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CORRECTING AND REPLACING -- eFuture Announces Corrected Unaudited Third Quarter 2015 Financial Results

BEIJING, Nov. 23, 2015 (GLOBE NEWSWIRE) -- The release published on November 20, 2015 by eFuture Information Technology Inc. (Nasdaq:EFUT), included an incorrect RMB amount of negative RMB 0.8 million, instead of the correct amount, negative RMB 0.08 million, for the adjusted EBITDA in the Third Quarter 2015 Financial and Operational Highlights section. The corrected release follows:

eFuture Information Technology Inc. (Nasdaq:EFUT) (the "Company" or "eFuture"), a leading software and solution provider and a mobile business enabler to China's rapidly growing retail and consumer goods industries, today announced its unaudited financial results for the third quarter ended September 30, 2015.

Third Quarter 2015 Financial and Operational Highlights

  • Third quarter total revenue increased 6% year-over-year to RMB36.1 million (US$5.7 million).
  • Gross profit increased 7% year-over-year to RMB16.4 million (US$ 2.6 million).
  • Adjusted EBITDA was negative RMB0.08 million (US$0.01 million), compared to negative RMB0.1 million in the third quarter 2014.
  • Operating loss was RMB3.7 million (US$ 0.6 million), compared to an operating loss of RMB1.8 million in the third quarter 2014.
  • Net loss was RMB3.9 million (US$0.6 million), compared to a net loss of RMB 1.8 million in the third quarter 2014.
  • Backlog as of September 30, 2015 decreased 11% year-over-year to RMB197.7 million (US$31.1 million).

"In the first half of 2015, we focused on the company's management structure realignment to better serve our core business--software and services. We also adjusted and more clearly identified the direction of innovative businesses and selected a few early-stage projects for incubation. In the third quarter of 2015, we fine-tuned the company's business strategy--build an open and cooperative software and cloud service platform that forms the omni-channel sales loop by connecting retailers, merchandises and consumers and provides an O2O ("Online together with Offline") matchmaker service to help internet platforms cooperate with physical retailers in different real-world scenarios." Mr. David Ren, Chief Executive Officer of eFuture, commented.

Ms. Ping Yu, Chief Financial Officer, further commented, "Due to the continued reduction of physical retail business under the current macro economy condition, our contract value and associated backlog decreased in the third quarter of 2015. However, new business opportunities in the O2O area should benefit both physical retailers and internet players and help to create greater demand for eFuture's services. We believe that we have the strongest physical retail client base especially among top 100 chain retailers. Looking ahead, we will continue to enhance our core software business and invest in high-potential innovative synergistic businesses. We remain confident in our repositioned strategy and our ability to acquire new revenue streams for our omni-channel cloud service platform over the long term."

THIRD QUARTER 2015 FINANCIAL RESULTS

Revenue

Total revenue for the third quarter 2015 increased 6% to RMB36.1 million (US$5.7 million) from RMB34.0 million in the third quarter 2014.

Revenue Breakdown

3Q14 3Q15
RMB '000 RMB '000 USD '000 Y-o-Y Change
Software revenue 13,497 13,337 2,099 -1%
Hardware revenue 597 605 95 1%
Service fee revenue 19,906 22,208 3,494 12%
Total 34,000 36,150 5,688 6%

Software revenue for the third quarter 2015 decreased 1% year-over-year to RMB13.3 million (US$2.1 million) from RMB13.5 million in the third quarter 2014.

Hardware revenue in the third quarter 2015 increased 1% year-over-year to RMB0.6 million (US$0.1 million) from RMB0.6 million in the third quarter 2014.

Service fee revenue for the third quarter 2015 increased 12% year-over-year to RMB22.2 million (US$3.5 million) from RMB19.9 million in the third quarter 2014. The increase was primarily attributable to increased revenue recognized from customers in the shopping mall industry in the third quarter 2015.

Cost of Revenue

Cost of revenue for the third quarter 2015 increased 6% to RMB19.8 million (US$3.1 million) from RMB18.7 million in the third quarter 2014. The primary reason was the increased amortization of software costs associated with myStore development from previous years.

Cost of Revenue Breakdown

3Q14 3Q15
RMB '000 RMB '000 USD '000 Y-o-Y Change
Cost of software revenue 2,720 2,895 456 6%
Cost of hardware revenue 574 301 47 -48%
Cost of service fee revenue 14,482 13,762 2,166 -5%
Amortization of software costs 943 2,799 440 197%
Total 18,719 19,757 3,109 6%

Gross Profit and Gross Margin

Gross profit increased by 7% year-over-year to RMB16.4 million (US$2.6 million) from RMB15.3 million in the third quarter 2014, and consolidated gross margin for the third quarter 2015 and 2014 was 45%, consolidated gross margin remained stable.

Operating Expenses

Research and development ("R&D") expenses for the third quarter 2015 increased 118% year-over-year to RMB2.8 million (US$0.4 million), or 8% of total revenue, compared with RMB1.3 million, or 4% of total revenue in the third quarter 2014. The increase in R&D expenses was primarily attributable to an expenditure relating to a software project and myStore in the third quarter 2015.

General and administrative expenses ("G&A") for the third quarter 2015 increased 50% year-over-year to RMB8.7 million (US$1.4 million), representing 24% of total revenue, compared with RMB5.8 million, or 17% of total revenue in the third quarter 2014. The increase in G&A expenses was primarily attributable to an increased bad debt provision resulting from a trade receivable that had not been collected on schedule, as well as higher rental costs and expenses resulting from moving into two new offices in Beijing.

Selling and distribution ("S&D") expenses for the third quarter 2015 decreased 14% year-over-year to RMB8.6 million (US$1.4 million), representing 24% of total revenue, compared with RMB10.0 million, or 29% of total revenue in the third quarter 2014. The decrease in S&D expenses was primarily attributable to decreased promotion expenses on streamlined innovative businesses, as well as improved management efficiency.

Operating Loss

Operating loss in the third quarter 2015 was RMB3.7 million (US$0.6 million), compared to operating loss of RMB1.8 million in the third quarter 2014.

Net Loss/Adjusted Net Loss and Loss Per Share/Adjusted Loss Per Share

Third quarter 2015 net loss was RMB3.9 million (US$0.6 million), compared with a net loss of RMB1.8 million in the third quarter 2014. Adjusted net loss for the third quarter 2015 was RMB0.7 million (US$0.1 million), compared with an adjusted net loss of RMB0.5 million in the third quarter 2014.

Basic and diluted loss per share in the third quarter 2015 was RMB0.81 (US$0.13), compared to basic and diluted loss per share of RMB0.43 in the third quarter 2014. Adjusted diluted loss per share was RMB0.15 (US$0.02), compared to adjusted diluted loss per share of RMB0.13 in the third quarter 2014.

EBITDA

Adjusted EBITDA for the third quarter 2015 was negative RMB0.08 million (US$0.01 million), compared to negative RMB0.13 million in the third quarter 2014.

Balance Sheet and Cash Flow

As of September 30, 2015, cash and cash equivalents were RMB48.4 million (US$7.6 million), a decrease of RMB16.2 million from RMB64.6 million as of December 31, 2014, The decrease was primarily attributable to the payment of annual bonuses and expenditures incurred on customers' projects.

Total accounts receivable as of September 30, 2015 decreased 15% to RMB34.8 million (US$5.5 million) from RMB40.9 million as of December 31, 2014. We also strengthened the management of our accounts receivable relative to 2014.

Inventory and work in process as of September 30, 2015 increased 204% to RMB44.2 million (US$7.0 million) from RMB14.6 million as of December 31, 2014. The increase was primarily attributable to a great number of on-going projects which had not reached the point of revenue recognition.

For the quarter ended September 30, 2015, net cash provided by operating activities was RMB10.3 million (US$1.6 million). Net cash used in investing activities was RMB3.4 million (US$0.5 million). Net cash used in financing activities was RMB3.0 million (US$0.5 million).

FOURTH QUARTER2015 GUIDANCE

eFuture expects total revenue for the fourth quarter 2015 to be in the range of RMB82 million (US$12.9 million) to RMB88 million (US$13.8 million). Adjusted EBITDA for the fourth quarter 2015 is expected to be in the range of RMB9 million (US$ 1.4 million) to RMB13 million (US$2.0 million).

TAX INSPECTION

The Beijing tax authority has recently conducted a tax inspection on our wholly owned subsidiary, eFuture (Beijing) Royalstone Information Technology Inc. ("eFuture Beijing") for the period from 2004 to 2014. Due to the timing difference between financial reporting and tax reporting regarding the realization of income from revenue and advance payments from customers, the Beijing tax authority has taken the position that eFuture Beijing failed, under local tax regulations, to recognize income and, therefore timely make tax payments. Based on our internal estimates, eFuture Beijing may be required to pay the unpaid taxes and possibly a fine and late payment fees, in the range between RMB6.0 million (US$0.9 million) and RMB30.9 million (US$4.9 million). Since our previously filed US financial statements have provided provisions for the unpaid taxes, our auditors have concluded that a restatement of financial statements is not required. Any unpaid tax, fine and late payment fees (if any) are expected to be due within 2015 after they are issued by the Beijing tax authority. The funds need to pay taxes, fines and late payment fees will come from our working capital and we anticipate that the expense will be booked in the fourth quarter in 2015. eFuture Beijing has taken several corrective measures, including personnel changes and staff training regarding Chinese tax law compliance, so this does not occur again.

CURRENCY CONVENIENCE TRANSLATION

For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB6.3556 to US$1.00, the noon buying rate for US dollars in effect on September 30, 2015 for cable transfers of RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

USE OF NON-GAAP FINANCIAL MEASURES

To supplement eFuture's unaudited consolidated financial results presented in accordance with U.S. GAAP, eFuture uses the following non-GAAP measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission: (i) adjusted EBITDA excluding amortization of acquired software technology, amortization of intangibles, impairment of intangible assets, share-based compensation expenses and depreciation; (ii) adjusted net income excluding amortization of acquired software technology, amortization of intangibles, impairment of intangible assets, share-based compensation expenses and accretion on convertible notes; and (iii) adjusted basic and diluted earnings per share excluding amortization of acquired software technology, amortization of intangibles, share-based compensation expenses and accretion on convertible notes.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.

eFuture believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding expenses that may not be indicative of its operating performance from a cash perspective or be indicative of its operating performance. eFuture believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to eFuture's historical performance and liquidity. eFuture computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. The accompanying paragraphs have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

eFuture's management also believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization is a useful financial metric to assess its operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, eFuture's management believes that EBITDA is widely used by other companies in the software industry and may be used by investors as a measure of its financial performance. Given the significant investments that eFuture has made in property, equipment, depreciation and amortization expense comprises a meaningful portion of the Company's cost structure. eFuture's management believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains eFuture considers to be outside the ordinary course of its business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Further, share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of eFuture's financial results. The term EBITDA or adjusted EBITDA is not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing eFuture's operating and financial performance, you should not consider this data in isolation or as a substitute for its net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA and adjusted EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as eFuture does.

STATEMENT REGARDING UNAUDITED FINANCIAL INFORMATION

The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company's year-end financial statements, which could result in significant differences from this unaudited financial information.

ABOUT EFUTURE INFORMATION TECHNOLOGY INC.

eFuture Information Technology Inc. (Nasdaq:EFUT) is a leading software and solution provider and a mobile business enabler to China's rapidly growing retail and consumer goods industries. eFuture's clients include over 1,000 active retailers with more than 50,000 physical stores across China, of which approximately 45% were ranked among the top 100 chain retailers during 2014. 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, 2013 financial outlook and quotations from management in this announcement, as well as strategic and operational plans, contain forward-looking statements. eFuture may also make written or oral forward-looking statements in periodic reports to the Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to second parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: eFuture's anticipated growth strategies; eFuture's future business development, results of operations and financial condition; expected changes in the Company's revenue and certain cost or expense items; eFuture's ability to attract clients and leverage its brand; trends and competition in the software industry; the Company's ability to control expenses and maintain profit margins; the Company's ability to hire, train and retain qualified managerial and other employees; the Company's ability to develop new software and pilot new business models at desirable locations in a timely and cost-effective manner; the performance of third parties under contracts with the Company; the expected growth of the Chinese economy software market in retail and consumer goods industries; and Chinese governmental policies relating to private managers and operators of software and applicable tax rates.

Further information regarding these and other risks will be included in eFuture's annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of November 20, 2015, and the Company undertakes no duty to update such information or any other forward-looking information, except as required under applicable law.

– FINANCIAL TABLES TO FOLLOW –

EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES Exchange rate 6.3556
CONDENSED CONSOLIDATED BALANCE SHEETS
Chinese Yuan (Renminbi) U.S. Dollars
December 31, September 30, September 30,
2014 2015 2015
(Audited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 64,558,916 48,378,950 7,612,019
Trade receivables, net of allowance for doubtful accounts of ¥4,502,766 and ¥7,220,496($1,136,084), respectively 40,889,759 34,833,964 5,480,830
Refundable value added tax 6,765,916 3,178,803 500,158
Advances to employees 1,117,272 996,375 156,771
Other receivables 2,474,076 2,520,063 396,511
Prepaid expenses 1,554,052 1,578,871 248,422
Inventory and work in process, net of inventory provision of ¥4,356,091 and ¥1,962,802($308,830), respectively 14,560,195 44,241,606 6,961,043
Deferred tax assets, current portion 7,046,782 7,012,586 1,103,371
Total current assets 138,966,968 142,741,218 22,459,125
Non-current assets
Long-term investments, net of impairment of ¥240,000 and ¥240,000($37,762), respectively -- -- --
Property and equipment, net of accumulated depreciation of ¥9,515,986 and ¥10,556,401($1,660,961), respectively 3,279,483 3,967,689 624,282
Intangible assets, net of accumulated amortization of ¥80,190,029 and ¥85,734,817($13,489,650), respectively 40,294,260 39,145,579 6,159,226
Goodwill 80,625,667 80,625,667 12,685,768
Deferred tax assets 919,637 983,709 154,778
Total non-current assets 125,119,047 124,722,644 19,624,054
Total assets 264,086,015 267,463,862 42,083,179
LIABILITIES AND EQUITY
Current liabilities
Short-term loans 10,692,003 10,000,000 1,573,416
Trade payables 12,509,613 11,835,505 1,862,217
Other payables 17,978,021 13,596,533 2,139,300
Accrued expenses 24,685,555 7,849,899 1,235,115
Taxes payable 16,128,358 8,969,722 1,411,310
Advances from customers 51,661,078 78,425,769 12,339,633
Total current liabilities 133,654,628 130,677,428 20,560,991
Equity
Ordinary shares $0.0756 U.S. dollars par value; 6,613,756 shares, authorized;3,989,626 shares and 4,858,651 shares issued and outstanding, respectively 2,357,978 2,762,195 434,608
Additional paid-in capital 234,405,541 255,567,492 40,211,387
Statutory reserves 8,574,634 8,574,634 1,349,146
Accumulated deficits (114,906,766) (130,117,887) (20,472,951)
Total equity 130,431,387 136,786,434 21,522,190
Total liabilities and equity 264,086,015 267,463,862 42,083,181
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES Exchange rate 6.3556
CONDENSED CONSOLIDATED INCOME STATEMENTS
Nine months ended Three months ended
Chinese Yuan (Renminbi) U.S. Dollars   Chinese Yuan (Renminbi) U.S. Dollars  
September 30, September 30, September 30, September 30, September 30, September 30,
2014 2015 2015 Y-o-Y
Change
2014 2015 2015 Y-o-Y
Change
(Unaudited) (Unaudited) (Unaudited) % (Unaudited) (Unaudited) (Unaudited) %
Revenues
Software revenue 28,764,116 31,743,786 4,994,617 10% 13,497,500 13,336,840 2,098,439 -1%
Hardware revenue 2,440,437 6,231,569 980,485 155% 596,737 605,285 95,236 1%
Service fee revenue 56,700,616 54,579,794 8,587,670 -4% 19,905,857 22,207,540 3,494,169 12%
Total revenues 87,905,169 92,555,149 14,562,770 5% 34,000,094 36,149,665 5,687,845 6%
Cost of revenues
Cost of software revenue 7,468,927 7,144,706 1,124,159 -4% 2,720,186 2,894,822 455,476 6%
Cost of hardware revenue 2,304,670 5,325,887 837,983 131% 574,264 300,869 47,339 -48%
Cost of service fee revenue 39,700,584 36,687,609 5,772,486 -8% 14,481,585 13,762,134 2,165,356 -5%
Amortization of software costs 2,811,196 5,544,788 872,426 97% 943,319 2,798,826 440,372 197%
Total cost of revenues 52,285,377 54,702,990 8,607,054 5% 18,719,354 19,756,651 3,108,542 6%
Gross profit 35,619,792 37,852,159 5,955,716 6% 15,280,740 16,393,014 2,579,302 7%
Operating expenses
Research and development expenses 2,030,635 4,681,306 736,564 131% 1,283,817 2,800,766 440,677 118%
General and administrative expenses 17,074,046 23,071,164 3,630,053 35% 5,804,916 8,718,122 1,371,723 50%
Selling and distribution expenses 29,722,098 24,901,876 3,918,100 -16% 9,988,986 8,606,659 1,354,185 -14%
Total operating expenses 48,826,779 52,654,346 8,284,717 8% 17,077,719 20,125,547 3,166,585 18%
Loss from operations (13,206,987) (14,802,187) (2,329,001) (1,796,979) (3,732,533) (587,283)
Other income (expenses)
Interest income 481,260 237,051 37,298 70,717 54,850 8,630
Interest expenses (25,025) (708,758) (111,517) (25,025) (222,530) (35,013)
Other income 564,481 302,154 47,541 429,509 293,351 46,156
Foreign currency exchange gain 19,015 130,743 20,571   341 189,786 29,861  
Loss before income tax (12,167,256) (14,840,997) (2,335,106) (1,321,437) (3,417,076) (537,648)
Less: Income tax expense (benefit) (827,921) 370,124 58,236   477,562 478,126 75,229  
Net loss (11,339,335) (15,211,121) (2,393,342) (1,798,999) (3,895,202) (612,877)
Loss per share
Basic (2.69) (3.36) (0.53) (0.43) (0.81) (0.13)
Diluted (2.69) (3.36) (0.53) (0.43) (0.81) (0.13)
Basic weighted average shares outstanding 4,217,184 4,527,425 4,527,425 4,217,426 4,835,636 4,835,636
Fully diluted weighted average shares outstanding 4,217,184 4,594,382 4,594,382 4,217,426 4,925,815 4,925,815
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES Exchange rate 6.3556
NON-GAAP MEASURES OF PERFORMANCE
Nine months ended Three months ended
Chinese Yuan (Renminbi) U.S. Dollars Chinese Yuan (Renminbi) U.S. Dollars
September 30, September 30, September 30, September 30, September 30, September 30,
2014 2015 2015 2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
NON-GAAP OPERATING INCOME (LOSS) AND ADJUSTED EBITDA
Operating loss (GAAP basis) (13,206,987) (14,802,187) (2,329,001) (1,796,979) (3,732,533) (587,283)
Adjustments for non-GAAP measures of performance:
Add back amortization of intangibles 2,811,196 5,544,788 872,426 943,319 2,798,826 440,372
Add back share-based compensation expenses 901,508 1,637,076 257,580 300,901 369,582 58,151
Adjusted non-GAAP operating loss (9,494,283) (7,620,323) (1,198,995) (552,759) (564,125) (88,760)
Add back depreciation 1,383,129 1,347,691 212,048 419,082 486,493 76,546
Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) (8,111,154) (6,272,632) (986,947) (133,677) (77,632) (12,215)
NON-GAAP OPERATING LOSS AND ADJUSTED EBITDA, as a percentage of revenue
Operating loss (GAAP BASIS) -15% -16% -16% -5% -10% -10%
Adjustments for non-GAAP measures of performance:
Amortization of intangibles 3% 6% 6% 3% 8% 8%
Share-based compensation expenses 1% 2% 2% 1% 1% 1%
Adjusted non-GAAP operating loss -11% -8% -8% -2% -2% -2%
Depreciation 2% 1% 1% 1% 1% 1%
Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) -9% -7% -7% 0% 0% 0%
NON-GAAP EARNINGS PER SHARE
Net loss (11,339,335) (15,211,121) (2,393,342) (1,798,999) (3,895,202) (612,877)
Amortization of intangibles 2,811,196 5,544,788 872,426 943,319 2,798,826 440,372
Share-based compensation expenses 901,508 1,637,076 257,580 300,901 369,582 58,151
Adjusted net loss (7,626,631) (8,029,257) (1,263,336) (554,779) (726,794) (114,355)
Adjusted non-GAAP diluted loss per share (1.81) (1.77) (0.28) (0.13) (0.15) (0.02)
Shares used to compute non-GAAP diluted loss per share 4,217,184 4,527,425 4,527,425 4,217,426 4,835,636 4,835,636
EFUTURE INFORMATION TECHNOLOGY INC. AND SUBSIDIARIES Exchange rate 6.3556
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended Three months ended
Chinese Yuan (Renminbi) U.S. Dollars Chinese Yuan (Renminbi) U.S. Dollars
September 30, September 30, September 30, September 30, September 30, September 30,
2014 2015 2015 2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss (11,339,335) (15,211,121) (2,393,342) (1,798,999) (3,895,202) (612,877)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation of property and equipment 1,383,129 1,347,691 212,048 419,082 486,493 76,546
Amortization of intangible assets 2,811,196 5,544,788 872,426 943,319 2,798,826 440,372
Loss on disposal of property and equipment 23,935 8,124 1,278 24,718 7,885 1,241
Allowance for doubtful accounts 1,234,511 3,035,808 477,659 (210,564) 1,377,155 216,684
Provision for loss in inventory and work in process 3,322,384 (2,393,289) (376,564) (931,114) (1,070,152) (168,379)
Compensation expenses 901,508 1,637,076 257,580 300,901 369,582 58,151
Deferred income taxes (827,921) (29,876) (4,701) 477,562 478,127 75,229
Foreign exchange loss 6,276 (130,743) (20,571) (195) (189,786) (29,861)
Other noncash expense 891,945 3,042,653 478,736 891,945 3,042,653 478,736
Changes in assets and liabilities:
Trade receivables (882,236) 2,364,987 372,111 (3,698,958) (12,211) (1,921)
Refundable value added tax (2,583,766) 3,587,113 564,402 (2,278,099) (645,016) (101,488)
Advances to employees (89,589) 120,897 19,022 130,631 200,570 31,558
Advances to suppliers (30,667) -- -- 380,552 350,434 55,138
Other receivables 111,005 609,013 95,823 153,053 780,106 122,743
Prepaid expenses (414,231) (24,819) (3,905) (718,028) 802,797 126,313
Inventory and work in process (24,390,379) (27,288,122) (4,293,557) (6,483,221) (6,877,439) (1,082,107)
Trade payables (4,088,019) (674,108) (106,065) (1,014,328) (1,345,174) (211,652)
Other payables 459,164 (4,381,488) (689,390) 5,008,943 676,724 106,477
Accrued expenses (14,389,034) (16,835,656) (2,648,948) (1,985,044) (3,333,005) (524,420)
Taxes payable (10,173,713) (7,102,555) (1,117,527) (1,997,338) (1,369,183) (215,429)
Advances from customers 41,054,969 26,764,691 4,211,197 32,148,853 17,678,739 2,781,600
Net cash provided by (used in) operating activities (17,008,868) (26,008,936) (4,092,288) 19,763,671 10,312,923 1,622,654
Cash flows from investing activities:
Purchases of property and equipment (1,544,660) (2,099,897) (330,401) (667,106) (761,610) (119,833)
Payments for intangible assets (11,414,104) (7,438,759) (1,170,427) (2,458,874) (2,593,302) (408,034)
Cash received from disposal of property and equipment 3,300 (206) (32) -- (256) (40)
Net cash used in investing activities (12,955,464) (9,538,862) (1,500,860) (3,125,980) (3,355,168) (527,907)
Cash flows from financing activities:
Proceeds from short-term loans 3,000,000 (692,003) (108,881) 3,000,000 (3,000,000) (472,025)
Proceeds from exercise of options by employees 55,805 178,880 28,145 -- -- --
Issurance of ordinary shares -- 19,750,212 3,107,529 -- -- --
Net cash provided by (used in) financing activities 3,055,805 19,237,089 3,026,793 3,000,000 (3,000,000) (472,025)
Effect of exchange rate changes on cash and cash equivalents (6,276) 130,743 20,571 195 189,786 29,861
Net increase (decrease) in cash and cash equivalents (26,914,803) (16,179,966) (2,545,784) 19,637,886 4,147,541 652,581
Cash and cash equivalents at beginning of period 62,620,652 64,558,916 10,157,800 16,067,963 44,231,409 6,959,439
Cash and cash equivalents at end of period 35,705,849 48,378,950 7,612,019 35,705,849 48,378,950 7,612,019
Supplemental cash flow information
Interest paid 25,025 690,008 108,567 25,025 228,380 35,934
Income tax paid 3,736,424 3,042,230 478,669 -- -- --

CONTACT: Investor Contact: Troe Wen, Company Secretary eFuture Information Technology Inc. +86 10 50916128 ir@e-future.com.cn

Source:eFuture Information Technology Inc.