China Green Material (PINK:CAGM)

CHINA GREEN MATERIAL TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF  INCOME AND COMPREHENSIVE INCOME
		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Net sales		$	3,041,840			$	4,493,784			$	7,544,434			$	7,283,182
Cost of revenues			1,890,411				2,300,315				4,712,498				3,916,105
Gross profit			1,151,429				2,193,469				2,831,936				3,367,077
Operating Expenses
Selling expenses			33,513				44,556				78,813				87,279
General and administrative expenses			590,206				410,487				1,014,950				653,248
Stock based compensation			21,666				153,262				58,102				153,262
Total Operating Expenses			645,385				608,305				1,151,865				893,789
Income From Operations			506,044				1,585,164				1,680,071				2,473,288
Other income (expense):
Interest income			5,564				1,412				8,339				2,939
Interest expenses			(1,067	)			-				(2,219	)			-
Net rental income/(expenses)			(137,287	)			(28,103	)			(166,429	)			(66,030	)
Loss on investment			-				(96,153	)			-				(293,251	)
Loss on disposal of property and equipment			-				(32	)			-				(125,689	)
Other expenses - net			(765	)			(17,544	)			(1,997	)			(18,220	)
Total other income (expense)			(133,555	)			(140,420	)			(162,306	)			(500,251	)
Income Before Income Taxes			372,489				1,444,744				1,517,765				1,973,037
Provision for income taxes			34,785				181,584				256,656				274,978
Net Income			337,704				1,263,160				1,261,109				1,698,059
Gain from foreign currency translation adjustment			598,137				195,224				1,049,592				198,694
Comprehensive Income		$	935,841			$	1,458,384			$	2,310,701			$	1,896,753
Net Income Per Common Share
basic		$	0.01			$	0.05			$	0.05			$	0.07
diluted		$	0.01			$	0.05			$	0.05			$	0.07
Weighted Common Shares Outstanding
basic			25,734,074				24,037,098				25,727,275				23,230,924
diluted			25,734,074				24,282,098				25,727,275				23,354,101

Due to the overall economic uncertainties in the global economy, credit tightening in China and under current circumstances of rising raw material prices and labor costs, the demand for our products in second quarter of 2011 decreased as compared to first quarter of 2011 as well as comparable quarter in 2010. Besides, due to the start up costs for Zhonghao Bio, the operating costs in second quarter increase from $0.51 million for three months ended March 31, 2011 to $0.64 million for three months ended June 30, 2011. Currently, we are focusing the efforts on streamlining the Company operations and enhancing efficiency at the new production facility in Harbin. The new production facility in Harbin Economic and Technological Development zone has commenced production in March 2011 and we have successfully consolidated the existing manufacturing facility from other location to this location, we believe that our manufacturing efficiency, quality and productivity will be enhanced dramatically to a higher competitive level.

• Q1 2011 revenues increased to $4.5 million, 61.4% over the comparable quarter of 2010
• Q1 2011 net income increased 112.3% to $0.9 million
• Q1 2011 EPS increased to $0.04 from $0.02 in Q1 2010
• Q1 2011 cash flow from operations of $2.4 million

"We are focused on expanding our capacity to meet the robust demand for our products. During the first quarter of 2011, our new state-of-the-art facility which is located in the Harbin Economic and Technological Development Zone has commenced production. The new facility allows us to operate more efficiently and will provide the ability to fill larger orders from our growing base of domestic and international customers. All in all, I am extremely excited about the future growth outlook for China Green Materials," concluded Mr. Su.  

Full Year 2010 Results:

• Total revenues increased 49.5% to $20.0 million for the year ended December 31, 2010 from $13.4 million in the year ended December 31, 2009.
• Gross profit increased 38.3% to $8.8 million for the year ended December 31, 2010 compared to $6.4 million in the year ended December 31, 2009
• Adjusted net income (non-GAAP) was $5.8 million, an increase of 26.5% over 2009 adjusted net income
• Adjusted net income per diluted share (non-GAAP) was $0.24 vs. $0.25.

GeoTeam Note:   2010 vs. 2009 Adjusted fourth quarter EPS was $0.07 vs. $0.06.

Mr. Su Zhonghao, Chief Executive Officer of the Company, declared, "We experienced further acceleration in our revenue growth to 49.5% for the year ended December 31, 2010. This strong momentum reflects growing demand from new and existing customers in China, particularly for the product categories of disposable cups, containers and plates. As we continue to introduce new branded products, which are stronger and less expensive than those from our competitors, we are poised to capture additional market share in the rapidly growing RMB 2.5 billion biodegradable products market in China."

HARBIN, China, April 7, 2011 /PRNewswire-Asia/ -- China Green Material Technologies, Inc. (CAGM), a Chinese leader in developing and manufacturing starch-based biodegradable containers, tableware and packaging materials, today announced that it recently began production at its new facility located in the Harbin Economic and Technological Development Zone ofHeilongjiang Province.  The new facility will enable the Company to:

• Increase its capacity of finished products, ultimately by more than 100%, from the current 9,000 tons per year to 20,000 tons per year;
• Manufacture products in a wider variety of sizes;
• Further automate its production processes and systems, with a resulting savings in per-unit labor costs.
• Reduce the amount of waste from the manufacturing process through an increase in the percentage of finished products that are "qualified products."

In the new facility, the Company will begin using a double layer sheet co-extrusion machine, which the Company recently developed in house, to manufacture bi-color products to increase the diversity of its finished products.

Mr. Su Zhonghao, Chief Executive Officer of China Green Material Technologies, stated, "With the new facility coming online, the quality of our products will be greatly improved and will meet the requirements of potential customers outside China. It will add to the overall competitiveness and brand recognition of the Company in the international market.  As a result, we will attempt to address more opportunities worldwide and seek additional export sales accordingly."

 March 23, 2011, CAGM restated its financial statements as of and for the quarterly periods ended June 30, 2010 and September 30, 2010. Each of those restatements was filed on a Form 10-Q/A submitted to the Securities and Exchange Commission (the “S.E.C.”) on March 23, 2011. Those quarterly financial statements were restated in response to an S.E.C. Staff comment relating to the Registrant’s accounting for warrants issued by the Registrant during April and June 2010. Because of the restatements, the Registrant needs additional time to ensure that the principles applied in the restatements are consistently applied in the audited financial statements to be included in the annual report on Form 10-K for the fiscal year ended December 31, 2010. As a result, the Registrant is unable, without unreasonable effort and expense, to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 by the prescribed filing date. The Registrant intends to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 prior to April 15, 2011

CAGM anticipates that it will report:
 

• Revenues of approximately $20.0 million for the fiscal year ended December 31, 2010 million as compared to revenues of approximately $13.4 million for the fiscal year ended December 31, 2009, an increase of approximately $6.6 million or 49.5%.   The anticipated increase in revenues would be attributable to increased sales to existing customers as well as sales to new customers.
   
• Costs of goods sold of approximately $11.3 million for the fiscal year ended December 31, 2010 million as compared to costs of goods sold of approximately $7.1 million for the fiscal year ended December 31, 2009, an increase of approximately $4.2 million or 59.6%.
   
• Gross profit of approximately $8.8 million for the fiscal year ended December 31, 2010 million as compared to gross margin of approximately $6.4 million for the fiscal year ended December 31, 2009, an increase of approximately $2.4 million or 38.3%.  This anticipated 2010 gross profit would reflect a decline in the gross margin percentage from approximately 47.4% to approximately 43.9%, resulting from increased raw material prices and other production costs.
   
• Net income of approximately $5.2 million for the fiscal year ended December 31, 2010 million as compared to net income of approximately $4.2 million for the fiscal year ended December 31, 2009, an increase of approximately $1.1 million or approximately 26.2%.  This anticipated 2010 net income would represent 26.2% of 2010 revenues, as compared to 2009 net income which represented 30.1% of 2009 revenues.  This anticipated decline in net income as a percentage of revenues would be attributable principally to increased raw material prices and other production costs, increased general and administrative expenses, increased stock-based compensation expense, and increases in certain other expenses.
   
• Net income per common share for the fiscal year ended December 31, 2010 million of $0.21 as compared to $0.22 for the fiscal year ended December 31, 2009, a decrease of approximately 5%.  Weighted average common shares outstanding were 24.5 million (basic) and 24.6 million (diluted) for 2010 as compared to 18.7 (basic and diluted) for 2009

HARBIN, China, March 21, 2011 /PRNewswire-Asia-FirstCall/ -- China Green Material Technologies, Inc.  today announced that it will restate its previously issued unaudited financial statements for the quarters ended June 30, 2010 and September 30, 2010 included in the Company's Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission on August 16, 2010 and November 9, 2010, respectively, due to errors identified in these financial statements. This decision was made by the company's board of directors, upon the recommendation of the audit committee and in consultation with management. As a result of this decision, investors should no longer rely upon the Company's previously issued financial statements for these periods and any related earnings releases or other communications.

The financial statement errors related to the manner in which the Company accounted for warrants issued in April and July 2010 providing for the right to purchase an aggregate of 457,500 shares of the Company's common stock at $0.90 per share.  Each of the warrants includes an anti-dilution provision that would adjust the warrant exercise price if the Company issues or sells any shares of common stock or securities convertible into common stock for a consideration per share of common stock less than the exercise price of the warrants.  The errors were discovered by management as a result of a Securities and Exchange Commission comment letter received by Company after an SEC Staff review of certain Company filings.

Third Quarter 2010:

• Revenues increased 43.6% to $6.0 million from $4.2 million in the third quarter of 2009. 

Mr. Su Zhonghao, Chief Executive Officer of the Company, declared, "We experienced further acceleration in our revenue growth which increased from 28.4% during the first half of this year to 43.6% in the third quarter. This strong momentum reflects growing demand from new and existing customers in China, particularly for the product categories of disposable cups, disposable containers and disposable plates. As we continue to introduce new branded products, which are stronger and less expensive than those from our competitors, while expanding our distribution capabilities to make our products available to more Chinese consumers, we are poised to capture additional market share in the rapidly growing RMB2.5 billion biodegradable products market in China." (Source: Degradable Plastics Committee of China Plastics Processing Industry Association)

• Gross profit in the third quarter of 2010 increased 35% to $2.7 million compared to $2.0 millionin the third quarter of last year, while gross margin was 45.6% versus 48.6% a year ago.  

• Income from operations increased 13.9% to $2.0 million from $1.8 million in the year ago period. Operating margin was 33.5% in the 2010 period versus 42.2% a year ago. Excluding the stock compensation, operating margin was 37.3%, down 4.9% compared to the same period last year.  

• Net income in the third quarter of 2010 was$1.7 compared to $1.1 millionin the third quarter of 2009.  

• Adjusted net income (non-GAAP) was $1.9 million, an increase of 22.4% versus a year ago adjusted net income.  

• Net income per diluted share was$0.07 in the third quarter of 2010 versus net income per diluted share of $0.06 in the third quarter of 2009 based on weighted average shares of 25.9 million and 18.7 million, respectively.

• Adjusted net income per diluted share (non-GAAP) was $0.07 in the third quarter of 2010 vs. $0.08  in the third quarter of 2009.

"We are focused on expanding our capacity to meet the robust demand for our products. During the third quarter, we completed construction of our new state-of-the-art facility which is located in Harbin Economic and Technological Development Zone. We completed the buildout on schedule and once fully utilized, will enable us to produce 11,000 tons of finished products each year, which expands our currently capacity by 122%. We will scale into this during the coming year as we grow our revenues and gain additional market share. More specifically, we expect to be operating at 13,000 tons of capacity by the end of this year and scaling to full capacity at 20,000 tons by the end of 2011. The new facility allows us to operate more efficiently and will provide the ability to fill larger orders from our growing base of domestic and international customers. All in all, I am extremely excited about the future growth outlook for China Green Materials," concluded Mr. Su.  

Second quarter 2010:

• Revenues increased 26.6% to $4.5 million compared to $3.5 million in the second quarter of 2009. The results reflect growing demand for the Company's products from existing customers, as well as the successful penetration of new customers and new geographic markets.
  
• Net income in the second quarter of 2010 was $1.0 compared to $1.3 million in the second quarter of 2009.
  
• Adjusted net income (non-GAAP) was $1.5 million, an increase of 24.5% versus a year ago.
  
• Net income per diluted share was $0.04 in the second quarter of 2010 versus net income per diluted share of $0.07 in the second quarter of 2009 based on weighted average shares of 24.3 million and 18.7 million, respectively. The increase in share count reflects the issuance of 5.0 million and 1.9 million common shares in private placements completed in the first and second quarters of 2010, respectively. Adjusted net income per diluted share (non-GAAP) was $0.06 in the second quarter of 2010.

Mr. Su Zhonghao, Chief Executive Officer of China Green Material Technologies, stated, "The 28% increase in revenues in the first half of 2010 reflects strong demand from new and existing customers in both China and abroad. We are beginning to see the benefits from the investments we have made to acquire intellectual properties, in addition to the expansion of our sales and marketing team which is supporting a broader distribution footprint. With a healthy pipeline of new products and the ability to produce customer orders, we are excited about our ability to become a stronger global competitor in the large and growing biodegradable products market."

"We continue to leverage our intellectual property assets and low-cost manufacturing advantage to develop more products and further expand to new geographies," continued Mr. Su Zhonghao. "We are on track to complete the construction of our new state-of-art manufacturing facility in Harbin, which will not only increase our capacity by 45% to 13,000 tons per annum, but should also improve gross margin across all product lines."

Mr. Su Zhonghao concluded, "Looking ahead, we are focused on two key areas of growth: 1) expanding our presence in China and entering key overseas markets, including the U.S., Italy, France, the U.K., Israel, Korea and Japan; and 2) developing new product categories such as disposable trash bags, shopping bags and medical products. We are especially excited about the long-term opportunity for biodegradable packaging, which is estimated by the International Association of Packaging Research Institutes to surpass $60 billion in total sales during 2010."

"We are pleased to report progress on our expansion plans, which will enable us to meet existing customer demand and facilitate growth for this year and next," said Mr. Zhonghao Su, Chief Executive Officer. "The global market demand for environmentally-friendly, bio-degradable products is among the fasting growing in the consumer products segment. We are ideally positioned in China, where our Company has a strong position in a highly fragmented market, maintains a low cost advantage and offers superior product performance. To capitalize on the rapid domestic growth, we are focused on increasing our market share in the airline and railway sectors, developing additional clients in the fast food industry and expanding our network of agents and distributors. To pursue further growth in international markets, we are working with distributors to expand our reach to the U.S., France, the U.K., Israel, Korea and Japan. Importantly, we have a focused sales and marketing strategy in place to execute our plans and expect to achieve revenue growth of 25%-30% in 2010."

"We believe there is a significant market opportunity for China Green given our early mover advantage, intellectual property, expert R&D team and low-cost manufacturing process," continued Mr. Su Zhonghao. "In 2010 we plan to significantly expand our production capacity, with a new facility expected to come on line in the second half of this year. We anticipate the additional capacity, coupled with our targeted sales and marketing programs, will result in continued increases in revenues. Additionally, increased efficiency from the new manufacturing facility should enable us to expand our gross margins across all product lines."

Mr. Su Zhonghao concluded, "Looking ahead, we are focusing on two key areas of growth:

1) further expanding our presence in China and entering key overseas markets, including the U.S., Italy, France, the U.K., Israel, Korea and Japan

2) developing new product categories such as trash bags, shopping bags and medical products. Importantly, we have a dedicated and capable team and the financial resources to execute our plans."

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