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Tengtu International Reports Fiscal 2004 Financial Results TORONTO & BEIJING --(Business Wire)-- Nov. 18, 2004 -- Tengtu International Corp. (OTCBB: TNTU) today reported audited results for fiscal 2004 and has filed its form 10-K with the Securities and Exchange Commission.Mr. William Ballard, chairman of Tengtu International, stated, "Since acquiring the remaining 43% of Tengtu China in April 2004, we have been implementing new financial controls and replacing senior management. In light of the issues related to our former joint-venture partner, we are pleased to have completed our year-end audit and financial restatement. We now look forward to focusing our efforts on driving sales growth through the Western Rural School Project, the National Educational Portal, and our Education Resource for Microsoft(R) Office." Revenue for fiscal 2004 was $2.4 million, compared to $5.3 million for fiscal 2003. Results for fiscal 2004 reflect a restatement of the company's results for the fiscal first, second and third quarter of 2004. In connection with the company's April 2004 acquisition of the remaining 43% interest in Tengtu United from its former joint venture partner, Tengtu China, the company has been undertaking a thorough examination of the financial condition of Tengtu United and its operations. Prior to the acquisition, Tengtu China conducted all of Tengtu United's business with all Chinese government entities as its agent. Accordingly, the company relied on the integrity of its agent's reporting of sales and other information. Only since the acquisition has the company conducted a thorough analysis of the internal financial controls of the combined organizations. As previously disclosed, the review has uncovered overstatements of revenue for each quarter of fiscal 2004. The company believes that the overstatements were due to the failure by Tengtu China, the company's former joint venture partner in Tengtu United, to maintain adequate financial controls and systems. This in turn impacted the recording of revenues for the joint venture, which are reflected in the consolidated financial statements of the company. The overstatements arose from inadequate financial controls and systems at the company's former joint venture partner and agent, and are made up of accounting errors, double counting of sales, and recognition of revenue that is considered premature under United States generally accepted accounting principles because revenue was recognized before services or products had been provided. As further disclosed, the company believed that its $19.5 million receivable due from Tengtu China was materially impaired and that the company was continuing its assessment of the impairment. Upon further assessment, the company believes that approximately $800,000 of this amount will be collected from schools. As a result, the company has recorded an $18.7 million write-down of the receivable for the quarter ended June 30, 2004. Additionally, the company evaluated the carrying value of its goodwill in light of the restatement and write-down of receivables. Pursuant to this analysis, the company determined goodwill was impaired. Accordingly, the company recorded a non-cash goodwill impairment loss of $45.5 million. This one-time write-down of the goodwill impairment does not affect or relate to any of the debt covenants currently in settlement discussions. Net loss for fiscal 2004 was $71.1 million, or $0.82 per share, versus $1.9 million, or $0.03 per share, for the same period last year. The increase in net loss resulted largely from the impairment of goodwill and write-down of receivables. Established in 1996, Tengtu International Corp. is the leading provider of integrated education software and distance learning solutions in the People's Republic of China. Its wholly owned subsidiary has been chosen by China's Ministry of Education to be the operating partner in the deployment of China's national education portal and distance learning network (CBERC) to make computerized education available to 250 million students in China's primary and secondary schools. For more information please visit WWW.TENGTU.COM. To be added to Tengtu's email list for company news, please send your email address to [email protected]. Portions of this document include "forward-looking statements", which may be understood as any statement other than a statement of historical fact. Forward-looking statements contained in this document are made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from management's expectations and projections expressed in this document. Certain factors that can affect the company's ability to achieve projected results are described in the company's annual report on form 10-K and other reports filed with the Securities and Exchange Commission. -0- *T Tengtu International Corp. and Subsidiaries Consolidated Statements of Operations For the three month ended June 30, 2004 2003 ---- ---- SALES 289,008 1,945,640 COST OF SALES 118,219 1,153,494 ----------------------- 170,789 792,146 ----------------------- OPERATING EXPENSES Research and development 803,432 - General and administrative 1,716,705 323,546 Related party consultants 208,155 83,550 Collection Provision 9,947 24,005 Bad debts expenses 18,700,000 - Selling 219,308 287,437 Goodwill write off 45,450,000 Depreciation 174,339 15,786 ----------------------- 67,281,886 734,324 ----------------------- Operating Income (67,111,097) 57,822 OTHER INCOME (EXPENSE) Equity earnings (loss) in investee (14,288) (16,753) Interest income 702 61,843 Interest expense (100,670) (107,750) Other income 37,791 763,507 Other expense (2,118,096) (728,243) ----------------------- (2,194,561) (27,396) ----------------------- Income (Loss) before minority interests (69,305,658) 30,426 Minority interest in subsidiarys'-Income (Loss) 21,236 ----------------------- Net Income (Loss) (69,326,894) 30,426 ======================= WEIGHTED AVERAGE NUMBER OF SHARES: Basic 103,707,249 60,386,872 Common stock equivalents 2,650,582 ----------------------- Diluted 103,707,249 63,037,454 ======================= EARNINGS (LOSS) PER COMMON SHARE: Basic (0.67) 0.00 Diluted (0.67) 0.00 Tengtu International Corp. and Subsiiaries Consolidated Balance Sheets June 30, -------- ASSETS CURRENT ASSETS 2004 2003 ---- ---- Cash and cash equivalents 2,358,536 283,802.00 Accounts receivables, net 992,986 - Due from related party - 3,593,607 Prepaid expenses 74,778 811,269 Inventories 511,119 - Other receivables 173,150 154,011 ------------------------ Total Current Assets 4,110,569 4,842,689 ------------------------ ------------------------ PROPERTY AND EQUIPMENT, net 197,253 82,688 ------------------------ OTHER ASSETS Due from Related Party - 14,497,209 Notes receivable - 11,881 Long-term Investment 1,229,660 4,392,793 Goodwill 1,822,951 - ------------------------ 3,052,611 18,901,883 ------------------------ TOTAL ASSETS 7,360,433 $23,827,260 ======================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable 619,937 $752,647 Accrued expenses 3,292,601 1,446 Prepaid revenue from cutomers 482,404 - Due to related party consultants 1,207,714 1,207,714 Short-term loan 1,973,159 1,454,404 Other liabilities 398,033 650,310 ------------------------ Total Current Liabilities 7,973,847 4,066,520 ------------------------ Minority interest 85,877 - COMMITMENTS (Note 9) STOCKHOLDERS' EQUITY Preferred stock, par value $.01 per share; authorized 10,000,000 shares; issued -0- shares 0 - Common stock par value $.01 per share; authorized 150,000,000 shares; issued 110,706,914 shares (2003-66,736,223); outstanding 110,628,494 shares (2003-66,657,803) 1,106,285 666,578 Additional paid in capital 85,178,486 34,872,453 Accumulated deficit (86,882,617)(15,761,845) Accumulated other comprehensive income (loss): Cumulative translation adjustment (100,660) (15,662) ------------------------ (698,507) 19,761,524 Less: Treasury stock, at cost, 78,420 common shares (784) (784) ------------------------ Total Stockholders' Equity (699,291) 19,760,740 ------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 7,360,433 23,827,261 ======================== *T |
