ZHEJIANG, China, April 25, 2011 /PRNewswire-Asia/ -- Lizhan
Environmental Corporation ("Lizhan" or
the "Company")
(NasdaqGM: LZEN), one
of China's leading manufacturers
of eco-friendly fabrics whose products are developed using patented
technology that regenerates collagen fiber from genuine leather
scraps, announced today that the Company has obtained lines of
credit to fuel expansion.
Lines of Credit
On March 24, 2011, the Tongxiang
Branch of China Citic Bank agreed to provide Hongzhan (Zhejiang) New Material Co. Ltd. ("Hongzhan"),
a subsidiary of Lizhan Environmental Corporation ("Lizhan" or the
"Company"), with a line of credit in the principal amount of up to
$3.4 million (approximately
RMB 22,000,000). At the end of
March 2011, the Company drew down
approximately $1.7 million
(approximately RMB 10,000,000) from
this line of credit at an interest rate of 7.272% per annum. The
loan matures on March 23, 2012. The
proceeds of the loan were only used for working capital of the
Company, such as payment of salaries, utilities and other customary
operational expenses. Lizhan's Chairman and Chief Executive
Officer, Jianfeng Liu, and Mr. Liu's
wife, have entered into guarantee agreements with the bank pursuant
to which Mr. and Mrs. Liu have provided personal guarantees on
amounts drawn by Hongzhan from the line of credit. The loan is
secured by Hongzhan's construction in progress and land use rights
for approximately 17,200 square meters of real property. If
Hongzhan defaults on the loan, the bank may exercise its remedies
against the Company's land use rights for its real property.
In addition, on March 31, 2011,
the Tongxiang Branch of the Industry and Commercial Bank of
China agreed to provide Lizhan
Textile (Zhejiang) Co., Ltd.
("Lizhan Textile"), a subsidiary of the Company, with a line of
credit in the principal amount of up to $6.1
million (approximately RMB 40
million). On April 8, 2011,
Lizhan Textile drew down approximately $1.9
million (approximately RMB 12.3
million) from this line of credit at an interest rate of
6.7275% per annum. The proceeds of the loan were used for the
purchase of raw materials for Evergreen Products. The Company
intends to use the balance of this line of credit for the purchase
of raw materials. Lizhan's subsidiary, Hongzhan, provided a
guarantee through April 5, 2013 on
amounts drawn by Lizhan Textile from the line of credit.
Update on Production Facilities and Customer
Orders
The Company continues to make progress in completing production
line 1 so that the Evergreen Products produced on production line 1
meet the Company's quality standards. The Company expects to
receive four sets of water treatment equipment before the end of
April. The equipment costs $140,000
(approximately RMB 900,000), which
the Company intends to pay from cash currently available from
operating income. If the equipment is delivered and installed as
scheduled, the Company anticipates that the production line will
produce 70,000 meters per month by June
2011. Contemporaneously with installing the four sets of
water treatment equipment, the Company will seek the certification
and acceptance by its customers of the Evergreen Products being
produced on line 1.
When production line 1 achieves full production capacity, the
Company intends to complete installation of production line 2. The
Company has applied all of the proceeds from its November 2010 public offering to production line
2 for its production of Evergreen Products. The proceeds were used
to construct the plant, purchase equipment and hire additional
employees. The expenses incurred in constructing production line 2
increased dramatically due to inflation in China which caused an increase in the price of
steel and concrete, higher labor costs and higher rent. As a
result, the Company expects that the total remaining costs to
complete production line 2 will be approximately $1.24 million (approximately RMB 8 million). The Company expects to use cash
generated from current and future operations to fund the completion
of production line 2. If cash from operations are not sufficient to
fund the completion of production line 2, the Company will need to
raise additional capital or borrow additional funds. The Company
expects to begin testing of production line 2 in August 2011.
As a result of the delays in completing the installation of
production lines 1 and 2, the Company has postponed the
installation of production lines 3 and 4. Once production lines 1
and 2 are operating at full capacity and depending on the demand
for the Company's Evergreen Products, the Company will determine
whether to commence installation of production line 3 and/or
production line 4. The Company anticipates that it will need to
raise additional capital or borrow additional funds if and when it
determines to commence installation of production line 3 and 4.
The delays in completing the installation of production lines 1
and 2 have had a negative impact on the Company's aggregate
production capacity and orders of our Evergreen Products. At full
capacity, the Company expects production line 1 to produce
approximately 5,000 meters of product per day.
Despite the delays in production, the Company's customers in
China and internationally continue
to express a strong interest in the Company's Evergreen Products.
However, before these customers will issue purchase orders, the
Company expects that the customers will have to analyze and approve
the quality of the Evergreen Products, and determine the Company's
capacity to produce the quantities of the products required by the
customers. Therefore, the Company does not anticipate realizing
full production and revenues in 2011 from previously disclosed
pre-orders. Assuming the timely installation of productions line 1
and 2 subject to customer's acceptance as described above, the
Company anticipates receiving a lesser amount of revenue than
previously disclosed in 2011.
Comments from the CEO
"Regarding the two lines of credit obtained by the Company," Mr.
Jianfeng Liu, Chairman and Chief
Executive Officer of Lizhan commented, "The Company has built its
reputation with its global customers based on quality and
reliability of its products. We are gratified that these two
prestigious Chinese lending institutions have recognized the
Company's potential and track record for quality products and have
provided us with substantial credit facilities in light of the
tightening credit that companies are facing in China. The cautious approach that we have
taken in completing our production facilities reflects our
commitment to quality in order to provide our customers with the
quality products that they deserve. The combination of having the
credit facilities and installation of our Evergreen production
lines has allowed the Company to continue its growth plans in spite
of unpredictable delay and cost increases. We will continue to
emphasize quality to ensure that our shareholders will be in a
better position to benefit from the continued strong demand for our
products in both China and
international markets."
About Lizhan Environmental Corporation
Lizhan Environmental Corporation is one of China's leading manufacturers of eco-friendly
fabrics whose products are developed with patented technology that
regenerates collagen fiber from leftover cuttings, pieces and
trimmings of genuine leather. The Company's products are mainly
used in furniture, garments and other consumer applications.
Safe Harbor Statements
This press release may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve
inherent risks and uncertainties that could cause actual results to
differ materially from those projected or anticipated, including
risks outlined in the Company's public filings with
the Securities and Exchange Commission, including the
Company's annual report on Form 20-F. Some of risks
inherent in an investment in our company include, but are not
limited to, our limited operation history, our need to maintain
sufficient levels of liquidity and working capitals, the potential
need to reduce our expansion plans, price inflation in the PRC,
difficulties in developing and selling our new Evergreen Products,
seasonal patterns in our business, protection of our intellectual
property and the risk of infringing the intellectual property of
others, customer decisions to discontinue purchasing our products,
and restrictions imposed by Chinese regulations, including every
policies. All information provided in this press
release is as of the date hereof. Except as required by law, the
Company undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated
events.
For more information, please contact:
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Corporate
Contact:
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Investor
Relations Contact:
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Lizhan Environmental
Corporation
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Cooper Global
Communications
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Silvia
Liu
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Richard Cooper
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Investor Relation
Manager
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Email: rcooper@cooperglobalcommunications.com
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Email: ir@lezncorp.com
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Sabrina Zhang
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Web: www.lzencorp.com
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Email:szhang@cooperglobalcommunications.com
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Phone: +86 573 8862
268
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Phone: (212)
317-1400
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SOURCE Lizhan Environment Corporation