SOURCE: Sports Source, Inc.

November 17, 2006 08:00 ET

Sports Source, Inc. Announces Quarterly Financial Results for September 30, 2006

Kinfair Holdings Limited Successfully Completes Merger With Sports Source, Inc. on October 11, 2006

NEW YORK, NY -- (MARKET WIRE) -- November 17, 2006 -- Sports Source, Inc. (OTCBB: SPSI) ("Sports Source") announced today its unaudited fiscal 2007 second quarter results for its wholly owned operating subsidiary, Kinfair Holdings Limited (formerly Henan Jinding Chemicals Co. Ltd.) ("Kinfair"), for the period ended September 30, 2006. Kinfair completed a merger with Sports Source on October 11, 2006 subsequent to the end of the September quarter. These results represent Kinfair's quarterly performance prior to the acquisition and are provided to assist investors in analyzing Sports Source's historical financial performance. Sports Source intends to change its name to New Oriental Energy & Chemical Corp. to reflect its new business.

For the three-month period ended September 30, 2006 revenues were $8.1 million and included the sale of Kinfair's core chemical products and the contribution from the expanding alternative energy product portfolio including methanol and Dimethyl ether (DME). Sports Source is looking to take advantage of its existing manufacturing facility, products and expertise to become a leading Chinese producer of alternative energy. Cost of goods sold were $6.9 million with gross profit of $1.2 million. Gross profit margin for the quarter is 15.0%.

Total operating expenses were $0.4 million during the third quarter. Operating income totaled $0.9 million with respective operating margin of 10.6%. Third quarter 2006 net income totaled $0.8 million, which on a fully diluted share basis would have equated to earnings per share of $0.06. Kinfair has a total of $12.6 million fully diluted shares outstanding.

"Kinfair showed solid improvements in sales of its core chemical products to fertilizer manufacturers while benefiting from increased sales of Dimethyl ether (DME), a replacement for diesel fuel, which is manufactured at our recently expanded facility. We currently have 100,000 tons of annual DME production capacity and during August of this year we embarked on a plan to double this capability for 2007," stated Mr. David Tang, Kinfair's Chief Financial Officer. "As the Chinese economy has grown so has its dependence and consumption of oil. China has been a net oil importer since 1993 and as of the end of 2005 was the second largest oil consumer in the world. Supported by several significant macro and government drivers, we believe that our alternative fuels business will drive sustainable growth during the next several years."

For the six-month period ended September 30, 2006, revenues were $17.5 million with gross profits of $2.9 million, representing 16.6% of sales. Income from operations was $2.1 million and operating margin for the first six months is 11.9%. Net income for the six-month period was $1.5 million, which in on a fully diluted basis would have equated to $0.12 in earnings per share.

As a reference point, Kinfair reported $30.8 million in revenues, $3.2 million in income from operations and net income of $2.7 million for the fiscal year ended March 31, 2006.

On September 30, 2006, Kinfair had current assets of $11.0 million. Kinfair generated $22.1 million in cash flow from operations during the first six months of fiscal 2007, which Kinfair has utilized to build out new DME manufacturing capacity. In addition, shareholder's equity increased 18.5% to $9.8 million, up from $8.3 million at the end of the previous fiscal year.

About Sports Source, Inc.

Sports Source is an emerging alternative fuel and specialty chemical manufacturer based in Hena, China. The company is focused on the production of Dimethyl ether (DME), methanol and fertilizer products, and expects to begin production of biodiesel within the next year. Sports Source sells its products primarily through a network of distribution partners.

GAAP note: This entire press release does not conform to GAAP standards due to the fact that the operating company merged with Sports Source on October 11, 2006, subsequent to the quarter end. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's operating performance that enhances investors' ability to evaluate the new Company and its historical financial performance and position.

Safe Harbor Statement:

This press release contains forward-looking statements concerning Sport Source's business and products. The actual results may differ materially depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology or product techniques, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. Sports Source, Inc. undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.

                   Consolidated Balance Sheets (Unaudited)

                                             September 30,      March 31,
                                                 2006             2006
                                             -------------    -------------
  Cash and cash equivalents                 $      917,098   $    3,281,761
  Restricted cash                                3,034,633        2,120,494
  Notes receivable                                  77,130           10,099
  Inventories, net                               3,768,534        1,078,592
  Marketable securities                             15,224           12,580
  Prepayments for goods                          3,053,713          835,712
  Due from employees                                49,692           49,021
  Other receivables and prepaid expenses            28,647           22,006
                                             -------------    -------------
      Total current assets                      10,944,671        7,410,265

  Plant and equipment, net                       9,922,608        9,527,685
  Land use right, net                            1,533,947          580,597
  Construction in progress                       3,766,168        3,154,836
  Deposits                                         852,694        1,172,321
  Notes receivable                               1,264,430        1,247,349
  Deferred taxes                                   713,590          369,450
                                             -------------    -------------

    TOTAL ASSETS                            $   28,998,108   $   23,462,503
                                             =============    =============


  Accounts payable                          $    5,260,924   $    2,627,224
  Other payables and accrued liabilities           496,220          440,937
  Short term debt                                3,021,988        6,677,210
  Notes payable                                  5,247,032        1,026,569
  Customer deposits                              1,987,741        1,860,459
  Due to a shareholder                           1,137,987        1,122,614
  Due to employees                                  16,741           16,515
  Taxes payable                                    317,361           59,110
                                             -------------    -------------
      Total current liabilities                 17,485,994       13,830,638
                                             -------------    -------------

  Deferred taxes                                 1,588,832        1,243,751
  Due to employees                                  94,945           90,856
                                             -------------    -------------
      Total long-term liabilities                1,683,777        1,334,607
                                             -------------    -------------

TOTAL LIABILITIES                              198,169,771       15,165,245
                                             -------------    -------------

  Paid-in capital                                4,591,091        4,591,091
  Retained earnings (restricted portion
   was $293,558 and $176,443 as of Sep
   30, 2006 and Mar 31,2006, respectively)       5,037,731        3,545,887
  Accumulated other comprehensive income           199,515          160,280
                                             -------------    -------------

Total Shareholders' Equity                       9,828,337        8,297,258
                                             -------------    -------------

 EQUITY                                     $   28,998,108   $   23,462,503
                                             =============    =============

   Consolidated Statements of Income and Comprehensive Income (Unaudited)

                                           Unaudited          Unaudited
                                           For three           For six
                                          months ended       months ended
                                         September 30,      September 30,
                                              2006               2006
                                         --------------     --------------
REVENUES                                $     8,132,075         17,456,819

COST OF GOODS SOLD                           (6,913,124)       (14,556,978)
                                         --------------     --------------

GROSS PROFIT                                  1,218,951          2,899,841
Selling and distribution expenses               137,323            376,057

General and administrative expenses             219,324            449,439
                                         --------------     --------------

INCOME FROM OPERATIONS                          862,304          2,074,345


   Interest expense, net                        (50,668)          (118,308)

   Other expenses, net                          (41,603)           (61,713)
                                         --------------     --------------

INCOME BEFORE INCOME TAXES                      770,033          1,894,324

INCOME TAXES                                    (16,842)          (399,468)
                                         --------------     --------------

NET INCOME                                      753,191          1,494,856
                                         --------------     --------------


Foreign currency translation gain                30,059             50,452

Unrealized gain on marketable
 securities                                       2,561              5,043

                                         --------------     --------------
OTHER COMPREHENSIVE INCOME BEFORE TAX            32,620             55,495

 COMPREHENSIVE INCOME                            10,765             18,313

OTHER COMPREHENSIVE INCOME, NET                  21,855             37,182
                                         --------------     --------------

COMPREHENSIVE INCOME                    $       731,336  $       1,457,674
                                         ==============     ==============

Contact Information

  • Contact:

    Sports Source, Inc.
    Mr. Wang Gui Quan
    Xicheng Industrial Zone of Luoshan, Xinyang
    Henan Province, The People's Republic of China
    Tel: (011-86) 376-2169211
    Fax: (011-86) 376-6818152

    Investor Relations Contact
    Matt Hayden
    Hayden Communications Inc.
    Tel: (760) 613-3695