Restatement of 2007 Financial Statements BEIJING, Oct. 13
/PRNewswire-Asia/ -- eFuture Information Technology Inc. (Nasdaq:
EFUT, the "Company", or "eFuture"), a leading provider of software
and services in China's rapidly growing retail and consumer goods
industries, today announced its financial results for the full year
ended December 31, 2008. In connection with the Company's failure
to file its Form 20-F by June 30, 2009, it failed to satisfy NASDAQ
Marketplace Rule 5250(c)(1), which requires listed companies to
file periodic financial reports with the Securities and Exchange
Commission on or before the date they are required to be filed. As
the Company's July 15, 2009 press release anticipated, the Company
received a notice of noncompliance from the NASDAQ Stock Market on
October 7, 2009. After filing its annual report on October 13,
2009, the Company received confirmation from the NASDAQ Stock
Market that the Company had regained compliance with NASDAQ
Marketplace Rule 5250(c)(1). As noted in previous press releases,
the Company reviewed its accounting for certain matters in 2007 and
2008 and has determined that restatements of those years are
appropriate. Accordingly, those reports should no longer be relied
upon. Instead, investors should rely only on the audited financials
contained in the Company's Form 20-F filed on October 13, 2009. The
restatement of 2007 audited financials resulted in the following
changes: -- 2007 total revenues increased by RMB850,632; -- 2007
gross profit increased by RMB493,280; -- 2007 operating expenses
increased by RMB873,541; -- 2007 profit from operations decreased
by RMB380,261; and -- 2007 net loss decreased by RMB5,954,433. Full
Year 2008 Audited Financial Highlights: -- Total revenues increased
64.7% year-over-year to RMB139.9 million (US$20.5 million), from
RMB84.9 million for the full year 2007. - Revenue from software
license sales increased 57.4% year-over-year to RMB66.2 million
(US$9.7 million), from RMB42.1 million in 2007. - Revenue from
hardware sales increased 64.6% year-over-year to RMB26.7 million
(US$3.9 million), from RMB16.2 million in 2007. - Service fee
income increased 76.4% to RMB47.0 million (US$6.9 million), from
RMB26.6 million in 2007. -- Gross profit increased 49.7%
year-over-year to RMB57.8 million (US$8.5 million), from RMB38.8
million in 2007. Gross margin was 41.3%, compared to 45.4% in 2007.
-- Operating loss was RMB10.0 million (US$1.5 million), as compared
to an operating profit of RMB6.6 million in 2007. -- Net loss was
RMB4.5 million (US$0.7 million), compared to net loss of RMB21.5
million in 2007. -- Diluted loss per share was RMB1.39 (US$0.20),
compared to diluted loss per share of RMB8.01 in 2007. -- Operating
cash flow as of December 31, 2008 increased 82.5% year-over-year to
RMB31.0 million (US$4.6 million). -- Cash and cash equivalents as
of December 31, 2008 was RMB60.8 million (US$8.9 million). --
Adjusted net income (non-GAAP) was RMB15.6 million (US$2.3
million), an increase of 315.9% from 2007. -- Non-GAAP adjusted
diluted earnings per share were RMB5.0 (US$0.73). Ms. Ping Yu,
Chief Financial Officer of eFuture, stated, "Through the re- audit
process, we identified material weaknesses and deficiencies in our
internal controls, and as a result we are in the process of
strengthening our internal controls, systems and procedures. We
believe that the conclusion of this process will enable us to
ensure robust, consistent and accurate financial reporting moving
forward. Despite the adjustments made to our 2007 results, we
believe our 2008 financial results have shown that we maintained a
healthy financial footing and remain well positioned, and we
reaffirm the upward revision of our 2009 revenue guidance of US$28
million to US$29 million." "Our 2008 results demonstrate our
ability to deliver consistent growth through the focused execution
of our strategy. Throughout the year, we made steady progress on a
number of strategic and tactical initiatives, and our business
remains fundamentally strong. In 2008, we solidified our core
enterprise software business, grew value-added services revenues,
and expanded the scope and depth of our eService offering,
including our B2B service and SaaS service for SCM and B2C
eShopping platform. We believe this progress was made possible by
our continued execution, focused growth strategy consisting of both
organic and acquisitive initiatives, affordable and flexible suite
of solutions, a large and diversified install base, and the
continued resilience of China's retail and consumer goods industry.
We will continue to focus on executing our growth strategy by
investing in technology and business model innovations, expanding
our client base within tier-2 and tier-3 cities in China, and
actively pursuing domestic and international clients. Alongside
each of these initiatives, we will strive to maximize our
operational efficiency and enhance earnings growth to increase
long-term shareholder returns," said Mr. Adam Yan, Chairman and
Chief Executive Officer of eFuture. Full Year 2008 Audited
Financial Results Revenue Total revenues increased 64.7%
year-over-year to RMB139.9 million (US$20.5 million), from RMB84.9
million for 2007. Service fee income increased 76.4% to RMB47.0
million (US$6.9 million), from RMB26.6 million in 2007, as a result
of increased contribution from our B2B and SaaS services, and as a
result of our expanded customer base. The overall increases in
revenue are primarily attributable to the significant growth across
all product lines including software license sales driven by the
re-alignment of the software business into seven vertical strategic
business units and improved operating efficiency. Revenue Breakdown
2007 2008 FY FY RMB RMB US$ Y-o-Y '000 '000 '000 change Software
license sales 42,076 66,216 9,705 57.4 % Hardware sales 16,198
26,656 3,907 64.6 % Service fee income 26,646 46,992 6,888 76.4 %
Total 84,921 139,864 20,500 64.7 % Cost of Revenues The cost of
revenue for fiscal year 2008 increased 77.2% to RMB82.1 million
(US$12.0 million) from RMB46.3 million in 2007. Cost of Revenues
Breakdown 2007 2008 FY FY RMB RMB US$ Y-o-Y '000 '000 '000 change
Cost of software license sales 15,648 22,929 3,361 46.5 % Cost of
hardware sales 12,601 21,989 3,223 74.5 % Cost of service fees
6,965 20,248 2,968 190.7 % Amortization of acquired technology
8,231 13,308 1,951 61.7 % Amortization of software costs 2,889
3,633 532 25.7 % Total 46,335 82,106 12,035 77.2 % The increase in
cost of revenue was primarily attributable to a proportionate
increase in sales volume and, to a lesser extent, cost in hardware
sales along with an increase in service fee income expenses. The
increases in service fee income expenses were affected by several
factors: 1. The Company added senior technical personnel to major
accounts to explore service expansion and additional opportunities
to generate revenues. eFuture devoted its senior technical
personnel to its major accounts according to the customers'
anticipated programming needs in the next three years. The company
expects these efforts will deliver more value to these customers'
future operations, but devoting senior personnel results in higher
immediate expenses for the Company in return for anticipated
longer-term revenues for the Company. 2. eFuture increased its
marketing efforts on major accounts to further explore customers'
potential needs in their IT operating plans. 3. The Company changed
its allocation on the basis of labor costs from the previous method
of allocating its costs of revenue based on out-of-pocket expenses
on projects to the current method of allocating costs of revenue
based on labor costs. The Company does not expect this change to
have a material impact for future projects. Gross Profit Gross
profit increased 49.7% to RMB57.8 million (US$8.5 million) for the
fiscal year 2008 from RMB38.6 million in 2007. Consolidated gross
margin for 2008 was 41.3%, compared to 45.4% in 2007. The
year-over-year decrease in gross margin was a result of increased
amortization of acquired technology as a result of acquisitions
made in 2007 and 2008, and increases in cost of hardware and cost
of service fee income. Operating Expenses Research and development
expenses in 2008 were RMB6.5 million (US$1.0 million), or 4.7% of
total revenues, compared to 1.0% in 2007. The increase in research
and development expenses is mainly due to our larger expenditures
in software integration and upgrading. Management believes that
these efforts to integrate multiple versions of similar software
into full-featured single software versions will reduce eFuture's
R&D costs in the long term and reduce the future software
implementation costs. General and administrative expenses in 2008
were RMB40.5 million (US$5.9 million), or 28.9% of total revenues,
compared to 22.6% in 2007. The year-over-year increase was mainly
due to a RMB1.5 million increase in salaries and a RMB3.0 million
increase in the maintenance costs of eight new branches in 2008. In
addition, the expenses associated with the compliance of auditing
and Sarbanes-Oxley Act compliance contributed RMB1.6 million to the
general and administration expenses. Selling expenses in 2008 were
RMB20.8 million (US$3.0 million), or 14.9% of total revenues, as
compared to 14.1% in 2007. The year-over year increase was mainly
due to an expansion of our sales force and a proportionate increase
in sales volume in year-over-year. Total share-based compensation
expenses in 2008 were RMB2.7 million (US$0.4 million). Operating
Income/Loss 2008 operating loss was RMB10.0 million (US$1.5
million), as compared to an operating profit of RMB6.6 million in
2007. The decrease in operating profit is a result of four
principal factors: 1. RMB5.7 million increase in spending for
R&D expenses. We believe this significant increase of 697.7%
over our 2007 R&D expenses of RMB0.8 million is important for
our continued competitiveness in our industry. 2. RMB4.2 million
charge as a result of our decision to reflect our cost of revenue
through allocation on the basis of labor costs, as compared to our
previous method of allocating our costs of revenue based on
out-of-pocket expenses on projects. We believe this change will
result in more accurate estimates of costs of revenues by project
going forward. 3. RMB4.8 million charge due to an upward adjustment
in our accounting for a depository reserve we must maintain in
China for employee social security costs. 4. RMB1.7 million charge
relating to impairment of intangible assets. In 2008, management
identified impairment on certain internally generated software as
well as software acquired through acquisitions, as they are not
expected to generate future revenue, or be sellable to a third
party. These intangibles were significantly aged, and no further
capital investment for upgrades is planned. Net Income/Loss and
EBITDA Net loss for the year ended December 31, 2008 was RMB4.51
million (US$0.7 million), improved significantly as compared to
RMB21.5 million in 2007. 2008 basic and diluted losses per share
were RMB1.39 (US$0.20) and RMB1.39 (US$0.20), respectively.
Adjusted net income (non-GAAP) for 2008 was RMB15.6 million (US$2.3
million), an increase of 315.9% from 2007. 2008 adjusted non-GAAP
diluted earnings per share was RMB5.0 (US$0.73). 2008 EBITDA
(non-GAAP) was RMB10.9 million (US$1.6 million), a decrease of
47.7% from 2007. Balance Sheet and Cash Flow In 2008, net cash
generated from operating activities was RMB31.0 million (US$4.6
million), while net cash used in capital expenditures was RMB4.5
million (US$0.7 million). As of December 31, 2008, cash and cash
equivalents decreased 9.6% year- over-year to RMB60.8 million from
RMB67.2 million in 2007, mainly due to the make-whole payments
related to the conversion of US$4 million convertible notes, as
well as payment for the acquisition obligations of Royalstone and
Proadvancer in 2008. Total accounts receivable as of December 31,
2008 increased 10.8% to RMB19.5 million (US$2.9 million) from
RMB17.3 million as of December 31, 2007, mainly attributable to
increases in total revenue. Inventories as of December 31, 2008
decreased 49.9% to RMB2.9 million (US$0.4 million) from RMB5.7
million as of December 31, 2007. This decrease was mainly
attributable to a change in allocation of the basis of labor costs
from our previous method of allocating our costs of revenue based
on out-of- pocket expenses on projects. This change resulted in
lower inventories and the recognition of greater cost of revenues
in the same period. 2009 Guidance In 2009, eFuture plans to focus
upon continued execution on its growth strategy, which consists of
a combined organic and acquisitive approach. eFuture will continue
to solidify its core enterprise software business and forge into
new frontiers of eService and investing. eFuture maintains its
upward revision of guidance for 2009 and anticipates total revenues
to be in the range of approximately US$28 million to US$29 million,
representing annual growth of 38% to 40% over 2008. Adjusted EBITDA
(non-GAAP) is expected to be in the range of approximately US$5.1
million to US$6.1 million. This forecast is a current and
preliminary view and is subject to change. Currency Convenience
Translation For the convenience of readers, certain RMB amounts
have been translated into US dollars at the rate of RMB6.8225 to
US$1.00, the noon buying rate for US dollars in effect on December
31, 2008 for cable transfers of RMB per US dollar as certified for
customs purposes by the Federal Reserve Bank of New York. Use of
Non-GAAP Financial Measures To supplement eFuture's unaudited
consolidated financial results presented in accordance with U.S.
GAAP, eFuture uses the following non-GAAP measures defined as
non-GAAP financial measures by the SEC: adjusted EBITDA excluding
amortization of acquired software technology, amortization of
intangibles, share-based compensation expenses, depreciation,
adjusted net income excluding amortization of acquired software
technology, amortization of intangibles, share-based compensation
expenses and accretion on convertible notes, adjusted basic and
diluted earnings per share excluding amortization of acquired
software technology, amortization of intangibles, share-based
compensation expenses and accretion on convertible notes. The
presentation of these non-GAAP financial measures is not intended
to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with U.S. GAAP.
eFuture believes that these non-GAAP financial measures provide
meaningful supplemental information regarding its performance and
liquidity by excluding expenses that may not be indicative of its
operating performance from a cash perspective or be indicative of
its operating performance. eFuture believes that both management
and investors benefit from referring to these non-GAAP financial
measures in assessing the Company's performance and when planning
and forecasting future periods. These non-GAAP financial measures
also facilitate management's internal comparisons to eFuture's
historical performance and liquidity. eFuture computes its non-GAAP
financial measures using the same consistent method from quarter to
quarter. The Company believes these non-GAAP financial measures are
useful to investors in allowing for greater transparency with
respect to supplemental information used by management in its
financial and operational decision-making. The accompanying
paragraphs have more details on the reconciliations between GAAP
financial measures that are most directly comparable to non-GAAP
financial measures. eFuture's management also believes that EBITDA,
defined as earnings before interest, income tax expense,
depreciation and amortization is a useful financial metric to
assess its operating and financial performance before the impact of
investing and financing transactions and income taxes. In addition,
eFuture's management believes that EBITDA is widely used by other
companies in the software industry and may be used by investors as
a measure of its financial performance. Given the significant
investments that eFuture has made in property, equipment,
depreciation and amortization expense comprises a meaningful
portion of the Company's cost structure. eFuture's management
believes that EBITDA will provide investors with a useful tool for
comparability between periods because it eliminates depreciation
and amortization expense attributable to capital expenditures. The
presentation of EBITDA should not be construed as an indication
that the Company's future results will be unaffected by other
charges and gains eFuture considers to be outside the ordinary
course of its business. The use of EBITDA and adjusted EBITDA has
certain limitations. Depreciation and amortization expense for
various long-term assets, income tax expense, interest expense and
interest income have been and will be incurred and are not
reflected in the presentation of EBITDA. Further, share-based
compensation expenses have been and will be incurred and are not
reflected in the presentation of adjusted EBITDA. Each of these
items should also be considered in the overall evaluation of
eFuture's financial results. The term EBITDA or adjusted EBITDA is
not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a
measure of net income, operating income, operating performance or
liquidity presented in accordance with U.S. GAAP. When assessing
eFuture's operating and financial performance, you should not
consider this data in isolation or as a substitute for its net
income, operating income or any other operating performance measure
that is calculated in accordance with U.S. GAAP. In addition, the
Company's EBITDA and adjusted EBITDA may not be comparable to
EBITDA or similarly titled measures utilized by other companies
since such other companies may not calculate EBITDA in the same
manner as eFuture does. About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ:EFUT) is a leading
provider of software and services in China's rapidly growing retail
and consumer goods industries. eFuture provides integrated software
and services to manufacturers, distributors, wholesalers, logistics
companies and retailers in China's front- end supply chain(from
factory to consumer) market, especially in the retail and fast
moving consumer goods industries. eFuture currently serves over 15
Fortune 500 companies, over 1,000 retailers and over 5,000
suppliers operating in China. eFuture is one of IBM's premier
business partners in Asia Pacific and is a strategic partner with
Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture
has more than 600 employees and 20 branch offices across China. For
more information about eFuture, please visit http://www.e-/
future.com.cn/ Safe Harbor This announcement contains
forward-looking statements. These statements are made under the
"safe harbor" provisions of the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar
statements. Among other things, 2008 financial outlook and
quotations from management in this announcement, as well as
strategic and operational plans, contain forward- looking
statements. eFuture may also make written or oral forward-looking
statements in periodic reports to the Securities and Exchange
Commission (the "SEC"), in its annual report to shareholders, in
press releases and other written materials and in oral statements
made by its officers, directors or employees to second parties.
Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking
statements. Forward-looking statements involve inherent risks and
uncertainties. A number of factors could cause actual results to
differ materially from those contained in any forward-looking
statement, including but not limited to the following: eFuture's
anticipated growth strategies; eFuture's future business
development, results of operations and financial condition;
expected changes in the Company's revenues and certain cost or
expense items; eFuture's ability to attract customers and leverage
its brand; trends and competition in the software industry; the
Company's ability to control expenses and maintain profit margins;
the Company's ability to hire, train and retain qualified
managerial and other employees; the Company's ability to develop
new software and pilot new business models at desirable locations
in a timely and cost-effective manner; the performance of third
parties under contracts with the Company; the expected growth of
the Chinese economy software market in retail and consumer goods
industries; and Chinese governmental policies relating to private
managers and operators of software and applicable tax rates.
Further information regarding these and other risks is included in
eFuture's annual report on Form 20-F and other documents filed with
the SEC. All information provided in this press release and in the
attachments is as of October 13, 2009, and the Company undertakes
no duty to update such information or any other forward-looking
information, except as required under applicable law. For more
information, please contact: Investor Contact: Troe Wen, Company
Secretary eFuture Information Technology Inc. Tel: +86-10-5165-0998
x8804 Email: Investor Relations (US): Mahmoud Siddig Taylor
Rafferty Tel: +1-212-889-4350 Email: Investor Relations (HK): Ruby
Yim Taylor Rafferty Tel: +852-3196-3712 Email: Media Contact: Jason
Marshall Taylor Rafferty Tel: +1-212-889-4350 Email: E-FUTURE
INFORMATION TECHNOLOGY INC. AND SUBSIDIARY CONDENSED CONSOLIDATED
BALANCE SHEETS Chinese Yuan (Renminbi) U.S. Dollars December 31,
December 31, 2007 2008 2008 (Restated) ASSETS Current assets Cash
and cash equivalents 67,227,348 60,787,734 $8,909,891 Trade
receivables, less allowance for doubtful accounts of RMB4,695,898
and RMB4,743,679 ($695,299), respectively 17,259,965 19,468,029
2,853,504 Refundable value added tax 3,691,035 2,755,702 403,914
Deposits 156,695 -- -- Advances to employees 3,576,947 3,205,953
469,909 Advances to suppliers 657,724 198,752 29,132 Notes
receivable - related party 3,000,000 -- -- Other receivables
576,965 2,229,535 326,791 Prepaid expenses 862,653 735,083 107,744
Inventory and work in process 5,749,951 2,879,250 422,023 Total
current assets 102,759,283 92,260,038 13,522,908 Non-current assets
Long-term investments 4,264,433 654,192 95,887 Deferred loan costs
7,557,383 1,182,588 173,336 Property and equipment, net of
accumulated depreciation of RMB5,191,489 and RMB3,020,838
($442,776), respectively 2,065,040 3,605,458 528,466 Intangible
assets, net of accumulated amortization of RMB19,799,245 and
RMB34,704,373 ($5,086,753), respectively 47,217,193 49,875,082
7,310,382 Goodwill 45,013,827 91,284,735 13,379,954 Total
non-current assets 106,117,876 146,602,055 21,488,025 Total assets
208,877,159 238,862,093 $35,010,933 Chinese Yuan (Renminbi) U.S.
Dollars December 31, December 31, 2007 2008 2008 (Restated)
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade
accounts payable 3,845,873 5,646,259 $827,594 Other payable 844,753
11,097,702 1,626,632 Accrued expenses 4,626,683 6,873,703 1,007,505
Accrued interest 278,420 -- -- Taxes payable 8,976,305 7,933,734
1,162,878 Advances from customers 13,025,978 22,839,530 3,347,678
Royalstone acquisition obligation 19,818,925 6,416,970 940,560
Health field acquisition obligation 3,300,000 594,000 87,065
Proadvancer System acquisition obligation -- 29,958,518 4,391,135
BFuture acquisition obligation -- 392,877 57,585 Deferred tax,
current portion 1,098,063 1,553,197 227,658 Total current
liabilities 55,815,000 93,306,490 13,676,290 Long-term liabilities
3%-10% RMB6,822,500 ($1,000,000) convertible note payable, net of
RMB6,796,432 ($996,179) of unamortized discount 90,771 26,068 3,821
Derivative liabilities 46,521,310 5,111,417 749,200 Minority
shareholder interests -- 204,414 29,962 Deferred tax 3,237,309
5,458,232 800,033 Total long-term liabilities 49,849,390 10,800,131
1,583,016 Shareholders' equity Ordinary shares, $0.0756 U.S.
dollars par value; 6,613,756 shares authorized; 2,924,702 shares
and 3,362,241 shares outstanding, respectively 1,811,589 2,039,196
298,893 Additional paid-in capital 137,261,443 173,054,651
25,365,284 Statutory reserves 3,084,020 3,084,020 452,037
Accumulated deficit (38,944,283) (43,422,395) (6,364,587) Total
shareholders' equity 103,212,769 134,755,472 19,751,627 Total
liabilities and shareholders' equity 208,877,159 238,862,093
$35,010,933 E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INCOME STATEMENTS Chinese Yuan (Renminbi)
U.S. Dollars For the Year Ended For the Years Ended December 31,
December 31, 2006 2007 2008 2008 Revenues (Restated) Software sales
29,832,720 42,076,411 66,215,769 $9,705,499 Hardware sales
11,403,473 16,198,402 26,655,967 3,907,067 Service fee income
6,607,337 26,646,180 46,991,766 6,887,764 Total Revenues 47,843,530
84,920,993 139,863,502 20,500,330 Cost of revenues Cost of software
7,665,866 15,648,282 22,928,605 3,360,733 Cost of hardware
10,548,649 12,601,230 21,989,087 3,223,025 Cost of service fee
income 1,887,676 6,965,367 20,247,922 2,967,816 Amortization of
acquired technology -- 8,231,375 13,308,030 1,950,609 Amortization
of software costs 2,727,198 2,889,118 3,632,744 532,465 Total Cost
of Revenue 22,829,389 46,335,372 82,106,388 12,034,648 Gross Profit
25,014,141 38,585,621 57,757,114 8,465,682 Operating Expenses
Research and development 527,219 816,479 6,512,776 954,602 General
and administrative 7,298,980 19,192,286 40,488,964 5,934,623
Selling and distribution expenses 9,210,975 12,014,601 20,792,618
3,047,654 Total Operating Expenses 17,037,174 32,023,366 67,794,358
9,936,879 Profit/(loss) from operations 7,976,967 6,562,255
(10,037,244) (1,471,197) Interest income 141,230 3,533,326
1,424,029 208,725 Interest expense (13,471) (2,813,489) (1,246,780)
(182,744) Interest expenses - amortization of discount on notes
payable -- (22,415) (33,212) (4,868) Interest expenses -
amortization of deferred loan costs -- (2,114,685) (978,204)
(143,379) Income/(loss) on investments -- 985,085 (3,552,902)
(520,763) Gain on derivatives -- 10,324,874 33,122,465 4,854,887
Loss on extinguishment of convertible notes -- (39,504,662)
(22,529,233) (3,302,196) Foreign currency exchange gain -- 544,173
368,127 53,958 Profit/(loss) before tax 8,104,726 (22,505,538)
(3,462,954) (507,577) Income tax expense/(benefit) -- 946,704
(810,744) (118,834) Minority interest in profit/(loss) of
consolidated subsidiary -- 32,520 (204,414) (29,962) Net
Income/(loss) 8,104,726 (21,526,314) (4,478,112) (656,374) Other
comprehensive income/(loss) Foreign currency translation adjustment
(491,079) 491,079 -- -- Comprehensive Income/(loss) 7,613,647
(21,035,235) (4,478,112) $(656,374) Earnings/(loss) per ordinary
share Basic 4.80 (8.01) (1.39) $(0.20) Diluted 4.43 (8.01) (1.39)
$(0.20) Basic Weighted-average Shares Outstanding 1,689,434
2,687,380 3,214,466 3,214,466 Fully-Diluted Weighted- average
Shares Outstanding 1,831,258 2,687,380 3,214,466 3,214,466 E-FUTURE
INFORMATION TECHNOLOGY INC. AND SUBSIDIARY NON-GAAP MEASURES OF
PERFORMANCE December 31, 2007 December 31, 2008 RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) NON-GAAP OPERATING INCOME
(LOSS) AND ADJUSTED EBITDA Operating income (loss) (GAAP Basis)
6,562,255 (10,037,244) (1,471,197) Adjustments for non-GAAP
measures of performance: Add back amortization of acquired software
technology 8,231,375 13,308,030 1,950,609 Add back amortization of
intangibles 2,889,118 3,632,744 532,465 Add back share-based
compensation expenses 2,663,105 3,109,903 455,830 Adjusted non-GAAP
operating income 20,345,853 10,013,433 1,467,707 Add back
depreciation 500,633 891,183 130,624 Adjusted EBITDA (Earnings
before interest, taxes, depreciation and amortization) 20,846,486
10,904,616 1,598,331 NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED
EBITDA, as a percentage of revenue Operating income (loss) (GAAP
BASIS) 8% -7% -7% Adjustments for non-GAAP measures of performance:
Amortization of acquired software technology 10% 10% 10%
Amortization of intangibles 3% 3% 3% Share-based compensation
expenses 3% 2% 2% Adjusted non-GAAP operating income 24% 7% 7%
Depreciation 0.6% 0.6% 0.6% Adjusted EBITDA (Earnings before
interest, taxes, depreciation and amortization) 25% 8% 8% NON-GAAP
EARNINGS PER SHARE Net Income(Loss) (21,035,235) (4,478,112)
(656,374) Amortization of acquired software technology 8,231,375
13,308,030 1,950,609 Amortization of intangibles 2,889,118
3,632,744 532,465 Accretion on convertible notes 22,415 33,212
4,868 Share-based compensation expenses 2,663,105 3,109,903 455,830
Adjusted Net income (7,229,222) 15,605,777 2,287,398 Adjusted
non-GAAP diluted earnings per share (2.41) 4.99 0.73 Shares used to
compute non-GAAP diluted earnings per share 2,997,921 3,124,463
3,124,463 E-FUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Chinese Yuan
(Renminbi) U.S. Dollars For the Year Ended For the Years Ended
December 31, December 31, 2006 2007 2008 2008 (Restated) Cash flows
from operating activities: Net income (loss) 8,104,726 (21,035,235)
(4,478,112) $(656,374) Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation 679,876 500,633 891,183 130,624 Amortization of
intangible assets 2,727,198 11,120,493 16,940,774 2,483,074
Impairment of intangible assets -- -- 2,143,290 314,150
Amortization of discount on notes payable -- 22,413 33,212 4,868
Amortization of deferred loan costs -- 2,114,685 978,204 143,379
Gain on derivatives -- (10,324,873) (33,122,465) (4,854,887) Loss
on extinguishment of convertible notes -- 39,504,662 22,529,233
3,302,196 Investment (income)/loss -- (985,085) 3,552,902 520,762
Loss on disposition of property and equipment -- -- 385,995 56,577
Provision for doubtful debt -- 2,585,988 2,340,706 343,086
Provision for loss in inventory and work in process -- -- 1,449,542
212,465 Compensation expense for options issued to employees --
2,663,105 3,109,903 455,830 Deferred taxes -- (946,704) 481,774
70,615 Foreign exchange loss -- (652,397) (2,222,996) (325,833)
Minority interest -- (32,520) 204,414 29,962 Change in assets and
liabilities: Accounts receivable (664,562) (13,788,696) (2,526,441)
(370,310) Refundable value added tax 72,593 (1,220,094) 935,333
137,095 Deposits 466,458 (111,752) 156,695 22,967 Advances to
employees (162,781) (2,378,346) 370,994 54,378 Advances to
suppliers (334,840) (214,694) 991,888 145,385 Other receivables
60,552 537,784 136,565 20,017 Prepaid expenses (66,189) (291,548)
305,014 44,707 Inventories 25,277 265,645 1,421,159 208,305 Trade
payables 208,096 1,827,696 1,230,861 180,412 Other payables --
(1,013,731) 7,269,063 1,065,454 Accrued expenses (101,711)
1,570,905 2,360,449 345,980 Accrued interest -- 278,420 (278,420)
(40,809) Taxes payable (482,309) 2,437,452 (1,084,826) (159,007)
Advances from customers 2,116,454 4,575,302 4,542,952 665,878 Net
cash provided by operating activities 12,648,838 17,009,508
31,048,845 $4,550,948 Cash flows from investing activities:
Purchases of property and equipment (537,340) (527,743) (1,618,331)
(237,205) Payments for intangible assets (3,818,597) (7,151,309)
(2,930,247) (429,498) Long-term investments -- (4,475,216) -- --
Acquisition of business -- (53,188,175) (28,278,247) (4,144,851)
Loan to Guarantor 800,000 -- -- -- Amounts due from a related party
-- (3,000,000) -- -- Net cash used in investing activities
(3,555,937) (68,342,443) (32,826,825) $(4,811,554) Chinese Yuan
(Renminbi) U.S. Dollars For the Years For the Ended December 31,
Year Ended December 31, 2006 2007 2008 2008 (Restated) Cash flows
from financing activities: Issuance of ordinary shares for cash,
net of offering costs paid 47,128,495 -- -- -- Proceeds from
exercise of warrants -- 1,060,992 3,657,908 536,154 Issuance of
convertible notes -- 69,079,430 -- -- Payment of make-whole
obligation -- (10,015,958) (8,054,079) (1,180,517) Repayment of
short-term loans (2,800,000) -- -- -- Net cash provided by (used
in) financing activities 44,328,495 60,124,464 (4,396,171)
(644,363) Effect of exchange rate changes on cash (791,476)
(2,537,839) (265,463) (38,910) Net increase (decrease) in cash
52,629,920 6,253,690 (6,439,614) (943,879) Cash and cash
equivalents at beginning of year 8,834,817 61,464,737 67,227,348
9,853,770 Cash and cash equivalents at end of year 61,464,737
67,718,427 60,787,734 $8,909,891 Supplemental cash flow information
Interest paid 66,593 510,282 1,525,200 $223,554 Non-cash Investing
and Financing Activities Acquiring assets by assuming payment
obligation -- 23,118,925 36,813,365 $5,395,876 Conversion of
convertible notes -- 36,473,000 27,273,200 $3,997,538 Issuance of
common stock for acquisition -- 8,555,961 14,310,115 $2,097,488
DATASOURCE: eFuture Information Technology Inc. CONTACT: Investor
Contact, Troe Wen, Company Secretary of eFuture Information
Technology Inc., +86-10-5165-0998 x8804, ; or Investor Relations
(US), Mahmoud Siddig of Taylor Rafferty, +1-212-889-4350, ; or
Investor Relations (HK), Ruby Yim of Taylor Rafferty,
+852-3196-3712, ; or Media Contact, Jason Marshall of Taylor
Rafferty, +1-212-889-4350, Web site: http://www.e-future.com.cn/
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