HOHHOT, China, May 21 /PRNewswire-Asia/ -- Gold Horse International, Inc., (OTC Bulletin Board: GHII) ("Gold Horse" or "the Company"), a multifaceted business group that controls and operates a construction company, real estate development business and a hotel in Inner Mongolia, China, today announced its financial results for the three and nine months ended March 31, 2009.
Third Quarter Highlights
-- Net revenue increased 102.4% year-over-year to $9.3 million
-- Gross profit increased 80.4% year-over-year to $1.7 million, gross
margin was 17.7%
-- Operating income was $1.1 million compared to an operating loss of
$45,931 a year ago
-- Net loss decreased 89.1% year-over-year to $88,080 from $811,789
-- Excluding non-cash debt financing expenses, adjusted net income was
$359,603, or $0.01 per fully diluted share, versus adjusted net loss of
$364,106, or a loss of $0.01 per fully diluted share, a year ago
"During the third quarter of fiscal 2009, we continued to make progress on each of our construction and real estate projects. As the third quarter of our fiscal year is a slower period in construction due to weather conditions and the Chinese New Year holiday, we are pleased that we not only recorded strong increases in our revenue and gross profit but also generated operating income," said Mr. Liankuan Yang, chairman and CEO of Gold Horse International, Inc.
Third Quarter Results
For the third quarter of fiscal year 2009, net revenue was $9.3 million, up 102.4% from $4.6 million in the same quarter of 2008. Construction revenue was $8.4 million, or 90.1% of net revenue, up from $3.5 million, or 76.7% of net revenue, for the three months ended March 31, 2008. The 137.7% increase was mainly due to several major construction projects: Fu Xing Bath Center, Lanyu Garden Number 3 residential building and Ai Bo Garden residential apartment project (Phase II). Revenue from the hotel segment was $0.9 million, up 20.4% from $0.7 million in the same quarter last year. The Company generated insignificant real estate revenue, as a result of the previous sale of its real estate inventory and refocused business strategy to concentrate on its construction segment.
Gross profit for the quarter was $1.7 million, up 80.4% from $0.9 million for the same quarter last year. Gross margin was 17.7%, down from 19.9% compared to the same period prior year. The decrease in gross margin was primarily due to increased construction costs.
Operating expenses for the quarter were $0.6 million, or 6.3% of net revenue, down 39.3% for the three months ended March 31, 2008, or 20.9% of net revenue. While the Company incurred higher salaries and employment benefits and depreciation and amortization expenses, operating expenses declined due to decreases in hotel operating expenses and general and administrative expenses.
Operating income for the quarter was $1.1 million, reversing the $45,931 operating loss for the same period in the prior year. Operating margin for the third quarter of 2009 was 11.5%.
The Company recorded a net loss of $88,080 for the quarter ended March 31, 2009, compared to a net loss of $811,789 for the same period prior year. Excluding non-cash debt financing expenses, adjusted net income was $359,603, or $0.01 per fully diluted share compared with adjusted net loss of $364,106, or $0.01 per fully dilutes share, a year ago.
Nine Months Results
Net revenue for the nine months ended March 31, 2009 was $51.6 million, up 140.4% from $21.5 million in the same period prior year. Construction revenue was $48.6 million, or 94.2% of net revenue, up 176.6% from $17.6 million, or 81.8% of net revenue, in the same period of 2008. Revenue from the hotel segment was $2.6 million, or 5.1% of net revenue, up 11.6% from $2.3 million, or 10.9% of net revenue, in the same period prior year. Revenue from the real estate segment was $0.4 million, or 0.7% of net revenue, down 75.5% from $1.6 million, or 7.3% of net revenue, in the same period prior year. Gross profit was $8.2 million, or 15.8% of net revenue, up 88.8% from $4.3 million, or 20.2% of net revenue for the same period of last year. Operating income was $6.7 million, or 13.0% of net revenue, up 208.4% from $2.2 million, or 10.2% of net revenue, in the same period of 2008. Net income was $3.3 million, or $0.05 per fully diluted share, up 738.0% from $0.4 million, or $0.01 per fully diluted share in the same period of 2008. Excluding non-cash debt financing expenses, adjusted net income was $4.6 million, or $0.07 per fully diluted share for the nine months ended March 31, 2009, compared with adjusted net income of $1.0 million, or $0.02 per fully diluted share, in the same period last year.
Financial Condition
As of March 31, 2009, Gold Horse had $0.2 million in cash and cash equivalents, $9.1 million in working capital and a current ratio of 1.9 to 1. At quarter end, the Company had short-term debt, including the unamortized discount on the Company's convertible debt, of $3.7 million and long-term debt of $3.3 million. Additionally, the Company had approximately $2.2 million of secured convertible debt, which management did not repay when it became due on March 31, 2009. The Company is in the process of finalizing an agreement with its convertible note holders to extend and modify the payment terms of these notes. Pursuant to current negotiations with investors, during the nine months ended March 31, 2009, the Company accrued default interest of $218,300. This amount represents 10% of the outstanding principal balance, which is management's estimate of the default payments that will be due upon successful negotiations with the investors. Shareholders' equity was $25.3 million, up from $21.8 million as of June 30, 2008. Cash used in operating activities during the first nine months of fiscal 2009 was $5.9 million, which was primarily attributable to an increase in construction in progress related to the construction of student dormitories which will be leased to the school for a period of 20 years. The Company is currently in negotiations with several banks and expects to secure short-term bank loans to fund its ongoing operations.
Business Outlook
For fiscal year 2009, Gold Horse affirms its net revenue guidance of approximately $90.0 million, based on the number of construction projects underway for the fourth quarter of 2009.
"Although the current business environment remains challenging and unpredictable, we believe the stimulus package introduced by the Chinese government will play an important role in creating favorable long term benefits for our construction business," commented Mr. Yang. "We are actively bidding on several projects that meet our profitability requirements in the Inner Mongolia region, and look forward to securing some of them in the months ahead."
Use of Non-GAAP Financial Information
GAAP results for the three month and nine month periods ended March 31, 2009 and for the three and nine months ended March 31, 2008 include certain non-cash debt financing expenses. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, which reflect adjusted net income and adjusted fully diluted earnings per share, and exclude the impact of the non-cash debt financing expenses discussed above. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments to GAAP results appears below (Table 2). This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
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 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 and banquet facility located in Hohhot. Jin Ma Real Estate develops residential and commercial properties in Hohhot.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. 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 the ability of the Company to secure short term bank loans and accelerate collection of receivables, 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 further information, please contact:
Gold Horse International, Inc.
Mr. Adam Wasserman, CFO
Tel: +1-800-867-0078 x702
Email: adamw@cfooncall.com
CCG Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Elaine Ketchmere, VP of Financial Writing
Tel: +1-310-954-1345
Email: elaine.ketchmere@ccgir.com
Web: http://www.ccgirasia.com
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET REVENUES
Construction $8,376,388 $3,524,291 $48,649,659 $17,585,684
Hotel 922,826 766,158 2,610,290 2,339,870
Real estate 362 304,755 382,552 1,560,283
Total Revenues 9,299,576 4,595,204 51,642,501 21,485,837
COST Of REVENUES
Construction 7,175,985 3,027,432 41,766,632 14,895,208
Hotel 472,956 456,677 1,394,491 1,318,281
Real estate 284 196,377 300,587 938,406
Total Cost of
Revenues 7,649,225 3,680,486 43,461,710 17,151,895
GROSS PROFIT 1,650,351 914,718 8,180,791 4,333,942
OPERATING EXPENSES:
Hotel operating
expenses 11,046 19,347 43,336 75,661
Bad debt expense
(recovery) 22,550 489,184 (171,351) 796,875
Salaries and
employee benefits 278,047 231,764 579,895 550,262
Depreciation and
amortization 206,670 135,010 644,927 361,126
General and
administrative 64,434 85,344 358,913 369,071
Total Operating
Expenses 582,747 960,649 1,455,720 2,152,995
INCOME (LOSS) FROM
OPERATIONS 1,067,604 (45,931) 6,725,071 2,180,947
OTHER INCOME (EXPENSES):
Other
income(expense) 3 (26) 2,381 (1,698)
Registration rights
penalty -- (55,000) -- (55,000)
Interest income 559 4,992 552,877 7,106
Interest expense (889,529) (565,973) (2,225,755) (858,378)
Total Other Expenses (888,967) (616,007) (1,670,497) (907,970)
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAX 178,637 (661,938) 5,054,574 1,272,977
PROVISION FOR INCOME
TAXES 266,717 149,851 1,767,459 880,708
NET INCOME (LOSS) $(88,080) $(811,789) $3,287,115 $392,269
COMPREHENSIVE INCOME
(LOSS):
NET INCOME (LOSS) $(88,080) $(811,789) $3,287,115 $392,269
Unrealized foreign
currency
translation gain 29,935 615,780 93,659 1,173,805
COMPREHENSIVE INCOME
(LOSS) $(58,145) $(196,009) $3,380,774 $1,566,074
NET INCOME (LOSS) PER
COMMON SHARE:
Basic -- $(0.02) $0.06 $0.01
Diluted -- $(0.02) $0.05 $0.01
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 52,668,603 52,483,824 52,612,486 51,210,607
Diluted 52,668,603 52,483,824 61,242,951 55,970,580
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL DATA
For the Three For the Three
Adjusted Net income Months Ended Months Ended
March 31, 2009 March 31, 2008
Diluted Diluted
Net Income EPS Net Loss EPS
Net Income (Loss) Diluted EPS
Adjusted Amount $359,603 $0.01 $(364,106)$(0.01)
Adjustments
Interest expense from amortization
of debt discount 409,313 0.01 409,313 0.01
Amortization of debt issuance costs 38,370 0.00 38,370 0.00
Amount per consolidated statement of
income $(88,080)$(0.00)$(811,789)$(0.01)
Adjusted Net income
For the Nine For the Nine
Months Ended March Months Ended
31, 2009 March 31, 2008
Diluted Diluted
Net Income EPS Net Income EPS
Net Income Diluted EPS
Adjusted Amount $4,630,163 $0.07 $989,179 $0.02
Adjustments
Interest expense from amortization
of debt discount 1,227,938 0.02 545,750 0.01
Amortization of debt issuance costs 115,110 -- 51,160 --
Amount per consolidated statement of
income $3,287,115 $0.05 $392,269 $0.01
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of As of
March 31, June 30,
2009 2008
(Unaudited)
ASSETS
Cash and cash equivalents $190,211 $1,637,986
Accounts receivable, net 11,943,185 7,528,608
Note receivable, net - current
portion 158,818 --
Inventories, net 44,004 56,847
Advances to suppliers, net 98,161 95,754
Other receivable, net 23,421 35,478
Due from related parties 16,828 1,700,036
Deferred debt costs -- 115,110
Real estate held for sale -- 125,070
Cost and estimated earnings in
excess of billings 48,319 221,537
Construction in progress 5,091,074 4,537,240
Deposit on prepaid land use
rights 1,672,674 2,524,877
Prepaid land use rights - current
portion 3,575 3,561
Refundable performance deposit -- 145,522
Total Current Assets 19,290,270 18,727,626
Property and equipment, net 9,888,876 10,476,397
Note receivable - non-current
portion, net 8,652,379 --
Deposit on prepaid land use
rights 803,436 2,182,835
Prepaid land use rights - non-
current portion 163,263 165,312
Total Assets $38,798,224 $31,552,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Convertible debt, net $2,183,000 $955,062
Loans payable, current portion 1,498,189 145,522
Accounts payable 4,759,067 1,278,779
Accrued expenses 848,152 468,235
Taxes payable 487,451 2,215,381
Advances from customers 311,997 192,356
Billings in excess of costs and
estimated earnings 126,972 23,369
Total Current Liabilities 10,214,828 5,278,704
Loans payable, net of current
portion 3,301,391 4,490,235
Total Liabilities 13,516,219 9,768,939
Commitments (Note 16) -- --
Stockholders' Equity:
Preferred stock ($.0001 par
value; 20,000,000 shares
authorized; none issued and
outstanding) -- --
Common stock ($.0001 par value;
300,000,000 shares authorized;
52,668,603 and 52,544,603 shares
issued and outstanding at March
31, 2009 and June 30, 2008) 5,266 5,254
Non-controlling interest in
variable interest entities 6,095,314 6,095,314
Additional paid-in capital 4,689,166 4,571,178
Statutory reserve 1,666,204 1,216,292
Retained earnings 10,363,347 7,526,144
Other comprehensive income 2,462,708 2,369,049
Total Stockholders' Equity 25,282,005 21,783,231
Total Liabilities and
Stockholders' Equity $38,798,224 $31,552,170
GOLD HORSE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
March 31,
2009 2008
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,287,115 $392,269
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation 644,927 361,126
Rent expense associated with prepaid
land use rights 2,681 --
Bad debt expense (recovery) (171,351) 796,875
Common stock issued for services -- 156,680
Interest expense from amortization of
debt discount 1,227,938 545,750
Amortization of debt issuance costs 115,110 51,160
Recognition of unearned gain (51,784) --
Changes in assets and liabilities:
Accounts receivable (4,247,794) (647,734)
Note receivable 200,568 --
Inventories 13,059 (42,682)
Other receivables 46,206 163,366
Advance to suppliers (2,040) (62,728)
Costs and estimated earnings in
excess of billings 174,040 15,707
Real estate held for sale 125,531 815,288
Construction in progress (9,495,098) (2,719,216)
Refundable performance deposit 146,058 --
Accounts payable and accrued expenses 3,853,631 1,698,293
Taxes payable (1,736,158) (346,164)
Advances from customers 118,887 (433,432)
Billings in excess of costs and
estimated earnings 103,498 (122,978)
NET CASH (USED IN ) PROVIDED BY
OPERATING ACTIVITIES (5,644,976) 621,580
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of amounts due from related
party 1,689,469 --
Proceeds from sale of property and
equipment -- 83,424
Proceeds from return of deposit on
prepaid land use rights 2,249,295 7,993
Payment of deposits for prepaid land
use rights -- (1,351,923)
Purchase of property and equipment (17,400) (1,900,345)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 3,921,364 (3,160,851)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debt -- 2,183,000
Payment of placement fees -- (204,640)
Repayment of loans payable -- (135,192)
Capital contribution -- 140,507
Proceeds from loan 146,058 --
Proceeds from sale of common stock 118,000 2,219,252
NET CASH PROVIDED BY FINANCING
ACTIVITIES 264,058 4,202,927
EFFECT OF EXCHANGE RATE ON CASH 11,779 115,147
NET (DECREASE) INCREASE IN CASH &
CASH EQUIVALENTS (1,447,775) 1,778,803
CASH & CASH EQUIVALENTS - beginning
of period 1,637,986 251,044
CASH & CASH EQUIVALENTS - end of the
period $190,211 $2,029,847
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $399,906 $855,027
Income taxes $2,801,659 $1,188,993
