In the news release, "China Growth Development, Inc. Reports Second
Quarter 2008 Financial Results" issued earlier today by China
Growth Development, Inc. over PR Newswire, we are advised by the
company that in the second quarter highlights, second bullet point,
which read, "Operating expenses increased approximately 49% over
same quarter last year to $2.55 million, or 27% for the six-month
period to $3.42 million as compared with same period last year,"
should read, "Operating expenses increased approximately 49% over
same quarter last year to $2.55 million, or 27% for the six-month
period to $4.34 million as compared with same period last year."
The corrected release follows: TAIYUAN CITY, China and LOS ANGELES,
Aug. 27 /PRNewswire-FirstCall/ -- China Growth Development, Inc.
(OTC:CGDI) (BULLETIN BOARD: CGDI) ('China Growth Development' or
'the Company'), the largest investor, owner and manager of
commercial real estate in the capital city of Taiyuan, located in
the Shanxi province of southern China, today announced its
financial results for the second quarter ended June 30, 2008.
Second Quarter 2008 Highlights: -- Net revenues increased
approximately 8% over same quarter last year to $3.73 million, or
20% for the six-month period to $7.41 million as compared with the
same period last year. -- Operating expenses increased
approximately 49% over same quarter last year to $2.55 million, or
27% for the six-month period to $4.34 million as compared with same
period last year. One-time charges of $880,485 incurred in the
closing of the reverse acquisition were expensed during the current
quarter. -- Net income decreased approximately 64% over same
quarter last year to $1.15 million, or 41% for the six-month period
to $1.46 million as compared with same period last year, which was
primarily due to one-time charges associated with the closing of
the reverse acquisition. "We are pleased with our second quarter
results," stated Mr. Ning Liu, COO of China Growth Development,
Inc. "We believe that our business will flourish due to four
important factors, which include: Location, our shopping centers
are in prime locations; strong management, our team members have
extensive commercial real estate experience; innovation, we offer
our tenants innovative payment options and we are able to maximize
lease payments and reduce our accounts receivable; and, land
banking, we intend to acquire additional popular and profitable
land for future development. "We have a solid development program
for additional commercial spaces in Taiyuan and we are optimistic
that we will successfully acquire rights to a very valuable land
bank. These valuable development rights are unlikely to be
duplicated in Taiyuan, as it is not possible to create more land."
He added, "In addition, management will continue our financially
prudent practice of requiring prepaid rents from our commercial
tenants, for the entire term of the leases, which is typically five
to eight years. This method allows for an expeditious return of
capital to the Company, while greatly reducing debt service carried
on the properties." Comparison of Three Months Ended June 30, 2008
and 2007. Net revenue increased by $278,649 from $3,459,975 for the
three months ended June 30, 2007 to $3,738,624 for the three months
ended June 30, 2008, an 8% increase. Operating expenses increased
by $840,121 from $1,708,276 for the three months ended June 30,
2007 to $2,548,397 for the three months ended June 30, 2008, a 49%
increase. Such increase was primarily triggered by the issuances of
1,400,000 warrants fair valued at $689,347 and 500,000 warrants
fair valued at $191,138 associated with the closing of reverse
acquisition between CGDI and TRBT as stated in "Reverse Merger"
below. These expenses are deemed to be one-time charges. Excluding
the one-time charges, operating expenses decreased by $40,364, or
2% to $1,667,912 during the current quarter over same quarter prior
year. Income from operations decreased by $597,833 from $1,751,699
for the three months ended June 30, 2007 to $1,153,866 for the
three months ended June 30, 2008, a 34% decrease. Such decrease was
mainly attributable to the one-time charges associated with the
closing of reverse acquisition as mentioned above. Excluding the
effect of the one-time charges, income from operations increased by
$282,652, or 16% to $2,034,351 during the current quarter over same
quarter prior year. Net Income before Income Taxes and Minority
Interest was $1,529,768 for the three months ended June 30, 2007
and $1,001,699 for the three months ended June 30, 2008, a 35%
decrease which was also driven by the one-time charges from the
closing of reverse acquisition. Excluding the effect of the
one-time charges, net income before income taxes and minority
interest was $1,882,184 for the current quarter, a 23% increase
from same quarter last year. Net income was $1,153,983 for the
three months ended June 30, 2007, compared to $410,348 for the
three months ended June 30, 2008, a 64% decrease which was
primarily resulted from the one-time charges associated with the
closing of reverse acquisition as mentioned above. Revenue
recognition and deferred revenue The Company's revenue recognition
policies are in compliance with Staff Accounting Bulletin (SAB)
104. Revenue is recognized when services are rendered to customers
when a formal arrangement exists, the price is fixed or
determinable, the delivery is completed, no other significant
obligations of the Company exist and collectability is reasonably
assured. The Company recognizes revenue net of an allowance for
estimated returns, at the time the merchandise is sold or services
performed. The allowance for sales returns is estimated based on
the Company's historical experience. Sales taxes are presented on a
net basis (excluded from revenues and costs). If the Company had
any merchandise on consignment, the related sales from merchandise
on consignment would be recorded when the retailer sold such
merchandise. Payments received before all of the relevant criteria
for revenue recognition are satisfied are recorded as deferred
revenue. The Company has two major sources of revenue from its
shopping mall leasing business, including rental revenue and
management services revenue. Rent covering the entire leasing
period is generally collected up front from the tenants upon
signing the lease agreements, and recorded as deferred revenue.
Rental revenue is then recognized over the respective lease term,
generally on a monthly basis. Deferred revenue is classified as
current and non-current based on the length of maturities. In
addition to rental revenue, the Company charges management services
fee from its tenants based on the size of the leasing unit. Such
management services fee is generally collected once a month, or
once every two to three months at certain locations. Fees collected
in advance to the months of services being performed will be
deferred and recognized as income in the later period being earned.
As of June 30, 2008 and December 31, 2007, current deferred revenue
was $8,357,591 and $9,530,814, whereas non-current deferred revenue
was $28,567,884 and $29,501,367, respectively. Reverse Merger On
May 7, 2008, CGDI completed the acquisition of Taiyuan Rongan
Business Trading Company, Limited ("TRBT"), a company incorporated
under the laws of the People's Republic of China, pursuant to the
Stock for Stock Equivalent Exchange Agreement and Plan (the
"Exchange Agreement") among CGDI, TRBT, and each of the equity
owners of TRBT ("TRBT Shareholders") entered into on November 12,
2007. Pursuant to the Exchange Agreement, CGDI issued 31,500,000
shares of its common stock, representing 97.3% of CGDI's issued and
outstanding common stock immediately following the acquisition and
1,400,000 warrants exercisable at the rate of one warrant for one
common share at a price of $0.5 per share, in exchange of 80%
equity interest in TRBT. The fair value of the warrants was
estimated on the grant date using the Black-Scholes option pricing
model as required under SFAS 123 and EITF-96-18 with the following
weighted average assumptions: expected dividend yield 0%,
volatility 157.56%, risk-free interest rate of 1.57%, and expected
warrant life of twelve months. The Company fair valued these
warrants at $689,347. As TRBT Shareholders have become the majority
shareholder of the consolidated entity comprising CGDI and TRBT,
the acquisition has been accounted for as a reverse acquisition
using the purchase method of accounting, where CGDI (the legal
acquirer) is deemed to be the accounting acquiree and TRBT (the
legal acquiree) to be the accounting acquirer. However, the
acquisition is also considered to be a capital transaction in
substance as TRBT (a private operating company) has been merged
into CGDI (a public corporation with nominal non-monetary net
assets) with the shareholders of CGDI, the former public
corporation continuing only as passive investors. Hence, the cost
of the acquisition has been measured at the carrying value of the
net assets of CGDI with no goodwill or other intangible being
recorded in accordance with the accounting interpretation and
guidance issued by the SEC staff. The results of CGDI have been
consolidated from the date of the acquisition. Subsequent to the
closing of reverse acquisition, in consideration of services
provided, the Company issued to Mirador Consulting 500,000 warrants
exercisable at the rate of one warrant for one share of its common
stock at a price of $1.00 per share expiring on November 5, 2008.
The fair value of the warrants was estimated on the grant date
using the Black-Scholes option pricing model as required under SFAS
123 and EITF-96-18 with the following weighted average assumptions:
expected dividend yield 0%, volatility 157.56%, risk-free interest
rate of 1.57%, and expected warrant life of twelve months. The
Company fair valued these warrants at $191,138. TRBT was
incorporated in Taiyuan City, Shanxi Province, China in December
2005 under the laws of the PRC. TRBT is engaged in the business of
building and operation of commercial real estates in China. TRBT
holds 76.1% of the issued and outstanding capital contributions of
five subsidiaries organized in China that owns and operates
shopping malls. The five subsidiaries of TRBT, including Yudu
Minpin Shopping Mall ("Yudu"), Xicheng Shopping Mall ("Xicheng",
also known as Taiyuan Clothing City), Jingpin Clothing City
("Jingpin"), Longma Shopping Mall ("Longma"), and Xindongcheng
Clothing Distribution Mall ("Xindongcheng") were owned initially by
Taiyuan Clothing City Group ("TCCG"), the predecessor company of
TRBT, prior to May, 2003. During the year 2003, these five shopping
malls were acquired by individuals and incorporated as five
separate business entities. In January, 2005, TCCG reacquired 51%
ownership of each of five shopping malls from the individual
shareholders and increased its ownerships to 76.1%. In December
2005, TRBT, which is related to Taiyuan Clothing City Group (TCCG)
through common ownership, was incorporated. In December 2005, TRBT
acquired all the shares owned by TCCG for the five shopping malls.
All five shopping malls are located in Taiyuan City, Shanxi
Province, China. TRBT leases each shopping mall booth to commercial
tenants conducting business in retail, wholesale and distribution
of clothes, shoes, cosmetics, beddings, etc. Liquidity and Capital
Resources The Company currently generates its cash flow through
operations which it believes will be sufficient to sustain current
level operations for at least the next twelve months. In 2008, we
intend to continue to work to expand our presence in the commercial
real estate market, including the acquisition of another shopping
mall. To the extent we are successful in growing our business,
identifying potential acquisition targets and negotiating the terms
of such acquisition, and the purchase price includes a cash
component, we plan to use our working capital and the proceeds of
any financing to finance such acquisition costs. Our opinion
concerning our liquidity is based on current information. If this
information proves to be inaccurate, or if circumstances change, we
may not be able to meet our liquidity needs. 2008 - 2009 Outlook
Over the course of the next few years, we intend to grow and expand
our commercial real estate business. We expect to acquire an
additional 3 shopping centers within the next two years. These
acquisitions will be financed either through revenues of the
Company or by financings and sales of the Company's stock or other
securities. In addition, CGDI expects to complete the acquisition
of development rights to 3,000 square metric units of prime
commercial land. About China Growth Development China Growth
Development Inc. (CGDI) is the largest investor, owner and manager
of commercial real estate in the capital city of Taiyuan, located
in the Shanxi province of southern China. China Growth Development
Inc., owns and manages 5,000 commercial units within its six
strategically located shopping centers, servicing an urban
population of 3.4 million people. Formed in 2005, CGDI provides
high-quality leasing opportunities for both retail and wholesale
clients in convenient, modern shopping centers. Our continued focus
on anticipating and satisfying the evolving needs of our retail and
wholesale clients has positioned us as a leader in commercial real
estate leasing. With a portfolio valued at over US $60 million and
more than half of the market share in commercial leasing, we are
committed to defining the urban commercial landscape of Shanxi.
Forward Looking Statements: This news release contains certain
"forward- looking statements." Forward-looking statements are based
on current expectations and assumptions and are inherently subject
to risks and uncertainties, some of which cannot be predicted or
quantified, and many of which are beyond the Company's control. The
forward-looking statements are also identified through the use of
words "believe," enable," "may," "will," "could," "intends,"
"estimate," "anticipate," "plan," "predict" "probable,"
"potential," "possible," "should," "continue," and other words of
similar meaning. Actual results could differ materially from these
forward-looking statements as a result of a number of risk factors
detailed in the Company's periodic reports filed with the SEC.
Given these risks and uncertainties, investors are cautioned not to
place undue reliance on such forward-looking statements and no
assurances can be given that such statements will be achieved.
China Growth Development, Inc. does not assume any duty to publicly
update or revise the material contained herein. Contact: China
Growth Development, Inc. (626) 581-9098 Email: -- FINANCIAL TABLES
FOLLOW -- Comparison of Three and Six Months Ended June 30, 2008
and 2007. The following table sets forth the results of our
operations for the periods indicated: CHINA GROWTH DEVELOPMENT,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) For The Three Months For The Six Months Ended June 30,
Ended June 30, 2008 2007 2008 2007 Net revenue $3,738,624
$3,459,975 $7,407,703 $6,195,900 Cost of revenue 36,361 - 36,361 -
Gross Profit 3,702,263 3,459,975 7,371,342 6,195,900 General,
selling and administrative expenses 2,548,397 1,708,276 4,339,844
3,422,813 Operating income 1,153,866 1,751,699 3,031,498 2,773,087
Non-operating income (expenses) Interest income 1,494 - 3,466 3,714
Interest expense (72,679) (221,931) (176,561) (138,971) Other
expense (80,982) - (101,548) - Total non-operating expenses
(152,167) (221,931) (274,643) (135,257) Income before provision for
income tax 1,001,699 1,529,768 2,756,855 2,637,830 Provision for
income tax 22,534 17,898 43,069 30,863 Net income before minority
interest 979,165 1,511,870 2,713,786 2,606,967 Minority interest
568,817 357,886 1,254,647 148,067 Net income $410,348 $1,153,983
$1,459,138 $2,458,900 Net earnings per share: Basic & diluted
$0.03 $0.05 $0.08 $0.08 Weighted average number of shares
outstanding: Total Current Liabilities 32,562,612 31,500,000
32,031,306 31,500,000 CHINA GROWTH DEVELOPMENT, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For
The Six Months Ended June 30, 2008 2007 CASH FLOWS FROM OPERATING
ACTIVITIES Net income $1,459,138 $2,458,900 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation & amortization 1,182,313 868,972 Minority interest
1,254,647 148,067 Warrants issued for compensation 191,138 -
Warrants issued in reverse acquisition 689,347 - Decrease
(increase) in current assets: Accounts receivable 8,883 -
Inventories 17,683 - Other receivable (29,653) (207,636) Other
receivable from related parties (43,651) - Interest receivable from
related parties 563 3,648 Advances to suppliers (74,853) - Prepaid
expenses 30,369 141,245 Increase (decrease) in liabilities:
Construction payable (765,553) (1,106,882) Other payable (62,080)
(239,744) Tax payable 25,605 2,647,551 Accrued expense (206,256)
169,693 Deferred revenue (4,440,735) (2,819,783) Net cash (used in)
provided by operating activities (763,095) 2,064,032 CASH FLOWS
FROM INVESTING ACTIVITIES Cash acquired on reverse acquisition
3,742 - Acquisition of property & equipment (229,055) (837,037)
Proceeds from loan receivables from employees 9,216 - Proceeds from
loan receivables from related parties - (101,930) Proceeds from
loan receivables from others - 59,904 Advance to related parties
for notes receivable (9,435) - Net cash used in investing
activities (225,532) (879,063) CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from loans payable 369,320 - Net proceeds from loans
from related parties 394,383 4,616 Repayments of short-term loan -
(1,222,523) Proceeds from long-term debt - 1,070,857 Net cash
provided by (used in) financing activities 763,703 (147,050) EFFECT
OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS 67,800 82,505
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS (157,123)
1,120,423 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 1,184,621
1,676,718 CASH & CASH EQUIVALENTS, ENDING BALANCE $1,027,498
$2,797,141 SUPPLEMENTAL DISCLOSURES: Interest paid $172,617
$138,971 Income tax paid $- $- DATASOURCE: China Growth
Development, Inc.
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