China Shenghuo Reports Unaudited Financial Results for the Third Quarter of 2009
Pharmaceutical Holdings, Inc. (NYSE Amex Equities: KUN) (“China Shenghuo” or
the “Company”), which is engaged in the research, development, manufacture,
and marketing of pharmaceutical, nutritional supplement and cosmetic products
in
results for the third quarter ended
Third Quarter 2009 Financial Highlights
-- Total revenues increased by 45% year-over-year to $10.56 million;
-- Gross margin decreased to 72.08% from 72.89% in the same period of 2008;
-- Net cash provided by operations was $0.88 million compared with
negative cash flow of $ 0.23 million for the nine months ended
September 30, 2009 and 2008, respectively.
Mr. Gui Hua Lan, Chief Executive Officer of China Shenghuo, commented,
“Sales for the three months ended
million
implementation of a new sales policy that has stimulated the enthusiasm of
sales representatives, resulted in the increased sales of products. Our
primary products, Xuesaitong Soft Capsules and the innovative 12 Ways cosmetic
products continued to produce meaningful growth in a difficult market
environment.”
Third Quarter 2009 Financial Results
Revenues for the third quarter of 2009 increased by 45% to
compared to
revenues was primarily due to the Company’s implementation of a new sales
policy that has stimulated the enthusiasm of sales representatives and
resulted in increased sales of products.
Gross margin for the third quarter of 2009 increased by 43.41% to
million
three months ended
same period in 2008. The decrease in gross margin percentage was primarily due
to the increasing price of raw material.
Selling expense for the third quarter of 2009 was
with
increase in selling expenses was the change in our marketing policy. Our main
product has been sold to patients through hospitals, which customer
relationships were cultivated by sales representatives. However, we believe it
is in our long-term best interest to grow our operations through the
over-the-counter (“OTC”) market, which we anticipate will produce higher
profit margins. Accordingly, we began developing the OTC market in 2009 and as
of
of the total sales revenue for Medicine. As of
that our expenditures for developing the Company’s presence in the OTC market
through such in 2009 are approximately
dedicate significant funds in the future to continue to develop in the OTC
market. Although we are focusing our operations on the OTC market, we have
adopted a policy to absorb a significantly higher percentage of costs incurred
by our sales representatives than in the past in order to foster their
cooperation in developing the OTC market. The costs being borne by us with
respect to developing the OTC market are being accrued in selling expenses.
The Company reimburses the sales representatives their selling and
marketing expenses when they submit the appropriate documentation to be
reimbursed and their sales are collected. The accrued selling expenses are due
within one to six months. The Company reimburses the sales representatives
their accrued selling expenses when related accounts receivable are collected.
General and administrative expenses decreased by 41.53% to
in the third quarter of 2009 compared with
in 2008, primarily due to (i) reduction of the professional service fee
relating to maintain our status as a public company with its securities traded
on a U.S. national exchange; and (ii) our strengthened budget control over
expense disbursements to reduce unnecessary expense.
Loss from operations for the third quarter of 2009 was
compared with operating income of
Net (Loss) Income attributable to shareholders for the third quarter of
2009 was
to a net income of
the same period of 2008.
Balance Sheet
As of
amounted to
2008
2009
Drugs Pipeline
China Shenghuo has a number of drugs currently in phase II clinical trials
with the State Food and Drug Administration (SFDA) for prescription use. The
Company’s drug portfolio development strategy mainly focuses on three major
markets — cardio- and cerebro-vascular diseases, peptic ulcer diseases and
general health products. Below is the list of drugs and their anticipated SFDA
approval timetable:
Anticipated
Drugs Name Intended Use Approval Year
Levofloxacin Hydrochloride Antibiotic applications 2010
Soft Capsule
Dencichine Hemostat Anti-hemorrhagic applications 2012
Wei Dingkang Soft Capsule Peptic ulcer 2011
Business Update
Mr. Lan concluded, “Strong product-development capabilities, existing
product pipelines and those products entering into clinical-research stages
are helping to generate meaningful year-over-year top-line growth as we
continue our efforts on expanding market share in the vast cardio- and
cerebro-vascular market. On the other hand, we believe it is in our best-long
term interest to grow our operations through the over-the-counter (“OTC”)
market, which will produce higher profit margins. We therefore began
developing the OTC market in 2009 and we can expect a further expansion of OTC
market in the fourth quarter of this year since we have achieved remarkable
results so far. In addition, our 12 Ways cosmetics products give us greater
revenue diversification that we did not have before. We are building a solid
foundation which will help us to increase profitability and increase
shareholder value going forward.”
About China Shenghuo
Founded in 1995, China Shenghuo is a specialty pharmaceutical company that
focuses on the research, development, manufacture and marketing of
Sanchi-based medicinal and pharmaceutical, nutritional supplement and cosmetic
products. Through its subsidiary, Kunming Shenghuo Pharmaceutical (Group) Co.,
Ltd., it owns thirty SFDA (State Food and Drug Administration) approved
medicines, including the flagship product Xuesaitong Soft Capsules, which has
already been listed in the Insurance Catalogue. At present, China Shenghuo
incorporates a sales network of agencies and representatives throughout
which markets Sanchi-based traditional Chinese medicine to hospitals and drug
stores as prescription and OTC drugs primarily for the treatment of
cardiovascular, cerebrovascular and peptic ulcer disease. The Company also
exports medicinal products to Asian countries such as
Kingdom
http://www.shenghuo.com.cn .
Safe Harbor Statement
This press release may contain certain “forward-looking statements,” as
defined in
that involve a number of risks and uncertainties. There can be no assurance
that such statements will prove to be accurate, and the actual results and
future events could differ materially from management’s current expectations.
Such factors include, but are not limited to, risks of litigation and
governmental or other regulatory proceedings arising out of or related to any
of the matters described in recent press releases, including arising out of
the restatement of the Company’s financial statements; the Company’s ability
to refinance or repay loans received; the Company’s uncertain business
condition; the Company’s continuing ability to satisfy any requirements which
may be prescribed by the Exchange for continued listing on the Exchange; risks
arising from potential weaknesses or deficiencies in the Company’s internal
controls over financial reporting; the Company’s reliance on one supplier for
Sanchi; the possible effect of adverse publicity on the Company’s business,
including possible contract cancellation; the Company’s ability to develop and
market new products; the Company’s ability to establish and maintain a strong
brand; the Company’s continued ability to obtain and maintain all certificates,
permits and licenses required to open and operate retail specialty counters to
offer its cosmetic products and conduct business in
Company’s intellectual property rights; market acceptance of the Company’s
products; changes in the laws of
the Company’s operations; cost to the Company of complying with current and
future governmental regulations; the impact of any changes in governmental
regulations on the Company’s operations; general economic conditions; and
other factors detailed from time to time in the Company’s filings with the
United States Securities and Exchange Commission and other regulatory
authorities. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
For further information, please contact:
China Shenghuo Pharmaceutical Holdings, Inc.
Miss Shujuan Wang
Director of Securities Affairs Department
Email: wangshujuan@chinashenghuo.net
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2009 2008
Assets: Unaudited Audited
Current Assets:
Cash and cash equivalents $ 2,723,716 $ 1,612,054
Accounts and notes receivable, less
allowance for doubtful accounts of
$1,650,774 and $4,834,745, for
2009 and 2008, respectively 13,721,541 9,108,703
Other receivables, less allowance for
doubtful accounts of $2,495,914 and
$2,955,516, respectively 7,212,920 8,637,653
Advances to suppliers 271,132 446,168
Inventories, net of allowance for
obsolescence of $148,335 and
$147,978, respectively 3,485,225 4,287,462
Receivables from related parties 164,044 --
Other current assets 10,543 41,177
Total Current Assets 27,589,121 24,133,217
Property, plant and equipment, net of
accumulated depreciation of
$5,761,407 and $5,341,933,
respectively 7,345,163 7,581,664
Intangible assets, net of accumulated
amortization of $186,951 and
$71,456, respectively 1,134,697 665,959
Deferred tax assets 401,300 --
Long-term other receivables, less
allowance for doubtful accounts
of nil and $664,532, respectively -- 663,433
$ 36,470,281 $ 33,044,273
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUTED)
September 30, December 31,
2009 2008
LIABILITIES AND STOCKHOLDERS' Unaudited Audited
EQUITY:
Current Liabilities:
Accounts payable $ 3,228,171 $ 1,293,460
Other payables and accrued
expenses 8,143,224 2,721,082
Deposits 6,379,811 5,550,502
Payables to related parties -- 148,575
Short-term notes payable 5,337,043 9,850,211
Advances from customers 1,304,861 222,609
Taxes and related payables 1,440,571 1,236,574
Current portion of long-term notes
payable 3,802,504 3,245,685
Total Current Liabilities 29,636,185 24,268,698
Long-term notes payable 6,435,006 1,131,193
Total Liabilities 36,071,191 25,399,891
Equity:
Common stock, par value $0.0001;
100,000,000 shares authorized;
19,679,400shares outstanding,
both periods 1,968 1,968
Additional paid-in capital 6,193,927 6,193,927
Statutory reserves 147,023 147,023
Accumulated deficit (7,372,543) (603,572)
Accumulated other comprehensive
income 1,587,438 1,656,812
Total shareholder's equity 557,813 7,396,158
Noncontrolling interest (158,723) 248,224
Total equity 399,090 7,644,382
$ 36,470,281 $ 33,044,273
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME / (LOSS)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Unaudited Unaudited Unaudited Unaudited
Sales $10,558,218 $7,281,384 $25,459,077 $21,359,149
Cost of Sales 2,947,511 1,973,865 7,643,566 7,061,446
Gross Margin 7,610,707 5,307,519 17,815,511 14,297,703
Operating Expenses:
Selling expenses 6,988,017 2,989,486 19,604,857 8,666,561
General and
administrative
expenses 1,063,981 1,819,573 5,230,722 7,001,410
Research and
development
expenses 10,534 66,052 24,455 255,241
8,062,532 4,875,111 24,860,034 15,923,212
(Loss) / Income
from Operations (451,825) 432,408 (7,044,523) (1,625,509)
Other Income /
(Expense):
Interest income 1,349 588 2,661 5,701
Income from
research and
development
activities 49,723 5,745 194,902 344,370
Interest expense (184,228) (272,002) (704,242) (963,198)
Non-operating
expenses (2,847) (330) (22,038) (138,812)
(136,003) (265,999) (528,717) (751,939)
(Loss) / Income
Before Income Tax
(Expense) Benefit
and Non-controlling
Interest (587,828) 166,409 (7,573,240) (2,377,448)
Income tax
benefit /
(expense) 401,012 (4,471) 401,012 (4,484)
Net (Loss) / Income (186,816) 161,938 (7,172,228) (2,381,932)
Net loss /
(income)
attributable to
noncontrolling
interest 154,892 (7,652) 403,257 146,089
Net (Loss) / Income
Attributable to
Shareholders $(31,924) $154,286 $(6,768,971) $(2,235,843)
Basic and Diluted
Earnings / (Loss)
per Share $(0.00) $0.01 $(0.34) $(0.11)
Weighted-average
Number of Shares
Outstanding -
Basic and Diluted 19,679,400 19,679,400 19,679,400 19,679,400
Comprehensive
(Loss) / Income:
Net (Loss) /
Income (186,816) 161,938 (7,172,228) (2,381,932)
Foreign
currency
translation
adjustment (76,185) 54,116 (73,064) 744,189
Comprehensive
(Loss) / Income (263,001) 216,054 (7,245,292) (1,637,743)
Comprehensive
(Loss) / Income
attributable to
noncontrolling
interest 158,739 (10,385) 406,947 108,507
Comprehensive
(Loss) Income
Attributable to
Shareholders (104,262) 205,669 (6,838,345) (1,529,236)
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30,
2009 2008
Unaudited Unaudited
Cash Flows from Operating
Activities:
Net loss $ (6,768,971) $ (2,235,843)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 542,040 619,402
Deferred income taxes (401,012) --
Non-controlling interest in loss
of subsidiaries (403,257) (146,089)
Allowance for doubtful accounts 1,454,131 3,596,319
Change in current assets and
liabilities:
Accounts and notes receivable (5,749,846) (919,991)
Other receivables 1,783,691 (1,465,805)
Advances to suppliers 175,993 (60,460)
Inventories 812,063 333,486
Other current assets 30,709 143,282
Accounts payable 1,930,185 655,989
Accrued expenses and deposits 6,191,182 (538,712)
Advances from customers 1,080,935 119,991
Taxes and related payables 200,851 (334,217)
Net Cash Provided by (Used in)
Operating Activities 878,694 (232,648)
Cash Flows from Investing
Activities:
Capital expenditures (738,350) (218,780)
Receivables from related parties (163,926) (3,957)
Net Cash Used in Investing
Activities (902,276) (222,737)
Cash Flows from Financing
Activities:
Payables to related parties (181,445) 87,385
Proceeds from short and long-term
notes payable 21,227,417 5,715,216
Payments on short and long-term
notes payable (19,915,434) (7,215,461)
Net Cash Provided by (Used in)
Financing Activities 1,130,538 (1,412,860)
Effect of foreign currency
exchange rate fluctuation
on Cash and Cash Equivalents 4,706 148,328
Net Change in Cash and Cash
Equivalents 1,111,662 (1,719,917)
Cash and Cash Equivalents at
Beginning of Period 1,612,054 2,800,641
Cash and Cash Equivalents at End
of Period $ 2,723,716 $ 1,080,724
Supplemental Information
Cash paid for interest $ 704,242 $ 963,198
Cash paid for income taxes $ -- $ --
SOURCE China Shenghuo Pharmaceutical Holdings, Inc.