China Golf Group (0001444183)

SHANGHAI, April 12, 2011 /PRNewswire-Asia-FirstCall/ -- Headquartered in Shanghai, China Golf Group, Inc. announced that on March 31, 2011, Company entered into an Asset Purchase Agreement with Beijing Xingwang Real Estate Co., Ltd., a Sino joint venture founded by Maxwell Investment Ltd. and Beijing Shengwen Investment & Consulting Co., Ltd., to purchase certain assets of the joint venture, namely, 16 villas in Noble House located in the Daxing District of Beijing estimated to be valued at $13.5 million.  

In consideration for the transfer of the villas, China Golf will issue to the seller 4,500,000 of its shares of common stock (which is based on an appraisal of the villas of $13,500,000). An appraisal of the villas is required to be completed within 30 days of the execution of the agreement. The closing is required to occur within 30 days after the completion and acceptance of the appraisal. Once the appraisal is completed and accepted, the transfer of the land and villas will be completed and the shares will be issued. In the event that the appraisal is less than $13.5 million the purchase price well be adjusted dollar for dollar and China Golf will only be required to issue such number of shares as shall equal the appraised value divided by 3.

Noble House is 30-minute driving distance from Beijing Capital International Airport, 20-minute driving distance from China World Trade Center and Central Business District. Furthermore, it can easily access to Beijing-Tianjin-Tangshan freeway.

Noble House occupies an area of 33,500 m and the total floor area is 22,908 m. In which, one clubhouse and 33 villas have been built, among these 16 villas are available for sale. Moreover, a 4,000-m artificial lake surrounded by 20 lake-view wooden holiday houses has been built in the community.

Mr. Tiger Bi, the CEO of China Golf commented, "successful purchase of the assets in Noble House will increase the company's net asset by USD 0.43 per share and the potential net profit will be USD 6.18 million; Meanwhile, it is a successful attempt for China Golf to M&A through equity rather than cash."

SHANGHAI, Dec. 10, 2010 /PRNewswire-Asia-FirstCall/ -- Headquartered in Shanghai, China Golf Group, Inc. announced selling to a non-U.S. investor 2,000,000 shares of the Company's common stock at the price of $1.25 per share (the "Second Round PIPE"). The Second Round PIPE was under substantially the same terms as the financing of the Company that was completed on September 9, 2010 (the "First Round PIPE").  The details of the First Round PIPE and the Second Round PIPE can be found in the Company's Current Report on Form 8-K filed with the SEC.

Combining the First Round PIPE and the Second Round PIPE, China Golf has issued 2,939,992 million shares of Common Stock priced at $1.25 each for an aggregate purchase price of $3,674,990.  The Company said it plans to use the proceeds for a number of acquisitions, for which the Company has already engaged in negotiations, and general corporate purposes.

Commenting on the private placement, Mr. Tiger Bi, China Golf's Chief Executive Officer and Founder, was pleased about the close of this transaction.  "This gives us more flexibility and strength to execute on a number of strategic and operational initiatives that we have been working on for some time", said Mr. Bi.

Highlights of Third Quarter ended September 30, 2010

• Revenues increased 6,842% to approximately $2.1 million from $29,933 for the same quarter 2009

• Cost of sales was approximately $1.1 millionfor the quarter 2010 compared to $15,099one year ago

• Gross Profit increased 6,271% to $945,086 compared to $14,834one year ago

• Gross Margin as a percentage of revenues decreased to 45.5% compared to 49.5% for the same quarter 2009

• Total operating expenses increased to $1.2 million compared to $35,335one year ago due to expanded business operations and increased professional fees in connection with our capital markets transactions in the third quarter 2010;

• As a percentage of revenues, however, operating expenses decreased to 57.8% of revenues compared to 118.0% one year ago

• Net loss of $307,313 compared to net loss of $21,171 one year ago

• Consummated a share exchange transaction with the stockholders of Goodintend Holdings Limited, a British Virgin Islands company

• Entered into a Securities Purchase Agreement providing for the sale to investors of up to $7.0 millionin common stock

• Engaged KPMG Advisory (China) Limited Beijing Branch to attest to the Company management's assessment of its internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002

• Opened its regional office in Beijing to further the Company's strategic development, marketing and sales efforts

• Positive outlook on revenue and net income growth objectives for the fourth quarter and full year 2010 through a number of contemplated development, consolidation and land transfer projects

Looking into the fourth quarter, the Company management believes it will have more capacity and financial resources to focus on business executions. In addition to a few acquisition opportunities for which China Golf has entered the late contract stage, the Company plans to start construction and consolidation of a few golf courses, selling memberships and realize some revenues from contemplated land transfer.

Business Outlook

The Company management expects that our emphasis on selective strategic acquisition, broadening our market coverage coupled with our increased project planning and construction, along with our enhanced sales and marketing efforts will continue to yield increases in our financial performance for fiscal year 2010 and beyond.  The management believes it will have more capacity and financial resources to focus on business executions during the fourth quarter.   In addition to a few acquisition opportunities for which China Golf has entered the late contract stage, the Company plans to start construction and consolidation of a few golf courses, selling memberships and realize some revenues from contemplated land transfer.  

Commenting on the Company's third quarter earnings, China Golf's Chief Executive Officer and Founder Mr. Tiger Bi said, "We are pleased to announce our operating Results for the first time as a public company, and we are committed to continuing our efforts to improve the business for our shareholders."  

Targets as part of recent financing/reverse merger.:

• The Company is required to use its best efforts to consummate an underwritten public offering of its common stock no later than September 10, 2011 (the first anniversary of the initial closing) and obtain a listing on the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange.

• Private Placement Make Good Agreement:

At the closing, the Company delivered 2,000,000 shares to an escrow agent which will be required to be delivered, upon a prescribed formula, to the investors in the event that the Company’s net income for the fiscal year ending December 31, 2010 is less than $14.81 million

Maximum of 2,000,000 shares less any shares that have been paid out as a result of any 2010 Percentage Shortfall, if net income for the fiscal year ended December 31, 2011 is less than $25 million.

If the Company’s net income for fiscal years 2010 and 2011 exceeds, respectively, the 2010 Target Income and the 2011 Target Income, the Make Good Shares will be canceled.

• Reverser Merger Make Good Agreement:

1,537,500 shares were placed in escrow to be released to parties of the reverse merger if the above make good targets are not met.

On July 6, 2010 China Golf Group became a public company via a reverse merger transaction.

On September 10, 2010, China Golf Group, Inc. sentered into a Securities Purchase Agreement providing for the sale to the investors of up to 5.6 million shares of common stock for an aggregate purchase price of up to $7.0 million (or $1.25 per Share). The Securities Purchase Agreement contemplates one or more closings. The first closing occurred on September 10 2010, through the sale of 939,992 Shares for an aggregate purchase price of $1,174,990.

Company Snapshot:

Design, construct and develop premium golf courses and golf communities in the PRC

Industry Snapshot:

• So far, China has more than 500 golf courses and driving ranges, more than 3 million golfers, at an annual growth rate of approximately 20% to 30%, according to Zhang Xiaoning, a director of State Sport General Administration Ball Sports Management Center.

• "2011 Observation of China’s Golf Market Trends Forecast” has indicated that the

• United States has a population of 250 million, of which 30 million play golf;
• Japan has 120 million, of which 16 million play golf;
• Korea has 48 million, of which 5 million are golfers. 

In these countries, golfers represent more than 10% of the total population.  China, on the other hand, currently has 3 million people playing golf, only 0.0023% of the total population.  Undoubtedly, there will be a huge potential for improvement in China. The revenue of the golf industry in China in 2006 reached RMB 47.9 billion; and in 2009, it exceeded RMB60 billion.  The potential golf consumers in 2008 were estimated at 20 million.

• According to a study jointly conducted by MasterCard International and Institute of China National Conditions Research, people tend to start golfing once their annual income exceeds $21,000. Inferred from this study, China should have a much larger golfer population.  This indicates that China has a huge potential for the golf consumer market development.

• It is widely believed that China will soon enter the era of golf, because the fast-growing Chinese economy and the increasing consumer demand is strong enough to support the golf industry to have a  compatible, fast and sustainable development.  According to statistics, the number of golf courses in China in recent years has grown at a 30% annual rate, but it still cannot meet the needs of golfers.   Various A number of courses are almost full during every season.   There areSome economists who believe the potential of the Chinese golf consumption is amazingly large huge.  Currently, it is estimated that 20 million people are golf consumers or potential golf consumers, and the number may exceed 50 million by the year of 2020. 

• On December 1, 2009, the Chinese State Council released a document regarding “Advice on accelerating the development of the tourism industry in China." It states that “it is encouraged to actively promote leisure tourism and adjacent resorts, orderly develop golf courses and large scale theme parks, foster “red” tourism continuously and proprietary intellectual property rights of leisure products, mountaineering, skiing, scuba diving, camping, outdoor adventure, golf and other kinds of outdoor activities, specialty supplies and other products for hotels and restaurants.”

• It is noteworthy that the words "limit, contain, prohibited, prohibited," that were consistently used by the policy makers referring to the golf industry, have been changed to "normal development" and “orderly development”.  This was the Chinese central government’s first direct reference to golf after golf’s inclusion in the Olympics.

Post Merger Share Calculation:

•      836,478: Pre reverse merger outstanding shares  
•   4,480,000: Shares from convertible notes associated with private placement
• 4 ,000,000 : Shares of Common Stock from note conversion 
• 24,737,500: Newly issued shares of Common Stock
•     442,935 : Shares from warrants

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  34,053,978

Financial Snapshot:

• Revenues increased 45.1% to $659,103 for the three months ended March 31, 2010 from $361,834 for the three months ended March 31, 2009. The $297,269 increase was mainly attributable to the revenue derived from our completed four golf course design services provided for the three months ended March 31, 2010, which normally has lower costs and higher profit margin, compared to golf course construction projects.
  
• Net income of $312,762 for the three months ended March 31, 2010, an increase of $206,646, as compared to the net income of approximately $106,116 for the three months ended March 31, 2009, The increase in our net income was primarily due to our increased revenues, higher profit margin from project design services and lower costs of sales incurred for the three months ended March 31, 2010 as compared to prior comparative period.