KUNMING, China, Nov. 14, 2011 /PRNewswire-Asia-FirstCall/ --
China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Alternext US:
KUN) ("China Shenghuo" or the "Company"), today reported financial
results for the third quarter ended September 30, 2011.
Third Quarter 2011 Highlights
- Total revenue was approximately $10.9
million for the third quarter of 2011, an increase of 28%
from approximately $8.6 million for
the same period of 2010.
- Gross profit as a percentage of revenues was approximately 64%,
as compared to 65 % for the same period of 2010.
- Net cash provided by operating activities for the nine months
ended September 30, 2011 was
approximately $2.3 million, an
increase of approximately $0.1
million as compared to approximately $2.2 million for the same period of 2010.
- Net loss attributable to shareholders was $506,454 for the three months ended September 30, 2011 as compared to the net income
attributable to shareholders of $787,657 for the same period of 2010.
Sales: Sales for the three months ended
September 30, 2011 was approximately
$10.9 million, an increase of
approximately $2.3 million, or 28%,
from approximately $8.6 million for
the three months ended September 30,
2010. The increase in sales was primarily due to the
Company's main product Xuesaitong's sales increasing in
Tianjin City and Yunnan Province as Xuesaitong was listed on
the PIC list of Tianjin City since
the second half year in 2010 and the Company strengthened sales
promotion in the provinces and cities where Xuesaitong was listed
on their PIC lists, especially Yunnan
Province and Tianjin City.
The OTC market also contributed part of increase of revenue as the
Company also strengthened the OTC market development in 2011.
Cost of goods sold: Our cost of sales for the
three months ended September 30, 2011
was approximately $3.9 million, an
increase of approximately $0.9
million or 31% from approximately $3.0 million for the three months ended
September 30, 2010. The increase in
cost of sales was due to the increase of the sales volume and the
purchase price of Sanqi which is the main raw material of our main
product Xuesaitong. Although we have started to grow Sanqi within
the Resort, we will not be able to harvest until 2014 because it
has a three year growth cycle. In addition, the Zhonghuang Hotel
began trial operation since January
2011 which has contributed approximately $0.5 million to the increase of cost of
sales.
Gross profit: Our gross profit for the three
months ended September 30, 2011 was
approximately $7.0 million as
compared with approximately $5.6
million for the three months ended September 30, 2010, an increase of approximately
$1.4 million, or 26%. Gross profit as
a percentage of revenues was approximately 64% for the three months
ended September 30, 2011, a decrease
of 1% from 65% for the three months ended September 30, 2010. The slight decrease in gross
profit percentage was primarily due to the increase of cost of
sales as set forth above.
Selling expense: Selling expenses were
approximately $5.2 million for the
three months ended September 30,
2011, an increase of approximately $1.4 million, or 36%, from approximately
$3.8 million for the three months
ended September 30, 2010. The primary
reason for the increase in selling expenses was due to increase of
sales commission to sales representative in line with the sales
increment.
We reimburse the sales representatives their selling and
marketing expenses when they submit the appropriate documentation
to be reimbursed and their sales are collected. We reimburse the
sales representatives their accrued selling expenses when related
accounts receivable are collected.
General and administrative expense: General and
administrative expenses were approximately $1.4 million for the three months ended
September 30, 2011, an increase of
approximately $0.5 million, or 53%,
from approximately $0.9 million for
the three months ended September 30,
2010. The increase was primarily due to the increase of the
management's traveling and conference expenses for expanding our
sales channel. In addition, Zhonghuang Hotel began trial operation
since January 2011 which has
contributed $94,100 to the increase
of general and administrative expense.
Research and development expense: Research and
development expense for the three months ended September 30, 2011 was $321,297, as compared to $160,795 for the three months ended September 30, 2010, an increase of $160,502. The increase was primarily due to the
expenditures in the third quarter of 2011 for outside experts for
the Phase I clinical test of Sh1002 which amounted to $168,680.
Other expenses: Other expenses were $592,448 for the three months ended September 30, 2011, which consisted of interest
expense and non-operating expense, offset by subsidy income,
interest income and non-operating income, a decrease of
$890,991, or 298%, from an income of
$298,543 for the three months ended
September 30, 2010. The decrease was
mainly due to an increase in interest expenses occurring and less
subsidy income received as compared the same period in 2010.
Income tax benefit
(expense): Income tax
benefit was $37,949 for the three
months ended September 30, 2011 as
compared to income tax expense of $118,370 for the three months ended September 30, 2010. The tax benefit was mainly
attributable to the medicine segment of the Company and the
deferred tax assets benefit from accrued expenses and provisions
for inventory.
Net (loss) income attributable
to shareholders: Net loss was $506,454 for the three months ended September 30, 2011 as compared to the net income
of $787,657 for the three months
ended September 30, 2010. The net
loss was primarily due to the increase of the cost of raw material,
expenses related to the trial operation of Shenghuo Plaza, research
and development expense on the Phase I clinical test of Sh1002 in
America, operating expenses, interest expense, and less government
subsidy income ($1,011 as compared to
$492,451 for the prior year
period).
The Company expects to receive mortgage financing for its
completed Shenghuo Plaza and two office buildings upon obtaining
the Building Completion Certificates and the Property Ownership
Certificate. This financing should help address the imbalance
between the Company's ratio of current liabilities to current
assets and result in an improved balance sheet.
About China Shenghuo
Founded in 1995, China Shenghuo is primarily engaged in 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 is currently being listed in the
2010 Provincial Insurance Catalogue of sixteen provinces around
China. At present, China Shenghuo
incorporates a sales network of agencies and representatives
throughout China, 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
Indonesia, Singapore, Japan, Malaysia, and Thailand and to European countries such as the
United Kingdom, Tajikistan, Russia and Kyrgyzstan.
With the substantial completion of Shenghuo Plaza at the end of
2010, China Shenghuo entered into a new business - the hotel and
hospitality business. Two floors of Shenghuo Plaza are
designed to be utilized as 12 Ways Chinese Herbal Beauty
Demonstration Center. The balance of Shenghuo Plaza is
used as a business hotel - Zhonghuang Hotel, restaurant and banquet
facilities and an entertainment venue.
China Shenghuo is also expanding into the businesses of wellness
tourism. For more information, please visit
http://www.shenghuo.com.cn.
Safe Harbor Statement
This press release may contain certain "forward-looking
statements," as defined in the United
States Private Securities Litigation Reform Act of 1995,
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 China;
protection of the Company's intellectual property rights; market
acceptance of the Company's products; changes in the laws of
the People's Republic of China
that affect 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.
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Company Contact:
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China Shenghuo Pharmaceutical
Holdings, Inc.
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Ms. Shujuan
Wang
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Secretary of Board of
Directors
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+86-871-7282698
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Investor Relations
Contact:
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The Trout Group
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Mark Xu
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+86-15821996861
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CHINA
SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND
SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(Amounts in
USD)
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2011
|
|
|
2010
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
3,936,948
|
|
$
|
1,669,387
|
|
Restricted
Cash
|
|
|
314,718
|
|
|
-
|
|
Accounts and notes
receivable, net of allowance of
2,355,552 and
2,260,505 for 2011 and
2010, respectively
|
|
|
15,895,009
|
|
|
11,531,027
|
|
Other receivables,
net of allowance of
3,292,772 and
3,159,623 for 2011 and
2010, respectively
|
|
|
4,271,421
|
|
|
4,111,315
|
|
Advances to
suppliers
|
|
|
590,735
|
|
|
580,168
|
|
Inventories
|
|
|
2,102,299
|
|
|
2,599,351
|
|
Due from related
parties
|
|
|
201,077
|
|
|
190,614
|
|
Current deferred
tax assets
|
|
|
1,133,114
|
|
|
833,568
|
|
Other current assets
|
|
|
135,549
|
|
|
208,111
|
|
Total
current assets
|
|
|
28,580,870
|
|
|
21,723,541
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
22,586,801
|
|
|
21,069,139
|
|
Other non-current
assets
|
|
|
2,395,763
|
|
|
2,554,193
|
|
Total
assets
|
|
$
|
53,563,434
|
|
$
|
45,346,873
|
|
|
|
|
|
|
|
|
|
Liabilities
and equity:
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
8,643,563
|
|
$
|
8,964,404
|
|
Other payables and
accrued expenses
|
|
|
12,133,317
|
|
|
9,699,857
|
|
Sales
representative deposits
|
|
|
5,532,182
|
|
|
4,936,429
|
|
Due to related
parties
|
|
|
-
|
|
|
79,864
|
|
Short-term
borrowings
|
|
|
16,864,031
|
|
|
5,289,178
|
|
Advances from
customers
|
|
|
1,337,319
|
|
|
1,158,649
|
|
Taxes payable and
other current liabilities
|
|
|
1,071,970
|
|
|
881,506
|
|
Current portion of
long-term borrowings
|
|
|
6,199,940
|
|
|
6,039,833
|
|
Total
current liabilities
|
|
|
51,782,322
|
|
|
37,049,720
|
|
Long-term
borrowings
|
|
|
-
|
|
|
6,251,227
|
|
Total
liabilities
|
|
|
51,782,322
|
|
|
43,300,947
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Common stock,
$0.0001 par value, 100,000,000 shares authorized and
19,679,400 shares issued and outstanding
|
|
|
1,968
|
|
|
1,968
|
|
Additional paid-in
capital
|
|
|
6,077,003
|
|
|
6,193,927
|
|
Appropriated
retained earnings
|
|
|
147,023
|
|
|
147,023
|
|
Accumulated
deficit
|
|
|
(6,243,196)
|
|
|
(5,940,439)
|
|
Accumulated other
comprehensive income
|
|
|
1,677,434
|
|
|
1,638,109
|
|
Total
stockholder's equity
|
|
|
1,660,232
|
|
|
2,040,588
|
|
Non-controlling
interest
|
|
|
120,880
|
|
|
5,338
|
|
Total
equity
|
|
|
1,781,112
|
|
|
2,045,926
|
|
Total
Liabilities and equity
|
|
$
|
53,563,434
|
|
$
|
45,346,873
|
|
|
|
|
|
|
|
|
|
|
CHINA
SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
AND
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Amounts in
USD, except shares)
|
|
|
|
|
|
Three Months
Ended September
30,
|
|
Nine Months
ended September
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
10,910,079
|
|
$
|
8,551,182
|
|
$
|
31,248,165
|
|
$
|
23,340,191
|
|
Cost of
goods sold
|
|
|
3,936,610
|
|
|
2,996,674
|
|
|
11,749,518
|
|
|
7,561,650
|
|
Gross profit
|
|
|
6,973,469
|
|
|
5,554,508
|
|
|
19,498,647
|
|
|
15,778,541
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
5,233,061
|
|
|
3,849,347
|
|
|
14,255,496
|
|
|
11,869,164
|
|
General and administrative
expenses
|
|
|
1,366,711
|
|
|
894,301
|
|
|
3,638,386
|
|
|
2,493,749
|
|
Research and development
expense
|
|
|
321,297
|
|
|
160,795
|
|
|
587,871
|
|
|
417,184
|
|
|
|
|
6,921,069
|
|
|
4,904,443
|
|
|
18,481,753
|
|
|
14,780,097
|
|
Income
from operations
|
|
|
52,400
|
|
|
650,065
|
|
|
1,016,894
|
|
|
998,444
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidy income
|
|
|
1,011
|
|
|
492,451
|
|
|
155,753
|
|
|
654,013
|
|
Interest and other
expense
|
|
|
(593,459)
|
|
|
(193,908)
|
|
|
(1,494,441)
|
|
|
(718,323)
|
|
|
|
|
(592,448)
|
|
|
298,543
|
|
|
(1,338,688)
|
|
|
(64,310)
|
|
(Loss) income
before income tax
|
|
|
(540,048)
|
|
|
948,608
|
|
|
(321,794)
|
|
|
934,134
|
|
Income tax
benefit (expense)
|
|
|
37,949
|
|
|
(118,370)
|
|
|
10,786
|
|
|
(141,001)
|
|
Net (loss)
income
|
|
|
(502,099)
|
|
|
830,238
|
|
|
(311,008)
|
|
|
793,133
|
|
Net income (loss)
attributable to non-controlling interests
|
|
|
4,355
|
|
|
42,581
|
|
|
(8,252)
|
|
|
34,313
|
|
Net (loss)
income attributable
to stockholders
|
|
$
|
(506,454)
|
|
$
|
787,657
|
|
$
|
(302,756)
|
|
$
|
758,820
|
|
Comprehensive
income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
|
(502,099)
|
|
|
830,238
|
|
|
(311,008)
|
|
|
793,133
|
|
Foreign currency
translation adjustment
|
|
|
(9,388)
|
|
|
21,221
|
|
|
40,397
|
|
|
26,135
|
|
Comprehensive
(loss)
income:
|
|
$
|
(511,487)
|
|
$
|
851,459
|
|
$
|
(270,611)
|
|
$
|
819,268
|
|
Comprehensive
gain (loss)
attributable to non-controlling interests
|
|
|
8,711
|
|
|
42,617
|
|
|
(7,180)
|
|
|
35,444
|
|
Comprehensive
(loss) income
attributable to
stockholders
|
|
$
|
(520,198)
|
|
$
|
808,842
|
|
$
|
(263,431)
|
|
$
|
783,824
|
|
Basic and
diluted (loss)
earnings per
share
|
|
$
|
(0.03)
|
|
$
|
0.04
|
|
$
|
(0.02)
|
|
$
|
0.04
|
|
Weighted
average number of shares
outstanding-basic and diluted
|
|
|
19,679,400
|
|
|
19,679,400
|
|
|
19,679,400
|
|
|
19,679,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHINA
SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND
SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
|
|
(Amounts in
USD)
|
|
|
|
|
Nine months
ended September
30,
|
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities
|
$
|
2,275,642
|
|
$
|
2,239,891
|
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
Purchase of long-lived
assets
|
|
(4,425,497)
|
|
|
(5,607,809)
|
|
Proceeds from disposal of
property
|
|
171
|
|
|
308,229
|
|
Net cash
used in investing activities
|
|
(4,425,326)
|
|
|
(5,299,580)
|
|
|
|
|
|
|
|
|
Cash flows
from financing activities:
|
|
|
|
|
|
|
Proceeds from
borrowings
|
|
22,083,616
|
|
|
24,640,172
|
|
Transfer to restricted
cash
|
|
(314,718)
|
|
|
-
|
|
Payments on
borrowings
|
|
(17,444,806)
|
|
|
(21,904,375)
|
|
Net
cash provided by
financing
activities
|
|
4,324,092
|
|
|
2,735,797
|
|
|
|
|
|
|
|
|
Effect of foreign currency
fluctuation on cash and cash equivalents
|
|
93,153
|
|
|
40,775
|
|
Net increase (decrease)
in cash and cash
equivalents
|
|
2,267,561
|
|
|
(283,117)
|
|
Cash and cash equivalents
at beginning of period
|
|
1,669,387
|
|
|
1,986,540
|
|
Cash and
cash equivalents at end of period
|
$
|
3,936,948
|
|
$
|
1,703,423
|
|
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
1,041,719
|
|
$
|
543,799
|
|
Cash paid for income
taxes
|
$
|
71,077
|
|
$
|
130,489
|
|
|
|
|
|
|
|
|
|
SOURCE China Shenghuo Pharmaceutical Holdings, Inc.