Gold Horse International, Inc. Announces Results for Fiscal Year 2010

Oct 14, 2010, 08:00 ET from Gold Horse International, Inc.

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: adamw@cfooncall.com



                        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.



RELATED LINKS

http://www.goldhorseinternational.com