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Exhibit Number
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Page
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1.1
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KongZhong
Corporation Announces Resolutions Adopted at the 2009 Annual General
Meeting
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4
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1.2
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KongZhong
Corporation Reports Unaudited Third Quarter 2009 Financial
Results
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6
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| KONGZHONG CORPORATION |
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By:
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/s/
Leilei Wang
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Name:
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Leilei
Wang
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Title:
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Chief
Executive
Officer
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Investor
Contact:
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Media
Contact:
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Jay
Chang
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Xiaohu
Wang
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Chief
Financial Officer
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Manager
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Tel.:
(+86-10) 8857-6000
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Tel:
(+86-10) 8857-6000
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Fax:
(+86-10) 8857-5891
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Fax:
(+86-10) 8857-5900
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E-mail:
ir@kongzhong.com
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E-mail:
xiaohu@kongzhong.com
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l
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Revenues
exceeded guidance – Total revenues for the Third Quarter of 2009 (“3Q09”)
increased 40% year-over-year and increased 9% quarter-over-quarter to
$35.1 million (“mn”), exceeding the Company’s 3Q09 revenue guidance of $34
mn to $35 mn.
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l
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Gross
margin stable – Total gross margin was 51% in the 3Q09, stable compared
with 51% in 2Q09.
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l
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Net
income increased – Net income in 3Q09 was $4.50 mn, a 27% increase
compared with 2Q09 net income of $3.55 mn and a net loss in
3Q08. Basic net income per ADS was $0.13 based on 34.08 mn ADS
while diluted net income per ADS was $0.11 based on 39.24mn ADS
outstanding as of September 30,
2009.
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l
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Non-GAAP
net income increased – Non-GAAP net income was $6.28 mn, a 33% increase
compared to 2Q09, while Non-GAAP diluted net income per ADS was $0.16
(Non-GAAP Financial
Measures are described and reconciled to the corresponding GAAP measures
in the section titled “Non-GAAP Financial
Measures.”)
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l
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Cash
and cash equivalents – As of September 30, 2009, the Company had $ 134 mn
in cash and cash equivalents.
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·
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In
October 2009, we acquired 100% of an online Chinese-language novel Company
(“Zhulang”) and its related party (“Success Blueprint”), for an aggregate
price of $US 2.34 mn in cash and 1,000,000 ordinary shares (equivalent to
25,000 ADS). Zhulang is engaged in the management, aggregation
and distribution of user-generated and professionally written Chinese
novels, mainly focused on the contemporary and martial arts genres (URL:
http://www.zhulang.com). Success Blueprint, a BVI company, is
engaged in the management of overseas Chinese novel
copyright. The acquisition of Zhulang will support the
development of KONG.net’s mobile novel channel, already one of the leading
mobile novel sites in China, to further develop its access to original
content and the author community to develop new and more innovative
publishing business models based on mobile platforms. Also, we expect
Zhulang to support the development of our mobile games business as we
leverage content and other copyrights on the Zhulang platform for future
mobile game titles.
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For the Three
Months Ended
September 30,
2008
(US$ thousands)
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For the Three
Months Ended
June 30,
2009
(US$ thousands)
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For the Three
Months Ended
September 30,
2009
(US$ thousands)
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Revenues
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$ | 25,050 | $ | 32,287 | $ | 35,091 | ||||||
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WVAS
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22,070 | 23,925 | 25,387 | |||||||||
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Mobile
Games
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2,368 | 6,802 | 8,202 | |||||||||
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Wireless
Internet Service
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612 | 1,560 | 1,502 | |||||||||
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Cost
of Revenue
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$ | 13,395 | $ | 15,733 | $ | 17,167 | ||||||
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WVAS
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12,135 | 12,173 | 13,074 | |||||||||
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Mobile
Games
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955 | 2,791 | 3,341 | |||||||||
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Wireless
Internet Service
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305 | 769 | 752 | |||||||||
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Gross
profit
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$ | 11,655 | $ | 16,554 | $ | 17,924 | ||||||
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WVAS
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9,935 | 11,752 | 12,313 | |||||||||
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Mobile
Games
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1,413 | 4,011 | 4,861 | |||||||||
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Wireless
Internet Service
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307 | 791 | 750 | |||||||||
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Gross
profit ratio
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47 | % | 51 | % | 51 | % | ||||||
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WVAS
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45 | % | 49 | % | 49 | % | ||||||
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Mobile
Games
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60 | % | 59 | % | 59 | % | ||||||
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Wireless
Internet Service
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50 | % | 51 | % | 50 | % | ||||||
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For the Three
Months Ended
September 30,
2008
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For the Three
Months Ended
June 30,
2009
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For the Three
Months Ended
September 30,
2009
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Product
development
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$ | 4,078 | $ | 4,373 | $ | 4,829 | ||||||
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Sales
and marketing
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5,018 | 4,453 | 4,338 | |||||||||
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General
and administrative
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3,551 | 3,127 | 3,430 | |||||||||
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Goodwill
impairment loss
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21,624 | - | - | |||||||||
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Total
Operating Expenses
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$ | 34,271 | $ | 11,953 | $ | 12,597 | ||||||
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(In weighted average, mn)
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Basic ADS
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Diluted ADS
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Balance
as of June 30, 2009
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34.71 | 38.53 | ||||||
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Less:
Share repurchase
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(0.73 | ) | (0.73 | ) | ||||
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Add: Vested
shares and exercised options
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0.10 | 0.10 | ||||||
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Warrant
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- | 0.48 | ||||||
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Outstanding
options and nonvested shares
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- | 0.86 | ||||||
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Balance
as of September 30, 2009
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34.08 | 39.24 | ||||||
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For the Three
Months Ended
September 30,
2008
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For the Three
Months Ended
June 30,
2009
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For the Three
Months Ended
September 30,
2009
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Revenues
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$ | 25,050 | $ | 32,287 | $ | 35,091 | ||||||
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Cost
of revenues
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13,395 | 15,733 | 17,167 | |||||||||
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Gross
profit
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11,655 | 16,554 | 17,924 | |||||||||
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Operating
expenses
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Product
development
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4,078 | 4,373 | 4,829 | |||||||||
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Sales
& marketing
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5,018 | 4,453 | 4,338 | |||||||||
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General
& administrative
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3,551 | 3,127 | 3,430 | |||||||||
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Goodwill
impairment loss
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21,624 | - | - | |||||||||
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Total
operating expenses
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34,271 | 11,953 | 12,597 | |||||||||
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Operating
profit (loss)
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(22,616 | ) | 4,601 | 5,327 | ||||||||
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Interest
income
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1,134 | 765 | 717 | |||||||||
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Investment
income
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- | - | 117 | |||||||||
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Interest
expense on convertible notes
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- | 223 | 234 | |||||||||
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Income before
tax expense
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(21,482 | ) | 5,143 | 5,927 | ||||||||
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Income
tax expense
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89 | 1,594 | 1,431 | |||||||||
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Net
income (loss)
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$ | (21,571 | ) | $ | 3,549 | $ | 4,496 | |||||
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Basic
earnings (loss) per ADS
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$ | (0.61 | ) | $ | 0.10 | $ | 0.13 | |||||
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Diluted
earnings (loss) per ADS
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$ | (0.61 | ) | $ | 0.09 | $ | 0.11 | |||||
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Weighted
average ADS outstanding (mn)
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35.63 | 34.71 | 34.08 | |||||||||
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Weighted
average ADS used in diluted EPS calculation (mn)
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35.63 | 38.53 | 39.24 | |||||||||
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For the Nine Months
Ended
September 30, 2008
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For the Nine
Months Ended
September 30, 2009
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Cash
Flows From Operating Activities
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Net
Income (Loss)
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$ | (21,183 | ) | $ | 10,567 | |||
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Adjustments
to reconcile net income to net cash
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provided
by operating activities
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Share-based
compensation
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1,862 | 2,963 | ||||||
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Depreciation
and amortization
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2,204 | 2,058 | ||||||
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Disposal
of property and equipment
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- | (4 | ) | |||||
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Goodwill
impairment loss
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21,624 | - | ||||||
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Amortization
of the debt discount
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- | 202 | ||||||
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Changes
in operating assets and liabilities
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5,236 | (8,429 | ) | |||||
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Net
Cash Provided by Operating Activities
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9,743 | 7,357 | ||||||
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Cash
Flows From Investing Activities
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Purchases
of subsidiaries, net of cash US$330 acquired
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- | (4,433 | ) | |||||
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Purchase
of property and equipment
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(1,277 | ) | (1,167 | ) | ||||
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Proceeds
from disposal of property
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- | 4 | ||||||
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Purchase
of long-term investment
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(2,964 | ) | - | |||||
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Net
Cash Used in Investing Activities
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(4,241 | ) | (5,596 | ) | ||||
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Cash
Flows From Financing Activities
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Proceeds
from issuance of Convertible Note
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- | 6,620 | ||||||
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Proceeds
from exercise of share options
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- | 603 | ||||||
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Stock
Repurchase
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- | (11,107 | ) | |||||
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Net
Cash Used in Financing Activities
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- | (3,884 | ) | |||||
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Effect
of foreign exchange rate changes
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7,043 | 75 | ||||||
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Net
increase in Cash and Cash Equivalents
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$ | 12,545 | $ | (2,048 | ) | |||
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Cash
and Cash Equivalents, Beginning of Period
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$ | 122,343 | $ | 136,054 | ||||
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Cash
and Cash Equivalents, End of Period
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$ | 134,888 | $ | 134,006 | ||||
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September 30,
2008
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June 30,
2009
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September 30,
2009
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Cash
and cash equivalents
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$ | 134,888 | $ | 132,004 | $ | 134,006 | ||||||
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Accounts
receivable (net)
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16,457 | 21,386 | 23,463 | |||||||||
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Other
current assets
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2,742 | 6,121 | 6,745 | |||||||||
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Total
current assets
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154,087 | 159,511 | 164,214 | |||||||||
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Rental
deposits
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525 | 568 | 582 | |||||||||
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Intangible
assets (net)
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831 | 2,165 | 1,849 | |||||||||
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Property
and equipment (net)
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3,286 | 3,307 | 3,107 | |||||||||
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Long-term
investments
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2,964 | 2,964 | 2,964 | |||||||||
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Goodwill
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15,776 | 21,244 | 21,262 | |||||||||
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Total
assets
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$ | 177,469 | $ | 189,759 | $ | 193,978 | ||||||
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Accounts
payable
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$ | 10,529 | $ | 11,622 | $ | 11,161 | ||||||
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Other
current liabilities
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5,806 | 11,753 | 10,479 | |||||||||
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Total
current liabilities
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16,335 | 23,375 | 21,640 | |||||||||
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Convertible
notes
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-
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2,687 | 2,767 | |||||||||
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Non-current
deferred tax liability
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112 | 451 | 400 | |||||||||
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Total
liabilities
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$ | 16,447 | $ | 26,513 | $ | 24,807 | ||||||
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Shareholders’
equity
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161,022 | 163,246 | 169,171 | |||||||||
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Total
liabilities & shareholders’ equity
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$ | 177,469 | $ | 189,759 | $ | 193,978 | ||||||
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For the Three
Months Ended
September 30,
2008
(US$ thousands)
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For the Three
Months Ended
June 30,
2009
(US$ thousands)
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For the Three
Months Ended
September 30,
2009
(US$ thousands)
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GAAP
Net Income (Loss)
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$ | (21,571 | ) | $ | 3,549 | $ | 4,496 | |||||
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Share-based
compensation
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604 | 721 | 1,229 | |||||||||
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Financial
expense on convertible notes
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- | 223 | 234 | |||||||||
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Goodwill
impairment loss
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21,624 | - | - | |||||||||
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Amortization
of intangibles
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152 | 215 | 319 | |||||||||
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Non-GAAP
Net Income
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$ | 809 | $ | 4,708 | $ | 6,278 | ||||||
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Non-GAAP
diluted net income per ADS (Note 1)
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$ | 0.02 | $ | 0.12 | $ | 0.16 | ||||||
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Investor
Contact:
|
Media
Contact:
|
||
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Jay
Chang
|
Xiaohu
Wang
|
||
|
Chief
Financial Officer
|
Manager
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||
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Tel.:
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(+86-10)
8857 6000
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Tel:
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(+86-10)
8857 6000
|
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Fax:
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(+86-10)
8857 5891
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Fax:
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(+86-10)
8857 5900
|
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E-mail:
|
ir@kongzhong.com
|
E-mail:
xiaohu@kongzhong.com
|
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