WisdomTree International AI Enh (NYSE:AIVI)

On June 7, 2011, the Company and its subsidiary Shenzhen AIVtech were served with a Summons and Complaint filed by CCG Investor Relations in the Court of Beverly Hills of the State of California against the Company and Shenzhen AIVtech for breach of contract, seeking total damages of $116,686, including $79,866 for services rendered by CCG, $12,000 interest and $25,000 for attorney’s fees. On August 1, 2011, the Company entered into a settlement agreement with CCG and agreed to pay $76,865 to CCG immediately in order for CCG to withdraw the lawsuit filed with the Court. The Company made the payment of $76,865 on September 5, 2011 and CCG withdrew the lawsuit with the Court on September 7, 2011.

The Company’s products can be divided into three categories: casual furniture audio, multi-media speakers and LED TV. Furniture audio is the leading selling product of the Company, which accounted for about 46.9% of total sales for the three months ended September 30, 2011. In addition, sales of TV product decreased during the quarter as compared to three months ended September 30, 2010. As a result, total sales for the three months ended September 30, 2011 was $20,667,885 compared to $27,419,290 for the same period in 2010, representing a decrease of $6,751,405 or approximately 25%. The decrease in sales revenue was driven by fewer sales orders received from our customers than in the same quarter last year. The Company also obtained several large sales orders in September 2011, but these sales orders were still under manufacturing as of September 30, 2011 and will be delivered to customers by October 2011.

Sales revenue from furniture audio product decreased from $13.49 million for the quarter ended September 30, 2010 to $9.68 million for the same quarter ended September 30, 2011, representing $3.80 million, or approximately 28% decrease in the third quarter this year as compared to the same quarter last year. In terms of quantity sold, quantity sold of furniture audio products decreased from 1,221,879 units during the quarter ended September 30, 2010 to only 763,278 units sold for the quarter ended September 30, 2011, representing 37.53% decrease. The decrease in furniture audio products during the period was due to decreased sales order received from distributors affected by competitive market environment. The Company’s furniture audio product is primarily exported to U.S and European market through distributors and the quantity sold is affected by the overall economy conditions of these major markets. As the economy conditions in the U.S. and Europe went down, export demand for this product declined, accordingly, sales revenue went down for the quarter ended September 30, 2011 as compared to prior comparative period.

Sales revenue from multi-media speaker product increased from $3.36 million for the quarter ended September 30, 2010 to $5.83 million for the quarter ended September 30, 2011, representing $2.46 million, or approximately 73% increase. The increase is contributed by increased orders of multi-media speaker product from one of the major distributors during the third quarter this year. In terms of quantity sold for multi-media speakers, 502,895 multi-media speakers were sold during the quarter as compared to only 342,320 items sold during the prior comparative period.  Quantity sold increased 46.91% for this product.

Sales revenue from TV product also decreased from $10.57 million for the quarter ended September 30, 2010 to only $5.15 million for the quarter ended September 30, 2011. In terms of quantity sold, 71,443 units were sold in 2010 and only 32,907 items were sold during current quarter, representing 20.58% decrease. The Company just started to produce TV product in May 2010 and as a result, sales revenue for the quarter ended September 30, 2010 climbed as of September 30, 2010 because major distributor Guangdong Guanghong Import and Export Company ordered significant amount of TV products to be distributed to overseas market for the quarter ended September 30, 2010. However, during the quarter ended September 30, 2011, Guanghong reduced its orders on TV products because orders from 2011first two quarters have not been fully distributed and accordingly Guanghong reduced orders

Financial Results for the Three Months Ended March 31, 2011

• Revenue for the three months ended March 31, 2011 totaled $11.4 million, a decrease of 66.7%, compared to $19.0 million from the same period in 2010.

Several large orders in our audio furniture division were delivered on April 15, 2011 adding significant revenue in the second quarter of 2011 instead of the first quarter. Our estimated revenue for the month of April is $6.5 million.

• Net income for the three months ending March 31, 2011 decreased to $1.7 million compared to $3.9 million for the same three months of 2010.

• Basic and diluted earnings per share for the first quarter of 2011 totaled $0.07 per share based on 22.5 million shares compared to basic and diluted earnings per share for the same period in 2010 of $0.37 based on 10.4 million shares.

"While our first quarter results came in beneath expectations, we remain confident in our previously stated net income guidance of $13.7 million or $0.61 per share for the 2011 full year.  We believe that we will make up much of the shortfall in earnings during the rest of year," commented Mr. Jinlin Guo, Chairman and CEO of AIVtech, "Additionally, we received several large orders during the first quarter that were not fulfilled until April which materially impacted the financial results in the first quarter.  However, these orders will be reported during the second quarter of 2011. Our estimated revenue for the month of April is $6.5 million. The majority of these orders pertained to our audio furniture product line. The timing of these orders was a contributing factor in the decrease in revenue during the 2011 first quarter and subsequent increase in inventory. Another factor in the year over year decline in earnings was that during the fourth quarter of 2009 we relocated our manufacturing facility from Shenzhen to Dongguan which forced us to temporarily suspend the production of furniture audio products until January 2010.  By producing December 2009 orders in the first quarter of 2010, this substantially increased revenues during that period. Adjusted for the two impactful events described above, our revenue during the 2011 first quarter would have been more in line with our expectations."

Summary Financials for the Years Ended December 31, 2010
Twelve months ended December 31,	2010	2009	CHANGE
Sales	$68.3 million	$38.5 million	77.60%
Gross Profit Margin	$15.9 million	$10.4 million	52.60%
Operating Income	$13.0 million	$8.3 million	56.00%
Net Income	$11.0 million	$7.5 million	47.00%
Fully Diluted EPS*	$0.66	$0.72	-8.00%
SG&A, as % of Sales	4.20%	5.40%	-1.20%
Tax Rate	13.10%	10.00%	3.10%

*2010 EPS was based on 16.6 million of shares and 2009 EPS was based on 10.4 million of shares.

GeoTeam Note: Fourth Quarter 2010 vs. 2009 was $0.17 vs. $0.45

"We completed an outstanding year, with record profit and sales, and exceeded our 2010 "make good" earnings per share projections," commented Mr. Jinli Guo, the Chairman and CEO of AIVtech International. "Furthermore, we successfully went public in May 2010 and raised $7.5 million in a private placement with two institutional investors in December 2010, which has strategically positioned our Company for future growth and expansions.  As a result of these accomplishments, we have already published guidance of $13.7 million of net income for 2011. We believe we will continue to see strong growth in all three of our businesses units consisting of electronic furniture, multimedia/digital speakers, and video products in 2011 and beyond. Our core growth strategy will remain product innovation; however increased distribution and improved branding will be our key initiatives going forward that will also contribute greatly to our success."

Mr. Jinlin Guo continued, "2011 will be a year of growth and expansion in all fronts. In second half of 2011, we plan to commence domestic sales of our market leading electronic furniture in China. We also anticipate the Interactive Intelligent Panel will begin generating revenue in the second quarter of 2011 and yield gross profit margins above 30%. We will also be launching other new products and new sales channels internationally.  Additionally, we plan to evaluate select acquisitions and investments to continue building our reputation as a leader of innovative electronic products that are sold around the world."

2011 Guidance

The company reiterates its 2011

• net income of $13.7 million
• earnings per share of $0.61 based on 22.5 million shares.

Risk Factors section was omitted from the 2010 10K.

SHENZHEN, China, Feb. 22, 2011 /PRNewswire-Asia-FirstCall/ -- AIVtech International Group Co. today announced

• Net income guidance of $13.7 million, or
• earnings per share of $0.61 based on 22.8 million fully diluted shares for the fiscal year ending December 31, 2011.

Mr. Jinlin Guo, President, Chief Executive Officer, and Chairman of the Board of AIVtech, stated, "We are pleased to announce net income guidance of $13.7 million, representing $0.61 EPS, for fiscal year 2011. In 2011, we expect electronic furniture sales to remain stable. Through the introductions of new video products such as the Interactive Intelligent Panel and new features to the Digi Panda and other speaker products, we expect revenue to increase in both of those products categories."

On December 29, 2010, AIVtech International Group Co. entered into a subscription agreement with certain accredited investors for the issuance and sale in a private placement of investment units each Unit consisting of

• one share  of the Company’s common stock
• a warrant to purchase one-tenth (1/10) of one share of common stock for each Unit purchased, for aggregate gross proceeds of $7,540,000.

The purchase price per Unit was $3.00 which was equal to sixty (60%) percent of the average closing price of the common stock for the 10 trading days prior to the Closing Date. In the aggregate, we issued to the Investors a total of 2,513,334 shares of common stock and five-year Series A Warrants to purchase up to an additional 251,334 shares of common stock at an exercise price of $4.00. We also paid to the Placement Agent  a fee of $150,800 and issued to the Placement Agent a five-year Agent Warrants to purchase a total of 50,267 shares of common stock at an exercise price of $4.00 per share

Third Quarter 2010 Results (USD)(unaudited)
Three months ended September 30,	Q3 2010	Q3 2009	CHANGE
Sales	$27.5 million	$16 million	+72%
Gross Profit	$6 million	$4.3 million	+40.6%
Operating Income	$5.3 million	$3.8 million	+39.6%
Net Income	$4.4 million	$3.4 million	+27.8%
Fully diluted EPS	$0.22	$0.17	+29.4%

Nine months ended September 30,	2010	2009	CHANGE
Sales	$56.2 million	$27.8 million	+102%
Gross Profit	$13.5 million	$7.5 million	+80.5%
Operating Income	$11.6 million	$6 million	+93.7%
Net Income	$9.8 million	$5.4 million	+81.6%
Fully diluted EPS	$0.49	$0.27	+81.5%

"We are very pleased to report record financial results for the third quarter of 2010 which included an increase in revenue of 72% and net income of 27.8%. Continued momentum in our business is a direct result of several competitive advantages including the well known domestic and international brand we have worked diligently on establishing since the Company was founded in 2004. We have also met consumer demand with new and innovative products. Our new product line of LED TV's have complimented our existing consumer and electronics product base of specialty audio and multimedia speakers, accounting for approximately 39% of total revenue during the third quarter of 2010," stated Mr. JinLin Guo, AIVtech's Chairman and Chief Executive Officer.

Mr. JinLin Guo continued, "The manufacturing of our products take place in our 30,000 sq. meter facility in Dongguan, Guangdong Province, where we are currently operating at 90% capacity. The production cycle at our facility occurs is 12 to 18 days for existing products and 15 to 21 days for new products.  Additionally, we have an established and stable distribution channel with well known and respected distributors nationwide. Going forward, we expect sales momentum to continue for each of our product lines," stated Mr. JinLin Gro, AIVtech's Chairman and Chief Executive Officer.

2010 GUIDANCE

Company's 2010 guidance included

• revenues of $69 million
• net income of$9.4 million
• $0.47 in earnings per share. Management will provide updated guidance in the near future.

GeoTeam® Note: Guidance implies that fourth quarter EPS will come in at a loss of 2 cents. Likey due to seasonality:

"The sales of furniture audios and multi-media speakers are seasonal. The peak season of each year is from July to November."

On May 12, 2010 AIVtech became a public company via a reverse merger transaction.

Company Snapshot:

AIVtech is a fast-growing manufacturer of high-quality electronic furniture, multimedia speakers and LED televisions.

Industry Snapshot:

• International Market
  
  • Electronic Furniture: Audio gaming chair grows very fast in the electronic furniture industry. It targets the audio-visual entertainment, especially the video game markets. The audio gaming chair was recognized as one of the best peripherals for video game by CNN in 2008.
    
  • Multimedia/ Digital Speakers: At present, the global speakers market is dominated by a certain number of manufacturers with large production capacity and leading technologies. These manufacturers mainly operate in the United States, Japan and European countries.
    
  • LED/LCD Television: According to a conservative estimation by Display Bank, the number of LEDs to be sold globally each year will be more than 15 million units in 2010, and 25 million and 50 million in 2011 and 2012 respectively.

• Chinese Domestic Market
  
  • Furniture audios: The video game especially the online video game industry started late in China but it is growing rapidly. Since 2000, its annual growth rate has exceeded 50%
    
  • Multimedia/ Digital Speakers: China is the country with the largest production and distribution of multimedia/ digital speakers in the world. The Pearl River Delta region of China is the location of speaker manufacturers which produce 70% of the world’s speakers.
    
  • LED/LCD Television: According to a survey by the Consumption Electronic Products Investigation Office of the China Electronic Chamber of Commerce, 75% of the domestic television consumers pay attention to LED products and 34% of them have plans to purchase LED products in 2010.

Post Merger Share Calculation:

•  9,625,000: Pre reverse merger outstanding shares  
• 10,375,000: Newly issued shares of Common Stock

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  21,000,000

Financial Snapshot:

• For the year ended December 31, 2009, AIVtech reported revenues of $38.5 million, representing 85.4% growth from $20.7 million in 2008.
  
• Full-year 2009 net income was $7.5 million, an increase of 91.9% over 2008 net income of $3.9 million.

The Company currently generates its cash flow through operations which it believes will be sufficient to sustain current level operations for at least the next twelve months.