GUANGZHOU, China, Dec. 4 /PRNewswire-FirstCall/ -- China Medicine
Corporation (OTC Bulletin Board: CHME), a leading distributor of medical
products, traditional pharmaceutical and Chinese medicines, herbs and dietary
supplements today is reporting third quarter financial results for the period
ending September 30, 2006.
Key Financial Indicators
(All numbers in thousands, except per share amounts in USD)
Q3 2006 Q3 2005 Percentage Change
Revenues $ 6,367 $ 2,576 147.2%
Cost of goods sold $ 4,490 $ 1,716 161.6%
Gross Profit $ 1,877 $859 118.3%
Total Operating
Expenses $217 $ 217 0.3%
Operating Income $ 2,890 $ 1,095 163.8%
Net Income $ 2,277 $ 1,506 51.3%
Fully Diluted EPS $ 0.29 $ 0.23 26.1%
Financial Results
For the third quarter ended September 30, 2006, the Company reported
revenue of $6.4 million as compared to $2.6 million during the third quarter
last year, representing a 147.2 percent increase. Revenue growth was driven
by a substantial increase in product sales, specifically related to the
acquisition of distribution rights for three new products acquired in the
second half of 2005 and an overall increase in the number of new distribution
customers. Gross profit was $1.9 million as compared to $0.9 million during
the third quarter last year, representing an increase of 118.3 percent. Gross
margins for the quarter were 29.5 percent as compared to 33.3 percent last
year with the year over year decrease primarily related to lower medicine
prices on certain products as mandated by the Chinese government beginning in
early 2006.
Operating income increased 163.8 percent to $2.9 million for the third
quarter 2006 as compared to operating income of $1.1 million for the same
period last year resulting in a 2.9 percent increase in operating margins to
45.4 percent. Included in operating income for the third quarter 2006 was
$1.3 million in other non operating income as compared to $0.5 million last
year which represent proceeds from the sale of certain pharmaceutical
technology and know-how to certain non-affiliated drug manufactures.
"During the third quarter we generated higher overall revenues as a
result of our expanded product portfolio and increasing customer count,"
commented Mr. Senshan Yangchairman and CEO of China Medicine
Corporation. "The secular trend towards increased domestic consumption of
pharmaceutical products continues as growing numbers of Chinese citizens
become more health conscious and have more disposable income to treat their
ailments. Based on our diversified product portfolio we believe we are fairly
well positioned to participate in this future growth."
Net income for the third quarter increased 51.3 percent to approximately
$2.3 million, or $0.29 per weighted average fully diluted share as compared
to $0.23 in the year ago period. The Company incurred taxes at a rate of 17.3
percent as compared to no tax expense in the third quarter 2005. In
calculating fully diluted earnings per share, the Company utilized 7.7
million weighted average fully diluted outstanding shares as compared to 6.5
million in the same period a year ago. Including all warrants and shares
outstanding the fully diluted share for the Company is 19.5 million.
"We are actively looking to expand our proprietary product offering to
complement our existing distribution business and take advantage of a growing
push towards the use of Chinese based herbal remedies in the market,"
commented Ms. Huizhen YuChief Financial Officer of China Medicine
Corporation. "We believe our own internally developed products address large
and growing market opportunities with the increase in this business having
favorable long-term margin implications for the Company. As we progress
toward 2007 our goal is to have a larger contribution of proprietary products
as a percentage of our overall revenue."
For the nine months ending September 30, 2006 revenues increased 68.9
percent to $13.9 million. Gross profit increased 81.5 percent to $4.0 million
resulting in gross margins of 28.5 percent as compared to 33.5 percent last
year. Gross margins on a comparable basis were impacted by the aforementioned
price reductions on certain products as mandated by the Chinese government.
Operating income for the period totaled $3.3 million, or an 11.0 percent
decrease as compared to $3.7 million in the comparable period last year.
During the first nine months of 2006 the Company incurred approximately $0.9
million in additional costs related to being a US publicly traded company as
compared to no such expense last year. In each case operating income
benefited from $1.6 million in other operating income respectively for each
period. Net income decreased 41.5 percent to $2.4 as a result of lower gross
margins, higher public company costs and taxes of $0.7 million. Weighted
average fully diluted earnings per share were $0.31 versus $0.62 in the year
ago period as the Company utilized 7.6 million and 6.5 million shares
respectively.
The Company maintained working capital of $9.8 million as of the end of
the third quarter 2006. Cash used in operations for the nine months period of
this year was $0.7 million which was primarily impacted by an increase in
total receivables. Total receivables at the end of the third quarter were
$5.7 million and management believes these receivables are in good standing
based on current customer quality. Shareholder’s equity increased 143.5
percent to $11.6 million as compared to the end of 2005.
About China Medicine Corporation:
China Medicine is a distributor of medical products, traditional
pharmaceutical medicines, traditional Chinese medicines, Chinese herbs and
dietary supplements to over 28 provinces and 2,500 customers within China.
The Company sells more than 1,100 products and is actively building a
pipeline of proprietary traditional and Chinese herbal remedy products
targeting oncology, high blood pressure and the removal of Aflatoxins from
food and animal feed. For more information visit the Company’s website at
http://www.chinamedicinecorp.com.
Safe Harbor Statement:
This press release contains forward-looking statements concerning China
Medicine Corporation’s business and products. The actual results may differ
materially depending on a number of risk factors including, but not limited
to, the following: general economic and business conditions, development,
shipment, market acceptance, additional competition from existing and new
competitors, changes in technology, and various other factors beyond its
control. All forward-looking statements are expressly qualified in their
entirety by this Cautionary Statement and the risks factors detailed in the
Company’s reports filed with the Securities and Exchange Commission. China
Medicine Corporation undertakes no duty to revise or update any forward-
looking statements to reflect events or circumstances after the date of this
release.
CHINA MEDICINE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
3 months ended Fiscal year end
CURRENT ASSETS September 30, 2006 December 31, 2005
Cash $642,023 $ 91,964
Accounts receivable, trade,
net of allowance for doubtful
accounts 5,569,669 2,410,824
Investment 784,920
Inventories 1,510,141 1,382,929
Other receivables 167,362 38,301
Advances to suppliers 2,447,416 1,075,546
Total Current Assets 11,121,531 4,999,564
EQUIPMENT, NET 1,731,527 330,015
TOTAL ASSETS $12,853,058 $5,329,579
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable, trade $176,081 $170,196
Short-term loans 95,480
Other payables and accrued liabilities 101,945 97,449
Customer deposits 34,307 37,292
Taxes payable 907,000 170,456
Total Current Liabilities 1,219,333 570,873
OTHER LIABILITIES:
Contingent liabilities 44,003
TOTAL LIABILITIES 1,263,336 570,873
STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value;
10,000,000 shares authorized,
3,120,000 shares issued and
outstanding 312
Common stock, $0.0001 par value;
$90,000,000 shares authorized,
7,380,000 shares issued and
outstanding 738 653
Paid-in capital 4,375,517 120,347
Statutory reserves 722,909 722,909
Retained earnings 6,189,274 3,813,665
Accumulated other comprehensive income 300,972 101,132
Total shareholders’ equity 11,589,722 4,758,706
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $ 12,853,058 $ 5,329,579
CHINA MEDICINE CORPORATION AND SUBSIDIARY
(FORMERLY KNOWN AS LOUNSBERRY HOLDINGS III, INC.)
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
For the For the
For the three For the nine
three months nine months
months ended ended months ended ended
Sep 30, Sep 30, Sep 30, Sep 30,
2006 2005 2006 2005
REVENUES $6,366,619 $2,575,896 $13,856,558 $8,206,063
COST OF GOOD SOLD 4,490,055 1,716,375 9,910,331 5,459,973
GROSS PROFIT 1,876,564 859,521 3,946,227 2,746,090
OTHER OPERATING INCOME 1,229,912 452,024 1,589,136 1,555,693
OPERATING EXPENSES
Research and
development expenses 31,361 109,606 270,702 314,580
Selling, general and
administrative
expenses 185,517 106,649 1,084,194 336,411
Reverse acquisition
expense - - 931,270 -
Total Operating
Expenses 216,878 216,255 2,286,166 650,991
INCOME FROM OPERATIONS 2,889,598 1,095,290 3,249,197 3,650,792
OTHER INCOME (EXPENSES) 136,645 410,203 143,757 410,175
INCOME BEFORE INCOME
TAXES 2,752,953 1,505,493 3,105,440 4,060,967
PROVISION FOR INCOME
TAXES 475,574 - 729,831 -
NET INCOME 2,277,379 1,505,493 2,375,609 4,060,967
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation gains 128,142 47,849 199,840 47,849
COMPREHENSIVE INCOME $2,405,521 1,553,342 $2,575,449 $4,108,816
Earning per share-basic $0.31 0.23 $0.33 $0.62
Earning per share-diluted $0.29 0.23 $0.31 $0.62
Weighted average number
of shares 7,380,000 6,530,000 7,250,926 6,530,000
outstanding-basic
Weighted average number
of shares 7,749,000 6,530,000 7,563,893 6,530,000
outstanding-diluted