Diguang International Reports First-Quarter Financial Results

SHENZHEN, China, May 15 /Xinhua-PRNewswire/ -- Diguang International Development Co., Ltd. (OTC Bulletin Board: DGNG) ("Diguang") today announced financial results for the first quarter, ended March 31, 2007, of the Company’s 2007 fiscal year.

First-quarter net revenues of $6.8 million represented a decrease of

$2.0 million, or 22.7%, from $8.8 million in the quarter ended March 31, 2006. The decrease in net revenues was primarily due to continuing pricing pressure in the backlight industry and a shortage of raw materials for TFT-LCD panel assemblies, which decreased the Company’s deliveries to certain customers. These factors were partially mitigated by the success of the Company’s strategic initiative to improve its product mix in favor of higher-priced and higher value-added products.

Gross profit for the first quarter of 2007 totaled $1.3 million, a 56.5% decline compared to gross profit of approximately $3.1 million recorded for the corresponding period of the prior year. Gross margins for the first quarter of 2007 were 19.8%, a 15.3% decrease as compared to 35.1% for the first quarter of 2006. Quarterly gross margins declined year over year due to industry-wide pricing pressure, which amounted to an average pricing decline totaling fully 24% on the Company’s existing products, as well as an increases in labor costs and production overhead per unit.

For the first quarter ended March 31st, 2007, Diguang posted a loss per share of $0.05 per share, as compared to earnings per share of $0.10 in the corresponding prior-year period.

In strategic highlights for the quarter, Diguang:

-- Continued to advance its 15" to 19" new product series, on which

the Company has been named in-house backlight supplier by one of the

four "Taiwan Tigers" that is leading the global TFT-LCD panel


-- Continued trial production of 32" CCFL backlights for flat-panel


-- Continued to maintain relatively healthy gross margins in a context

of significant ongoing gross profit declines industry-wide, by

shifting its product mix toward higher-margin products,

re-engineering product designs and employing other cost-efficiency

measures; and

-- Exercised its option to purchase from Sino Olympics Industrial

Limited all of its 65% equity interest in North Diamond International

Co., Ltd., providing Diguang with an enhanced presence in the Yangtze

River Region, an important LCD manufacturing base, and bolstering its

position as a leading LCD backlight supplier in South China.

Cost of sales totaled $5.4 million in the 2007 first quarter, a decrease of approximately $252,000, or 4.4%, compared to $5.6 million for the same period of the prior year. Raw materials comprised 55% of Q1 07 revenues as compared with 43% in the prior-year first quarter. Labor cost as a percentage of quarterly revenues increased 1% year over year, to 14%, and production overhead as a percentage of quarterly revenues grew 2% year over year, to 11%.

Total operating expenses (general and administrative, research and development and selling) for the first quarter of 2007 were $2.6 million, or 37.9% of net revenues, compared to $1.0 million, or 11.7% of net revenues, for the same quarter of the prior year. This partly reflected a year-over-year increase in quarterly share-based compensation expenses, which totaled $627,000 during the first quarter of 2007, an increase of $362,000, or 137%, as compared to equivalent expenses of $265,000 in the 2006 first quarter.

First-quarter 2007 selling expenses totaled approximately $626,000, or approximately 9.3% of net revenues, a 181% increase compared to first-quarter 2006 selling expenses of approximately $223,000, or 2.5% of net revenues. This primarily reflected the Company’s heightened efforts to expand market share and promote new products such as backlights for computer monitors and television sets, driving increases in the Company’s sales staff headcount, higher sales incentives and higher advertising and trade show expenses.

Quarterly research and development expenses decreased approximately $140,000, or 45.9%, from $304,000 in the 2006 first quarter to $164,000 in the 2007 first quarter. R&D expense as a percentage of net revenue declined from 3.5% to 2.4% comparing the first quarters of 2006 and 2007.

General and administrative expenses for the three months ended March 31, 2007 were approximately $1.8 million, an increase of $1.3 million over G&A expenses of $500,000 in the 2006 first quarter. As a percentage of net revenues, G&A expenses grew from 5.7% in the prior-year first quarter to 26.3% in the 2007 first quarter. A major component of this increase was share-based compensation expenses of $627,000 incurred during the first quarter of 2007 as noted above. Excluding the share-based compensation expense, the G&A expense for the periods ended March 31, 2007 and 2006 represented 17% and 3% of revenues respectively.

Song Yi, Diguang’s Chief Executive Officer, commented, "I think we will eventually look back at this quarter as an important period in which we strengthened our long-term strategic position by solidifying our North Diamond manufacturing presence in South China. Although it was a challenging quarter by any measure, our revenues increased 15% compared to the fourth quarter of 2006 and margins improved 150 basis points sequentially, an endorsement of our ongoing strategic shift in product mix."

Teleconference and Webcast Information

Management will conduct a conference call and webcast to discuss financial results for the first quarter, ended March 31, of its 2007 fiscal year. The conference call and webcast will take place at 8:30 a.m. Eastern (U.S.) Time, on Tuesday, May 15, 2007. Anyone interested in participating should call 800-884-5695 if calling from within the United States, or 617-786-2960 if calling internationally; the passcode is 50189242.

There will be a replay available until May 22, 2007. To listen to the playback, please call 888-286-8010 if calling within the United States, or 617-801-6888 if calling internationally. Please use passcode 63940575 for the replay.

The event will also be webcast live and a webcast archive will be available for 90 days. The webcast will be available at: and is being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at , Thomson’s individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents ( ), a password-protected event management site.

About Diguang International Development Co., Ltd.

Diguang, through its subsidiaries, specializes in the research, development, production, sale and distribution of backlights and backlight technologies. A backlight is the typical light source of a liquid crystal display (LCD). The Company is focused on providing LED and CCFL backlights for international producers of televisions, monitors, cellular phones, digital cameras, DVDs and other home appliances. Diguang currently develops an average of approximately 50 new products per month. Diguang is a Nevada corporation with its manufacturing subsidiary located in Shenzhen, PRC, and its sales and marketing subsidiary located in the British Virgin Islands.

Safe Harbor Statements

This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are statements that are not historical facts such as statements that we remain optimistic that the rollout of our exciting new computer monitor backlight products will gain traction in the coming months and that these new products will position us for high growth and gains in market share during 2007. Such forward-looking statements are based upon the current plans, estimates and projections of Diguang’s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Diguang is engaged; fluctuations in customer demand; management of rapid growth; intensity of competition from other providers of backlights; timing approval and market acceptance of new products introduction; general economic conditions; geopolitical events and regulatory changes, as well as other relevant risks not included herein, including but not limited to risks outlined in the Company’s periodic filings with the U.S. Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Diguang does not assume any obligation to update the information contained in this press release.



(In U.S. Dollars)

Three Months Ended March 31,

2006 2007

(Unaudited) (Unaudited)


Revenues, net $ 8,751,178 $ 6,762,087

Cost of sales 5,675,872 5,424,100

Gross profit 3,075,306 1,337,987

Selling expense 222,873 625,548

Research and development costs 304,283 164,498

General and administrative expenses 500,207 1,775,865

Income (loss) from operations 2,047,943 (1,227,924)

Interest income (expense), net 18,496 13,964

Investment income (loss) 5,013 --

Other income 4,883 167,148

Income (loss) before income taxes 2,076,335 (1,046,812)

Income tax provision 126,937 --

Net income (loss) before minority interest 1,949,398 (1,046,812)

Minority interests -- 26,251

Net income (loss) $ 1,949,398 $ (1,073,063)

Weighted average common shares

outstanding - basic 18,925,578 21,688,704

Earnings (loss) per share - basic 0.10 (0.05)

Weighted average common shares

outstanding - diluted 19,031,988 21,688,704

Earning (loss) per shares - diluted 0.10 (0.05)

Other comprehensive income (loss):

Net income (loss) 1,949,398 (1,073,063)

Translation adjustment 59,001 193,616

Other comprehensive income (loss) $ 2,008,399 $ (879,447)




(In U.S. Dollars)

December 31, March 31,

2006 2007



Current assets:

Cash and cash equivalents $ 18,910,808 $16,323,012

Accounts receivable, net of allowance for

doubtful accounts of $751,145 and $751,145 5,006,649 7,271,120

Trade receivable from a related party 246,337 --

Inventories, net of provision $545,446 and

$563,967 4,008,445 5,916,630

Prepayment and other receivables 215,569 295,605

VAT recoverable 220,793 90,929

Advance to suppliers 756,208 547,342

Amount due from related parties 55,997 30,229

Deferred tax asset 86,572 86,572

Loan receivable from a related party 2,050,204 2,066,916

Total current assets 31,557,582 32,628,355

Investment 1,500,000 1,500,000

Property and equipment, net 2,672,338 5,697,533

Prepayment for purchasing office space 1,969,462 --

Total assets $ 37,699,382 $39,825,888


Current liabilities:

Accounts payable $ 5,685,836 $ 6,632,090

Advance from customers 177,184 216,037

Accruals and other payables 1,575,933 1,812,769

Accrued payroll and related expense 342,531 450,517

Income tax payable 335,672 347,451

Total current liabilities 8,117,156 9,458,864

Total liabilities 8,117,156 9,458,864

Minority interest -- 1,077,895

Stockholders’ equity:

Common stock, par value $0.001 per share,

50 million shares authorized,

18,250,000 shares and 22,593,000 shares

outstanding 22,593 22,593

Additional paid-in capital 14,193,773 14,820,921

Appropriated earnings 1,294,578 1,294,578

Retained earnings 13,202,629 12,088,768

Translation adjustment 868,653 1,062,269

Total shareholders’ equity 29,582,226 29,289,129

Total liabilities and stockholders’ equity $ 37,699,382 $39,825,888




(In U.S. Dollars)

Three Months Ended March 31,

2006 2007

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net income (loss) $ 1,949,398 $ (1,073,063)

Adjustments to reconcile net income to net

cash provided by (used in) operating


Minority interest -- 26,251

Depreciation 86,434 164,851

Share-based compensation 265,103 627,148

Changes in operating assets and liabilities:

Accounts receivable (1,685,421) (863,486)

Inventory 16,199 (1,508,416)

Prepayment and other receivable (240,348) (51,872)

VAT recoverable -- 129,728

Advance to suppliers 308,779 283,754

Accounts payable (285,834) 157,009

Accruals and other payable (60,084) 45,416

Advance from customers (335,440) 40,032

Taxes payable 175,340 11,706

Net cash provided by (used in) operating

activities 194,126 (2,010,852)

Cash flows from investing activities:

Purchase of fixed assets (66,429) (295,882)

Purchase of marketable securities (1,494,964) --

Due from related parties 21,538 (16,712)

Business acquisition, net of cash acquired -- (469,145)

Deposit for office building (1,812,058) --

Net cash used in investing activities (3,351,913) (781,739)

Cash flows from financing activities:

Dividend paid (111,140) --

Gross proceeds from issuing 12 million

shares 12,000,000 --

Offering expense (1,485,624) --

Net cash provided by financing activities 10,403,236 --

Effect of changes in foreign exchange rates 50,373 204,795

Net increase (decrease) in cash and cash

equivalents 7,295,822 (2,587,796)

Cash and cash equivalents, beginning of the

period 10,054,567 18,910,808

Cash and cash equivalents, end of

the period $ 17,350,389 $ 16,323,012

Source: Diguang International Development, Ltd.
Related Stocks: