Pansoft Co Ltd (NASDAQ:PSOF)

Third Quarter 2012 Results

• Revenues were $4.45 million, an increase of 13.0% versus the year-ago quarter
• Gross profit was $0.22 million, a decrease of 75.7% versus the year-ago quarter
• Operating loss was $1.24 million, compared to an operating loss of $0.3 million in the year-ago quarter
• Net loss attributable to Pansoft shareholders was $1.0 million, compared to net income attributable to Pansoft shareholders of $0.1 million in the year-ago quarter
• Net loss per diluted share attributable to Pansoft shareholders was $0.22, compared to a net loss attributable to Pansoft shareholders of $0.04 per share in the year-ago quarter

"During the fiscal third quarter, we achieved modest year-over-year revenue growth, driven by strength at our HongAo and Pansoft-Japan subsidiaries, which offset softer results from our core Pansoft China business. In particular, higher HR costs resulting from our expanded team put significant pressure on our gross margins in the quarter," said Hugh Wang, Pansoft's Chairman of the Board. "Nevertheless, we remain confident that our business model is sound and we remain committed to serving the large ERP software market in China. Our immediate priority is to improve margins and restore profitability in the near term."

Business Outlook

Pansoft will continue to expand its team for future business growth. The Company will continue to focus on the coal mining, thermal power and oilfield markets.

"While we continue to experience revenue growth in this fiscal year, our margins remain under pressure from the higher costs and expenses incurred from the realization of our business expansion strategy. We expect to post a slight net profit this fiscal year," concluded Mr. Wang.

JINAN, CHINA--(Marketwire - May 17, 2012) - 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 that the Company entered into an agreement and plan of merger (the "Agreement") on May 16, 2012 with Timesway Group Limited, a company limited by shares incorporated under the laws of the British Virgin Islands (the "Parent"), Genius Choice Capital Limited, a company limited by shares incorporated under the laws of the British Virgin Islands and a direct wholly owned subsidiary of Parent (the "Merger Sub"). Timesway Group Limited is controlled by Chairman Hugh Wang and CEO Guoqiang Lin and had voting power over 63% of the Company's voting securities as of June 30, 2011. Timesway Group Limited intends to finance the merger and the other transactions contemplated by a bank loan raised in Hong Kong, China.

Pursuant to the Agreement, (i) upon the terms and subject to the conditions set forth therein, at the effective time of the merger, upon the terms and subject to the conditions of this Agreement and in accordance with the BVI Companies Law, Merger Sub shall be merged with and into the Company. Following the Merger, the Company shall continue as the surviving corporation and the separate corporate existence of Merger Sub shall cease, and (ii) each ordinary share, par value US$0.0059 per share, of the Company issued and outstanding immediately prior to the effective time of the merger (individually, a "Share" and collectively, the "Shares") (other than Shares to be cancelled), shall be cancelled in exchange for the right to receive an amount in cash equal to US$4.15 per Share without interest. As of the effective time of the merger, all of the Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist and the register of members of the Company will be updated accordingly. The $4.15 cash Per Share consideration, represents a 106.0% premium to the one-day pre-announcement price of $2.01 per share on January 6, 2012, the last trading day prior to the Company's announcement on January 9, 2012 that it had received a "going private" proposal, representing a 10% increase from the $3.76 originally offered by Timesway on January 7, 2012.

The Company's Board of Directors, acting upon the unanimous recommendation of the Special Committee consisting of independent Board members Paul Gillis, Samuel Shen, and Tony Luh, approved the Agreement and the merger contemplated in the Agreement and resolved to recommend that the Company's shareholders vote to approve and adopt the Merger Agreement and the merger. The Special Committee, which is composed solely of directors unrelated to Parent, Merger Sub or any of the management members of the Company, negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors.

The merger contemplated in the Agreement is subject to the approval by an affirmative vote of shareholders representing a majority of the Shares present and voting in person or by proxy as a single class at a meeting of the Company's shareholders which will be convened to consider the approval and adoption of the Agreement and the merger, as well as certain other customary closing conditions. If completed, the merger will result in the Company becoming a privately-held company and its Shares would no longer be listed on the NASDAQ Capital Market.

Duff & Phelps, LLC is serving as financial advisor to the Special Committee. Morgan, Lewis & Bockius, LLP as the Special Committee's United States law counsel and Maples and Calder is serving as its British Virgin Islands law counsel.

First Quarter 2012 Results

• 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."

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.

JINAN, China, Jan. 9, 2012 /PRNewswire/ --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 that 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 under the British Virgin Islands law that 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 and 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 Paul Gillis, Samuel Shen, and Tony Luh, to evaluate the offer.  Dr. Gillis will serve as the Special Committee's chairman. 

The board of directors cautions Pansoft's shareholders and others considering trading in its securities that it has only received the proposal and that no decisions have been made by the board of directors with respect to the Company's response to the proposal. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.

Highlights for the Fiscal 2010 Year 

• Revenues were $12.1 million, an increase of 42.6% compared to $8.5 million for the twelve months ended June 30, 2009.
  
• Operating profit was $3.6 million, an increase of 33.3% compared to $2.7 million for the twelve months ended June 30, 2009.
  
• Net income was $3.2 million, an increase of 28.2% compared to $2.5 million for the twelve months ended June 30, 2009.
  
• Diluted earnings per share were $0.59, an increase of 27.6% compared to $0.47 for the twelve months ended June 30, 2009.
  
• Adjusted net income excluding share-based compensation expense was $3.7 million, an increase of 19.8% compared to $3.1 million for the twelve months ended June 30, 2009.
  
• Adjusted diluted EPS excluding share-based compensation expenses were $0.67, an increase of 19.3% compared to $0.57 for the twelve months ended June 30, 2009

"We reported strong financial and operational results in our fiscal 2010 business year," said Guoqiang Lin, Pansoft's CEO. "We witnessed strong demand from our major clients from our large-scale software system-integration projects. We were also successful with our expansion strategy and we acquired several software companies and formed partnerships with complementary businesses to diversify our future revenue streams. We expect our core business in several sectors and our software partnerships to grow even faster next fiscal year and make a greater contribution to our top and bottom lines."

"Our strong revenue growth in fiscal 2010 exceeded our guidance. Although the increase in operating expenses reduced our profit margin versus last fiscal year, we achieved strong double-digit growth in both net income and EPS," added Allen Zhang, Pansoft's Chief Financial Officer. "We expect to maintain our momentum through organic growth and additional revenue streams from recent acquisitions."

Business Outlook

In 2011, Pansoft expects to continue to achieve sustainable organic growth driven by strong demand for its services and solutions from its existing customer base, in addition to growth from acquisitions and new clients in new market sectors and businesses. Moreover, the Company expects a meaningful contribution from the acquisitions that were made in fiscal 2010.

For the fiscal year ending June 30, 2011, Pansoft expects to maintain solid growth and achieve 60% organic growth in revenues in our core business, excluding any impact from future mergers or acquisitions or stock-based compensation.

"We look forward to integrating our acquisitions and benefiting from the synergies from our human capital and sales and marketing efforts. We expect new business generated from our acquisitions to enable us to provide a variety of software solutions and services to a wider range of customer groups and business in China. China's domestic economic growth and our industry's potential provide a solid platform for us to continue to grow and expand," said Hugh Wang, Chairman of the Board.

Mr. Allen Zhang, Pansoft CFO, said, "We are pleased to announce our solid first quarter 2009 financial results. In this quarter, we see strong customer demands for our customized ERP software solutions. Our centralized financial and accounting applications continued to gain exceptional client acceptance and drive our top-line increase. While the first quarter of the year is normally impacted by low seasonality, the solid business growth has demonstrated our superior technical expertise and capability of weathering the global economic storm." Mr. Zhang added, "We continue to make progress toward our goal of record revenue and earnings growth in 2009 and beyond."

Source: Business Wire (May 14, 2009)

Guidance Report: 

Mr. Allen Zhang, Chief Financial Officer, commented on the preliminary 4Q and 2008 revenue and earnings, "While 2008 was a difficult year for the world economy, we are pleased to report that we have not seen significant impact on our business. On the contrary, the unique solutions and services we provide to our clients are gaining momentum. We look forward to having another growth year in 2009."

GeoTeam® Note: 

The guidance in the press release states the following:

The lower operating margin in the quarter and full year was primarily due to income taxes (the company did not incur any income taxes in 2007) and fees associated with the IPO on NASDAQ Capital Market. 

There may be an error in this statement as the tax rate is not part of the general definition of an operating margin. The GeoTeam® has thus assumed that the operating margin is before tax.

It likely should read:  The lower operating margin in the quarter and full year was primarily due to fees associated with the IPO on NASDAQ Capital Market. 

Fourth Quarter as Reported

Full Year Results as Reported

*** Fourth Quarter Adjusted for a Standard Tax Rate

***Full Year Results Adjusted for a Standard Tax Rate

• *       The company paid no taxes in 2007. For 2008 reported net income figures, the Geoteam® used the company's nine month  tax rate of 18%

• **    The company did not provide 2008 EPS figures.  The GeoTeam® 2008 Eps calculations use the 3rd quarter 2008 outstanding share count of 4,525,189
  
• *** The GeoTeam® used a 34% tax rate for the adjustment.