China Forestry Industry (GREY:CNFI)

First Quarter Results:

• Revenue totaled $10.4 million, up 143.4% from $4.3 million for the first quarter in 2010
• Gross profit totaled $3.6 million, up 136.3% from $1.5 million in the first quarter of 2010
• Gross margin was 34.3%, compared to 35.3% in the same period in 2010
• Operating income was $2.9 million, up 138.8% from $1.2 million in the first quarter 2010
• Net income was $2.1 million or $0.07 per fully-diluted share, compared to net income of $1.2 million or $0.06 per fully-diluted share in the first quarter 2010

"Our fiscal year 2011 began on a strong note with significant top and bottom line growth for the first quarter," said Mr. Yulu Bai, China Forestry Industry Group's Chairman and CEO. "The results were mainly driven by the performance of our laminate flooring subsidiary following the incorporation of Silvan Flooring and the accelerated marketing efforts to promote the "Silvan Touch" brand throughout 2010. Supported by our intention to expand our production capacity and sales network, we expect our growth momentum to continue as we strive to meet the strong demand for interior design and housing-related products in China."

Moving forward in 2011, the Company expects to focus on its five-pronged growth plan that involves the expansion of sales through its retail stores and distribution networks, brand building efforts, production capacity expansion for the fiber board and laminate flooring segment, raw material resource cultivation and expansion of forestry assets through maintenance and upstream acquisitions, and horizontal acquisitions of regional market leading flooring companies in key growth regions in China.

While the capacity for fiber board production is expected to meet customer demand in the coming quarters, current production capacity of laminate flooring may only suffice to cover customer orders for the second quarter of 2011 due to anticipated demand growth. The Company's planned capacity expansion remains on schedule with the new production facility to accommodate for the anticipated increase in demand expected to be completed by mid-2012.

"While our growth strategy is still in its early stages, we believe that our vertically integrated business model will help us become a market leader in the flooring industry in southwestern China and allowing us to benefit from the rising demand for flooring and fiberboard in the growth centers of our country," concluded Mr. Bai. "We expect the negative cash flow from operating activities to be temporary as large prepayments and deposits were made to acquire additional raw material for the second quarter. We do not expect any disruptions to our planned progress on capacity expansion as we expect to see a decrease in raw material spending in the second quarter and as we are implementing better cash management practices. Moreover, we actively promote more flexible credit terms to our customers, such as payments in installments, to encourage more effective cash collection. If necessary, we believe our Company will have access to additional banking facilities due to our strong forecasted revenue streams, planned capacity expansion and our solid relationships with local banks."

Fourth Quarter Results:

• Revenue grew 206.1% year-over-year to $11.3 million
• Gross profit increased 164.8% to $3.1 million, from $1.2 million in the fourth quarter of fiscal year 2009
• Operating income was $2.6 million, an increase of 159.0% compared to $1.0 in the year-ago period
• Net income increased 169.2% to $2.1 million, or $0.08 per diluted share, as compared to approximately $0.8 million, or $0.04 per diluted share a year ago
• The Company completed a reverse acquisition transaction with China Bingwu Forestry Group Limited, a Hong Kong company, as a result of which, the Company changed its name to China Forestry Industry Group, Inc. and is engaged through Bingwu's subsidiaries, in the business of producing and selling floor materials and related products to residential and commercial customers in China

"We are pleased to report strong growth in revenues, operating margins, and earnings in 2010," said Mr. Yulu Bai, Chairman and Chief Executive Officer of China Forestry.  "This performance was mainly driven by our strategy to expand into flooring products, develop forestry resources and build a large distribution network for floor products in southwestern China. The increase in sales was mainly due to the expansion of our product portfolio from fiber boards to include laminate flooring, following Silvan Flooring's November 2009 commencement of operations, and the expansion of our distribution network to include 8 retail stores and over 500 contracted flooring specialty stores as of December 31, 2010. As a result of economies of scale from our growing production and sales volume and the inclusion of higher-margin laminate flooring, our gross profit margin and net income increased as well

Mr. Bai concluded: "We are optimistic about our business and believe that we are well positioned to benefit from the rising demand for flooring and fiberboard in China. We believe that our vertically integrated business model will help us to become a leading player in the flooring industry in southwestern China. We also expect that the availability of raw materials from our own forestry lands by 2012 will enable us to keep our raw material costs stable and support our gross margin going forward. "

SAN BRUNCO, Calif. and HONG KONG, Feb. 22, 2011 /PRNewswire-Asia/ -- China Forestry Industry Group, Inc., formerly known as Phoenix Energy Resource Corp, today announced that on November 1, 2010, it completed a reverse acquisition transaction with China Bingwu Forestry Group Limited, a Hong Kong company, to acquire 100% of Bingwu's issued and outstanding stock.  As a result of the transaction, China Forestry has terminated its prior business and is now engaged through Bingwu's subsidiaries in China solely in the business of producing and selling floor materials and related products to residential and commercial customers in China. Bingwu's product lines include laminate flooring and industrial fiber boards.  Through these subsidiaries, Bingwu sells flooring products under the "Silvan Touch" brand throughout China.  

"We operate an environmentally sound and low carbon footprint business.  Instead of reducing natural forests for wood, our flooring products use primarily by-products such as branches and other wood scraps for raw material," said Mr. Yulu Bai, CEO of the combined company. "We are pleased with this transaction as it provides us with an enhanced platform to execute on our growth strategy."

• For the fiscal year ended December 31, 2009, the Company's revenues were $13.3 million.  
• For the nine months ended September 30, 2010 revenues were $25.7 million, representing a 168.3% increase over the same period of 2009.

As of September 30, 2010, the Company had cash and cash equivalents of $3.4 million, primarily consisting of cash on hand and demand deposits.  To date, the Company has financed its operations primarily through cash flows from operations, augmented by short-term bank borrowings and equity contributions by its stockholders.

• Net cash provided by operating activities was $4.4 million for the nine months ended September 30, 2010, as compared to $1.6 million used in operating activities for the same period in 2009. The increase in net cash provided in operating activities was primarily due to an increase in net income and a decrease in inventories due to our efforts to minimize our inventory balance.  Net cash provided by operating activities was $2.2 million for the year ended December 31, 2009, as compared to $1.3 million for 2008.