Gold Horse International, Inc. Announces Results for Fiscal Year 2010
HOHHOT, China, Oct. 14 /PRNewswire-Asia/ -- Gold Horse International, Inc., (OTC Bulletin Board: GHII) ("Gold Horse" or the "Company"), a multifaceted business group that controls and through the Jin Ma Companies operates a construction company, real estate development business and a hotel/banquet facility in Inner Mongolia, China, today announced its financial results for the twelve months ended June 30, 2010.
Fiscal Year 2010 Highlights
-- Net revenue decreased 37.1% year-over-year to $50.9 million
-- Gross margin was 20% compared to 15.3% in the prior year
-- Gross profit decreased 18.1% year-over-year to $10.2 million
-- Operating income was $7.98 million compared to operating income of
$10.78 million in the prior year
-- Net income increased 34.1% year-over-year to $8.3 million from $6.2
million
-- Adjusted net income excluding non-cash gains and expenses was $6.6
million, or $4.01 per fully diluted common share as compared to
adjusted net income of $7.5 million, or $3.86 per fully diluted common
share, a year ago
"We are quite pleased with Jin Ma Real Estate's new real estate development projects, and we are confident that the Jin Ma Companies remain on track to become one of the most prominent construction and real estate development companies in Inner Mongolia, China. We are confident that real estate development in Hohhot, Inner Mongolia and its surrounding areas, a third- tier city, will remain strong and will not feel the effects of the slower real estate markets occurring in tier-one cities such as Beijing and Shanghai," said Mr. Liankuan Yang, chairman and CEO of Gold Horse
Fiscal 2010 Results
For the fiscal year 2010, net revenue was $50.9 million, down 37.1% from $80.9 million in fiscal 2009. Construction revenue was $37.5 million or 73.7% of net revenue, down from $77 million, or 95.2% of net revenue for the fiscal year ended June 30, 2009.
-- The 51.3% decrease in construction revenues was mainly caused by a
softening of the real estate market in Hohhot. Additionally, the
reduction of construction revenue was attributable to the shift in
focus from acting as general contractor for third parties to acting as
general contractor for the real estate development business in order to
vertically integrate all development processes from construction
management to the sale of real estate units to customers.
-- Revenue from the hotel segment was $3.1 million, down 11.4% from $3.5
million in the same period last year.
-- Revenue from the real estate segment was $10.3 million, up 2,601% from
$0.38 million. During fiscal 2010, the real estate business, Jin Ma
Real Estate, in cooperation with the construction business, Jin Ma
Construction, who acted as general contractor, developed Buildings 1 to
4 of Procuratorate Housing Estates and Jian Guan Residential buildings
(also known as building 5 of the Procuratorate Housing Estates). In
fiscal 2010, Jin Ma Real Estate sold substantially all of the units of
real estate held for sale and recognized revenue from the sale of these
units.
Gross profit for the year was $10.2 million, down 18.1% from $12.4 million last fiscal year. Gross margin was 20%, up from 15.3% in the prior year.
Operating expenses for the fiscal year were $2.2 million, or 4.32% of net revenue. While the Company incurred lower salaries and employment benefits and depreciation and amortization expenses, operating expenses increased due to increases in hotel operating expenses and general and administrative expenses.
Operating income for fiscal 2010 was $7.98 million, down from $10.8 million in fiscal 2009.
Operating margin for the fiscal year of 2010 was 15.7% as compared to 13.3% in fiscal 2009.
The Company recorded net income of $8.3 million in fiscal 2010 as compared to net income of $6.2 million in fiscal 2009. Adjusted net income excluding non-cash gains and expenses was $6.6 million or $3.99 per fully diluted common share as compared to adjusted net income of $7.5 million or $3.86 per fully diluted common share in fiscal 2009.
Financial Condition
As of June 30, 2010, Gold Horse had $0.3 million in cash and cash equivalents, short-term debt of $3.1 million and long-term debt of $0.35 million. Shareholders' equity was $36.6 million, up from $30.3 million as of June 30, 2009. Cash provided by operating activities for fiscal 2010 was $0.3 million.
Business Outlook
The Jin Ma Companies are in various stages of development of three new real estate development projects totalling approximately $96 million in estimated revenues over fiscal years 2011 to 2013. These projects are a joint effort between the Jin Ma Construction and Jin Ma Real Estate with the construction business serving as the general contractor for the construction of these projects.
Mr. Liankuan Yang, Chairman and CEO of Gold Horse, offered a brief description on each project:
-- In July 2010, construction of buildings No. 6 of the Procuratorate
Housing Estates (Jiari Residential Building) began which consists of a
construction area of 38,000 square meters and is expected to be
completed in October 2011, with estimated revenues of $22 million. Jin
Ma Real Estate will sell units to individual homebuyers.
-- In October 2010, Jin Ma Construction is expected to begin the
construction of the Beiyuan Residential Building Project, which is in
proximity to Xinchen District Government Building and consists of a
construction area of 70,000 square meters with an expected completion
date of June 2012, and estimated revenues of $37 million. Jin Ma Real
Estate will sell units to individual homebuyers.
-- In August 2011, Jin Ma Construction expects to begin the construction
of the Jinwu Residential Building Project, which consists of a
construction are of 100,000 square meters with an expected completion
date of December 2012, and estimated revenues of $37 million. Jin Ma
Real Estate will sell units to individual homebuyers.
Reconciliation of Net Income to Adjusted Net Income
In addition to disclosing financial results in accordance with United States generally accepted accounting principles (GAAP) and to supplement the Company's consolidated financial statements presented on a GAAP basis in Table 1, the Company's earnings release contains the non-GAAP financial measures "adjusted net income."
Adjusted net income is not a measure of performance defined in accordance with GAAP. However, management believes that adjusted net income is useful to investors in evaluating the Company's performance because adjusted net income reflects the elimination of interest expense from the amortization of debt discount and debt issuance costs associated with the Company's convertible debt and warrants as well as a gain from derivative liabilities and extinguishment of debt.
Management believes that the disclosure of adjusted net income offers an additional view of the Company's operations that, when coupled with the GAAP results and the reconciliation to GAAP net income, provides a more complete understanding of the Company's results of operations and the factors and trends affecting the Company.
Adjusted net income should not be considered as an alternative to net income as an indicator of the Company's performance or as an alternative to net cash provided by operating activities as a measure of liquidity. The primary material limitations associated with the use of adjusted net income as compared to GAAP net income is:
-- it may not be compared to similarly titled measures used by other
companies in the Company's industry, and
-- it excludes financial information that some may consider important in
evaluating the Company's performance.
The Company compensates for these limitations by providing a reconciliation of adjusted net income to GAAP net income to enable investors to perform their own analysis of the Company's operating results.
Reconciliation of Adjusted
Net Income to GAAP Net Income
Fiscal Year Ended June 30,
($ in millions, except per share data) 2010 2009
Net income $8,273 $6,165
Interest expense from amortization of
debt discount and debt issuance costs 2,183 1,343
Gain on change in fair value of
derivative liabilities (1,757) --
Gain from extinguishment of derivative
liabilities (2,111) --
Adjusted net income $6,588 $7,508
Net income per common share - diluted $5.01 $3.17
Adjusted net income per common share -
diluted $3.99 $3.86
Weighted average common shares
outstanding - diluted 1,651,520 1,943,857
About Gold Horse International, Inc.
Gold Horse International, Inc., through its wholly owned subsidiaries, Gold Horse International, Inc. (Nevada) and Global Rise International Ltd., controls and operates its variable interest entities Inner Mongolia Jin Ma Construction Co., Ltd., Inner Mongolia Jin Ma Hotel Co., Ltd., and Inner Mongolia Jin Ma Real Estate Development Co., Ltd., all based in Hohhot, the regional capital of Inner Mongolia Autonomous Region in China. Jin Ma Construction has been providing construction and general contractor services in Hohhot to both private developers and to the local and regional governments since 1980. Jin Ma Hotel owns, operates and manages the Jin Ma Hotel, a full-service, two-star hotel and restaurant/banquet facility located in Hohhot. Jin Ma Real Estate develops residential and commercial properties in Hohhot. For more information on the Company, visit http://www.goldhorseinternational.com . Information on the Company's Web site or any other Web site does not constitute a portion of this release.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its variable interest entities Jin Ma Construction, Jin Ma Hotel and Jin Ma Real Estate. These forward looking statements are often identified by the use of forward-looking terminology such as "believes", "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties such as cost overruns, lack of materials, projected earnings not realized and other risks of construction that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its Web site (http://www.sec.gov ). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
Gold Horse International, Inc.
Mr. Adam Wasserman, CFO
Phone: +1-800-867-0078 x702
Email: [email protected]
GOLD HORSE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30,
2010 2009
ASSETS
Cash and cash equivalents $309,996 $112,134
Accounts receivable, net 7,912,119 11,943,996
Note receivable on sales type
lease - current portion 1,150,333 157,923
Inventories, net 64,007 27,838
Advances to suppliers -- 200,570
Prepaid expenses 210,000 --
Other receivables, net 24,969 1,197,705
Due from related parties -- 33,283
Cost and estimated earnings in
excess of billings 93,879 16,539
Real estate held for sale 367,009 --
Deferred tax assets 267,668 --
Prepaid land use rights for
resale -- 4,041,090
Total Current Assets 10,399,980 17,731,078
Property and equipment, net 8,727,796 9,383,982
Construction in progress 12,860,646 10,560,114
Note receivable on sales type
lease - non-current portion 15,853,319 8,654,311
Total Assets $47,841,741 $46,329,485
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Loans payable - current portion $3,091,678 $4,420,290
Accounts payable 3,522,030 7,966,488
Due to related parties 230,453 --
Accrued expenses 832,597 1,251,843
Taxes payable 2,374,059 1,678,084
Advances from customers 144,670 246,191
Derivative liability 653,630 --
Billings in excess of costs and
estimated earnings 90,205 37,498
Total Current Liabilities 10,939,322 15,600,394
Loans payable - net of current
portion 345,152 379,850
Total Liabilities 11,284,474 15,980,244
Stockholders' Equity:
Preferred stock ($0.0001 par
value; 20,000,000 shares
authorized; none issued and
outstanding) -- --
Common stock ($0.0001 par value;
300,000,000 shares authorized;
1,934,878 and 1,316,715 shares
issued and outstanding at June
30, 2010 and 2009, respectively) 193 132
Non-controlling interest in
variable interest entities 6,095,314 6,095,314
Additional paid-in capital 7,127,577 6,883,300
Statutory reserve 2,470,154 2,040,899
Retained earnings 18,213,466 12,866,842
Accumulated other comprehensive
income 2,650,563 2,462,754
Total Stockholders' Equity 36,557,267 30,349,241
Total Liabilities and
Stockholders' Equity $47,841,741 $46,329,485
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Years Ended June 30,
2010 2009
NET REVENUES
Construction $37,496,002 $77,041,208
Hotel 3,086,553 3,515,821
Real estate 10,331,004 382,463
Total Revenues 50,913,559 80,939,492
COST OF REVENUES
Construction 32,311,960 66,277,041
Hotel 1,965,973 1,945,299
Real estate 6,465,472 300,510
Total Cost of Revenues 40,743,405 68,522,850
GROSS PROFIT 10,170,154 12,416,642
OPERATING EXPENSES:
Salaries and employee benefits 908,590 935,383
Depreciation and amortization 775,715 847,941
Selling, general and
administrative 516,230 480,637
Other hotel operating expenses 89,292 59,575
Bad debt recovery (102,704) (993,338)
Loss on disposal of property and
equipment -- 302,776
Total Operating Expenses 2,187,123 1,632,974
INCOME FROM OPERATIONS 7,983,031 10,783,668
OTHER INCOME (EXPENSES):
Other income -- 2,497
Registration rights penalty
recovery -- 117,882
Foreign currency loss -- (20)
Gain on extinguishment of
derivative liabilities 2,111,506 --
Gain on change in fair value of
derivative liabilities 1,756,959 --
Gain on sale of land use rights
and property 350,885 --
Interest income 1,274,999 552,777
Interest expense (2,864,685) (2,472,021)
Total Other Income (Expenses) 2,629,664 (1,798,885)
INCOME BEFORE PROVISION FOR INCOME
TAX 10,612,695 8,984,783
PROVISION FOR INCOME TAXES 2,339,637 2,819,478
NET INCOME $8,273,058 $6,165,305
COMPREHENSIVE INCOME:
Net income $8,273,058 $6,165,305
OTHER COMPREHENSIVE INCOME:
Unrealized foreign currency
translation gain 187,809 93,705
COMPREHENSIVE INCOME $8,460,867 $6,259,010
NET INCOME PER COMMON SHARE:
Basic $5.14 $4.69
Diluted $5.01 $3.17
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 1,608,685 1,315,662
Diluted 1,651,520 1,943,857
SOURCE Gold Horse International, Inc.
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