NEW YORK and GUANGZHOU, China, Aug. 30, 2010 (GLOBE NEWSWIRE) -- Sino Green Land Corporation (OTCBB:SGLAE), a leading distributor of high-end fruits and green foods in China, today announced financial results for the second quarter ended June 30, 2010.
Second quarter 2010 highlights:
- Net sales increased 36.7% to $29.8 million from the second quarter of 2009
- Gross profit increased 28.5% to $2.8 million compared to the same period last year
- GAAP net income of $3.9 million, or $0.02 per diluted share
- Adjusted net income of $2.2 million, or $0.01 per diluted share, excluding change in derivative liability, non-cash stock-based compensation and amortization expense
- $4.1 million of cash and cash equivalents, no long-term debt and shareholder's equity of $33.7 million
Mr. Anson Fong, Chairman of Sino Green Land, commented, "I am pleased that we had another quarter of strong year-over-year revenue growth, even though the second quarter is typically our seasonally weakest period. We attribute this success to a number of initiatives. Most importantly, we leased additional land and acquired first priority purchase rights from new farming cooperatives earlier this year. These land leases allow us to lock in a guaranteed supply of produce from farmers across China and, in return, provide them a stable outlet for their produce. During the second quarter of this year, we achieved a number of additional milestones, including the enhancement of our management team, appointments to our board, a $3.4 million private placement to accelerate construction of our green food distribution hub, and the addition of new export channels in the global marketplace."
Mr. Fong continued, "We are also very pleased with the rapid progress we have made constructing the green food distribution hub, which is on track to commence operations in the second half of 2010. Currently there is no centralized distribution of green foods throughout China and there are no established channels to ensure the quality or that green foods being sold are, in fact, coming from certified manufacturers. The opening of our green food distribution hub will mark the official launch of this initiative and we believe it will clearly establish our leadership in this market."
Mr. Fong concluded, "Overall, we are extremely encouraged by the near and long-term outlook for the business. Specifically we expect our legacy fruit distribution business will continue to grow at strong double digit rates for the foreseeable future. At the same time we expect our new green food distribution business can achieve annualized sales in excess of $150 million, on a standalone basis, within the next 1-2 years."
Revenue for the three months ended June 30, 2010 increased 36.7% to $29.8 million, as compared to $21.8 million for the three months ended June 30, 2009. The increase was primarily due to higher volume sales of produce and higher average sale prices.
Gross profit increased 28.5% to $2.8 million for the three months ended June 30, 2010, as compared to $2.2 million for the three months ended June 30, 2009, representing gross margins of approximately 9.5% and 10.1%, respectively. Gross margins declined slightly due to increased amortization of land use rights as the company expanded its leased apple co-ops in the first half of 2010. Amortization expenses for the three month period ended June 30, 2010 and 2009 were $288,237 and $174,858, respectively.
Operating income increased 12.1% to $1.3 million for the three months ended June 30, 2010, compared to $1.2 million for the three months ended June 30, 2009, representing operating margins of 4.4% and 5.4%, respectively. The decline in operating margin was primarily due to $588,196 of stock-based compensation expense.
Net income for the three months ended June 30, 2010 was $3.9 million, or $0.02 per diluted share, compared to net income of $1.5 million, or $0.02 per diluted share, for the same period last year. The second quarter of 2010 included a non-cash gain of $2.6 million due to a change in derivative liability, related to the fair value of the company's warrants. 2009 included a non-cash gain of $2.6 million due to a change in derivative liability and a $284,320 gain due to forgiveness of company debt by a related party.
Adjusted net income for the second quarter of 2010, which excludes the aforementioned non-cash change in derivative liability, non-cash stock-based compensation and amortization expenses, would have been $2.2 million, or $0.01 per diluted share, compared to $1.8 million, or $0.02 per diluted share for the second quarter of 2009 (see table below for reconciliation to net income). Excluding gains from the related-party debt forgiveness in 2009, adjusted net income would have increased 62.1% over the same period last year.
As of June 30, 2010, the company had cash and cash equivalents of $4.1 million, no long-term debt and shareholders' equity of $35.3 million.
Table 1: Reconciliation of Reported Net Income and Adjusted Net Income and Net Income per Diluted Share for the Three Months and Six Months Ended June 30, 2010 and 2009:
The Company defines adjusted net income as earnings before non-cash stock-based compensation and amortization expenses. Adjusted net income is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), and should not be considered in isolation of, or as a substitute for, earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. The Company believes the presentation of adjusted net income is relevant and useful by enhancing the readers' ability to understand the Company's operating performance. The Company's management utilizes adjusted net income as a means to measure performance. The Company's measurements of adjusted net income may not be comparable to similar titled measures reported by other companies. The table below reconciles adjusted net income, a non-GAAP measure, to net income for the three months ended June 30, 2010 and June 30, 2009.
On Friday August 13, 2010, the Company received SEC comments on its S-1/A prior to filing its Form 10-Q for the second quarter of 2010, On August 23, 2010, the Company concluded, after consultation with its independent registered public accounting firm, and a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the years ended December 31, 2009 and 2008, and the financial statements included in the Company's quarterly report for the quarter ended March 31, 2010 should not be relied upon due primarily to the accounting treatment applied to previously issued warrants. Certain warrants associated with the issuance of debt in 2008 and preferred stock in 2009 were reported as a component of equity, whereas the warrants should have been reflected as a derivative liability at fair value, with the changes in fair value reported in the income statement for each period.
The restatements of all prior financial statements delayed the Company's 10-Q filing for the second quarter of 2010. The warrant derivative liabilities represent the change in fair value of warrants outstanding. The change in fair value, as computed using the Black-Scholes option pricing model, was primarily driven by changes in the Company's stock price during this period. These non-cash derivative liabilities have no impact on the Company's operations and operating results.
About Sino Green Land Corporation
Sino Green Land Corporation is a leading agricultural distributor of high end fruits and vegetables in the People's Republic of China. Since its inception in 2003, Sino Green Land has grown from a small distributor of various produce to become a large distributor of high end fruits such as: Fuji apples, emperor bananas and tangerine oranges. Sino Green Land is also a leading Green Food distributor. The Green Food designation is an important standard set by China's Ministry of Agriculture, and recognized by over 40 trade partner countries. Through its relationship with the China Green Food Association, Sino Green Land has access to distribute over 17,000 food items from more than 6,000 producers. The company's Green Food distribution covers both Chinese and overseas markets. Green Foods are a fast growing market within China, and are becoming increasingly popular throughout the world. Sino Green Land has built a solid reputation, a sophisticated supply chain and a distribution network that stretches from Beijing to Guangzhou.
Safe Harbor Statement
This press release may contain forward-looking statements. Such statements include, among others, those concerning the company's expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to the company's ability to overcome competition in its market; the impact that a downturn or negative changes in the price of the company's products could have on its business and profitability; the company's ability to simultaneously fund the implementation of its business plan and invest in new projects; economic, political, regulatory, legal and foreign exchange risks associated with international expansion; or the loss of key members of the company's senior management; any of the factors and risks mentioned in the "Risk Factors" sections of the Company's amended current report on Form 10K/A filed on April 30, 2010. The Company assumes no obligation, and does not intend, to update any forward-looking statements, except as required by law.
CONTACT: Crescendo Communications, LLC David Waldman Vivian Huo (212) 671-1020 sgla@crescendo-ir.com