the Company.
Disposal plans for Company's major assets and liabilities in the future: management has confidence to collect the account receivables from the Company's clients in the future as we are committed for collecting the receivables all the time; the Company will pay its liabilities once the receivables are collected; the Company has made the account adjustments in this medium-term and will make the corresponding account adjustments according audit process in the future; the Company currently has no disposal plan of its fixed assets.
About Kingtone Wirelessinfo Solution Holding Ltd.
Kingtone Wirelessinfo Solution Holding Ltd (NASDAQ: KONE) is a 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, and improves 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 the Company'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 Annual Report for the fiscal year ended September 30, 2017 filed with the Securities and Exchange Commission. 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.
Revenue policy
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and subsequently issued modifications or clarifications in ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The revenue recognition principle in ASU 2014-09 and the related guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 prescribes a five-step process for evaluating contracts and determining revenue recognition. In addition, new and enhanced disclosures are required. Companies may adopt the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or a cumulative effect upon adoption approach. The adoption of ASU 2014-09, ASU 2016-10 and ASU 2016-12 will not have a material impact on our financial position and results of operations as a result of the cumulative adjustment prescribed by the modified retrospective method of adoption; The company has performed an assessment of our revenue contracts and concluded that there will be no change to (1) the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606, which includes Hardware selling income and consulting income, or (2) the presentation of revenue as gross versus net upon adoption of Topic 606. Because there will be no change to the timing and pattern of revenue recognition, we believe there will be no material changes to the Company's processes and internal controls.
For investor and media inquiries, please contact:
Mr. Frank Wang
Tel: +86-29-8826-6383
Email: wangfang@kingtoneinfo.com
SOURCE: Kingtone Wirelessinfo Solution Holding Ltd.
