Jade Art Group Announces Second Quarter 2008 Financial Results

  
    
  
  
    
      Jade Art Group Inc. (OTCBB: JADA) (the “Company”), 
      a seller and distributor of raw jade sourced from the SheTai Jade mine 
      in China, today announced its operating results for the second quarter 
      ended June 30, 2008.
    
    
      Revenue from the sale of raw jade was $6.7 million during the second 
      quarter ending June 30, 2008. Since Jade Art Group transitioned its 
      business from woodcarving to the sale of raw jade in the first quarter 
      of 2008, there are no comparable sales during 2007. Net income for the 
      quarter ending June 30, 2008 was $3.0 million, or $0.04 per diluted 
      share.
    
    
      “The revenue of $6.7 million in the second 
      quarter is respectable considering the transportation issues the company 
      faced in June resulting from an earthquake in Inner Mongolia, China,” 
      said Hua-Cai Song, CEO of Jade Art Group. “We 
      hope to attain higher sales levels once roads leading to our facilities 
      are repaired. Guidance will be revised shortly. Year to date, Jade Art 
      Group has entered into six sales agreements for SheTai Jade, 
      representing a total contractual sales value equivalent to approximately 
      $42 million. We believe that this is a good indication of the market’s 
      positive response to SheTai jade and supports our expectation of 
      continuing solid revenue performance.”
    
    
      Second Quarter and First Six Months Highlights
    
    
      Revenue from the sale of raw jade was $6.7 million during the second 
      quarter ending June 30, 2008, compared to $10.7 million for the quarter 
      ending March 31, 2008. The decrease in revenue is primarily attributed 
      to an earthquake that struck Inner Mongolia, China in June 2008. The 
      road to the mine was destroyed, leaving customers unable to transport 
      jade material from the mine. This has affected revenue to a large 
      extent. The government has recently increased the safety standards for 
      roads and other transportation routes in the area, thus affecting the 
      amount of time required to properly repair the damage. The road is 
      expected to be completely repaired and back at full operational capacity 
      within two or three months, contingent upon government approval.
    
    
      The reported cost of sales was $1.2 million during the three months 
      ended June 30, 2008, compared to $1.6 million during the three months 
      ended March 31, 2008, which resulted from the purchase of raw jade 
      materials from SheTai mine and the amortization of the intangible assets 
      pertaining to the exclusive distribution rights of the SheTai mine’s 
      jade. Under the Exclusive Distribution Agreement signed with XiKai 
      Mining, the purchase price for raw jade is RMB 2,000 per metric ton, 
      which is equivalent to approximately $290.
    
    
      The resulting gross profit for the three months ended June 30, 2008 was 
      $5.5 million, which represented around 88% of the revenue, compared to 
      $9.1 million for the three months ended March 31, 2008, which 
      represented around 85% of revenue.
    
    
      Selling, general and administrative expenses (SG&A) were $0.8 million 
      for the three months ended June 30, 2008, compared to $0.7 million for 
      the three months ended March 31, 2008. The increase in SG&A was 
      primarily due to options and warrants in the second quarter.
    
    
      The income tax expense pertaining to continuing operations for the three 
      months ended June 30, 2008 was $1.5 million, compared to $2.3 million 
      for the three months ended March 31, 2008. The company’s 
      effective tax rate of approximately 28% was higher than the statutory 
      rate of 25% due to certain expense not being deductible for PRC purposes.
    
    
      The Net income for the three months ended June 30, 2008 was $3.0 million 
      or 44% of revenue, compared to $61.4 million or 576% of revenue for the 
      three months ended March 31, 2008. The primary reason for the large 
      spike in net income in the first quarter was due to net income recorded 
      from discontinued operations of approximately $55.4 million.
    
    
      Taking out discontinued operations, Jade Art Group’s 
      net income from continuing operations was $3.0 million during the second 
      quarter of 2008, compared to net income from continuing operations of 
      $6.0 million during the first quarter of 2008. The decrease in net 
      income from continuing operations was mainly due to the earthquake that 
      occurred in Inner Mongolia, China, where the mine is located.
    
    
      Recent Events
    
    
      On January 17, 2008, Jade Art Group signed an Exclusive Distribution 
      Right Agreement with XiKai Mining enabling the Jade Art Group to acquire 
      90% of the raw jade produced from XiKai Mining’s 
      SheTai Jade mine for a period of 50 years. In exchange for this 
      exclusive right, Jade Art Group transferred its wholly-owned woodcarving 
      business to XiKai Mining and agreed to pay XiKai Mining RMB 60 million 
      (approximately $8.7 million) by March 2009.
    
    
      On April 16, Richard E. Khaleel was appointed an independent member of 
      the Board of Directors of the Jade Art Group. Mr. Khaleel is an 
      experienced senior marketing executive, having served as the Chief 
      Marketing Officer for the Bank of New York, the Chief Creative Marketing 
      Officer at Alliance Bernstein, and Vice President of Marketing at CNBC.
    
    
      On May 15, the Company underwent a one-for-three reverse stock split of 
      its outstanding common stock. The reverse split reduced the number of 
      outstanding shares from 239,940,000 shares to 79,980,000 shares.
    
    
      Mr. Song concluded, “We are quite excited 
      about the opportunity to be a leading seller and distributor of raw jade 
      in China. The increasing popularity of SheTai Jade and our favorable 
      long term agreement enabling us to obtain high quality SheTai jade in 
      significant quantities suggests further opportunities to generate 
      increasing value to our shareholders.”
    
    
      About Jade Art Group Inc.
    
    
      Jade Art Group Inc., through its wholly owned subsidiary, Jiangxi SheTai 
      Jade Industrial Co., Ltd., sells and distributes raw jade sourced from 
      the SheTai Jade mine throughout China, with uses ranging from decorative 
      construction material to high-end jewelry. This mine’s 
      operating capacity is estimated to reach 40,000 tons and it contains one 
      of the largest jade reserves in China. The mine is owned by XiKai 
      Mining, with which Jade Art Group signed an agreement to acquire 
      exclusive distribution rights to sell 90% of the SheTai Jade produced 
      from the mine for the next 50 years. According to a survey report issued 
      by the Inner Mongolia Geological Institution, the mine has proven and 
      probable reserves of approximately 6 million tons, or approximately $16 
      billion worth of jade at current market rates of $2,750 per ton. Several 
      national jade experts have noted the high quality of SheTai Jade as 
      compared to the other existing varieties of Chinese jade.
    
    
      For more information, please visit: www.jadeartgroupinc.com
    
    
      FORWARD-LOOKING STATEMENTS: This document includes forward-looking 
      statements. Forward-looking statements include, but are not limited to, 
      statements concerning estimates of, and increases in, production, 
      projected volume of customer orders, performance by customers, including 
      timely payment, under existing and future agreements, cash flows and 
      values, statements relating to the continued advancement of Jade Art 
      Group’s projects and other statements which 
      are not historical facts. When used in this document, the words such as 
      "could," "plan," "estimate," "expect," "intend," "may," and similar 
      expressions are forward-looking statements. Although Jade Art Group 
      believes that its expectations reflected in these forward-looking 
      statements are reasonable, such statements involve risks and 
      uncertainties and no assurance can be given that actual results will be 
      consistent with these forward-looking statements. Important factors that 
      could cause actual results to differ from these forward-looking 
      statements include, but are not limited to, those set forth in our 
      reports filed with the Securities and Exchange Commission, together with 
      the risks discussed in our press releases and other communications to 
      shareholders issued by us from time to time, such as our ability to 
      raise capital as and when required, the availability of raw products and 
      other supplies, competition, the costs of goods, government regulations, 
      and political and economic factors in the People's Republic of China in 
      which our subsidiaries operate.
    
    
      
        
          
            Jade Art Group Inc.
          
          
            and Subsidiaries
          
        
      
      
        
        
        
           
        
        
        
        
        
        
           
        
        
        
        
        
      
      
        
          
            Selected Consolidated Statements 
            of Operations
          
          
            (in millions, except per share amounts)
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
          
        
        
        
        
        
        
          (unaudited)

          
            Three months ended
          
          
            June 30
          
        
        
        
        
        
        
          (unaudited)

          
            Six months ended
          
          
            June 30
          
        
      
      
        
        
        
        
        
        
        
          2008
        
        
           
        
        
        
        
          2007
        
        
        
        
        
        
          2008
        
        
           
        
        
        
        
          2007
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $
        
        
          6.7
        
        
        
        
          $
        
        
          -
        
        
        
        
          $
        
        
          17.4
        
        
        
        
          $
        
        
          -
        
      
      
        
          Cost of sales
        
        
        
        
        
        
          1.2
        
        
        
        
        
        
          -
        
        
        
        
        
        
          2.8
        
        
        
        
        
        
          -
        
      
      
        
          Selling, general and admin expenses
        
        
        
        
        
        
          0.8
        
        
        
        
        
        
          -
        
        
        
        
        
        
          1.6
        
        
        
        
        
        
          -
        
      
      
        
          Income from operations
        
        
        
        
        
        
          4.7
        
        
        
        
        
        
          -
        
        
        
        
        
        
          13.0
        
        
        
        
        
        
          -
        
      
      
        
          Interest expense
        
        
        
        
        
        
          0.2
        
        
        
        
        
        
          -
        
        
        
        
        
        
          0.2
        
        
        
        
        
        
          -
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income tax expense
        
        
        
        
        
        
          1.5
        
        
        
        
        
        
          -
        
        
        
        
        
        
          3.8
        
        
        
        
        
        
          -
        
      
      
        
          Net income from continued operations
        
        
        
        
        
        
          3.0
        
        
        
        
        
        
          -
        
        
        
        
        
        
          9.0
        
        
        
        
        
        
          -
        
      
      
        
          Net income from discontinued operations
        
        
        
        
        
        
          -
        
        
        
        
        
        
          2.1
        
        
        
        
        
        
          55.4
        
        
        
        
        
        
          4.0
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
        
        
          $
        
        
          3.0
        
        
        
        
          $
        
        
          2.1
        
        
        
        
          $
        
        
          64.4
        
        
        
        
          $
        
        
          4.0
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic and diluted earnings per share
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Income from continuing operations
        
        
        
        
          $
        
        
          0.04
        
        
        
        
          $
        
        
          -
        
        
        
        
          $
        
        
          0.11
        
        
        
        
          $
        
        
          -
        
      
      
        
          Income from discontinued operations
        
        
        
        
        
        
          -
        
        
        
        
        
        
          0.03
        
        
        
        
        
        
          0.69
        
        
        
        
        
        
          0.05
        
      
      
        
          Total basic and diluted earnings per share
        
        
        
        
        
        
          0.04
        
        
        
        
        
        
          0.03
        
        
        
        
        
        
          0.80
        
        
        
        
        
        
          0.05
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average number of shares
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
        
        
          80.0
        
        
        
        
        
        
          75.0
        
        
        
        
        
        
          80.0
        
        
        
        
        
        
          75.0
        
      
      
        
          Diluted
        
        
        
        
        
        
          81.0
        
        
        
        
        
        
          75.0
        
        
        
        
        
        
          80.9
        
        
        
        
        
        
          75.0
        
      
    
    
      NOTE: The above numbers may not total correctly due to rounding.
    
    
      
        
          
            Jade Art Group, Inc.
          
          
            and Subsidiaries
          
        
      
      
        
        
        
           
        
        
        
      
      
        
          
             
          
          
            Selected Consolidated Balance 
            Sheet Items
          
          
            (in millions)
          
        
      
      
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          (unaudited)

          
            June 30, 2008
          
        
      
      
        
        
        
        
        
           
        
      
      
        
          Cash
        
        
        
        
          $
        
        
          0.5
        
      
      
        
          Accounts receivable
        
        
        
        
        
        
          0.7
        
      
      
        
          Notes receivable
        
        
        
        
        
        
          14.2
        
      
      
        
          Dividends payable
        
        
        
        
        
        
          14.3
        
      
      
        
          Accounts payable and accrued expenses
        
        
        
        
        
        
          0.9
        
      
      
        
          Taxes payable
        
        
        
        
        
        
          1.5
        
      
      
        
          Total stockholders’ equity
        
        
        
        
          $
        
        
          56.0
        
      
    
    
      NOTE: The above numbers may not total correctly due to rounding.
    
    
      
        
          
            Selected Consolidated Cash Flow 
            Items
          
          
            (in millions)
          
        
      
      
        
        
        
           
        
        
        
      
      
        
        
        
        
        
          (unaudited)

          
            Six months ended
          
          
            June 30
          
        
      
      
        
        
        
        
        
          2008
        
        
           
        
        
          2007
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net cash provided by operating activities
        
        
        
        
          $
        
        
          12.6
        
        
        
        
          $
        
        
          (0.1)
        
      
      
        
          Purchases of property and equipment
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
      
      
        
          Notes receivable
        
        
        
        
        
        
          (14.2)
        
        
        
        
        
        
          -
        
      
      
        
          Proceeds from loans (including loan from related party)
        
        
        
        
        
        
          10.0
        
        
        
        
        
        
          -
        
      
      
        
          Net increase in cash
        
        
        
        
          $
        
        
          0.2
        
        
        
        
          $
        
        
          -
        
      
    
    
      NOTE: The above numbers may not total correctly due to rounding.