China Information Technology, Inc. Announces Second Half and Full Year 2014 Results

SHENZHEN, China, March 31, 2015 /PRNewswire/ — China Information Technology, Inc. (the "Company" or "CNIT") (Nasdaq GS: CNIT), a leading provider of integrated cloud-based platform, exchange, and big data solutions to the Chinese new media industry, today announced its financial results for the second-half and fiscal year ended December 31, 2014.

Second Half 2014 Financial Highlights (Unaudited)

  • Revenue of $38.2 million, compared to $38.9 million in the same period a year ago;
  • Gross profit increased by 11.5% year-over-year to $10.7 million;
  • Gross margin of 28.0%, compared to 24.7% in the same period a year ago;
  • Net loss attributable to the Company of $29.3 million, compared to net loss of $68.7 million a year ago;
  • Excluding non-cash items, adjusted net loss was $1.8 million;
  • Fully diluted net loss per share of $0.93;
  • Excluding non-cash items, fully diluted net loss per share was $0.06

Full Year 2014 Financial Highlights

  • Revenue of $68.2 million, compared to $76.1 million in 2013;
  • Gross profit increased by 30.1% year-over-year to $22.5 million;
  • Gross margin of 33.0%, compared to 22.7% in 2013;
  • Net loss attributable to the Company of $29.2 million; fully diluted net loss per share of $0.96;
  • Excluding non-cash items, adjusted net income attributable to the Company was $1.5 million;
  • Excluding non-cash items, adjusted fully diluted net income per share of $0.05;
  • Cash used in operating activities of $12.7 million;
  • Cash and cash equivalents and restricted cash of $23.1 million as of December 31, 2014.

Mr. Jianghuai Lin, Chairman and CEO of CNIT, commented, "In 2014, we completed our strategic transition to become a leading provider of integrated cloud-based platform, exchange, and big data solutions to the Chinese new media industry. We laid a solid foundation to build an end-to-end ecosystem that integrates our Cloud-Application-Terminal (CAT) technology platform, our Taoping Net ad resource online exchange, and our upcoming big data services."

"Leveraging our differentiated product offerings which combine highly targeted advertisement placements with public information dissemination, our new media solutions gained traction among customers in various fields including automotive retailing, elevator management, conference management, public transportation, and residential community management. We will continue to expand our presence in additional industry verticals and geographical markets."

"Also in 2014, we transitioned away from businesses that are inconsistent with our long-term goals. We identified software development as our competitive strength and began closing down our manufacturing facilities. We migrated hardware production to third-party OEMs, thus enlisting our hardware competitors as our software sales channel partners while improving our profit margin considerably at the same time."

"We continued to shrink government-related business. Those projects entailed customized solutions, which result in low scalability and long cash collection cycles. As we shifted our resources away from government-related IT projects toward productizing our technology and selling standardized software solutions to the private sector, our operating performance improved. In addition, our cash collection cycle shrunk drastically as we require upfront payment before shipping products."

"Looking ahead, the strategic initiatives that we undertook in 2014 should continue to show benefits in 2015. The cash infusion from the recent land and property sale will reduce our debt burden and enable us to accelerate the growth of our software-as-a-service (SaaS) business. We have reduced our short-term debt to $53.7 million as of March 13, 2015 from $62.7 million as of December 31, 2014, and plan to pay back an additional $32.6 million of short-term bank loan before the end of June, 2015."

"We expect to formally launch Taoping Net, our proprietary online exchange for networked digital displays, around mid-2015. Our long-term goal remains to construct an end-to-end cloud-based ecosystem that transforms the business dynamics and competitive landscape of the Chinese new media industry." Mr. Lin concluded.

Second Half 2014 Results (Unaudited)

Revenue

Revenue was $38.2 million, compared to $38.9 million in the same period of 2013, a slight decrease of $0.7 million, or 1.8%. The increase in software and systems integration sales mostly offset the decline in hardware sales during the Company’s transition from a hardware manufacturer to a software developer.

The following table shows revenue, percentage of revenue and gross margin by category:

Six Months Ended December 31, 2014

Six Months Ended December 31, 2013

% of

Gross

% of

Gross

Revenue

Revenue

Margin

Revenue

Revenue

Margin

Hardware

$

12,949,764

33.9%

21.3%

$

21,438,922

55.2%

15.0%

Software

13,975,018

36.6%

46.4%

8,947,032

23.0%

43.1%

System integration

10,604,399

27.8%

12.6%

7,713,047

19.8%

29.0%

Others

652,350

1.7%

18.7%

763,311

2.0%

36.9%

Total

$

38,181,531

100%

28.0%

$

38,862,312

100%

24.7%

Hardware sales decreased by $8.5 million, or 39.6%, to $12.9 million in the second half of 2014, as compared to $21.4 million in the same period of 2013. The decline in products sales was mainly due to the Company beginning to close its manufacturing facility and outsourcing production to hardware OEMs in the second half of 2014.

Software sales increased by 56.2% to $14.0 million in the second half of 2014, from $8.9 million in the same period of 2013, as the Company transitioned to a software developer.

Sales of system integration services increased by 37.5% to $10.6 million in the second half of 2014, as compared to $7.7 million in the same period of 2013. In the second half of 2014, some large-scale system integration projects started to hit milestones and thus generated more revenue than the same period of 2013.

Other revenue was $652,350 in the second half of 2014, compared to $763,311 in the same period of 2013.

Gross profit and gross margin

Cost of revenue decreased by $1.8 million, or 6.1%, to $27.5 million in the second half of 2014, from $29.3 million in the same period of 2013. Gross margin was 28.0% in the second half of 2014, an increase of 332 basis points, from 24.7% in the same period of 2013 as the decline in cost of revenues outpaced that of revenues. The increase in the overall gross margin was primarily due to the shift in revenue composition from low-margin hardware to high-margin software.

Administrative expenses

Administrative expenses decreased by $27.9 million, or 57.8%, to $20.4 million in the second half of 2014, from $48.3 million in the same period of 2013. As a percentage of revenue, administrative expenses decreased to 53.4% in the second half of 2014, from 124.2% for the second half of 2013.

Notable changes that resulted in lower administrative expenses included: (1) a decrease of $24.5million in provision of accounts receivable; (2) a decrease of $6.9 million of stock-compensation expenses for employees; (3) a decrease of $0.8 million for depreciation of property, plant and equipment; and (4) an increase of $2.6 million in provision for obsolete inventories.

Research and development expenses

Research and development expenses increased to $2.1 million in the second half of 2014 from $1.5 million in the same period of 2013. As a percentage of revenue, research and development expenses increased to 5.4% in the second half of 2014, from 3.8% in the same period of 2013.

Prior to September 2014, we outsourced a large portion of R&D to Shenzhen Biznest Internet Software Co., Ltd. ("Biznest"). The Company’s subsequent acquisition of Biznest and its R&D staff increased the R&D expenses for the period. The Company remains committed to developing new products, and anticipates R&D expenses to further increase in the future.

Selling expenses

Selling expenses increased slightly by $0.3 million in the second half of 2014, or 6.0%, to $5.0 million, from $4.7 million in the same period of 2013. As a percentage of revenue, selling expenses increased to 13.1% for the second half of 2014, from 12.2% in the same period of 2013.

Impairment of intangible assets and goodwill

Goodwill impairment loss was $9.6million and impairment in intangible assets was $2.3 million in the second half of 2014. In comparison, the Company did not recognize any impairment in goodwill but recorded an impairment of $2.0 million on intangible assets during the same period of 2013. Impairment losses from goodwill and intangible assets were related to the business transition from the public sector to the private sector and from hardware manufacturing to software development.

Impairment of property, plant and equipment

Impairment of property, plant and equipment was $0.8 million during the second half of 2014, mainly due to the factory closure process and sale of factory-related property, plant, and equipment. In addition, the Company categorized $33.3 million of factory-related real estate property as ‘assets held for sale’. In comparison, the Company recognized $20.9 million of impairment in property, plant and equipment for the second half of 2013, as it reduced and terminated many governmental projects in light of its shift towards an internet-based business model.

Loss from operations

Loss from operations was $29.5 million in the second half of 2014, considerably lower than a loss of $67.7 million in the same period of 2013.

Net loss attributable to the Company

Net loss attributable to the Company decreased by $39.4 million to $29.3 million in the second half of 2014, from a net loss of $68.7 million in the same period of 2013.

Cash flow from operations

During the second half of 2014, cash used in operating activities amounted to $8.0 million. In the same period of 2013, cash provided by operating activities amounted to $2.1 million.

To further improve the Company’s liquidity, management is focusing on the following six areas in 2015: 1) redirecting resources to selling high-margin software solutions; 2) reinforcing stringent cash collection policies to shorten days of sales outstanding; 3) streamlining the purchase order management process to reduce inventory; 4) controlling the cost structure; 5) obtaining additional government subsidies for developing new and innovative cloud-based software solutions; and 6) reducing the short-term debt burden.

As of March 13, 2015, the Company reduced its short-term debt to $53.7 million, from $62.7 million at the end of 2014. In November 2014, the Company entered into an agreement to sell its Fuyong Industrial Park real estate and plant assets for RMB375.0 million (approximately $61.1 million). Management plans to use a portion of the proceeds to pay back an additional $32.6 million of short-term bank loan, thus reducing its debt burden by 53% from its 2014 level.

As of March 13, 2015, the Company had approximately $13.7 million of untapped credit facilities. Management believes that the Company’s current cash and cash equivalents, anticipated cash flows from operations and investing activities in 2015, and credit facilities are sufficient to meet its operating and financial obligations for the remainder of 2015.

Full Year 2014 Results

Revenue

Revenue was $68.2 million, compared to $76.1 million in FY2013, a decrease of $7.9 million, or 10.5%. The decrease was primarily due to the Company’s strategic transition from the public sector to the private sector and from hardware manufacturing to software development.

The following table shows revenue, percentage of revenue and gross margin by revenue categories:

Year Ended December 31, 2014

Year Ended December 31, 2013

% of

Gross

% of

Gross

Revenue

Revenue

Margin

Revenue

Revenue

Margin

Hardware

$

23,866,645

35.0%

21.4%

$

46,649,847

61.3%

16.8%

Software

25,389,636

37.3%

54.9%

16,172,885

21.2%

36.3%

System integration

17,490,371

25.7%

19.1%

11,701,929

15.4%

27.6%

Others

1,411,047

2.0%

5.2%

1,620,723

2.1%

22.6%

Total

$

68,157,699

100%

33.0%

$

76,145,384

100%

22.7%

Hardware sales decreased by $22.8 million, or 48.8%, to $23.9 million in FY2014, compared to $46.6 million in FY2013. Product sales constituted 35.0% of total revenue in 2014 compared to 61.3% in 2013. The year-over-year decrease in product sales was primarily due to the Company’s strategic transition from a hardware manufacturer to a software solution provider. In 2014, the Company started outsourcing hardware production from in-house facilities to OEMs.

Software sales increased by $9.2 million, or 57.0%, to $25.4 million in FY2014, from $16.2 million for FY2013. Software sales constituted 37.3% of total revenue in 2014, compared to 21.2% in 2013. The Company began shrinking government-related businesses to focus on providing software solutions to the new media sector and other private industries.

Sales of system integration services increased by $5.8 million, or 49.5%, to $17.5 million in FY2014, compared to $11.7 million in FY2013. As a percentage of revenue, system integration increased from 15.4% in 2013 to 25.7% in 2014. In 2014, some large-scale system integration projects started to hit milestones and thus generated more revenue than the same period of 2013.

Other revenue was $1.4 million in FY2014, compared to $1.6 million in FY2013.

Cost of revenue and gross profit

Cost of revenue decreased by $13.2 million, or 22.4%, to $45.7 million in FY2014, from $58.9 million in FY2013. As a percentage of revenue, cost of revenue decreased to 67.0% in 2014, from 77.3% in 2013. As a result, gross profit as a percentage of revenue was 33.0% in 2014 compared to 22.7% in 2013. The increase in gross profit margin resulted primarily from the Company’s shift towards the high-margin software business from the low-margin hardware business.

Administrative expenses

Administrative expenses decreased by $65.3 million, or 70.3%, to $27.6 million in FY2014, from $92.9 million in FY2013. As a percentage of revenue, administrative expenses decreased to 40.5% in 2014, from 122.0% in 2013. Notable changes that resulted in lower administrative expenses include:1) a decrease of $59.15 million in provision of accounts receivable and other current assets; 2) a decrease of $5.64 million in depreciation of property and equipment; 3) a decrease of $6.70 million in stock based compensation; partially offset by 4) an increase in provision for obsolete and loss on disposal of inventories of $3.6 million.

Research and development expenses

Research and development expenses increased by $0.1 million, or 4.2%, to $3.0 million in FY2014, from $2.9 million in FY2013. As a percentage of revenue, research and development expenses increased to 4.5% in 2014, from 3.8% in 2013. The Company’s acquisition of Biznest migrated its research and development talents in-house, resulting in the increase.

Selling expenses

Selling expenses increased slightly by $0.2 million, or 2.5%, to $9.0 million in FY2014, from $8.8 million in FY2013. As a percentage of revenue, our selling expenses increased to 13.3% in 2014, from 11.6% in 2013.

Impairment of intangible assets and goodwill

Goodwill impairment loss was $9.6 million and impairment in intangible assets was $2.3 million in FY 2014. In comparison, the Company did not recognize any impairment in goodwill, but recorded an impairment of $2.0 million for intangible assets in FY2013. Impairment loss related to goodwill and intangible assets was mainly due to the transition from the public sector to the private sector and from hardware manufacturing to software development.

Impairment of property, plant and equipment

As the Company started its factory closure process in late 2014, it recorded $0.8 million of impairment related to its property, plant and equipment in FY 2014. In addition, the Company categorized $33.3 million of factory-related real estate property as ‘assets held for sale’. In comparison, the Company recognized $30.0 million of impairment in property, plant and equipment in FY2013, as it reduced and terminated many governmental projects in light of its shift towards an internet-based business model.

Loss from operations

Loss from operations was $30.0 million in FY2014, compared to a loss of $119.4 million in FY2013.

Net loss attributable to the Company

Net loss attributable to the Company was $29.2 million in FY2014, compared to a net loss of $119.2 million in FY2013.

Cash and cash equivalents

As of December 31, 2014, the Company had $23.1 million in cash and cash equivalents and restricted cash, compared to $21.4 million as of December 31, 2013.

Cash flow from operations

During FY2014, cash used in operating activities amounted to $12.6 million, compared to $11.4 million in net cash used in operating activities a year ago.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that exclude non-cash charges. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that management excludes when it internally evaluates the performance of the Company’s business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of the Company. Accordingly, management excludes the expense arising from certain non-cash charges when making operational decisions. The Company also believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company’s financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company’s performance using the same methodology and information as that used by the Company’s management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, the Company’s management compensates for these limitations by providing the relevant disclosure of the items excluded.

The following table presents the non-GAAP financial measures contained in this press release and the most directly comparable GAAP measures and provides a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

Full Year and Second Half 2014 Reconciliation of Net Income (Loss) Attributable to the Company

and EPS

to Exclude Impairment of Goodwill and Intangible Assets, Provision for Losses on Accounts

Receivable, Stock-based Compensation and Other Asset Write-downs

Year Ended December 31

Six Months Ended December 31

2014

2013

2014

2013

Net Income (Loss) Attributable to the Company

$

(29,231,347)

$

(119,236,823)

$

(29,261,996)

$

(68,720,397)

Impairment of goodwill and intangible assets

11,914,144

2,008,249

11,876,529

2,008,249

Provisions for losses on accounts receivable
and other current assets

9,058,012

68,212,239

8,043,750

32,532,133

Provision for obsolete inventories

4,007,896

887,525

3,995,102

2,321,209

Depreciation

2,474,415

8,114,611

1,333,024

3,184,955

Amortization of intangible assets

2,292,572

2,486,809

1,272,098

1,275,079

Impairment of property and equipment

827,319

29,976,990

827,319

20,854,045

Stock-based payment for consulting fee

120,167

103,000

Stock-based compensation

81,615

6,900,000

6,900,000

Adjusted net income (loss)

$

1,544,793

$

(650,400)

$

(1,811,174)

$

355,273

Weighted Average Number of Shares Outstanding

– Basic and diluted

30,601,209

27,356,504

31,312,769

27,689,705

Adjusted net income (loss) per share

-Basic and diluted

$

0.05

(0.02)

(0.06)

0.01

About China Information Technology, Inc.

China Information Technology, Inc. (CNIT) is on a mission to make advertising accessible and affordable for businesses of all sizes. CNIT is a leading provider of integrated cloud-based platform, exchange, and big data solutions to the Chinese new media industry. Its Internet ecosystem enables all participants of the new media community to efficiently promote brands, disseminate knowledge, and exchange resources. Through continuous innovation, CNIT is leveraging 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: 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.

Robin Yang, CFO
Tel: +86 755 88319888
Email: IR@chinacnit.com
http://www.chinacnit.com

Grayling
Shiwei Yin
Investor Relations
Tel: +1.646.284.9474
Email: cnit@grayling.com


CHINA INFORMATION TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2014 AND 2013

Expressed in U.S. dollars (Except for share amounts)

December 31

December 31

2014

2013

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

11,189,191

$

11,083,592

Restricted cash

11,933,498

10,345,825

Accounts receivable, net

23,813,678

22,716,298

Bills receivable

358,273

1,097,025

Advances to suppliers

3,600,845

8,331,149

Amounts due from related parties

109,406

508,355

Inventories

5,418,446

15,655,723

Other current assets

14,820,715

10,975,335

Deferred tax assets

736,568

498,459

Assets held for sale-current

13,032,000

TOTAL CURRENT ASSETS

85,012,620

81,211,761

Assets held for sale-noncurrent

20,270,434

Deposit for purchase of land use rights

14,799,874

18,237,303

Long-term investments

2,648,378

2,661,385

Property, plant and equipment, net

12,803,185

31,531,027

Land use rights, net

13,222,442

Intangible assets, net

15,459,340

14,307,939

Goodwill

24,133,230

27,719,869

Deferred tax assets

4,278,748

347,264

TOTAL ASSETS

$

179,405,809

$

189,238,990

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term bank loans

$

62,684,843

$

58,948,332

Accounts payable

20,810,765

17,857,866

Bills payable

24,228,181

26,549,982

Advances from customers

2,754,644

4,623,283

Accrued payroll and benefits

3,016,771

2,845,977

Deposit for assets held for sale

13,032,000

Other payables and accrued expenses

9,190,614

12,544,571

Amounts due to related parties

851,262

900,350

Income tax payable

3,750,088

3,720,807

TOTAL CURRENT LIABILITIES

140,319,168

127,991,168

Long-term bank loans

214,630

312,547

Amounts due to related parties

13,065

13,129

Deferred tax liabilities

280,137

742,696

TOTAL LIABILITIES

140,827,000

129,059,540

COMMITMENTS AND CONTINGENCIES

Ordinary shares, par $0.01; shares issued and
outstanding, 2014; 475,000 shares; 2013: 725,000
shares

1,425,000

2,175,000

EQUITY

Ordinary shares, par $0.01; authorized capital
100,000,000 shares; shares issued and
outstanding, 2014:31,768,875 shares;
2013:28,641,528 shares

335,271

309,076

Treasury shares, 2014:717,448 shares;
2013:1,225,311 shares

(4,290,000)

(4,814,775)

Additional paid-in capital

126,862,049

115,668,644

Reserve

14,755,946

14,629,369

Deficit earnings

(142,910,476)

(113,513,766)

Accumulated other comprehensive income

24,755,457

25,070,226

Total equity of the Company

19,508,247

37,348,774

Non-controlling interest

17,645,562

20,655,676

Total equity

37,153,809

58,004,450

TOTAL LIABILITIES AND EQUITY

$

179,405,809

$

189,238,990

CHINA INFORMATION TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF LOSS

YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

Expressed in U.S. dollars (Except for share amounts)

2014

2013

2012

Revenue – Hardware

$

23,866,645

$

46,649,847

$

45,690,706

Revenue – Software

25,389,636

16,172,885

18,597,383

Revenue – System integration

17,490,371

11,701,929

20,905,251

Revenue – Others

1,411,047

1,620,723

1,184,115

TOTAL REVENUE

68,157,699

76,145,384

86,377,455

Cost – Hardware sold

18,769,868

38,829,515

40,119,790

Cost – Software sold

11,438,935

10,309,838

8,904,134

Cost – System integration

14,141,775

8,477,128

15,964,817

Cost – Others

1,337,597

1,253,759

889,234

TOTAL COST

45,688,175

58,870,240

65,877,975

GROSS PROFIT

22,469,524

17,275,144

20,499,480

Administrative expenses

27,608,259

92,930,409

52,800,320

Research and development expenses

3,037,161

2,915,641

4,951,166

Selling expenses

9,042,005

8,820,434

9,786,220

Impairment of property, plant and
equipment

827,319

29,976,990

11,809,432

Impairment of intangible assets and
goodwill

11,914,144

2,008,249

26,901,574

LOSS FROM OPERATIONS

(29,959,364)

(119,376,579)

(85,749,232)

Subsidy income

2,237,079

3,063,005

1,709,246

Other income (loss), net

(260,746)

1,097,233

(1,466,789)

Interest income

435,381

460,381

343,289

Interest expense

(6,593,549)

(5,553,522)

(4,646,818)

LOSS BEFORE INCOME TAXES

(34,141,199)

(120,309,482)

(89,810,304)

Income tax benefit (expense )

4,388,901

(1,896,545)

(812,254)

NET LOSS

(29,752,298)

(122,206,027)

(90,622,558)

Less: Net loss attributable to the
non-controlling
interest

520,951

2,969,204

992,050

NET LOSS ATTRIBUTABLE TO THE
COMPANY

$

(29,231,347)

(119,236,823)

$

(89,630,508)

WEIGHTED AVERAGE NUMBER OF
SHARES
OUTSTANDING

Basic and Diluted

30,601,209

27,356,504

27,017,780

LOSS PER SHARE ATTRIBUTABLE
TO
THE COMPANY

Basic and Diluted

$

(0.96)

$

(4.36)

$

(3.32)

CHINA INFORMATION TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

Expressed in U.S. dollars

2014

2013

2012

OPERATING ACTIVITIES

Net loss

$

(29,752,298)

$

(122,206,027)

$

(90,622,558)

Adjustments to reconcile net loss to net cash
provided by operating
activities:

Provision for losses on accounts receivable and
other current assets

9,058,012

68,212,239

27,882,120

Impairment of intangible assets and goodwill

11,914,144

2,008,249

26,832,255

Provision for obsolete inventories

4,007,896

887,525

2,235,574

Depreciation

2,474,415

8,114,611

11,532,635

Loss on disposal of intangible assets

69,319

Amortization of intangible assets and land use
rights

2,292,572

2,486,809

2,292,518

(Gain) loss on disposal of property and equipment,
net

(20,388)

89,885

2,915,708

Loss on disposal of inventories

476,597

Stock-based payment compensation for consulting services

120,167

Stock-based compensation

81,615

6,900,000

Impairment of property, plant and equipment

827,319

29,976,990

11,809,432

Dividends received from Xiamen Yili Geo Information Technology Co., Ltd.

(162,800)

(79,268)

Change in deferred income tax

(4,818,786)

1,501,645

306,838

Changes in operating assets and liabilities, net of
effects of

business acquisitions

(Increase) decrease in accounts receivable

(7,594,307)

510,419

(7,460,031)

Decrease in inventories

5,669,661

773,293

3,579,538

Increase in other receivables and prepaid expenses

(4,116,271)

(4,711,757)

(2,031,433)

Decrease (increase) in advances to suppliers

3,991,102

(2,352,897)

(1,551,504)

(Increase) decrease in restricted cash

(1,720,772)

942,495

250,306

Increase (decrease) in amounts due to/from related
parties

373,302

1,629,891

(1,825,311)

(Decrease) increase in other payables and accrued
expenses

(4,045,308)

4,294,228

15,173

(Decrease) increase in advances from customers

(1,844,913)

740,933

(2,700,713)

(Decrease) increase in accounts payable and bills
payable

103,734

(11,124,374)

7,175,522

Increase (decrease) in income tax payable

55,782

(51,697)

106,370

Net cash used in operating activities

(12,629,525)

(11,377,540)

(9,267,510)

INVESTING ACTIVITIES

Deposit received for assets held-for sale

13,024,000

Deposit refunded (for purchase) of land use rights

3,355,088

1,437,368

(47,561)

Dividends received from Xiamen Yili Geo
Information Technology Co., Ltd.

162,800

79,268

Cash acquired in Biznest acquisition

67,506

Proceeds from sale of property and equipment

20,399

226,369

18,549

Consideration paid for acquisition of Biznest

(5,951,968)

Investment in Geo

(128,901)

Capitalized and purchased software development
costs

(2,727,819)

(2,472,624)

(2,159,866)

Purchases of property and equipment

(861,673)

(2,041,270)

(778,691)

Investment in Zhongtian

(638,723)

(378,144)

Purchase of land use rights

(2,513,648)

Investment in Hubei Information Science and
Technology

(158,600)

Net cash provided by (used in) investing
activities

6,320,709

(3,228,301)

(5,560,549)

FINANCING ACTIVITIES

Borrowings under short-term loans

74,750,045

107,825,953

99,000,812

Common stock issued for cash

3,683,028

9,000,000

Decrease (increase) in restricted cash in relation to
bank borrowings

83,545

(619,509)

2,042,836

Capital injection by minority shareholders

2,585,600

283,612

Borrowings under long-term loans

350,534

Repayment of short-term loans

(70,736,951)

(101,276,350)

(89,499,942)

Repurchase of ordinary shares

(1,290,000)

(3,000,000)

(315,577)

Repayment of long-term loans

(94,279)

(147,923)

(35,576)

Net cash provided by financing activities

6,395,388

14,718,305

11,476,165

Effect of exchange rate changes on cash and cash
equivalents

19,027

223,130

80,258

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

105,599

335,594

(3,271,636)

CASH AND CASH EQUIVALENTS, BEGINNING

11,083,592

10,747,998

14,019,634

CASH AND CASH EQUIVALENTS, ENDING

$

11,189,191

$

11,083,592

$

10,747,998

Supplemental disclosure of cash flow
information:

Cash paid during the year

Income taxes

$

382,741

$

405,948

$

493,378

Interest

$

6,593,549

$

5,537,477

$

4,537,517

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/china-information-technology-inc-announces-second-half-and-full-year-2014-results-300058298.html