Kingtone Wirelessinfo Solution Holding Ltd Reports The First Six Months of Fiscal Year 2013 Unaudited Financial Results

XI'AN, China, May 22 2013 /PRNewswire-FirstCall/ -- Kingtone Wirelessinfo Solution Holding Ltd (Nasdaq: KONE) ("Kingtone", "we" or the "Company"), a China-based developer and provider of mobile enterprise solutions, today announced financial results for the six months ended March 31, 2013.  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, 2013:

• Revenues increased 153.1% to $3.0 million from $1.2 million for the six months ended March 31, 2012.
• Gross profit increased 318.3% to $0.4 million from minus $0.2 million for the six months ended March 31, 2012.
• Gross margin increased to 14.8% from minus 17.1% for the six months ended March 31, 2012.
• Net loss decreased to approximately $1.8 million from approximately $5.2 million for the six months ended March 31, 2012.
• Basic and diluted loss per share was $1.29 for the six months ended March 31, 2013 compared to basic and diluted loss per share of $3.70 for the six months ended March 31, 2012. Weighted average shares outstanding for the six months ended March 31, 2013 remained unchanged at 1,405,000*.

"Although it is a gradual process, I am glad to see our business is recovering," said Mr. Peng Zhang, Chief Executive Officer. "We believe that our business will grow slowly but steadily, and hope our investors will remain patient with our business and capital market performance. It is clear that the current economic environment presents a series of challenges and opportunities. Ultimately, we believe that client demand for our products and services will be the main force in driving our performance."

Results of Operations – For the Six Months Ended March 31, 2013 Compared to the Six Months Ended March 31, 2012

Net Revenues

The Company's revenues increased by 153.1% to $3.0 million for the six months ended March 31, 2013, as compared to $1.2 million for the six months ended March 31, 2012.

Revenues from software solutions increased by 284.6% to $0.2 million in the six months ended March 31, 2013, compared to $0.05 million in the six months ended March 31, 2012. As a percentage of total revenue, software solutions sales increased from 4.4% to 6.7%. The increase in our software solutions revenue was mainly due to the fact that the Company has signed contracts for larger value amounts in the six months ended March 31, 2013 than those signed in the six months ended March 31, 2012.

Revenues from wireless system solutions increased by 147.0% to $2.8 million in the six months ended March 31, 2013, compared to $1.1 million in the six months ended March 31, 2012. As a percentage of total revenue, wireless system solution sales decreased from 95.6% to 93.3% of our total revenue. The increase in revenue from wireless system solutions was mainly attributable to revenue recognition from the contracts signed in earlier periods.

Cost of Sales

Cost of sales increased by 84.1% to approximately $2.5 million for the six months ended March 31, 2013 from approximately $1.4 million for the six months ended March 31, 2012. As a percentage of our total revenues, cost of sales decreased from 117.1% of our total revenues for the six months ended March 31, 2012 to 85.2% of our total revenues for the six months ended March 31, 2013. The increase in our cost of sales was proportional to the increase in sales for the six months ended March 31, 2013.

Cost of sales for software solutions decreased by 30.3% to approximately $0.3 million for the six months ended March 31, 2013, compared to approximately $0.4 million for the six months ended March 31, 2012. This represented 9.9% and 26.3% of the total cost of sales, and 126.5% and 698.1% of software solutions revenue, for the six months ended March 31, 2013 and 2012, respectively.

Cost of sales for wireless system solutions increased by 125.0%, from approximately $1.0 million for the six months ended March 31, 2012 to approximately $2.3 million for the six months ended March 31, 2013. This represented 90.1% and 73.7% of the total cost of sales, and 82.3% and 90.3% of wireless system solution revenues, for the six months ended March 31, 2013 and 2012, respectively.

Gross Profit and Gross Margin

In the six months ended March 31, 2013, gross profit increased by 318.3% to $0.4 million from minus $0.2 million in the six months ended March 31, 2012. Gross margin for the six months ended March 31, 2013 was 14.8%, compared to minus 17.1% in the six months ended March 31, 2012.  This increase of gross profit and gross margin was primarily due to the relatively higher profit margin in the contracts we signed in the six months ended March 31, 2013 compared to those signed in the six months ended March 31, 2012.

Gross profit from software solutions increased by 83.0% for the six months ended March 31, 2013, from minus $0.3 million to minus $0.05 million, and gross margin increased to minus 26.5% from minus 598.1% in the six months ended March 31, 2012. Gross profit from wireless system solutions increased by 353.2% for the six months ended March 31, 2013, from $0.11 million to $0.5 million, and gross margin increased to 17.7% from 9.7% in the six months ended March 31, 2012. 

Operating Expenses

Total operating expenses for the six months ended March 31, 2013 were $2.3 million, compared to $5.0 million for the six months ended March 31, 2012, representing a decrease of 54.5%.

Selling and marketing expenses decreased by 38.7% to $0.27 million in the six months ended March 31, 2013, compared to $0.43 million for the six months ended March 31, 2012, and represented 8.9% and 36.8% of revenues for the six months ended March 31, 2013 and 2012, respectively. The decrease in sales and marketing expenses was a direct result of the Company's decision to close the representative offices in Tibet and Yan'An to reduce expenses.

General and administrative expenses were approximately $1.7 million in the six months ended March 31, 2013, a decrease of 59.8% from $4.4 million in the six months ended March 31, 2013, and represented 58.5% and 369.0% of revenues for the six months ended March 31, 2013 and 2012, respectively. The significant decrease in general and administrative expenses was primarily due to the fact that bad debt expenses were only $0.5 million in the six months ended March 31, 2013, compared to approximately $3.3 million in the six months ended March 31, 2012.

Research and development expenses were approximately $0.25 million in the six months ended March 31, 2013, an increase of 28.7% from $0.20 million in the six months ended March 31, 2012, and represented 8.4% and 16.5% of revenues for the six months ended March 31, 2013 and 2012, respectively.

Loss from Operations  

The Company had loss from operations of $1.8 million in the six months ended March 31, 2013, compared to loss from operations of $5.2 million in the six months ended March 31, 2012, a decrease of $3.4 million, or 64.8%, primarily due to increases in revenues from software solutions and wireless system solutions compounded by a decrease in operating expenses. Operating margins for the six months ended March 31, 2013 and 2012 were minus 61.1% and minus 439.5%, respectively.

Net Loss and EPS

Net loss was $1.8 million during the six months ended March 31, 2013, compared to net loss of $5.2 million in the six months ended March 31, 2012, a decrease of $3.4 million, or 65.0%. Net loss as a percentage of total net revenues were minus 60.6% and minus 438.5% for the six months ended March 31, 2013 and 2012, respectively. Basic and diluted loss per share was $1.29 in the six months ended March 31, 2013, compared to basic and diluted loss per share of $3.70 in the prior year period. The number of weighted average common shares outstanding for the six months ended March 31, 2013 remained unchanged at 1,405,000.

Liquidity and Capital Resources

Cash and Cash Equivalents

As of March 31, 2013, the Company had cash and cash equivalents of $8.1 million, compared to $6.4 million as of September 30, 2012, the Company's last fiscal year end. Cash flow provided by operating activities for the six months ended March 31, 2013 was approximately $1.5 million, compared to approximately $1.5 million used in operating activities for the six months ended March 31, 2012, mainly due to two factors: the $3.4 million decrease in net loss and a $3.9 million increase in advances from customers. Depreciation and amortization expenses were $0.31 million and $0.29 million for the six months ended March 31, 2013 and 2012, respectively. Cash flow provided by investing activities was approximately $0.1 million for the six months ended March 31, 2013, compared to $0.08 million used in investing activities for the six months ended March 31, 2012. This increase in cash inflow was attributable to the $0.07 million decrease in payments to purchase property and equipment and the $0.1 million proceeds from collection of due from related parties in the six months ended March 31, 2012.

Financial Outlook

For the fiscal year ending September 30, 2013, management expects revenues of $8.7 million to $11.0 million and net loss of $1.0 million to $1.8 million.

Conference Call

The Company will host a conference call to discuss the financial results for the six months ended March 31, 2013 at 8:00 a.m. EDT on May 23, 2013.

To participate in the conference call, please dial any of the following numbers:

A replay of the call will be available until 11:59 PM EDT on May 25, 2013.

To access the replay, please dial any of the following numbers:

Replay Passcodes (both required for playback):

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 http: 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, 2012 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.

SOURCE Kingtone Wirelessinfo Solution Holding Ltd

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