China Modern Announced Net Income of $5.0 Million and EPS of $0.09 for the First Quarter of Fiscal Year 2013

Revenue for the three months ended September 30, 2012 totaled $10.9 million, an increase of 119% as compared to $4.9 million for the same period in 2011. The revenue is generated predominately from the sale of natural milk and natural milk sales commissions from farmers. Sales revenue from natural milk was $7.67 million, an increase of $4 million or 109%, as compared to $3.67 million for the three months ended September 30, 2011. There were two main reasons for the increase in revenue. First, as Yulong Cattle was acquired on November 23, 2011, since results were not included in the consolidated financial statements for the three months ended September 30, 2011. Second, the milk sales price has increased significantly compared with the same period last year. The sales commissions from farmers were $3.25 million, an increase of 149% as compared to $1.3 million for the same period last year.

Gross profit for the three months ended September 30, 2012 was $7.0 million, an increase of 108% as compared to $3.4 million for the same period last year. Gross profit margin decreased to 64% from 67%, primarily due to the acquisition of Yulong Cattle since its financials were not included in the financial statements for the same period last year.

Operating expenses increased to $289,430 for the three months ended September 30, 2012 from $137,608 for the three months ended September 30, 2011, an increase of $151,822 or 110%. The main reason for this increase is due to a new revenue stream that was introduced. We incurred $162,528 and $65,190 in business taxes for the three months ended September 30, 2012 and 2011, respectively. We classified it as a selling expense which is included in operating expenses. In addition, the operating expenses of Yulong Cattle were consolidated in the financial statements for the three months ended September 30, 2012.

Net income attributable to the common stockholders of the Company was $5.0 million, representing $0.09 per share, and $2.6 million, representing $0.06 per share for the three months ended September 30, 2012 and 2011, respectively. The net income and EPS increased by 92% and 50% YOY respectively.