Jade Art (PK) (USOTC:JADA)
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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 third quarter ended
September 30, 2008.
Revenue from the sale of raw jade was $7.6 million during the third
quarter ending September 30, 2008. Since Jade Art Group transitioned its
business from decorative woodcarving to the sale of raw jade in January
2008 there are no comparable sales during 2007. Net income for the
quarter ending September 30, 2008 was approximately $4.0 million, or
$0.05 per diluted share.
“I am very pleased with our third-quarter revenue of $7.6 million
considering the major disruption caused by the June 10th earthquake,”
said Hua-Cai Song, CEO of Jade Art Group. “Despite loss of access to the
main supply road to the mine by heavy trucking until late September, our
customers were able to pick up a total of 2,300 metric tons of raw jade
within the last seven days of the quarter. Our dedicated team of
professionals, the XiKai mine and our loyal customers worked together to
overcome challenging obstacles and I’m extremely proud of our
accomplishments.”
Third Quarter and First Nine Months Highlights
Revenue from the sale of raw jade was $7.6 million during the third
quarter ending September 30, 2008, compared to $6.7 million for the
three months ended June 30, 2008. Raw jade shipments from the SheTai
Jade Mine were halted as a result of the June 10 earthquake in Inner
Mongolia, China, which damaged the main supply road. However, even with
almost no access to the mine aside from a small service road, XiKai
Mining was still able to prepare raw jade at their on-site warehouse. As
a result, customers were able to immediately collect orders when the
main supply road was reopened on September 23, 2008.
The increase in reported cost of sales to $1.4 million during the three
months ended September 30, 2008, from $1.2 million during the three
months ended June 30, 2008 resulted from the increase in the amount of
raw jade which the Company purchased 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 presently equivalent to
approximately $285.
The resulting gross profit for the three months ended September 30, 2008
was $6.2 million, which represented approximately 82 percent of the
revenue, compared to $5.5 million for the three months ended June 30,
2008, which corresponds to the same ratio.
Selling, general and administrative expenses (SG&A) were $0.6 million
for the three months ended September 30, 2008, compared to $0.8 million
for the three months ended June 30, 2008. The decrease in SG&A was
mainly due to the decrease in the Company’s normal operational
activities during the period when shipments of raw jade were interrupted
by the road damage caused by the earthquake.
The income tax expense pertaining to continuing operations for the three
months ended September 30, 2008 was $1.7 million, compared to $1.5
million for the three months ended June 30, 2008.
Net income for the three months ended September 30, 2008 was $4.0
million or 52 percent of revenue, compared to $3.0 million or 44 percent
of revenue for the three months ended June 30, 2008. This increase in
the ratio of net income to revenue is primarily due to a decrease in
interest expense, as well as a decrease in SG&A.
Fiscal 2008 Outlook
As a result of the interruption in the transport of raw jade, the
Company’s revenues were lower than anticipated in its second quarter
ended June 30, 2008 and its third quarter ended September 30, 2008. Jade
Art Group Inc. has subsequently adjusted 2008 full-year financial
guidance. The following projections exclude results from discontinued
operations.
- Revenues are expected to be between $32 million and $35 million.
- Net income is expected to be between $21 million and $23 million.
- Diluted earnings per share are expected to be between $0.26 and $0.29.
“Obviously the earthquake affected our sales, however the road to the
mine has been re-opened and our customers were able to collect a
substantial amount of raw jade before the end of the quarter,” said Mr.
Song. “No contracts were cancelled and all of our customers were
extremely supportive and understanding, considering the extreme
circumstances surrounding the event. We expect to attain higher sales
levels in future quarters now that full access to the mine has been
restored.”
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 metric tons per year in 2009 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. 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, our
ability to pay notes and obligations when due, the possibility that our
customers and other third parties will be unable to make timely
payments, 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
September 30
(unaudited)
Nine months ended
September 30
2008
2007
2008
2007
Sales
$
7.6
$
-
$
25.0
$
-
Cost of sales
(1.4
)
-
(4.2
)
-
Selling, general and admin expenses
(0.6
)
-
(2.2
)
-
Income from operations
5.6
-
18.6
-
Interest expense
-
-
(0.2
)
-
Income tax expense
(1.7
)
-
(5.5
)
-
Net income from continued operations
4.0
-
13.0
-
Net income from discontinued operations
-
2.7
55.4
6.7
Net income
$
4.0
$
2.7
$
68.4
$
6.7
Basic earnings per share
Income from continuing operations
$
0.05
$
-
$
0.16
$
-
Income from discontinued operations
-
0.04
0.69
0.09
Total basic earnings per share
0.05
0.04
0.85
0.09
Diluted earnings per share
Income from continuing operations
$
0.05
$
-
$
0.16
$
-
Income from discontinued operations
-
0.04
0.68
0.09
Total diluted earnings per share
0.05
0.04
0.84
0.09
Weighted average number of shares
Basic
79,980,000
74,980,000
79,980,000
74,980,000
Diluted
80,980,000
74,980,000
80,917,956
74,980,000
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)
September 30, 2008
Cash
$
0.5
Accounts receivable
8.1
Notes receivable
13.2
Dividends payable
14.3
Accounts payable and accrued expenses
1.1
Taxes payable
2.7
Total stockholders’ equity
$
60.5
NOTE: The above numbers may not total correctly due to rounding.
Selected Consolidated Cash Flow
Items
(in millions)
(unaudited)
Nine months ended
September 30
2008
2007
Net cash provided by operating activities
$
13.0
$
-
Purchases of property and equipment
-
-
Notes receivable
(14.7
)
-
Proceeds from loans (including loan from related party)
10.0
-
Net increase in cash
$
0.2
$
(0.1
)
NOTE: The above numbers may not total correctly due to rounding.