MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those which we discuss under Risk Factors and elsewhere in this prospectus.
General
We are engaged in the business of manufacturing and marketing wood furniture, straw and wicker products, and wood handicraft products. Our wood furniture products include items such as coffee tables, cabinets, bed frames, stools. Our straw and wicker products include items such as wicker baskets, bottle holders and planters. Our wood handicraft products include items such as decorative boxes, wood baskets and various storage cabinets.
We produce over 20,000 different products which are sold in more than thirty countries and places, including the PRC, United States, Germany, England, Holland, Italy, Sweden, Japan, Canada, Denmark, Hong Kong, and Taiwan. Our products are sold through well known retailers such as Trade Point A/S Direct Container, Zara-Home, Habitat UK Ltd., ABM Group Inc., and Fuji Boeki Co. Ltd. We believe that our products offer competitive prices and high quality.
Our operations are conducted in the PRC through our subsidiary, Shandong. For the three and nine months ended September 30, 2010, we generated sales of $22,746,574 and $62,181,727, respectively, and net income of $4,008,460 and $10,286,442, respectively. For the 2009 fiscal year, we generated sales and net income of $69,435,044 and $12,021,155, respectively, and for the 2008 fiscal year we generated sales and net income of $42,197,393 and $5,761,994, respectively.
For the nine months ended September 30, 2010, sales of our wood furniture products, straw-wicker products and handicraft products accounted for approximately $35.1 million, $25.9 million and $1.2 million, respectively, of our revenues. For the 2009 fiscal year, sales of our wood furniture products, straw-wicker products and handicraft products accounted for approximately $37.1 million, $31.2 million and $1.1 million, respectively, of our revenues, and for the 2008 fiscal year, approximately $20.1 million, $21.2 million and $0.9 million, respectively.
Our straw and wicker products as well as our wood handicraft products are high margin products as such products generally are manufactured by local persons in their homes, the raw material costs are low and the production of such products does not require advanced technology.
Based upon our perceived and historical growing demand for our wood furniture product and the changing demographics of the wood furniture industry, we believe we have a unique opportunity to substantially increase our revenues, net income and gross margins by not only expanding the manufacturing capacity of our existing wood furniture business but also producing different types of wood furniture products that we believe there is a large and increasing international demand for.
As a result, while we intend to continue manufacturing and sell our straw, wicker and handicraft products, we intend to devote substantial financial and other resources on our wood furniture products by not only producing new products but also increasing our current manufacturing capacity by renovating and upgrading our current production facilities.
Important Factors Affecting our Results of Operations
We believe significant factors that could affect our operating results are the (i) cost of raw materials, (ii) prices of our products to our international retailers and wholesalers and their markup to the end users, (iii) consumer acceptance of our new wood furniture line, and (iv) general economic conditions in China and global markets.