China Growth Stocks

[tbirdman]

Form 10-Q China Redstone Group
.37 eps
Net revenues for the three month period ended September 30, 2010 were $11,581,873 as compared to $6,746,388 for the three month period ended September 30, 2009, an increase of $4,835,485 or approximately 71.68%. Net revenues for the six month period ended September 30, 2010 were $23,676,460 as compared to $15,063,916 for the six month period ended September 30, 2009, an increase of $8,612,544 or approximately 57.17%.

We reported income from operations of $6,371,340 for the three month period ended September 30, 2010 as compared to income from operations of $3,459,920 for the same period ended September 30, 2009, an increase of $2,911,420 or approximately 84.15%. For the six months ended September 30, 2010, income from operations amounted to $11,841,746 as compared to $7,539,349 for the same period ended September 30, 2009, an increase of $4,302,397 or 57.07%. The increase in income from operations was attributable to the increase in the sale of cemetery plots. In addition, we were able to increase the average price of cemetery plot as we expanded into new developments, which had a more desirable location. The local economic environment experienced overall improvement in fiscal 2010 due to the assistance of large-scale state-owned enterprises and their projects in the Chongqing area, which led to higher overall consumer consumption. The significant increase in income from operations was mainly attributable to Foguang’s overall development momentum and a healthy sales pipeline. Foguang has been able to increase traffic to the cemetery and build momentum, which makes the rest of the cemetery land more desirable and valuable.

We have one short term loan of approximately $2 million that is due and payable by March 2011. We plan to use all the funds of approximately $4.6M from our February 2010 financing to develop the Gui Yuan II project. By the end of fiscal year 2011, we plan to complete the first phase of land acquisition and the construction of the cemetery and supporting facilities within the acquired land. We plan to develop 5,000 external tombs and 2,000 internal tombs. After the Gui Yuan II project is completed, our next focus will be the development of the Longqiao Lake project. In 2011, we plan to develop tourism, leisure, entertainment, dining accommodation, transportation and other comprehensive services and facilities. We plan to expand our seedling base in the Longqiao Lake area. Management believes that the funds for such short-term developments can be obtained through the sale of securities or issuance of debt instruments in addition to our retained earnings. Foguang’s projected income is approximately $12 million and $16 million in 2011 and 2012, respectively, so Foguang expects to have enough funds for its short term development projects.

Our long term development includes acquisition and merger with cemeteries locally or in other cities. We plan to acquire Shenzhen Huaqiao Public Cemetery in 2013. The funds needed for this acquisition is approximately $100 million.

We believe that cash and cash equivalents currently on hand and cash flows from operations will be sufficient to continue our operations and to pursue our growth strategy for the next eighteen months. Our future capital requirements will depend on many factors, including the rate of our revenue growth; the timing and extent of spending to enhance our advertising and marketing programs; investing in our sales force; the levels of the inventory we carry; and other factors relating to our business. We will require additional financing in the future in order to execute our operating and growth plans and we may not be able to obtain such financing. We cannot predict whether this additional financing will be in the form of equity, debt, or a combination of debt and equity. There are no assurances that our plans will be successful, or even be implemented.

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