China Technology Development Group Corporation CTDC

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CHINA TECHNOLOGY DEVELOPMENT GRO (U-CTDC) - News Release China Technology Development Group Corporation Financial Results Announcement for the Six Months Ended June 30, 2006 (Unaudited) 2006-10-06 09:30 ET - News Release HONG KONG, Oct. 6 /Xinhua-PRNewswire-FirstCall/ -- China Technology Development Group Corporation (collectively, the "Company", "We", "us", or "our") announced today its unaudited consolidated financial results for the six month period ended June 30, 2006. Our revenues increased by US$165,000, or 39.66%, from US$416,000 in the six months ended June 30, 2005 (the "2005 Period") to US$581,000 in the the six months ended June 30, 2006 (the "2006 Period"). The nutraceutical business acquired in 2005 contributed a total revenue of US$203,000 in the 2006 Period. Excluding this, the revenues of our IT operations slightly decreased by US$38,000, or 9.13% from US$416,000 in the 2005 Period to US$378,000 in the 2006 Period. Our total cost of sales increased by US$96,000, or 45.5%, from US$211,000 in the 2005 Period to US$307,000 in the 2006 Period. The cost of sales of our nutraceutical business in the 2006 Period was US$150,000. Excluding this, the cost of sales of our IT operations in the 2006 Period amounted to US$157,000, which represented a decrease of US$54,000, or 25.59%, from US$211,000 in the 2005 Period. The decrease was due primarily to an increase in the proportion of sales of our self-developed products, the costs of which are lower than the cost of products purchased from other suppliers due to the increased control we have with respect to the cost of the materials utilized to produce such products. As a result, our gross profit in the 2006 Period amounted to US$274,000, which increased by US$69,000, or 33.66%, from US$205,000 in the 2005 Period. The gross profit of our nutraceutical business in the 2006 Period amounted to US$53,000. Excluding this, the gross profit of our IT operations in the 2006 Period amounted to US$221,000, which represented an increase of US$16,000, or 7.8% from US$205,000 in the 2005 Period. As a percentage of sales, the gross profit margin of our IT operations increased by 9.19%, from 49.28% in the 2005 Period to 58.47% in the 2006 Period. Selling, general and administrative expenses ("SG&A expenses") increased by US$627,000, or 125.9%, from US$498,000 in the 2005 Period to US$1,125,000 in the 2006 Period. SG&A of our nutraceutical operations in the 2006 Period amounted to US$308,000 which mainly included amortization and depreciation charges of approximately US$158,300 for the 2006 Period. Excluding this, the SG&A expenses of our IT operations and corporate office increased by US$319,000, or 64.06%, from US$498,000 of the 2005 Period to US$817,000 of the 2006 Period. The significant increase in the SG&A expense was due to the following factors: (1) SG&A expenses of our IT operations increased by US$56,000 or 15.56%, from US$360,000 in the 2005 Period to US$416,000 in the 2006 Period, due primarily to additional technicians that were recruited by us to develop new products; (2) SG&A expenses of our corporate office increased by US$263,000, or 190.58%, from US$138,000 in the 2005 Period to US$401,000 in the 2006 Period. The significant increase was due primarily to an increase in staff costs and rental expenses as a result of the expansion of our corporate office beginning in May 2005. As of June 30, 2006, we had a cash balance of US$878,000. The Company also maintained a deposit of US$783,000 with China Biotech Holdings Limited, a related company, for the purpose of financing potential investments in nutraceutical entities in China. We also had available cash equivalents of $273,000 in the form of accounts receivables due from Beijing Holdings Limited, our principal stockholder, which amounts represented the proceeds receivable from Beijing Holdings Limited in respect of the sale of available- for-sales securities owned by us to Beijing Holdings Limited. CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) For the periods ended June 30, 2005 and 2006 June, 30 June 30, 2005 2006 US$(Note (1)) US$(Note (1)) Continuing operations: Revenues 416 581 Cost of sales (211) (307) Gross Profit 205 274 Selling, general and administrative expenses (498) (1,125) Operating loss (293) (851) Interest income -- 5 Non-operating income 39 76 Non-operating expenses -- (35) Loss before income tax provision (254) (805) Income taxes provision -- (1) Loss from continuing operations before minority interests (254) (806) Minority interest-continuing operations -- 70 Loss from continuing operations (254) (736) Discontinued operations: Loss from discontinued operations including loss on disposal of US$63 on March 31, 2005 (36) -- Net loss for the period (290) (736) Loss per share -Basic and dilutive (0.04) (0.07) Loss per share from continuing operations -Basic and dilutive (0.03) (0.07) Income/(loss) per share from discontinued operations -Basic and dilutive (0.01) -- Weighted average ordinary shares -Basic and dilutive 6,894 11,275 CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) at December 31, 2005 and June 30,2006 December 31, June 30, 2005 2006 US$(Note (1)) US$(Note (1)) ASSETS CURRENT ASSETS Cash and cash equivalents 2,292 878 Short-term investments-security trust account 14 1 Available-for-sale securities 46 55 Trade accounts receivable, net 99 92 Inventories 323 380 Value added tax and business tax recoverable -- 13 Due from related parties 1,057 1,106 Prepayment for investment in subsidiary -- 75 Other assets 183 148 TOTAL CURRENT ASSETS 4,014 2,748 Long-term prepayment for rental of land 66 65 Property, plant and equipment, net 1,147 1,058 Intangible asset 818 737 Goodwill 8,697 8,697 TOTAL ASSETS 14,742 13,305 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable 72 72 Accrued professional fees 484 313 Income tax payable 31 30 Value added tax and business tax payable 5 -- Deferred government grants 29 12 Due to a related party 446 62 Short term borrowings 111 71 Deferred tax liabilities 62 62 Other liabilities and accrued expenses 465 460 TOTAL CURRENT LIABILITIES 1,705 1,082 Minority interests 690 619 SHAREHOLDERS' EQUITY Common stock, US$0.01 par value; 2,500,000,000 shares authorised; shares issued and outstanding 11,274,497 in 2005 and 2006) 114 114 Additional paid-in capital 33,765 33,765 Accumulated deficit (21,412) (22,148) Accumulated other comprehensive losses (120) (127) TOTAL SHAREHOLDERS' EQUITY 12,347 11,604 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 14,742 13,305 CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amount in thousands) For the periods ended June 30, 2005 and 2006 2005 2006 US$(Note (1)) US$(Note (1)) Cash flows from operating activities Net loss (331) (736) Adjustments to reconcile net loss to net cash used in operating activities Minority interests in loss of consolidated subsidiaries -- (71) Amortization of intangible asset, goodwill and software development costs -- 81 Amortization of long-term prepayment for rental of land -- 1 Depreciation 6 95 Dividend income -- (1) Unrealised loss on trading securities 41 -- Gain on disposal of available-for-sale securities (2) -- Loss on disposal of discontinued operations 63 -- Changes in assets and liabilities: Decrease in trade accounts receivable 69 7 Increase in inventories (8) (57) (Increase)/decrease in due from related parties and other assets 8 (14) Decrease in trade accounts payable, amount due to a related party and other current liabilities (156) (577) Decrease in income tax payable (2) (19) Net cash used in operating activities (312) (1,291) Cash flows from investing activities Security trust account 1,929 13 Dividend income -- 1 Decrease in funds held by related parties for security investment purposes 1,034 -- Net cash and cash equivalents disposal of upon disposal of discontinued operations (44) -- Proceeds from disposal of available-for-sale securities 222 -- Prepayment for investment in subsidiary -- (75) Purchase of property, plant and equipment -- (6) Proceed on disposal of fixed assets (6) -- Net cash provided by investing activities 3,135 (67) Cash flows from financing activities Repayment of short term borrowings -- (40) Net cash used in financing activities -- (40) Effect of exchange rate changes on cash and cash equivalents 1 (16) Net increase/ (decrease) in cash and cash equivalents 2,824 (1,414) Cash and cash equivalents at beginning of period 657 2,292 Cash and cash equivalents at end of period 3,481 878 CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Amounts in thousands) at June 30, 2005, December 31, 2005 and June 30, 2006 Stock No. of Options shares Equity Granted US$(Note (1)) US$(Note (1)) Balance at June 30, 2005 6,894,497 23,483 -- Issue of shares 4,380,000 9,998 -- Stock options granted -- 398 Net loss -- -- Net unrealized gain on available-for-sale securities -- -- Less: Reclassification adjustment for loss realized on sale -- -- Translation adjustment -- -- Total comprehensive loss for the year Balance at December 31, 2005 11,274,497 33,481 398 Net loss -- -- Net unrealized gain on available-for-sale securities -- -- Translation adjustment -- -- Total comprehensive loss for the year Balance at June 30, 2006 11,274,497 33,481 398 Accumulated other Total Accumulated comprehensive shareholders' losses losses equity US$(Note (1)) US$(Note (1)) US$(Note (1)) Balance at June 30, 2005 (19,259) (444) 3,780 Issue of shares -- -- 9,998 Stock options granted -- -- 398 Net loss (2,153) - (2,153) Net unrealized gain on available-for-sale securities -- 23 23 Less: Reclassification adjustment for loss realized on sale -- 362 362 Translation adjustment -- (61) (61) Total comprehensive loss for the year 324 Balance at December 31, 2005 (21,412) (120) 12,347 Net loss (736) (736) -- Net unrealized gain on available-for-sale securities -- 9 9 Translation adjustment -- (16) (16) Total comprehensive loss for the year (7) Balance at June 30, 2006 (22,148) (127) 11,604 Note (1): The functional currency of the Company is Renminbi ("Rmb"), the lawful currency of the People's Republic of China. For the convenience of the reader, translation of amounts from Renminbi into United States Dollars ("US$") has been made at the noon buying rate in New York City for cable transfer in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York City on June 30, 2006 of Rmb 7.9943 = US$1.00 for the operating results of periods ended June 30, 2005 and 2006 and for the financial position as of December 31, 2005 and June 30, 2006. No representation is made that the Renminbi amounts could have been, or could be, converted into United States Dollars at that rate or at any other certain rate. Note (2): Our results for the 2006 Period included the results of our IT operations and nutraceutical operations (acquired in 2005), as compared to solely the IT operations was included in the 2005 Period. About CTDC CTDC is engaged in providing information network security solutions and developing health food products utilizing bio-active components of bamboo in People's Republic of China. For more information, please visit our website at www.chinactdc.com . This Report of Foreign Private Issuer on Form 6-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company's future financial performance. The Company has attempted to identify forward-looking statements by terminology including "anticipates", "believes", "expects", "can", "continue", "could", "estimates", "expects", "intends", "may", "plans", "potential", "predict", "should" or "will" or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. The information in this Report on Form 6-K is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this Form 6-K is filed, and the Company does not intend to update any of the forward-looking statements after the date this Report on Form 6-K is filed to confirm these statements to actual results, unless required by law. For Further information: Michael Siu Executive Director, Chief Financial Officer and Secretary Tel: [phone] Fax: [phone] Email: [e-mail] China Technology Development Group Corporation CONTACT: Michael Siu of China Technology Development Group Corporation, [phone], or fax, [phone], or [e-mail] Web site: https://www.chinactdc.com/