Correction: CY Oriental Holdings Ltd. reports second quarter results

    Note: The Second Quarter FY07 Financial Results news release issued this
    morning contained clerical errors in both the Consolidated Statements of
    Operations and the Consolidated Statements of Cash Flows. The following
    news release includes the corrected versions of both statements.

    VANCOUVER, Aug. 28 /CNW/ - CY Oriental Holdings Ltd. (TSX-V: CYO) ("CY"
or the "Company"), a value-added supplier of apparel and fashion products to
leading international brands and retailers, today announced its financial
results for its second quarter ended June 30, 2007. Financial information in
this press release has been compared to the unaudited financial results for
the corresponding period in the prior year. All figures are reported in
Canadian dollars, unless specified otherwise.
    "Efforts to make our new state-of-the-art Tengzhou plant operational
progressed as planned during the second quarter," said Ping Chen, Chairman and
CEO of CY Oriental Holdings Ltd. "Following the completion of the
infrastructure construction for Phase I of Tengzhou, the installation of
support services, plant and equipment were completed during the second
quarter. The Tengzhou facility commenced trial production runs in June under
the quality control and supervision of our Shanghai facility. And, continuing
in our focus on higher-end fashion apparel, we are very pleased to have added
some top-quality brand names to our portfolio, including Armani Jeans, Briggs
New York, DC Shoes, as well as the U.S. retailer, Zumiez."

    Financial Results for the Second Quarter

    The Company traditionally earns less revenue during the first half of a
calendar year than during the back half of the year due to the timing of two
extended holiday periods: the Chinese New Year during the first quarter and
the May Holiday during the second quarter. This business seasonality results
in quarterly performance that is not necessarily indicative of the year's
    Revenue for the second quarter of fiscal 2007 was $12.5 million,
equivalent to 29.0% of the annual revenue earned in fiscal 2006. Revenue for
the quarter benefited from the Company's progress in its strategy to migrate
its product offering more towards higher-end clothing, which commands higher
unit selling prices, as well as the commencement of trial production runs in
Tengzhou during the quarter. During the quarter, the Company fulfilled orders
from high-end apparel brand names including Armani Jeans and Briggs New York.
However, volatility of quota prices for certain product categories led to
cautious order placements from some customers. For the six months ended June
30, 2007, revenue totaled $22.4 million, an increase of 10.0% when compared to
the same period in the previous year and equivalent to 51.7% of fiscal 2006
annual revenue.
    Gross profit for the second quarter was $3.5 million, equivalent to 29.1%
of last year's annual gross profit. Gross profit as a percentage of revenue
for the quarter was 27.6%, compared to 28.8% for the first quarter 2007 and
27.5% achieved for fiscal year 2006. The margin for the quarter was dampened
by efforts to bring efficiency at the new Tengzhou facility up to targeted
operating level, offsetting the beneficial impact of focusing on higher-end
clothing, which contribute higher margins. The gross profit margin continued
to be under pressure from the continued appreciation of the Chinese RMB
against both the U.S. dollar and the Canadian dollar. Gross profit for the six
months ended June 30, 2007 amounted to $6.3 million, compared to $5.9 million
for the same period in 2006.
    EBITDA(1) for the quarter was $1.5 million. EBITDA for the six months
ended June 30, 2007 amounted to $2.4 million, compared to $3.7 million for the
same period of 2006. EBITDA for the second quarter was impacted by higher
general and administrative expenses, which are expected to be higher for
fiscal 2007 as a whole compared to fiscal 2006 due to incremental public
company costs and the addition of sales, technical and management personnel
for the manufacturing facility in Tengzhou, China.
    Net income for the quarter was $0.7 million, or $0.02 per common share.
Net income for the six months ended June 30, 2007 amounted to $0.6 million, or
$0.01 per common share. Earnings were impacted by several factors, including
expenses incurred in connection with the Company's Qualifying Transaction and
public listing, the appreciation of the RMB and the Canadian dollar, and the
accrual of income tax expense. Earnings per share are based on a weighted
average of 46,845,644 common shares outstanding during the quarter and
41,889,084 common shares outstanding during the first six months of the year.
Earnings per share for the six months ended June 30, 2006 was $0.09 per common
share based on a weighted average of 29,593,000 common shares outstanding
during the period.

    Update on Expansion Plans

    During the quarter ended June 30, 2007, the Company commenced trial
production runs while continuing its review and refinement of production
processes at its new facility in Tengzhou. Also during the quarter, the
Company's merchandising teams worked closely with key customers in conducting
compliance and quality audit processes. Bulk production orders are scheduled
to commence once the audits are completed. As at June 30, 2007, the Company
had approximately 1,400 employees engaged in the Tengzhou facility as planned,
with most of the new employees having prior experience in the garment
manufacturing industry. Management expects Phase I of the Tengzhou facility to
be fully operational before the end of the year.


    "Our growth plans remain on track and we look forward to a strong back
half of the year, bolstered by increased business with our existing customer
base while developing new," said Mr. Chen. "Our merchandising and development
teams have been working with leading brand name customers in the development
of their apparel lines for the Fall and Winter 2007 as well as Spring and
Summer 2008 seasons. Importantly, with robust demand and strong customer
relationships, we are well-positioned to capitalize on additional capacity as
it comes online. The increased scale that our Tengzhou plant will afford us
will propel our business to the next level and make us a leading manufacturer
of high-quality, valued added fashion products."

    Notice of Conference Call

    CY Oriental Holdings Ltd. will host a conference call on Wednesday,
August 29, 2007 at 9:00 a.m. (ET) to discuss its second quarter fiscal 2007
financial results. To access the conference call by telephone, dial
416-644-3419 or 1-866-249-1964. Please connect approximately fifteen minutes
prior to the beginning of the call to ensure participation. The conference
call will be archived for replay until Wednesday, September 5, 2007 at
midnight. To access the archived conference call, dial 416-640-1917 or
1-877-289-8525 and enter the reservation number 21245255 followed by the
number sign.

    Financial Statements

    For convenience, this press release includes the Company's Fiscal 2007
Second Quarter Consolidated Balance Sheets, Statements of Operations,
Statements of Comprehensive Income and Statements of Cash Flows.

                         CONSOLIDATED BALANCE SHEETS

                                 (Unaudited - Expressed in Canadian dollars)

    As at                                               June 30, December 31,
                                                           2007         2006
                                                              $            $

    Cash and cash equivalents                         1,612,851      770,688
    Restricted cash                                     480,155      116,866
    Trade receivables                                20,395,746   18,030,216
    Other receivables                                   447,664      240,117
    Amounts due from related parties                    266,710       27,491
    Loans receivable                                          -    2,559,172
    Inventories                                       2,126,983    1,562,861
    Prepayments                                       1,816,269    1,300,908
    Total current assets                             27,146,378   24,608,319
    Rental property                                   3,407,601    3,756,489
    Property, plant and equipment                     9,910,282    3,421,974
    Construction in progress                         16,276,746   15,993,693
    Deposit for land use right                        3,678,246    3,573,180
    Deposit for machinery                               424,328      149,300
    Total assets                                     60,843,581   51,502,955

    Short-term bank loans                             9,618,278    9,916,880
    Loan payable                                      3,715,730    8,521,370
    Trade payables                                    3,081,811    2,847,987
    Other payables                                    1,910,742    1,409,414
    Income tax payable                                  154,957            -
    Accrued liabilities                                 729,918      815,060
    Amounts due to related parties                            -      112,639
    Total liabilities                                19,211,436   23,623,350
    Commitments and contingent liabilities

    Shareholders' equity
    Share capital                                    21,476,287    7,713,904
    Accumulated other comprehensive loss             (5,379,941)  (1,500,487)
    Reserves                                          5,303,068    5,303,068
    Retained earnings                                16,929,753   16,363,120
    Contribution Surplus                              3,302,978            -
    Total shareholders' equity                       41,632,145   27,879,605
    Total liabilities and shareholders' equity       60,843,581   51,502,955


                                  (Unaudited - Expressed in Canadian dollars)

                                      Three months   Six months   Six months
                                             ended        ended        ended
                                           June 30,     June 30,     June 30,
                                              2007         2007         2006
                                                 $            $            $

    Revenue                             12,510,098   22,353,284   20,315,085
    Cost of sales                       (9,056,257) (16,063,794) (14,386,979)
    Gross profit                         3,453,841    6,289,490    5,928,106
    Rental income                          102,768      212,075      197,249
                                         3,556,609    6,501,565    6,125,355
    Selling and distribution expenses     (260,644)    (622,949)    (871,580)
    Administrative expenses             (1,434,171)  (2,374,929)  (1,578,175)
    Foreign exchange gain (loss)           125,186      (75,883)    (240,311)
    Income from operations               1,986,980    3,427,804    3,435,289
    Borrowing costs                       (250,113)    (753,934)    (666,010)
    Public listing expenses                      -     (681,011)    (335,000)
    Stock-based compensation              (583,812)    (744,230)           -
    Other income                                 -            -      163,000
    Income before income tax             1,153,055    1,248,629    2,597,279
    Income tax expense                    (414,999)    (681,996)           -
    Net income                             738,056      566,633    2,597,279

    Earnings per share
      - basic                                 0.02         0.01         0.09
      - fully diluted                         0.01         0.01         0.09

    Weighted average number of common
     shares outstanding
      - basic                           46,845,644   41,889,084   29,593,000
      - fully diluted                   52,823,039   46,105,336   29,593,000


                                  (Unaudited - Expressed in Canadian dollars)

                                      Three months   Six months   Six months
                                             ended        ended        ended
                                           June 30,     June 30,     June 30,
                                              2007         2007         2006
                                                 $            $            $

    Net income (loss)                      738,056      566,633    2,597,279
    Other comprehensive income (loss)            -            -            -
    Unrealized exchange gain (loss)
     on translation of self-sustaining
     foreign operations                 (3,836,018)  (3,879,454)    (918,823)
    Comprehensive income (loss)         (3,097,962)  (3,312,821)   1,678,456


                                  (Unaudited - Expressed in Canadian dollars)

                                      Three months   Six months   Six months
                                             ended        ended        ended
                                           June 30,     June 30,     June 30,
                                              2007         2007         2006
                                                 $            $            $

    Net income for the period              738,057      566,633    2,597,279
    Items not involving cash:
      Depreciation of property,
       plant and equipment and
       rental property                     184,448      350,138      231,166
      Stock-based compensation             583,812      744,230            -
    Changes in non-cash working
     capital items:
      Trade receivables                 (3,556,591)  (3,709,153)   6,677,511
      Inventories                          357,570     (699,350)    (917,135)
      Other receivables                    276,188      484,543     (431,403)
      Prepayments                         (219,439)    (630,302)     410,489
      Trade payables                       666,313      438,749     (783,548)
      Advances received                          -            -     (475,445)
      Other payables                      (342,700)    (106,114)     (80,206)
      Accrued liabilities                  606,893      105,620     (170,531)
    Cash provided by (used in)
     operating activities                 (705,449)  (2,455,006)   7,058,177

    Deposit paid                                 -            -   (4,081,960)
    Repayment on advances to related
     parties                                     -            -    4,866,651
    Repayment from (advances to) a
     related party                        (195,574)    (181,834)           -
    Repayment from (loans to)
     unrelated parties                   1,493,995    2,067,983   (2,959,037)
    Acquisition of property, plant
     and equipment                         (55,045)     (84,073)    (190,138)
    Additions in construction in
     progress                           (2,867,252) (10,494,322)  (2,390,320)
    Deposit for machinery                        -     (275,028)           -
    Cash provided by (used in)
     investing activities               (1,623,876)  (8,967,274)  (4,754,804)

    Advances from banks                          -    1,058,353    5,491,200
    Repayments to banks                 (1,322,173)  (1,411,153)  (1,971,200)
    Loans from other financial
     institutions                          728,987   (3,250,141)   1,987,414
    Distribution to shareholders                 -            -   (6,212,577)
    Restricted cash                      2,867,991     (363,289)           -
    Gross proceeds from private
     placement                                   -   17,500,000            -
    Cash acquired in reverse takeover            -       46,131            -
    Cash commission to agents                    -   (1,225,000)           -
    Cash provided by (used in)
     financing activities                2,274,805   12,354,901     (705,163)

    Effect of changes in exchange
     rates on cash                         (59,683)     (90,458)     209,703

    Increase (decrease) in cash and
     cash equivalents                     (114,203)     842,163    1,807,913
    Cash and cash equivalents,
     beginning of period                 1,727,054      770,688      371,882
    Cash and cash equivalents, end
     of period                           1,612,851    1,612,851    2,179,795

    Supplemental disclosure of cash
     flow information:
    Cash paid for interest                 496,011      446,638      584,505
    Tax paid                               526,054      526,054            -

    About CY Oriental Holdings Ltd.

    CY Oriental Holdings Ltd. is a Canadian incorporated, China-based
manufacturer and value-added supplier of apparel and fashion products to
leading international brands and retailers, including department stores. CY
owns and operates a manufacturing facility in Shanghai, China, and is readying
its newly constructed facility in the city of Tengzhou, China, for commercial
production. The Company's ready-made products include a broad range of
high-quality garments, including woven casual wear, woven formal wear, denim
and knit junior sportswear.

    (1) EBITDA is a non-Canadian GAAP financial measure. CY Oriental
calculates it by adding (1) net income (loss), (2) borrowing costs reported on
the income statement, (3) depreciation expenses reported as part of the cost
of sales, (4) depreciation expenses reported as part of the general and
administrative expenses on the income statement, (5) foreign exchange loss
(minus if there is foreign exchange gain) reported on the income statement,
and (6) income tax expenses on the income statement. EBITDA is not a
recognized measure under Canadian GAAP and does not have a standardized
meaning prescribed by Canadian GAAP and therefore it is unlikely to be
comparable to similar measures presented by other issuers. However the Company
believes that, in addition to net income (loss), EBITDA is a useful
complementary measure of cash available prior to borrowing costs, depreciation
expenses and foreign exchange losses.

    Forward-Looking Statements

    This press release contains "forward-looking" statements that are subject
to important risks, uncertainties and assumptions relating to the Company and
the environment in which it operates, which are based on the Company's
operations and management's estimates, forecasts and projections. Words used
in this press release such as "plan", "budget", "believe", "expect",
"anticipate", "estimate", "intend", "may", "project", "will", "would" and
similar expressions may identify such forward-looking statements.
    Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results, performance or achievements
to be materially different from any results, performance or achievements
anticipated or implied by the forward-looking statements. There is no
assurance that forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements. Accordingly, investors should not place undue reliance on
forward-looking statements. Such statements reflect management's view of
future events and are subject to certain assumptions, risks and uncertainties.
    Such assumptions include assumptions based on the growth of the apparel
industry and the success of the Company's marketing and expansion plans. The
following factors could cause material differences in results from those
expressed or implied in any forward-looking statements set out herein: changes
in consumer spending patterns; consumer preferences towards product offerings;
reliance on the U.S. market; reliance on major customers; the sustainability
of customers' orders; the Company's ability to develop new merchandise;
general economic conditions and normal business uncertainty; the potential
impact on the retail environment of national and international security and
health concerns; the impact of competition and pricing; competitive conditions
in the industries in which the Company participates; changes in weather
patterns; operating risks; seasonality of the retail industry; political
instability; transportation cost increases; the success or failure of the
Company's business plan; the ability of the Company to successfully execute
its growth strategy and whether such strategic initiatives will yield the
expected benefits; uncertainties related to the Tengzhou facility; the ability
to retain, hire and train key personnel; relationship with suppliers;
fluctuations in foreign currency exchange rates and raw materials prices;
interest rate fluctuations and other changes in borrowing costs; potential
deterioration of the Company's financial position; reliance on banking
facilities; import/export controls and inspection; insurance risks;
environmental protection; conflicts of interest; and changes in laws,
reductions in refunds of value added tax, volatility of quota prices for
certain products, rules and regulations applicable to the Company and other
risks associated with doing business in China (such as state ownership,
government intervention, foreign investment controls, repatriation of profits
and controls over currency conversion, taxes, shareholders' rights and
enforcement of judgments, permits and business licenses, a developing legal
system, acquisition and appropriation of land use rights, inflation, recent
regulations relating to cross-border mergers and acquisitions and relating to
establishment of offshore special purpose companies), as well as the
assumptions and risks set out under "Risk Factors" in the Company's
Management's Discussion & Analysis for the year ended December 31, 2006 as
filed on SEDAR on April 30, 2007.
    Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, our actual results could differ
materially from those anticipated in these forward-looking statements.
Although management believes that its expectations are based on reasonable
assumptions there is no assurance that these expectations will materialize.
    The Company does not assume any obligation to update this forward looking
information, except as may be required by law.

           The TSX Venture Exchange does not accept responsibility
                for the adequacy or accuracy of this release.

    %SEDAR: 00023392E

For further information:

For further information: John Yuan, VP and Corporate Secretary, CY
Oriental Holdings Ltd., Tel: (604) 633-9833, Email:;
Trevor Heisler, Investor Relations, The Equicom Group, Tel: (416) 815-0700 ext
270, Email:

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