Mountain China Resorts (Holding) Limited (TSX VENTURE:MCG) ("MCR" or the
"Company"), today reported its financial results for the three months ended June
30, 2012 (the "Reporting Period"). MCR reports its results in Canadian Dollars.
Financial Highlights
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(in thousands of Canadian
dollars except for per share For the three months For the three months
data) ended June 30, 2012 ended June 30, 2011
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Revenue 25 16
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Operating expenses (675) (494)
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Other income 2324 8
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General and administrative
expenses (306) (914)
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Depreciation and amortization (2,958) (2,346)
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Impairment of PPE - -
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Operating loss (1,590) (3,730)
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Total non-operating income and
expenses (2,146) (1,183)
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Deferred income tax recovery 33 15
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Net loss (3,703) (4,898)
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Net loss per share (Basic and
Diluted) (0.01) (0.02)
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Weighted average number of
shares outstanding(Basic and
Diluted) 308,859,103 203,092,285
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Total revenue and the net results were from resort operations only, with no real
estate sales revenue during the Reporting Period. For the three months ended
June 30, 2012, the Company generated revenues from resort operations of $0.025
million and incurred a net loss of $3.70 million or $0.01 per share, compared to
revenues from resort operations of $0.016 million and a net loss of $4.90
million or $0.02 per share in the same period in 2011. The low revenue and the
loss in the second quarter were primarily due to the fact that the Company's
Yabuli Resort's ski operations closed in late March, 2012.
Resort operating expenses from continuing operations totaled $0.68 million for
the three months ended June 30, 2012 compared to $0.49 million for the same
period in 2011. Operating expenses within the Yabuli Resort were mainly
attributable to staffing, fuel and utilities.
Corporate general and administrative expenses totaled $0.31 million for the
three months ended June 30, 2012 compared to $0.91 million for the same period
in 2011. This amount mainly comprised executive employee costs, public company
costs, and corporate information technology costs.
Depreciation and amortization expense from continuing operations totaled $2.96
million for the three months ended June 30, 2012 compared to $2.35 million for
the same period in 2011. The increase was mainly due to the additional
amortization expenses related to the building renovation completed in later
2011.
The Company incurred interest expenses of $1.85 million for the three months
ended June 30, 2012 from continuing operations compared to $0.90 million for the
same period in 2011.
The Company's cash and cash equivalents totaled $13.49 million and the Company's
working capital was negative $49.13 million as at June 30, 2012 compared to
$15.77 million and negative $62.79 million as at December 31, 2011.
Operations Sun Mountain Yabuli
The 2011-2012 MCR's Sun Mountain Yabuli Resort winter season operations
commenced on November 26, 2011 and ended on March 25, 2012. The summer operation
began on July 14, 2012 and will continue until September 2, 2012 for a total of
50 days at the Sun Mountain Yabuli Resort. For the summer operation, the resort
has provided outdoor activities including: archery, cross country mountain
bike/hiking, mountain top afternoon tea party and so on. For the three months
ended June 30, 2012, the total number of slide guests reached 268, the total
number of hotel guests was 17, and the hotel occupancy rate reached 14%.
Revenues at the Yabuli Resort for the second quarter and the six-month period
ended June 30, 2012 were $0.025 million and $5.26 million respectively.
Operating EBITDA was negative $0.65 million in the second quarter and $1.34
million in the first half of 2012.
Sun Mountain Yabuli - Real Estate Development
As at the end of Fiscal 2010, the Company had completely finished working on the
exterior decoration of 55 villas, including roofs, windows, painting and tiles.
Three of the 55 villas were completed with interior finishing, including wall
paint, carpets, wood floors, kitchen cabinets, countertops and other necessary
furniture. 20 villas were left in its foundation stage (a total of 75 villas
have been built) until the sales of the decorated villas begin. Flattened dirt
roads were also constructed to connect each of the villas and the main street.
As of the date of this MD&A, 55 villas are ready for sale and subject to
internal decoration pursuant to the specifications of buyers. Generally, buyers
in China are accustomed to have their interior decoration plan personalized,
therefore, majority of homes sold in China are not decorated interiorly at the
time when they are sold, but rather completely remained in cement.
A number of temporary policies have been introduced by the Chinese government
attempting to cool down the rapidly rising housing price in mainland China from
2011 to present and the related government policies still have not changed in
the quarter ended June 30, 2012. Therefore, the Company temporary suspended its
efforts to sell the villas. Depending on the condition of the Chinese real
estate market in the later part of 2012, the Company may recommence its efforts
to sell the villas in the winter of 2012.
Balance Sheet Key Indicators
(in thousands of Canadian dollars except for ratios)
June 30, 2012 December 31, 2011
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Current Ratio(1) 0.46:1 0.41:1
Free Cash 13,491 15,772
Working Capital(2) (49,131) (62,787)
Total Assets 178,457 187,728
Total Debt(3) 116,803 118,152
Total Equity(4) 61,654 69,576
Total Debt to Total Equity Ratio 1.90:1 1.70:1
(1) Current ratio is defined as total current assets divided by total
current liabilities
(2) Working capital is defined as total current assets less total current
liabilities
(3) Total debt is defined as total current liabilities plus total non-
current liabilities
(4) Total equity is equal to the total shareholders' equity
The Company has an accumulated deficit, a working capital deficiency and has
defaulted on a bank loan, which casts substantial doubt on the Company's ability
to continue as a going concern. The Company's ability to meet its obligations as
they fall due and to continue to operate as a going concern is dependent on
further financing and ultimately, the attainment of profitable operations. The
Company's consolidated financial statements do not include any adjustments to
the amounts and classifications of assets and liabilities that might be
necessary should the Company be unable to continue as a going concern.
Management of the Company plans to fund its future operation by obtaining
additional financing through loans and private placements and through the sale
of the properties held for sale. However, there is no assurance that the Company
will be able to obtain additional financing or sell the properties held for
sale.
June 30, 2012 December 31, 2011
(in thousands of Canadian
dollars)
Accumulated deficit $ 261,337 $ 253,985
Working capital (deficiency) (49,131) (62,787)
Fiscal 2012 Major Corporate Developments
Debt Settlement Agreement with Melco
On July 10, 2012, during the Company's Annual and Special General Meeting, the
Company obtained approval of disinterested shareholders on the Debt Settlement
Agreement with Melco. As of the date of this news release, the Company is still
waiting for the final approval of the Exchange to complete the transactions
contemplated under the Debt Settlement Agreement.
New bank loan for the amount of RMB 140 million
On February 14, 2012, the Company secured a new bank loan for the amount of RMB
140 million with the Harbin Bank (the "New Bank Loan"). The New Bank Loan
carries a three year term with a maturity date of February 15, 2015 and a fixed
annual interest rate of 7.315%, which interest to be paid on a monthly basis
commencing February 16, 2012. The principal of the New Bank Loan is repayable in
four installments of RMB 35 million each, starting with the first installment
repayment due on August 15, 2013 and each subsequent installment repayment due
every six month thereafter. The original RMB 150 million bank loan with the same
bank was repaid with advance from a short term bridge loan made by a third party
trust company when it was due in on February 9, 2012. The Company then used the
advance from the New Bank Loan and RMB 10 million of its own funds to repay
bridge loan from the third party trust company.
Non-Brokered Private Placement
On February 22, 2012, the Company announced that it has closed the non-brokered
private placement of 105,700,000 common shares (the "Shares") initiated in
September 16, 2011, priced at $0.18 per Share for gross proceeds of $19 million
(the "Offering"). The proceeds from the Offering are being used for general
working capital and for the repayment of certain debentures. The Shares are
subject to a TSX Venture Exchange hold period of four months and one day from
closing of the Offering. On March 9, 2012, the Shares were issued to the
corresponding shareholders.
Loan Defaults
On March 2, 2012, Yabuli Resort missed the second installment principal
repayment in the amount of RMB 30 million under its RMB 250 million loan
agreement with the China Construction Bank (the "Bank"). According to the Loan
Agreement between Yabuli and the Bank, the Bank has the right to accelerate
Yabuli's obligation to repay the entire unpaid principal plus interest
immediately and to take legal actions to enforce on the security. The Company is
still continuing its negotiation with the Bank for postponement of the second
installment, but negotiation has not reached conclusion.
About MCR
MCR is the premier developer of four season destination ski resorts in China.
MCR is transforming existing China ski properties into world-class, four seasons
luxury mountain resorts with excellent real estate investment opportunities for
discerning buyers. In February 2009, the Company's Sun Mountain Yabuli Resort
was awarded Best Resort Makeover in Asia by TIME Magazine. Yabuli is also the
permanent home of the China Entrepreneur's Forum the leading and most
influential community of China's most distinguished and successful entrepreneurs
and business leaders with over 5,000 members from across a variety of key
industries.
www.mountainchinaresorts.com
FORWARD LOOKING INFORMATION
Information in this press release that is not current or historical factual
information may constitute forward-looking information within the meaning of
securities laws, and actual results may vary from the forward-looking
information. Implicit in this information are assumptions regarding future
operations, plans, expectations, anticipations, estimates and intentions, such
as the plans to develop the ski resorts in China. These assumptions, although
considered reasonable by MCR at the time of preparation, may prove to be
incorrect. Readers are cautioned that actual future operating results and
economic performance of MCR are subject to a number of risks and uncertainties,
including general economic, market and business conditions, uncertainty relating
to land use rights in China, adverse industry events for the ski and real estate
industries, real estate prices in general in China, MCR's ability to make and
integrate acquisitions, the requirements of recent Chinese regulations relating
to cross-border mergers and acquisitions, the inability to obtain required
approvals or approvals may be subject to conditions that are unacceptable to the
parties, changing industry and government regulation, as well as MCR's ability
to implement its business strategies, dispose of assets or raise sufficient
capital, MCR's ability to obtain additional financial resources and sufficient
working capital, MCR's ability to complete the announced non-brokered private
placement, seasonality, weather conditions, competition, currency fluctuations
and other risks, and could differ materially from what is currently expected as
set out above.
Forward-looking information contained in this press release is based on current
estimates, expectations and projections, which MCR believes are reasonable as of
the date of this press release. MCR uses forward-looking statements because it
believes such statements provide useful information with respect to the
operation and financial performance of MCR, and cautions readers that the
information may not be appropriate for other purposes. Readers should not place
undue importance on forward-looking information and should not rely upon this
information as of any other date. While MCR may elect to, it does not undertake
to update this information at any particular time except as required by
applicable law.
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