Balance Sheet and Cash Flow

As of March 31, 2011, the Company had cash and cash equivalents of $1.5 million, compared to $4.2 million at December 31, 2010. Inventory increased from $9.9 million as of December 31, 2010 to $23.0 million as of March 31, 2011, as the Company purchased a significant amount of raw materials to meet future sales orders and to reduce the impact of increasing unit purchase prices in the future. Accounts receivable balance was approximately $11.8 million on March 31, 2011, versus approximately $13.3 million on December 31, 2010.

Days sales outstanding (DSO) for the first three months of 2011 were approximately 81 days, compared to 107 days for the same period in 2010 mainly due to increased collection effort. Working capital as of March 31, 2011 totaled $25.5 million. The Company had total stockholders’ equity of $35.7 million at March 31, 2011, with total assets of $57.8 million versus total liabilities of $22.1 million, compared to total stockholders’ equity of $32.2 million at December 31, 2010, with total assets of $51.6 million versus total liabilities of $19.5 million.

For three months ended March 31, 2011, the Company’s cash used in operations were $0.2 million, with the divergence in net income mainly coming from an increase in cash used in inventory.

"As fashion trends across Europe and Asia favor pure linen products and accessories, and consumers increasingly recognize the quality and value of these products, we believe the linen market will continue to expand in 2011. In addition, higher overall cotton prices make linen more affordable on a relative basis and give us another reason to be optimistic about our business prospects going forward," Mr. Ren concluded.