SOURCE: Puda Coal, Inc

November 15, 2006 07:58 ET

Puda Coal, Inc. Reports Record Quarterly Revenue of $42.7 Million and Operating Income of $7.1 Million

Q3 Revenue Up 136% Year-on-Year; Q3 Revenue Equal to 82% of Total 2005 Revenue

TAIYUAN CITY, CHINA -- (MARKET WIRE) -- November 15, 2006 -- Puda Coal, Inc. ("Puda" or the "Company") (OTCBB: PUDC), a leading producer of China's high grade metallurgical coking coal -- which is used to make coke for steel manufacturing -- has announced operating results for the quarter ended September 30, 2006.

Puda reported revenue of approximately $42.7 million for the quarter ended September 30, 2006, as compared to approximately $18.0 million in Q3 2005 -- a 136% increase. The tonnage sales of cleaned coal increased to approximately 546,000 metric tons in Q3 2006 from approximately 234,000 metric tons in Q3 2005 -- a 133% increase. The increase in sales was a result of China's continued strong economic growth and continued demand for high grade metallurgical coking coal.

Gross profit for the three months ended September 30, 2006 was approximately $8.9 million, as compared to gross profit of approximately $4.2 million in Q3 2005 -- a 112% increase. Gross profit margins were 21% in Q3 2006, down from 23% in Q3 2005 as a result of a slight increase in the purchase price of raw coal.

Puda also reported operating income of approximately $7.1 million for the three months ended September 30, 2006, as compared to approximately $2.8 million in Q3 2005 -- a 157% increase.

Puda reported net income of approximately $2.2 million for the three months ended September 30, 2006, as compared to net income of approximately $1.5 million in Q3 2005 -- a 40% increase. The increase was mainly due to an increase in gross profit of $4,723,000, which was offset by an increase in operating expenses of $356,000, an increase in interest expense of $577,000, an increase in debt financing costs of $1,672,000, an increase in derivative unrealized fair value loss of $314,000 and an increase in income taxes of $1,209,000 in the three months ended September 30, 2006.

Based on approximately 80.7 million shares of common stock outstanding as of September 30, 2006, Puda reported a profit of $0.03 per share for the three months ended September 30, 2006, compared to a profit of $0.02 per share in Q3 2005.

"Puda became a U.S. public company in Q3 2005," stated Puda Chairman and Chief Executive Officer Zhao Ming. "We are very pleased that, just one year hence, our sales have grown such that Q3 2006 revenue alone is equal to 82% of total 2005 revenue."

Nine-Month Operating Results

Puda reported revenue of approximately $94.4 million for the nine months ended September 30, 2006, as compared to approximately $31.1 million for the nine months ended September 30, 2005 -- a 204% increase. The tonnage sales of cleaned coal increased to approximately 1.2 million metric tons for the nine months ended September 30, 2006, from approximately 413,000 metric tons for the nine months ended September 30, 2005 -- a 193% increase. The increase in tonnage sales was primarily due to increased orders from existing and new customers; these orders were in turn a by-product of the substantial economic growth China experienced over this nine-month period.

Gross profit for the nine months ended September 30, 2006 was approximately $19.5 million, as compared to gross profit of approximately $6.9 million for the nine months ended September 30, 2005 -- a 181% increase. Gross profit margins were 21% in the nine months ended September 30, 2006, down from 22% for the nine months ended September 30, 2005 as a result of a slight increase in the purchase price of raw coal.

Puda also reported operating income of approximately $15.6 million for the nine months ended September 30, 2006, as compared to approximately $5.2 million for the nine months ended September 30, 2005 -- a 203% increase.

Puda reported a net loss of approximately $4.6 million for the nine months ended September 30, 2006, as compared to net income of approximately $3.1 million for the nine months ended September 30, 2005 -- a 248% decrease. The loss was mainly due to an increase in operating expenses of $2,057,000, an increase in interest expense of $2,356,000, an increase in debt financing costs of $9,513,000, an increase in derivative unrealized fair value loss of $3,327,000 and an increase in income taxes of $3,087,000, which were offset by an increase in gross profit of $12,532,000 in the nine months ended September 30, 2006.

Based on approximately 80.1 million shares of common stock outstanding as of September 30, 2006, Puda reported a loss of $0.06 per share for the nine months ended September 30, 2006, compared to a profit of $0.04 per share for the nine months ended September 30, 2005.

Earnings Conference Call

Puda will host a conference call on Thursday, November 16, 2006 to review third quarter earnings results. The conference call is scheduled for 9:00 a.m., Eastern Standard Time (EST). To participate in the call, please dial:

U.S. and Canada:    1 (800) 374-0113
International:      1 (706) 758-9607
A replay of the call will be available two hours after completion. You will be able to access it at any time through the Puda Website at www.puda-coal.com, or by phone until December 16, 2006. To access the replay by phone, please dial:
U.S. and Canada:    1 (800) 642-1687
International:      1 (706) 645-9291
Conference ID:      1529404
About Puda Coal, Inc.

Puda Coal, Inc., through its affiliates and controlled entities, supplies high grade coking coal to the steel making industry for use in making coke. The Company currently possesses 2.7 million metric tons of annual coking coal cleaning capacity, and management believes it is one of the largest coking coal cleaning company in terms of capacity in Shanxi Province, China. Shanxi Province provides 20-25% of China's coal output and supplies nearly 50% of China's coke.

FORWARD-LOOKING STATEMENTS

The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

                              PUDA COAL, INC.
                   UNAUDITED CONSOLIDATED BALANCE SHEET
                            September 30, 2006
                  (In thousand of United States dollars)


                                                           September 30,
                                                               2006
                                                           -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                  $      19,543
Restricted cash                                                      233
Accounts receivable, net                                           7,972
Other receivables
  - Related parties                                                   15
  - Third parties                                                     39
Advances to suppliers                                              1,199
Deferred charges                                                     402
Inventories                                                       13,600
                                                           -------------

Total current assets                                              43,003

PROPERTY, PLANT AND EQUIPMENT, NET                                10,112

INTANGIBLE ASSETS, NET                                             3,749
                                                           -------------

TOTAL ASSETS                                               $      56,864
                                                           =============

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
  - Related party                                          $       1,300
Accounts payable
  - Related party                                                    228
  - Third parties                                                  2,282
Other payables
  - Related party                                                    889
  - Third parties                                                  1,595
Accrued expenses                                                     599
Income taxes payable                                               2,453
VAT payable                                                          535
Distribution payable                                               1,013
Penalty payable                                                      821
                                                           -------------

Total current liabilities                                         11,715
                                                           -------------

LONG-TERM LIABILITIES
Long-term debt
  - Related party                                                 10,725
Convertible notes                                                  5,438
Derivative conversion feature                                      4,676
Derivative warrants                                               12,970
                                                           -------------

Total long-term liabilities                                       33,809
                                                           -------------

STOCKHOLDERS' EQUITY
Preferred stock, authorized 5,000,000 shares, par
 value $0.01, issued and outstanding Nil                               -
Common stock, authorized 150,000,000 shares,
 par value $0.001, issued and outstanding 82,952,667                  83
Paid-in capital                                                   11,252
Statutory surplus reserve fund                                     1,366
Accumulated deficit                                               (2,063)
Accumulated other comprehensive income                               702
                                                           -------------

Total stockholders’ equity                                        11,340
                                                           -------------

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                 $      56,864
                                                           =============



                              PUDA COAL, INC.
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
      For the three and nine months ended September 30, 2006 and 2005
      (In thousand of United States dollars, except per share data)

                      Three Months  Three Months  Nine Months  Nine Months
                         Ended         Ended         Ended        Ended
                       September     September     September    September
                        30, 2006      30, 2005      30, 2006     30, 2005
                      ------------  ------------  -----------  ------------

NET REVENUE           $     42,650  $     18,037  $    94,364  $     31,056

COST OF REVENUE            (33,725)      (13,835)     (74,899)      (24,123)
                      ------------  ------------  -----------  ------------

GROSS PROFIT                 8,925         4,202       19,465         6,933

OPERATING EXPENSES
Selling expenses             1,145           354        2,192           555
General and
 administrative
 expenses                      636           170        1,627           305
Other operating
 expenses                        -           901            -           902
                      ------------  ------------  -----------  ------------

TOTAL OPERATING
 EXPENSES                    1,781         1,425        3,819         1,762
                      ------------  ------------  -----------  ------------

INCOME FROM
 OPERATIONS                  7,144         2,777       15,646         5,171

GAIN ON SHORT-TERM
 INVESTMENTS                     -             -            -             6

INTEREST INCOME                 26             2           38             3

INTEREST EXPENSE              (577)            -       (2,356)            -

DEBT FINANCING COSTS        (1,672)            -       (9,513)            -

DERIVATIVE UNREALIZED
 FAIR VALUE
   LOSS                       (314)            -       (3,327)            -
                      ------------  ------------  -----------  ------------

INCOME BEFORE INCOME
 TAXES                       4,607         2,779          488         5,180

INCOME TAXES                (2,441)       (1,232)      (5,130)       (2,043)
                      ------------  ------------  -----------  ------------

NET INCOME/(LOSS)            2,166         1,547       (4,642)        3,137

OTHER COMPREHENSIVE
 INCOME
Foreign currency
 translation
 adjustment                    321           136          548           136
                      ------------  ------------  -----------  ------------

COMPREHENSIVE
 INCOME/(LOSS)        $      2,487  $      1,683  $    (4,094) $      3,273
                      ============  ============  ===========  ============

EARNINGS PER
 SHARE
    -BASIC            $       0.03  $       0.02  $     (0.06) $       0.04
                      ============  ============  ===========  ============
    -DILUTED          $       0.02  $       0.02  $     (0.06) $       0.04
                      ============  ============  ===========  ============

WEIGHTED AVERAGE
 NUMBER OF SHARES
 OUTSTANDING
    -BASIC              80,654,578    73,750,000   77,920,661    73,705,556
                      ============  ============  ===========  ============
    -DILUTED           118,452,056    73,915,000   77,920,661    73,870,556
                      ============  ============  ===========  ============


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