Tsingyuan Brewery (GREY:BEER)

TSINGYUAN BREWERY LTD. AND SUBSIDIARIES

(FORMERLY KNOWN AS SABRE INDUSTRIAL, INC. AND SUBSIDIARIES)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

(UNAUDITED)

		For The Nine Month Periods						For The Three Month Periods
		Ended September 30,						Ended September 30,
		2011			2010			2011			2010
Revenues	$	63,821,575		$	32,869,038		$	20,520,882		$	18,525,985
Cost of goods sold		49,329,727			26,141,747			15,122,037			14,432,621
Gross profit		14,491,848			6,727,291			5,398,845			4,093,364
Operating expenses:
General and administrative expenses		948,402			331,690			196,773			121,943
Selling expenses		660,319			66,356			193,205			42,010
Total operating expenses		1,608,721			398,046			389,978			163,953
Income from operations		12,883,127			6,329,245			5,008,867			3,929,411
Other income (expense):
Interest expense		-			(189,788	)		-			(3,328	)
Interest income		8,997			149,983			3,951			5,519
Other income		757,229			98,147			243,554			46,161
Total other income (expense)		766,226			58,342			247,505			48,352
Income before income taxes		13,649,353			6,387,587			5,256,372			3,977,763
Income taxes expense		3,598,263			1,596,887			1,200,969			997,912
Net income		10,051,090			4,790,700			4,055,403			2,979,851
Other comprehensive income:
Foreign currency translation adjustment		861,941			339,089			362,558			280,664
Comprehensive income	$	10,913,031		$	5,129,789		$	4,417,961		$	3,260,515
Earnings per share - basic and diluted:
Weighted-average shares outstanding, basic and diluted		126,857,289			125,216,622			126,857,289			125,430,970
Earnings per share, basic and diluted	$	0.08		$	0.04		$	0.03		$	0.02

The volume of malt we sold decreased from 25,386 MT in the three months ended September 30, 2010 to 17,885 MT in the three months ended September 30, 2011. The revenue from sales of malt decreased $1.4 million, or 12%, to $10.6 million for the three months ended September 30, 2011 from $12.0 million during the same period in 2010. However, the unit sales price of our malt products increased, as our R&D team developed some new types of malt with higher unit prices, which led to an increase in the average unit sales price.

Our revenue from sales of beer increased $3.3 million, or 50%, to $9.9 million for the three months ended September 30, 2011 from $6.6 million during the same period in 2010. The increase in revenues was primarily due to the increased sales volume of our beer products. Sales of our beer products increased as a result of our increased bottling capacity. The increase in our bottling capacity has allowed us to increase the number of beer distributors and expand the geographical reach of our target market for that segment.

TSINGYUAN BREWERY LTD. AND SUBSIDIARIES
(FORMERLY KNOWN AS SABRE INDUSTRIAL, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)

		For The Three Month Periods Ended March 31,
		2011			2010
Sales	$	21,077,475		$	3,890,286
Cost of goods sold		16,850,631			3,218,398
Gross profit		4,226,844			671,888
Operating expenses:
General and administrative expenses		494,109			12,451
Selling expenses		323,647			7,608
Total operating expenses		817,756			20,059
Income from operations		3,409,088			651,829
Other income (expense):
Interest expense		-			(57,379	)
Interest income		1,426			9,426
Other income (expense)		281,263			(45,634	)
Total other income (expense)		282,689			(93,587	)
Income before income taxes		3,691,777			558,242
Income taxes expense		1,108,176			46,070
Net income		2,583,601			512,172
Other comprehensive income:
Foreign currency translation adjustment		142,614			11,951
Comprehensive income	$	2,726,215		$	524,123
Earnings per share - basic and diluted:
Weighted-average shares outstanding, basic and diluted		126,857,289			125,107,671
Earnings per share, basic and diluted	$	0.02		$	0.00

"Looking ahead, we plan to aggressively expand our distribution network, which already spans six provinces in eastern and northern China. In the first quarter alone, we added over 20 new sales representatives and launched a nationwide advertising campaign, which has helped drive awareness for our products. As we increase penetration of our target markets, we also plan to expand our production capacity to accommodate the growing demand. In the second half of 2010, we added a new canning line, which increased our beer production capacity to 98,000 metric tons. In 2011, we plan to further expand our beer production capacity through the addition of new bottling lines. Overall, we have built a highly scalable infrastructure with a well-established brand, which should allow us to achieve our goal to become one of the leading national beer companies in China."

1) Revenue from sales of malt: The increase in revenues was primarily due to increased sales volume of our malt products. The pricing of our malt products is based primarily on the pricing of its principal raw material, barley. Since our malt is manufactured based on our customers’ specifications, our customers may adjust their selection of barley in the event they see fluctuations in the prices of certain types of barley or the prices of barley grown in certain locations. It is also because: 1) The volume of malt we sold in the first quarter of 2011 increased significantly from 7,006 tons in the first quarter of 2010 to that of 28,006 tons in the first quarter of 2011. 2) The sales unit price increased: The company R&D team develops some new type of malt with higher sales unit price so that it increased the total average unit price and the total sales. For the three months ended March 31, 2011, the sales of the new malt accounted for 19.76% of the total malt sales.

2) Revenue from sales of beer: We also experienced increases in sales of our beer products resulting from the effects of our increased bottling capacity. As discussed above, in January 2010, we added our second complete bottling line, which increased our maximum bottling capacity from 37,000 metric tons to 83,000 metric tons per annum, and in October 2010, we added our first complete canning line, which further increased our bottling capacity to 98,000 metric tons. The increase in our bottling capacity has allowed us to increase both the number of beer distributors to which we sell our beer products and the geographical reach of our target market for that segment. It is also because: 1) The volume of beer we sold in the first quarter of 2011 increased significantly from 3,600 tons in the first quarter of 2010 to that of 15,267 tons in the first quarter of 2011. 2). our beer revenues also increased in the first quarter of 2011 due to increased sales of higher priced beer products.

Our principal sources of liquidity include cash from operations and, in prior fiscal years, borrowings from local commercial banks. We believe that we have sufficient cash on hand and positive projected cash flow from operations to support our operating requirements and anticipated capital expenditures over the next 12 months, other than the construction of our new bottling line. To expand our operations, including our planned construction of an additional bottling line, we may seek additional financing, which may include additional equity financings.

On September 24, 2010 Tsingyuan Brewery became a public entity via a reverse merger transaction.

Company Snapshot: 

manufacturer and distributor of brewer's malt and beer throughout northern and eastern China

Post Merger Share Calculation:

• 60,000,000: Pre reverse merger outstanding shares
• 65,107,671: Newly issued shares of Common Stock

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  125,107,671

Full Year 2010 Results:

• Revenue increased 338.8% to $52.3 million compared to $11.9 million for 2009
• Gross profit increased 345.7% to $11.8 million versus $2.6 million for 2009
• Operating income increased 371.2% to $11.0 million versus $2.3 million for 2009
• Net income for 2010 increased 392.5% to $8.3 million, or $0.07 per basic and diluted share, versus $1.7 million, or $0.01 per basic and diluted share, for 2009

GeoTeam® Note: 2010 vs. 2009 Adjusted EPS

• Fourth Quarter:  $0.03 vs. nil

Zhang Dingyou, Chief Executive Officer, commented, "We are very pleased to report a 339 percent increase in revenue to $52.3 million for 2010 and a 393 percent increase in net income to $8.3 million for the full year. In 2010, we produced 72,770 metric tons of malt products and 6,159 metric tons of beer products compared to just 17,592 metric tons and 878 metric tons of malt products and beer products, respectively, in 2009. As the largest malt producer and one of the leading beer producers in Shandong Province, we benefit from economies of scale and a broader distribution network than our local competitors. Additionally, by internally producing the malt for our beer, we are able to keep costs low and offer attractive incentives to our beer distributors. Our malt is now distributed to breweries across three provinces, our beers are distributed by retailers in seven provinces, and we look forward to further expanding our footprint in the coming months and years. Lastly, as we further increase our capacity utilization we expect to benefit from significant operating leverage and thereby increase profitability as we continue to raise our production levels. "