Pansoft Company Limited (NASDAQ: PSOF) ("Pansoft" or the
"Company"), a leading ERP software service provider for the oil and
gas industry in China, today announced unaudited financial results
for the fiscal first-quarter of 2012 ended September 30, 2011.
Highlights for Fiscal First-Quarter
2012:
- Revenues were $4.2 million, an increase
of 20.9% versus the year-ago quarter
- Gross profit was $1.0 million, a decrease of 44.5% versus the year-ago quarter
- Operating loss was $0.3 million, compared
to operating profit of $1.1 million in the year-ago quarter
- Net loss attributable to Pansoft
shareholders was $0.08 million, compared to a net profit of
$1.0 million in the year-ago quarter
- Net loss per diluted share attributable to
Pansoft shareholders was $0.02, compared to a net profit per
diluted share of $0.18 in the year-ago quarter
- On January 7, 2012, Chairman Hugh Wang, representing Timesway
Group Limited ("Timesway"), submitted an offer to Pansoft's Board
of Directors to acquire all outstanding Pansoft shares that it did
not already own at a price of $3.76 per share
"Pansoft entered the fiscal 2012 business year with solid
revenue growth, both in our core business and from recent
acquisitions, which have started to make a significant contribution
to our top line," said Hugh Wang, Pansoft's Chairman of the Board.
"The delay in reaching breakeven at Pansoft-Japan and the slower
pace of revenue recognition at HongAo continue to pose a challenge
for our bottom line results, but we remain confident will
successfully execute our strategy to improve profitability at our
new ventures."
Financial Results Highlights for the Fiscal
First-Quarter of 2012
Revenues for the fiscal first quarter ended September 30, 2011
were $4.2 million, compared to $3.5 million in the prior fiscal
year, an increase of 20.9%, of which approximately 61.7% was
contributed by Pansoft-China and 38.3% by newly acquired
businesses. The revenue growth rate in the fiscal first quarter was
relatively lower than the rate expected for the entire fiscal year
due to a slower rate of revenue recognition and seasonality.
Cost of sales was $3.3 million, an increase of 83.4% from $1.8
million in the year-ago quarter. Cost of sales increased faster
than revenues, largely due to: 1) higher headcount and therefore,
higher compensation expense; 2) start-up losses at Pansoft-Japan,
the outsourcing joint venture for testing mobile-phone software;
and 3) a higher proportion of lower-margin hardware purchases for
clients at the HongAo subsidiary.
Gross profit was $1.0 million, a decrease of 44.5% from $1.7
million from the year-ago quarter. Gross margin was 22.4%, as
compared to 48.9% in the prior fiscal year. The decline in the
gross margin was mainly due to the aforementioned reasons.
Operating expenses were $1.2 million, an increase of 89.4% from
$0.7 million in the year-ago quarter. The increase in operating
expense was mainly due to: 1) higher general and administrative
expense related to maintaining three additional subsidiary offices
and their management teams; 2) amortization of intangible assets
from the HongAo and ITLamp acquisitions; and 3) higher sales and
marketing expense, particularly at HongAo and Pansoft-Japan.
Operating loss was $0.3 million, compared to operating profit of
$1.1 million in the year-ago quarter.
Net loss attributable to Pansoft shareholders was $0.08 million,
compared to a net profit attributable to Pansoft shareholders of
$1.0 million in the year-ago quarter and was mainly due to start-up
losses at Pansoft-Japan and higher amortization charges related to
recent acquisitions.
Net loss per diluted share attributable to Pansoft shareholders
was $0.02, as compared to a net profit per diluted share
attributable to Pansoft shareholders of $0.18 in the year-ago
quarter.
Segment Performance
The Company reports its financial results in three segments: (1)
design, development, implementation and servicing of ERP systems
for the energy industry such as oil/gas and coal mining; (2)
provision of technology solutions and related services to thermal
power industry; and (3) outsourced mobile phone software testing
and development.
- Pansoft-China and ITLamp represent the
core business of the Company and are engaged in the design,
development, implementation and servicing of ERP systems for the
energy industry such as oil/gas and coal mining, which together
contributed 66.6% of total revenue for the fiscal first quarter
ended September 30, 2011. In the quarter, revenues were $2.6
million, and net income was $0.5 million. ITLamp, which was
acquired in June 2010, operates as an oilfield software development
and service provider, primarily serving the Tarim Oilfield in
Xinjiang province. In the quarter, ITLamp recorded revenues of $0.2
million (5.0% of total fiscal first-quarter 2012 revenue) and net
loss of $0.2 million.
- HongAo, in which Pansoft acquired a
55.01% stake in October 2010, serves the thermal power industry as
a technical service provider in the Shandong province. Net revenues
were $0.9 million (21.0% of total fiscal first-quarter 2012
revenue) and the net loss was $0.05 million, due to a slower pace
of its revenue recognition for ongoing projects.
- Pansoft-Japan was established in August
2010 to provide outsourcing functions for Japanese clients,
initially in the field of cell-phone software testing. The new
testing operation was set up in Jinan, China with a front office in
Osaka, Japan. Pansoft-Japan continues to incur start-up losses
exceeding initial budget expectations. Net revenues were $0.5
million (12.4% of total fiscal first-quarter 2012 revenues) and the
net loss was $0.4 million. The venture is now expected to break
even towards the end of the 2012 calendar year.
Pansoft Segment Income Statement
(in USD) Fiscal First-Quarter Ended September 30, 2011
---------------------------------------------------------
Pansoft-China +
ITLamp HongAo Pansoft-Japan Total
---------------- ----------- -------------- -----------
Revenues $ 2,824,827 $ 888,251 $ 526,232 4,239,310
Cost of revenues 1,935,461 549,886 802,465 3,287,812
---------------- ----------- -------------- -----------
Gross profit 889,366 338,365 (276,233) 951,498
---------------- ----------- -------------- -----------
Income from
operations 235,523 (72,617) (444,779) (281,873)
---------------- ----------- -------------- -----------
Net income $ 313,057 $ (54,851) $ (444.545) $ (186,339)
Financial Condition
As of September 30, 2011, Pansoft had $2.5 million in cash and
equivalents, as compared to $3.7 million as of June 30, 2011. Cash
and cash equivalents exclude $5.5 million in short-term
investments, versus $6.8 million as of June 30, 2011. Total current
assets were $24.0 million, as of September 30, 2011, essentially
flat versus $24.1 million as of June 30, 2011, including a $1.5
million increase in accounts receivable, a $1.3 million increase in
inventory primarily for hardware equipment at HongAo, offset by
$1.5 million in lower deferred revenue and $0.5 million in lower
accruals and other current liabilities. Current liabilities were
$7.1 million as of September 30, 2011, up from $6.8 million as of
June 30, 2011. Total stockholders' equity was $23.1 million as of
September 30, 2011 versus $23.5 million as of June 30, 2011.
Recent Development
On January 7, 2012, the Company's Board of Directors received an
offer from Chairman Hugh Wang, representing Timesway Group Limited
("Timesway"), to acquire all outstanding Pansoft shares that it did
not already own at a price of $3.76 per share in a transaction
that, under the British Virgin Islands law, would result in the
Company becoming a privately-held company. The transaction is
intended to be structured as a merger between the Company and a
special purpose vehicle company incorporated under the British
Virgin Islands law and wholly owned by Timesway. Timesway is
represented by Chairman Hugh Wang, who had voting power over 64% of
the Company's voting securities as of June 30, 2011. The Company
has formed a Special Committee, consisting of independent Board
members Dr. Paul Gillis, Samuel Shen, and Tony Luh, to evaluate the
offer. Dr. Gillis will serve as the Special Committee's
chairman.
Business Outlook
For the fiscal year ending June 30, 2012, Pansoft continues to
expect revenues to keep a similar pace of growth as in recent
fiscal years. The Company expects a substantial increase in revenue
in the fiscal second quarter ended December 31, 2011, due to the
seasonality pattern, whereby a large proportion of revenues is
recognized and the related payments are received before the end of
the calendar year based on clients' decision-making and payment
cycles. The Company also expects revenues in the fiscal second
quarter to increase by about 10% from the year-ago quarter.
"We still expect Pansoft-Japan to break even towards the end of
calendar 2012 alongside lower visibility of market conditions. We
remain optimistic that this segment's competitive advantage as a
low-cost provider remains intact and we remain confident that, once
this business passes the startup phase, it will achieve success,"
concluded Mr. Wang.
About Pansoft Company Limited Pansoft is a
leading enterprise resource planning ("ERP") software and
professional services provider for the oil and gas industry in
China. Its ERP software offers comprehensive solutions in various
business operations including accounting, order processing,
delivery, invoicing, inventory control, and customer relationship
management. For more information, visit http://www.pansoft.com.
Forward-Looking Statements This press
release contains forward-looking statements concerning Pansoft
Company Limited, including but not limited to statements regarding
Pansoft's acquisition strategies, projected revenue growth,
contracts with customers, timing of development projects, and
efforts to achieve business growth. The actual results may differ
materially depending on a number of risk factors including, but not
limited to, the following: general economic and business
conditions, development, shipment and market acceptance of
products, additional competition from existing and new competitors,
purchase cycle of major customers, changes in technology or product
techniques, and various other factors beyond its control. All
forward-looking statements are expressly qualified in their
entirety by this Cautionary Statement and the risk factors detailed
in the Company's reports filed with the Securities and Exchange
Commission. Pansoft Company Limited undertakes no duty to revise or
update any forward-looking statements to reflect events or
circumstances after the date of this release.
- Financial Tables Follow -
Pansoft Company Limited
Consolidated Statements of Operations and Comprehensive Income
For the three-month ended September 30, 2011 and 2010
(in U.S. Dollars)
For the Three Months Ended
Sept. 30,
------------------------------
2011 2010
-------------- --------------
Sales $ 4,239,310 $ 3,506,332
Cost of sales 3,287,812 1,792,847
-------------- --------------
Gross profit 951,498 1,713,485
Expenses
General and administrative expenses 611,572 386,199
Amortization expenses of the intangible
assets 241,358 29,281
Selling expenses 205,960 75,471
Professional fees 119,115 65,298
Stock based compensation 46,695 94,849
(Gain) on disposition of property and
equipment 8,670 -
-------------- --------------
1,233,370 651,098
Income from operations (281,872) 1,062,387
Fair value change on liabilities (P&L) -
Extinguishment of liabilities -
Other income (expenses), net 86,466 (1,935)
Government Subsidy 18,699 44,100
Finance cost 4,341 (6,788)
Impairment loss on intangible assets -
Interest income 2,220 72,833
-------------- --------------
Income before provision from income taxes (170,147) 1,170,597
Provision for current income taxes 2,530 -
Provision for deferred income taxes 13,662 177,501
Net income (186,339) 993,096
Less: Net Income attributable to
noncontrolling interests (101,462)
Net Income attributable to Pansoft Common
Shareholders (84,876) 993,096
Other comprehensive (loss) income 128,771 201,204
-------------- --------------
Comprehensive income $ 43,895 1,194,300
============== ==============
Basic net income per share $ (0.02) 0.18
============== ==============
Diluted net income per share $ (0.02) 0.18
============== ==============
Basic weighted average number of shares
outstanding 5,389,323 5,438,232
============== ==============
Diluted weighted average number of shares
outstanding 5,572,695 5,484,986
============== ==============
Pansoft Company Limited
Consolidated Balance Sheets
(in U.S. Dollars)
September 30, 2011 June 30, 2011
--------------------- ---------------
Assets
Current assets
Cash and cash equivalents $ 2,525,108 3,680,716
Account receivables, net 5,155,504 3,678,463
Unbilled revenues, net 5,901,030 7,025,926
Prepayment, deposits and other
receivables 2,671,283 1,868,101
Deferred and prepaid expenses 3,443 -
Inventory 2,311,581 1,010,582
Short term investments - Available
for sales 5,477,017 6,829,841
--------------------- ---------------
Total current assets 24,044,966 24,093,629
Non-current assets
Property and equipment, net 2,305,612 2,312,590
Deposit for acquisitions - -
Long term equity investment 28,779 28,418
Deferred software development cost - -
Intangible assets 2,453,188 2,706,197
Goodwill on acquisition 1,373,708 1,373,708
--------------------- ---------------
Total assets $ 30,206,253 30,514,542
===================== ===============
Liabilities
Current liabilities
Accounts payable $ 1,787,807 969,998
Accrual and other current
liabilities 2,543,254 2,012,202
Acquisition payable 525,709 525,709
Short-term borrowing - -
Deferred revenue 539,928 2,048,859
Income tax payable 99,608 31,667
Deferred income taxes 925,370 570,711
Unearned government research
revenue 707,623 683,286
--------------------- ---------------
Total current liabilities 7,129,299 6,842,432
Non - Current liabilities
Deferred income taxes - 181,611
Total Liabilities 7,129,299 7,024,043
Shareholders' equity
Common stock (30,000,000 common
shares authorized; par value of
$0.0059 per share; 5,438,232 shares
issued and outstanding as of June
30, 2009)
Share capital 32,080 32,080
Treasure stocks, at cost (630,562) (503,602)
Additional paid-in capital 9,328,137 9,281,753
Retained earnings 9,596,535 9,782,874
Statutory reserves 1,430,558 1,429,858
Non-controlling interests 1,814,520 1,940,239
Accumulated other comprehensive
income 1,505,686 1,527,297
--------------------- ---------------
Total stockholders' equity 23,076,954 23,490,499
Total liabilities and stockholders
equity $ 30,206,253 30,514,542
===================== ===============
Company Contact: Pansoft Company Limited Allen Zhang
Chief Financial Officer Phone: +86-531-8887-4455 E-mail:
allen.zhang@pansoft.com Investor Contact: CCG Investor
Relations Mr. John Harmon, CFA Sr. Account Manager Phone:
+86-10-6561-6886 Ext. 807 (Beijing) E-mail: john.harmon@ccgir.com
www.ccgirasia.com
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