KONE Kingtone Wirelessinfo Solution Holding Ltd ADS (delisted)

XI'AN, China, June 30, 2017 /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 the financial results for the six months ended March 31, 2017. 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, 2017:

Revenues increased 1.2% to $0.5 million from $0.49 million for the six months ended March 31, 2016;

Gross profit increased 5.2%to $0.22million from $0.21 million for the six months ended March 31, 2016;

Gross margin increased to 44% from 42.3% for the six months ended March 31, 2016;

Net income of $0.05million as compared to net loss of $0.7 million for the six months ended March 31, 2016.

Basic and diluted income per share was $0.03for the six months ended March 31, 2017 compared to basic and diluted loss per share of $0.48 for the six months ended March 31, 2016. Weighted average shares outstanding for the six months ended March 31, 2017 remained unchanged at 1,405,000.

The Company's business is recovering gradually and the Company had also taken measures to increase the profit including cutting the headcounts to decrease the cost," said Mr. Peng Zhang, Chief Executive Officer, "Although the overall market of software solution is not positive, the Company still achieved the steady business growth. I hope our investors can be more patient with our business and capital market performance. In the future we will continue to take measures to improve our performance and optimize our business model to achieve sustainable growth."

Results of Operations - For the Six Months Ended March 31, 2017 Compared to the Six Months Ended March 31, 2016

Net Revenues

The Company's revenues increased by 1.2%to $0.5 million for the six months ended March 31, 2017, as compared to $0.49 million for the six months ended March 31, 2016.

Company had no revenue from software solutions for the six months ended March 31, 2017, compared to $0.06 million for the six months ended March 31, 2016.

Revenues from wireless system solutions increased by 15.7% to $0.5 million for the six months ended March 31, 2017, compared to $0.4 million in the six months ended March 31, 2016. As a percentage of total revenue, wireless system solution sales increased to100% from 99.5% 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 decreased by 1.7% to approximately $281,000 for the six months ended March 31, 2017 from approximately $286,000 for the six months ended March 31, 2016.  As a percentage of our total revenues, cost of sales decreased to 56% of our total revenues for the six months ended March 31, 2017 from 57.7% of our total revenues for the six months ended March 31, 2016, which partially attributable to the fact that the projects the Company had worked on were with old clients and therefore made our work more efficient. 

Cost of sales for wireless system solutions increased by 13.3%, from approximately $248,000 for the six months ended March 31, 2016 to approximately $281,000 for the six months ended March 31, 2017. This represented 100% and 86.7% of the total cost of sales, and 56% and 57.1% of wireless system solution revenue, for the six months ended March 31, 2017 and 2016, respectively.

Gross Profit and Gross Margin

For the six months ended March 31, 2017, gross profit increased by 5.2%to $0.22 million from $0.21 million for the six months ended March 31, 2016. Gross margin for the six months ended March 31, 2017 was 44%, compared to 42.3% in the six months ended March 31, 2016. 

Gross profit from wireless system solutions increased by 18.8% for the six months ended March 31, 2017, to $0.22 million from $0.19 million, and gross margin increased to 44% from 42.9% for the six months ended March 31, 2016. 

Operating Expenses

Total operating expenses for the six months ended March 31, 2017 were $0.8 million, compared to $1.4 million for the six months ended March 31, 2016, representing a decrease of 44.3%.

Selling expenses decreased by 20.6% to $0.05 million for the six months ended March 31, 2017, compared to $0.07 million for the six months ended March 31, 2016, and represented 10.8% and 13.7% of revenues for the six months ended March 31, 2017 and 2016, respectively. The decrease in sales expenses was a direct result of the Company's cost-control decision to reduce the marketing and traveling expenses coping with the depression in the software solution market. The demand for software solutions products is lower because most of our clients are government sponsored companies. With the macro-policy in China that controls the spending budgets in governmental agencies and fewer clients in such nature were inclined to buy value-added software solutions. 

General and administrative expenses were approximately $0.7 million for the six months ended March 31, 2017, a decrease of 43.3% from $1.3 million for the six months ended March 31, 2016, which represented 147% and 262.3% of revenues for the six months ended March 31, 2017 and 2016, respectively. 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 significant decrease in general and administrative expenses was mainly due to the decreased bad debt expense caused by the write-off of certain aged receivables, and decreased labor cost as a result of the decreased business operation in the six months ended March 31, 2017.

Research and development expenses were nil for the six months ended March 31, 2017, compared to $54,000 for the same period last year.

Income (Loss) from Operations

The Company had loss from operations of $0.6 million for the six months ended March 31, 2017, compared to loss from operations of $1.2 million for the six months ended March 31, 2016, a decrease of $0.6 million, which primarily due to the significantly lower general and administrative expenses for the six months ended March 31, 2017, compared to the same period last year.

Net income (Loss) and EPS

Net income was $0.05 million for the six months ended March 31, 2017, compared to net loss of $0.7 million for the six months ended March 31, 2016. Basic and diluted income per share was $0.03 in the six months ended March 31, 2017, compared to basic and diluted loss per share of $0.48 for the six months ended March 31, 2016. The number of weighted average common shares outstanding for the six months ended March 31, 2017 remained unchanged at 1,405,000.

Liquidity and Capital Resources

Cash and Cash Equivalents

As of March 31, 2017, the Company had cash and cash equivalents of $5.6 million, compared to $1.2 million as of September 30, 2016, the Company's last fiscal year end. Net cash provided by operating activities for the six months ended March 31, 2017 was approximately $0.05 million, compared to approximately $0.5 million used in operating activities for the six months ended March 31, 2016. For the six months ended March 31, 2017, the Company had a net income of $0.05 million compared to net loss of $0.7 million for the same period last year. Net cash provided by financing activities for the six months ended March 31, 2017 was approximately $4.4 million, compared to approximately $0.7 million used in financing activities for the six months ended March 31, 2016. As of March 31, 2017, the closing balance of due from related party decreased by $4.6 million to $1.6 million, compared to $6.2 million as of September 30, 2016. Net cash provided by investing activities was nil for the six months ended March 31, 2017, compared to $1,000 provided by investing activities for the six months ended March 31, 2016.

Financial Outlook

Based on the results of the first six months of fiscal year 2017, in light of increased competition, price pressure and continuing negotiations for new contracts that were expected to be signed later in the year, the Company updated its previously released guidance for fiscal year 2017. We now expect revenues in the range between $2 million and $4 million and net income in the range between $0 and $0.5 million.

Conference Call

The Company will host a conference call to discuss the financial results for the six months ended March 31, 2017 at 8:00 a.m. ET on June 30, 2017.

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 ET on July 2, 2017.

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

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, 2016 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.

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