In addition, our tier 2 and 3 city expansion strategy continued to reap rewarding results with leading regional department store operators, and our progress with clients such as Guofang Group only help to further solidify our market position in these high growth regions. With growing demand for our full suite of solutions designed to optimize business efficiency, our pipeline is much stronger and healthier as compared to last year, and provides a solid foundation for growth in year 2013."

Mr. Sean Zheng, Chief Financial Officer, added, "The first quarter of 2013 fell well in line with our guidance and expectations. The year over year decline in revenue reflected the delay in revenue recognition for our backlog, as well as some Q1 revenue was partially recognized last quarter when some projects finished earlier than expected. At the beginning of the year, we also made investments in people and enhanced our employees' benefits to retain talent, which resulted in higher SG&A expenses over the quarter. We expect these investments to provide eFuture with significant long-term benefits and hence strengthen our foundation to achieve a sustainable long term business growth for shareholders."

FIRST QUARTER 201 3 FINANCIAL RESULTS

Revenue

Total revenue for the first quarter 2013 decreased 3% to RMB22.5 million (US$3.6 million) from RMB23.3 million in the first quarter 2012.

Revenue Breakdown
     
  1Q12 1Q13
  RMB '000 RMB '000 USD '000 Y-o-Y Change
Software license sales 8,412 6,646 1,070 -21%
Hardware sales 2,239 4,217 679 88%
Service fee income 12,601 11,658 1,877 -7%
Total 23,252 22,521 3,626 -3%

Software license revenue for the first quarter 2013 decreased 21% year-over-year to RMB6.6 million (US$1.1 million) from RMB8.4 million in the first quarter 2012. The decrease was primarily attributable to decreased revenue recognized in the logistics and grocery industries and partial revenues that were recognized in Q4 last year due to some projects finishing earlier than expected.

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