SOURCE: China Modern Agriculture

November 14, 2011 08:00 ET

China Modern Net Income Increases 70.7% and Reports $0.07 EPS for the 2012 Fiscal First Quarter

Management to Host Financial Results Conference Call on Thursday, November 17th at 9:00 a.m. Eastern

HARBIN, CHINA--(Marketwire - Nov 14, 2011) - China Modern Agricultural Information Inc. ("the Company") (OTCQB: CMCI) (PINKSHEETS: CMCI), a high-tech livestock company specializing in the breeding of cows and calves, the production and sale of milk and the sale of organic fertilizer, today announced the financial results for the 2012 fiscal first quarter ended September 30, 2011. Net income increased 70.7% to $2.6 million or $0.07 per basic and diluted earnings per share.

Mr. Youliang Wang, Chief Executive Officer of China Modern Agricultural Information, commented, "We are pleased with our strong financial performance during our 2012 fiscal first quarter and year-over-year growth we have successfully achieved. During the quarter, revenue increased 16.1% to $5 million, driven by strong demand for our fresh high quality raw milk. Under our new business model of leasing our cows for five years directly to farmers, we are now developing the bandwidth to focus more aggressively on the sales and marketing of our products. Other advantages include moving the livestock assets off our balance sheet while enabling us to make a higher return on the sale of the cows. Additionally, farmers are further incentivized to produce more milk because they now have ownership of the cow. We have significantly lowered the cost of goods sold and improved our gross profit to $3.4 million, an increase of 57.7% year over year. Our gross profit margin has also improved from 49.9% to 67.8%."

Mr. Wang continued, "We have also set in motion several key growth drivers including a letter of intent to acquire Shangzhi Yunlong which would increase our production capacity by 30,000 tons and add approximately $4.5 million in net income in 2012. This is in conjunction with our recently signed 10-year lease for 4,120 acres of high quality pasture with a municipality of Heilongjiang Province. This agreement will help lower the feed cost for the cows. We will continue to aggressively seek other opportunities to fuel the growth of our business, while enhancing our relationship with the local government and farming community going forward."

Financial results for the 2012 fiscal first quarter ended September 30, 2011
2012 Fiscal First Quarter (USD) (unaudited)
Three Months End September 30, 2011 2010 CHANGE
Revenue $5.0 million $4.3 million 16.1%
Gross Profit $3.4 million $2.1 million 57.7.%
Gross Profit Margin 67.8% 49.9% 35.9%
Net Income $2.6 million $1.5 million 70.7%
Basic and diluted EPS* $0.07 $0.05 40%
* Based on 41.1 million and 36.0 million shares outstanding for 2012 and 2011 fiscal first quarters, respectively.

Financial Results for the Fiscal Year Ended September 30, 2011
Revenue for the 2012 fiscal first quarter ended September 30, 2011 totaled $5 million, an increase of 16.1% as compared to $4.3 million for the same period the prior year. During the quarter revenue consisted of $3.7 million from milk sales and $1.3 million from sales commission. Revenue is generated predominately from the sale of natural milk and natural milk sales commissions from farmers. The revenue from total milk sale decreased from $4.3 million to $3.7 million, mainly caused by the decrease in number of milk cows in the new business model. The sale price increased to RMB 2.60 per kg as of September 30, 2011 from RMB 1.85 per kg for the same period last year, or a 41% increase. The number of company cows decreased to 4,512 for the quarter ended September 30, 2011 from 6,845 for the same period last year. The Company recorded $1.3 million from sales commission from the new business model of leasing cows. Management expects direct natural milk revenue will continue to decrease and while sales commission revenue will continue increasing going forward due to the shift in business model.

Cost of goods sold for the fiscal 2012 first quarter ended September 30, 2011 totaled $1.6 million, or 32.2% of revenue, as compared to $2.1 million, or 50.1% of revenue, for the same period last year. Cost of goods sold consists of feed, feeding expenses, and other working capital. Cost of goods sold as a percentage of sales decreased mostly due to the reduced direct costs in food for livestock under the new business model.

Gross profit for the first quarter ended September 30, 2011 totaled $3.4 million, an increase of 57.7% compared to $2.1 million for the fiscal year ended September 30, 2010. Gross profit margin improved to 67.8% for the 2012 fiscal first quarter as compared to 49.9% for the same period last fiscal year. The improved gross profit margin is due to a combination of the reduction in operating costs under the new business model and the higher selling price of natural milk. Management expects the price of natural milk to continue rising over the next several years.

Non operating income was mainly generated from disposal of mature biological properties, interests from farmers and bank earned interest. For the quarter ended September 30, 2011, the total non operating income was $284,997, mainly due to the gain from disposal of biological properties for $246,678. Non operating income predominately consists of a one-time extraordinary gain. Management believes it will be largely reduced in the following quarters.

Net income for the fiscal first quarter ended September 30, 2011 totaled $2.6 million, an increase of 70.7% compared to $1.5 million for the 2011 fiscal year ended September 30, 2010. Earnings per share for the fiscal first quarter were $0.07, based on 41.1 million shares outstanding versus earnings per share of $0.05 for the 2011 fiscal first quarter, based on 36 million shares outstanding.

Liquidity and Capital Resources
As of September 30, 2011, China Modern had approximately $9.8 million in cash and cash equivalents or $0.24 per share. As of September 30, 2011, total current assets and total assets were approximately $13.0 million and $34.5 million, respectively. During the same period, total current liabilities and total liabilities were approximately $520,146 and $8.5 million, respectively. Working capital increased year-over-year by $4.3 million to $12.5 million as of September 30, 2011, as compared to $8.2 million as of June 30, 2010. Shareholder's equity totaled $25.9 million, or $0.63 per share, as of September 30, 2011.

Conference Call Details:
Date: Thursday, November 17, 2011
Time: 9:00 a.m. Eastern
U.S. Dial-In: (877) 941-8416
International Dial-In: (480) 629-9808
Live Webcast: http://viavid.net/dce.aspx?sid=0000904B

It is recommended that participants dial in approximately 10 minutes prior to the start of the 9:00 a.m. Eastern call. There will also be a simultaneous live webcast of the conference call which can be accessed through the following audio feed link and archived recording of the conference call available by clicking on the following link, http://viavid.net/dce.aspx?sid=0000904B.

Cautionary Statement Regarding Forward-Looking Information
Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our 8K/A dated March 31, 2011, and other recent filings. These filings are available at http://www.sec.gov/.

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2011 AND JUNE 30, 2011
ASSETS September 30,
2011
June 30,
2011
(Unaudited)
Current assets
Cash $ 9,772,238 $ 5,525,180
Accounts receivable 865,227 2,506,548
Inventories 204,995 90,017
Prepaid expenses 345,613 238,238
Interest receivable 86,559 -
Notes receivable, current portion 1,747,168 210,674
Total current assets 13,021,800 8,570,657
Property, plant and equipment 1,926,550 1,884,944
Less: accumulated depreciation (460,075 ) (430,096 )
Total property, plant and equipment - net 1,466,475 1,454,848
Other assets
Notes receivable 8,884,359 1,127,707
Security deposit 2,186,800 -
Loan receivable - 2,165,800
Biological assets, net 8,956,579 17,204,616
Total other assets 20,027,738 20,498,123
TOTAL ASSETS $ 34,516,013 $ 30,523,628
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2011 AND JUNE 30, 2011
LIABILITIES AND STOCKHOLDERS'EQUITY September 30,
2011
June 30,
2011
(Unaudited)
Current liabilities
Accrued expenses and other payables $151,512 $ 123,876
Stockholder loans 368,634 230,356
Total current liabilities 520,146 354,232
Deferred income taxes 8,023,512 7,080,292
Total liabilities 8,543,658 7,434,524
Stockholders' equity
Common stock, $0.001 par value; 75,000,000 shares authorized; 41,100,000 shares issued and outstanding at September 30, 2011 and June 30, 2011 41,100 41,100
Additional paid-in capital 1,603,170 1,603,170
Retained earnings 22,092,608 19,477,303
Statutory reserve fund 190,011 190,011
Other comprehensive income 1,731,081 1,498,692
Sub-total 25,657,970 22,810,276
Noncontrolling interests 314,385 278,828
Total stockholders' equity 25,972,355 23,089,104
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
$34,516,013 $ 30,523,628
CONSOLIDATED STATEMENTS OF INCOME
AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHSENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED)
2011 2010
Revenues
Milk sales $ 3,672,130 $ 4,286,020
Sales commission 1,303,796 -
Total revenues 4,975,926 4,286,020
Cost of goods sold (1,600,684 ) (2,145,843 )
Gross profit 3,375,242 2,140,177
Operating expenses
Selling and marketing (76,985 ) (6,095 )
General and administrative (60,623 ) (71,795 )
Total operating expenses (137,608 ) (77,890 )
Operating income 3,237,634 2,062,287
Other income
Non-operating income 284,997 1,290
Total other income 284,997 1,290
Income before provision for income taxes 3,522,631 2,063,577
Provision for income taxes 871,769 510,648
Net income before noncontrolling interests 2,650,862 1,552,929
Noncontrolling interests (35,557 ) (20,984 )
Net income attributable to controlling interests 2,615,305 1,531,945
Other comprehensive income
Foreign currency translation adjustment 232,389 208,421
Total comprehensive income $ 2,847,694 $ 1,740,366
Earnings per common share, basic and diluted $ 0.07 $ 0.05
Weighted average shares outstanding, basic and diluted 41,100,000 35,998,000

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