China Organic Agriculture Sells ErMaPao Subsidiary for $8.7 Million

The ErMaPao segment had shown significant decreases in sales of both green and organic rice since the beginning of 2008 leading to the Board’s decision to sell the business.

01/10/08 China Organic Agriculture, Inc., a growth-driven agricultural products company, has sold its Jilin Songyuan City ErMaPao Green Rice Limited subsidiary for $8.7 million to Bothven Investments Limited.

The ErMaPao segment had shown significant decreases in sales of both green and organic rice since the beginning of 2008 leading to the Board’s decision to sell the business.

“The sale of ErMaPao occurred, in part, as a result of several disappointing quarters of sales for green and organic rice,” said Jinsong Li, Chief Executive Officer of China Organic. “The exit from ErMaPao was priced at a discount compared to previous year’s earnings potential due to its precipitous decline in sales. Since we were able to sell to an interested investment firm before profits deteriorated further, we may now use the cash from this sale to make future accretive acquisitions.”

As reflected in the Company’s second quarter financials, sales in the ErMaPao segment declined to $398,439 in second quarter of 2008, as compared to $2.3 million in the comparable period of 2007. This represents more than an 80% drop in year-over-year sales.

This sell-off coincides with the shift of the Company's primary focus to agricultural trading opportunities and diversification into numerous agricultural products besides rice.

China Organic’s other major business segments will not be affected by this sale. These segments include: Ankang Agriculture (Dalian) Co., Ltd and The Bellisimo Vineyard. The Ankang segment trades agricultural products such as rice and grain, and generated an impressive $3.3 million in sales for the second quarter of 2008. Bellisimo is an active vineyard located in Sonoma Valley, California, and will be selling wine to Chinese consumers once a distribution network has been established.

“Based on ErMaPao’s poor performance under previous management, we are lucky to sell at the price we did,” said Mr. Li. “I will be detailing our vision for China Organic Agriculture in a strategic initiatives outline that will be issued via press release in the near future. Around that time, I will also issue guidance for the fourth quarter 2008 that will reflect the sale of ErMaPao and the approaching acquisition of Dalian Huiming.”