China Linen Textile Industry, Ltd., a China-based company engaged in the production and sale of linen yarn and various types of linen fabric, announced its first and second quarter 2010 financial results.

First Quarter Ended March 31, 2010 Financial Results

Revenue for the first quarter of 2010 increased 58.7% to approximately $8.8 million, compared to $5.5 million for the first quarter of 2009. The increase was primarily due to increased marketing efforts which resulted in an increase in sales of linen fabric of $3.8 million, or 77.0%.

The Company focused on linen fabric which generated 100% of revenue during the first quarter of 2010, while linen fabric contributed 90.0% of revenue in the first quarter of 2009 with 10% revenue generated from subcontracting linen fabric and linen yarn to fully utilize the Company's production capacity.

Cost of goods sold for the three months ended March 31, 2010 was approximately $6.1 million or 69.1% of revenue, as compared to $4.4 million or 79.5% of revenue for the three months ended March 31, 2009. Gross profit for the first quarter of 2010 was $2.7 million with gross margins of 30.9%, compared to $1.1 million in gross profit and gross margins of 20.5% for the first quarter of 2009. The increase in gross profit was due to the increased sales volumes of higher margin linen fabric in the first quarter of 2010.

Operating expenses for the three months ended March 31, 2010 were approximately $0.5 million, an increase of 69.0% compared to the same period in 2009. The increase was primarily due to the increased expenses in connection with its public company compliance efforts.

Operating income for the first quarter of 2010 totaled approximately $2.2 million, a 165.9% increase from $0.8 million reported for the first quarter of 2009. Operating margins were 24.8% and 14.8% for the first quarter of 2010 and 2009, respectively. The improvement in our operating margin was due to increased revenue and improved expense management.

Other income totaled $0.5 million for the first quarter of 2010, as compared to $0.7 million in the same period of 2009, representing a decrease of $0.2 million, or approximately 19.4%. This decrease is mainly due to a decrease of $0.2 million in government subsidies received by the Company in the first quarter of 2010, as compared to the same period in 2009.

Net income was approximately $2.1 million for the first quarter of 2010, an 89.8% increase from $1.1 million reported for the first quarter of 2009. The increase in net income was primarily attributable to an increase of $3,250,024 in revenue as compared to the same period in 2009.

Diluted earnings per share increased 89.1% to $0.10 for the first quarter of 2010 compared to $0.06 for the first quarter of 2009, based upon 20.2 million and 20.1 million diluted common shares outstanding, respectively. The increase in diluted earnings per share was attributable to an increase of $1 million in net income as compared to the same period in 2009.