CNIT Announces 2016 Financial Results

April 28, 2017 8:22 AM EDT | Source: China Information Technology, Inc.

Shenzhen, China--(Newsfile Corp. - April 28, 2017) - China Information Technology, Inc. (NASDAQ: CNIT), a provider of cloud-app technologies for Internet-of-Things (IoT) platforms and internet-based ad and information distribution systems in China, today reported that, for the year ended December 31, 2016, the company had revenue of $10,193,590, a 1 percent decrease on revenue of $10,284,868 in 2015. This decrease was mainly due to a year-over-year drop of about $1.5 million in revenue contributed by CNIT's government-oriented IT systems business - a segment the company continues to de-emphasize - offset in large part by increased revenue of about $1.4 million contributed by CNIT's privately-focused cloud-based technology solutions segment.

As a result, however, of a year-over-year increase in cost of revenue of approximately $1.2 million, gross profit as a percentage of revenue for 2016 fell to 25.4 percent from 38.0 percent in the prior year. Nevertheless, in 2016, CNIT cut its loss from operations to $14,577,928, a 46 percent reduction from its 2015 loss from operations of $26,963,357. This improvement resulted primarily from year-over-year decreases of roughly $2.9 million in administrative expenses, $1.3 million in selling expenses, $0.4 million in R&D expenses, and $4.5 million in impairment of intangible assets and goodwill.

Due to assorted non-recurring factors, though, the company had a net loss in 2016 of $18,170,601, or ($.45) per share, compared to a net loss of $7,504,262, or ($.22) per share, in 2015. The most prominent of these factors impacting 2016's bottom line results was the company's loss for that year on sale of deposits for land use rights of $2.8 million versus $0 in 2015. The most prominent factors mitigating CNIT's 2015 net loss was the sale in that year of the company's factory real estate property, which resulted in a gain on sale of assets of approximately $30.0 million versus $0 in 2016, as well as the company's 2015 income from discontinued operations of $1.5 million versus $0 in 2016.

CNIT reduced its short-term debt to $7.80 million at year-end 2016, from $15.27 million at the end of 2015. The company's cash on hand at the end of 2016 was $3.75 million compared to $3.79 million a year earlier.

Among the company's most important milestones in 2016, said CNIT, was its commercialization of a cloud-based new media ecosystem comprised of a cloud platform, proprietary intelligent display terminals, and a proprietary USB adaptor that easily transforms any kind of display terminal into a cloud-based IoT terminal and links it to CNIT's cloud platform. This, in turn, allows this terminal to access the company's Yunfa Net advertising content delivery system (www.cnitiot.com), which permits a customer to create reduced-cost ads on a PC or mobile app, instantly transmit them to the terminal, and receive feedback from the terminal on which ads it is displaying. These features enable customers to precisely measure the effectiveness of an ad upon a targeted audience.

As a result of this offering, said CNIT, both the number of subscribers to Yunfa Net and the digital ad terminals connected to the company's cloud network in 2016 increased significantly.

Regarding 2017, said CEO Mr. Jianghuai Lin, the company's steady migration to higher-margin cloud-based solution opportunities like Yunfa Net and its recently introduced IoT elevator safety system, Yunti Guard, should allow CNIT to achieve "break-even status or moderate profitability in the second half of the year."

Mr. Lin added that he believes the company's current cash and cash equivalents, anticipated cash flows from operations in 2017, and additional availability under its borrowing facilities will be sufficient to meet CNIT's operating and financial obligations for the remainder of the calendar year.

"We are confident that 2017 will be the year in which CNIT turns the corner and begins to bloom as one of China's better known providers of important cloud-based technologies for elevator safety and advertising communications."

For additional information on CNIT's 2016 performance, please see the company's 20-F filing at http://www.chinacnit.com/Relation/SecFill.

About China Information Technology, Inc.
China Information Technology, Inc. (CNIT) is a leading Internet service company that provides integrated cloud-based solutions enabling innovation and smart living in the fields of new media, elevator safety management, education, etc. Through continuous innovation, CNIT is aiming to leverage its proprietary Cloud-Application-Terminal technology to level the competitive landscape in the new media industry and deliver value for its shareholders, employees, customers, and the community. To learn more, please visit http://www.chinacnit.com.

Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China Information Technology, Inc., and its subsidiaries and other consolidated entities. All statements, other than statements of historical fact included herein, are "forward-looking statements" in nature within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, often identified by the use of forward-looking terminologies such as "believes", "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company and its subsidiaries and other consolidated entities or persons acting on their behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For further information, please contact:

China Information Technology, Inc.
Iris Yan
Tel: +86-755-8370-4767
Email: IR@chinacnit.com
http://www.chinacnit.com

or

Asia IR-PR
Jimmy Caplan
Tel: +512-329-9505
Email: jimmy@asia-irpr.com

or

Media Relations: Asia IR-PR
Rick Eisenberg
Tel: +212-496-6828
Email: rick@asia-irpr.com
 

CHINA INFORMATION TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2016 AND 2015

 
      December 31,     December 31,
      2016     2015  
ASSETS              
               
CURRENT ASSETS              
Cash and cash equivalents   $ 3,752,375   $ 3,786,846  
Restricted cash     -     868,317  
Accounts receivable, net     3,019,349     3,180,138  
Advances to suppliers     235,877     2,526,607  
Inventories, net     1,477,783     2,141,093  
Other current assets     7,159,803     8,113,861  
Receivable from sale of discontinued operations     -     13,272,186  
TOTAL CURRENT ASSETS     15,645,187     33,889,048  
               
Deposit for purchase of land use rights     -     14,020,901  
Property, plant and equipment, net     8,674,850     8,372,961  
Intangible assets, net     1,556,306     2,530,103  
Goodwill     -     4,753,454  
Long-term investments     43,205     -  
Deferred tax assets     100,435     460,237  
Other non-current assets     8,267,016     2,065,000  
TOTAL ASSETS   $ 34,286,999   $ 66,091,704  
               
LIABILITIES AND EQUITY              
               
CURRENT LIABILITIES              
Short-term bank loans   $ 7,799,852   $ 15,272,986  
Accounts payable     5,993,211     6,943,248  
Bills payable     -     1,322,912  
Advances from customers     1,668,049     2,651,156  
Accrued payroll and benefits     285,284     396,026  
Other payables and accrued expenses     3,044,779     4,570,298  
Amounts due to related parties     -     141,972  
Income tax payable     2,589,422     3,083,792  
Derivative Liability - Warrants     3,719     1,156,386  
TOTAL CURRENT LIABILITIES     21,384,316     35,538,776  
               
Amounts due to related parties     -     12,359  
Deferred tax liabilities     100,435     86,332  
TOTAL LIABILITIES     21,484,751     35,637,467  
               
COMMITMENTS AND CONTINGENCIES              
               
Ordinary shares, par $0.01; shares issued and outstanding, 2016; 0 shares; 2015: 120,000 shares     -     360,000  
               
EQUITY              
Ordinary shares, par $0.01; authorized capital 100,000,000 shares; shares issued, 2016: 41,633,607 shares; 2015: 40,733,812 shares; shares outstanding, 2016: 40,231,159 shares; 2015: 39,211,364 shares     426,744     416,546  
Treasury stock: 1,402,448 shares     (7,117,500 )   (7,117,500 )
Additional paid-in capital     145,742,163     144,000,767  
Reserve     13,812,095     13,812,095  
Accumulated deficit     (173,149,696 )   (154,979,095 )
Accumulated other comprehensive income     23,994,357     24,551,707  
Total equity of the Company     3,708,163     20,684,520  
Non-controlling interest     9,094,085     9,409,717  
Total equity     12,802,248     30,094,237  
               
TOTAL LIABILITIES AND EQUITY   $ 34,286,999   $ 66,091,704  
 
CHINA INFORMATION TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
 
        2016     2015     2014  
Revenue - Products     $ 6,553,090   $ 4,953,139   $ 22,628,612  
Revenue - Software       2,347,197     3,200,905     10,366,560  
Revenue - System integration       628,880     1,012,088     4,822,003  
Revenue - Others       664,423     1,118,736     817,572  
TOTAL REVENUE       10,193,590     10,284,868     38,634,747  
                       
Cost - Products       5,512,305     2,910,334     18,769,338  
Cost - Software       921,432     1,267,834     4,086,717  
Cost - System integration       1,078,103     1,745,647     4,480,388  
Cost - Others       95,350     457,390     809,947  
TOTAL COST       7,607,190     6,381,205     28,146,390  
                       
GROSS PROFIT       2,586,400     3,903,663     10,488,357  
                       
                       
Administrative expenses       8,342,842     11,223,502     20,837,181  
Research and development expenses       3,044,972     3,446,867     1,477,246  
Selling expenses       1,334,147     2,661,545     4,240,097  
Impairment of property, plant and equipment       -     4,616,679     827,319  
Impairment of intangible assets and goodwill       4,442,367     8,918,427     7,015,727  
LOSS FROM OPERATIONS       (14,577,928 )   (26,963,357 )   (23,909,213 )
                       
Subsidy income       223,166     501,404     676,159  
Gain on sale of assets       -     29,994,037     -  
Loss on disposal of consolidated entities       (575,956)     -     -  
Loss on sale of deposits for land use rights       (2,762,033)     -     -  
Other (loss) income, net       (326,546)     776,233     (407,616)  
Interest income       17,420     76,716     408,121  
Interest expense       (498,931 )   (3,116,777 )   (5,858,770 )
Change in fair value of warrant liability       34,175     (5,657,988 )   -  
                       
Loss from continuing operations before income taxes       (18,466,633 )   (4,389,732 )   (29,091,319 )
                       
Income tax (expense ) benefit       (57,844)     (4,305,028 )   4,599,559  
                       
Net loss from continuing operations       (18,524,477 )   (8,694,760 )   (24,491,760 )
Net income (loss) from discontinued operations       -     1,498,971     (5,260,538 )
NET LOSS       (18,524,477 )   (7,195,789 )   (29,752,298 )
Less: Net loss (income) attributable to the non-controlling interest       353,876     (308,473 )   520,951  
NET LOSS ATTRIBUTABLE TO THE COMPANY     $ (18,170,601 )   $ (7,504,262 ) $ (29,231,347 )
                       
                       
(Loss) earnings per share - Basic and Diluted                      
CONTINUING OPERATIONS                      
Basic     $ (0.45 ) $ (0.26 ) $ (0.79 )
Diluted     $ (0.45 ) $ (0.26 ) $ (0.79 )
                       
DISCONTINUED OPERATIONS                      
Basic     $ -   $ 0.04   $ (0.17 )
Diluted     $ -   $ 0.04   $ (0.17 )
                       
NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY                      
Basic     $ (0.45 ) $ (0.22 ) $ (0.96 )
Diluted     $ (0.45 ) $ (0.22 ) $ (0.96 )
 
CHINA INFORMATION TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
 
    2016     2015     2014  
OPERATING ACTIVITIES                  
Net loss $ (18,524,477 ) $ (7,195,789 ) $ (29,752,298 )
Adjustments to reconcile net loss to net cash used in operating activities from continuing operations:                  
(Income) loss from discontinued operations,                  
net of income taxes   -     (1,498,971 )   5,260,538  
Provision for losses on accounts receivable and other current assets   1,995,046     2,659,499     6,398,463  
Impairment of intangible assets and goodwill   4,442,367     8,918,427     7,015,727  
Provision for obsolete inventories   324,581     274,663     3,808,307  
Depreciation   1,736,607     1,665,257     2,135,644  
Amortization of intangible assets and land use rights   845,149     876,237     917,780  
(Gain) loss on sale of property and equipment and land use rights   (8,544 )   (30,005,007 )   (6,550 )
Loss on disposal of inventories   345,963     -     476,597  
Loss from disposals of consolidated entities   575,956     -     -  
Loss on disposal of deposit for land use rights   2,762,033     -     -  
Stock-based payment compensation for consulting services   -     98,483     120,167  
Stock-based compensation   273,102     102,282     81,615  
Impairment of property, plant and equipment   -     4,616,679     827,319  
Income tax expense (benefit)   365,401     3,761,084     (4,603,763 )
Change in fair value of warrants liability   (34,175)     5,657,988     -  
Changes in operating assets and liabilities, net of effects of business acquisitions and dispositions:                  
Accounts receivable   (913,486)     2,914,918     (1,497,285 )
Inventories   (590,274)     1,546,570     6,019,174  
Other receivables and prepaid expenses   6,222,650     (1,089,481 )   (3,435,388 )
Advances to suppliers   1,981,816     (1,708,552 )   5,781,743  
Restricted cash   848,573     9,566,303     (1,515,573 )
Amounts due to/from related parties   (154,331)     (1,088,001 )   1,126,768  
Other payables and accrued expenses   (2,344,677 )   (2,736,926 )   (3,808,563 )
Advances from customers   (846,599)     1,598,944     (2,017,504 )
Accounts payable and bills payable   (1,811,119 )   (24,134,831 )   (6,018,929 )
Income tax payable   (312,615 )   (118,973 )   171,552  
Net cash used in continuing operations   (2,821,053 )   (25,319,197 )   (12,514,459 )
Net cash used in operating activities from discontinued operations   -     (595,404 )   (115,066 )
Net cash used in operating activities   (2,821,053 )   (25,914,601 )   (12,629,525 )
                   
INVESTING ACTIVITIES                  
Deposit (paid) received for assets held-for sale   -     (20,717 )   13,024,000  
Deposit refunded for land use rights   -     -     3,355,088  
Cash acquired in Biznest acquisition   -     -     67,506  
Proceeds from sale of property and equipment   299,298     55,101     6,561  
Consideration paid for acquisition of Biznest   -     (1,488,969 )   (5,951,968 )
                   
Investment in Geo   -     -     (128,901 )
Investment in Biznest's joint company   (45,179)     -     -  
Capitalized and purchased software development costs   -     (66,870 )   (1,353,028 )
Purchases of property and equipment   (3,463,915 )   (3,004,209 )   (529,053 )
Investment in Zhongtian   -     -     (638,723 )
Cash received from sale of Zhongtian and Geo   12,312,378     -     -  
Cash received for sale of assets held for sale   -     45,052,000     -  
Net cash provided by investing activities from continuing operations   9,102,582     40,526,336     7,851,482  
Net cash provided by (used in) investing activities from discontinued operations   -     1,558,581     (1,530,773 )
Net cash provided by investing activities   9,102,582     42,084,917     6,320,709  
                   
FINANCING ACTIVITIES                  
                   
Borrowings under short-term loans   10,541,720     44,584,103     58,862,064  
Common stock issued for cash   -     12,786,353     3,683,028  
Decrease (increase) in restricted cash in relation to bank borrowings   -     543,300     256,427  
Repayment of short-term loans   (17,101,230 )   (79,952,564 )   (56,153,075 )
Repurchase of ordinary shares   (379,710 )   (1,310,184 )   (1,290,000 )
Repayment of long-term loans   (214,527 )   (97,751 )   (94,279 )
Cash paid to warrant holders   -     (542,806 )   -  
Net cash (used in) provided by financing activities from continuing operations   (7,153,747 )   (23,989,549 )   5,264,165  
Net cash (used in) provided by financing activities from discontinued operations   -     (147,237 )   1,131,223  
Net cash (used in) provided by financing activities   (7,153,747 )   (24,136,786 )   6,395,388  
Effect of exchange rate changes on cash and cash equivalents   837,747     564,125     19,027  
                   
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (34,471 )   (7,402,345 )   105,599  
CASH AND CASH EQUIVALENTS, BEGINNING   3,786,846     11,189,191     11,083,592  
CASH AND CASH EQUIVALENTS, ENDING $ 3,752,375   $ 3,786,846   $ 11,189,191  
Less cash and cash equivalents from discontinued operations $ -   $ -   $ 4,499,343  
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period $ 3,752,375   $ 3,786,846   $ 6,689,848  
                   

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