HARBIN, China, April 2, 2008 /Xinhua-PRNewswire-FirstCall/ -- China Sky One Medical, Inc. (OTC Bulletin Board: CSKI) (“China Sky One” or “the Company”), a manufacturer, marketer and distributor of pharmaceutical, medicinal and diagnostic products in China, today announced record financial results for the fourth quarter and fiscal year ended December 31, 2007.
Fourth Quarter 2007 Highlights
-- Total revenues increased to $12.7 million, up 223% from the fourth
quarter of 2006
-- Gross profit reached $9.9 million, up 201% from the fourth quarter of
2006
-- Operating income totaled $4.9 million, up from a loss of $532,262 in
the fourth quarter of 2006
-- Net income increased to $4.1 million, or $0.31 per diluted share, up
from a loss of $1.0 million, or ($0.08) per diluted share, in the
fourth quarter of 2006
Full Year 2007 Highlights
-- Total revenues increased 148% in 2007 to $49.3 million
-- Gross profit increased 159% in 2007 to $38.4 million
-- Gross profit margin increased 328 basis points to 77.8%
-- Operating income increased 863% to $18.6 million
-- Net income increased to $15.3 million, or $1.15 per diluted share, up
from $0.6 million, or $0.05 per diluted share in 2006
-- New Bio-Chemical Products series generated $3 million in revenue in
2007
-- Began exporting to overseas markets, generating $12.4 million in
revenues
-- Entered into an exclusive strategic partnership with Takasima
Industries to sell the Company’s patch products in Malaysia
“This was a very successful year for China Sky One, both in terms of financial performance and the execution of our business strategy. We achieved significant growth in revenues, due in large part to our strategy of hiring direct territory managers and sales agents to assure that our products and their benefits are reaching our customers. We also introduced a new line of bio-chemical products and expanded into the high margin overseas markets,” said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. “We have a strong pipeline of new products, and plan to begin clinical testing of eight new kit products in 2008. We are also excited about our research and development efforts in the areas of stem cell research and our cancer treatment drug Endothelin-1. We hope to complete clinical trials of Enothelin-1 in 2013 and plan to open a cord stem cell and tissue bank at our newly established facility outside Harbin in late 2008 or 2009.”
Fourth Quarter 2007 Results
China Sky One’s total revenues in the fourth quarter were $12.7 million, an increase of 223% on year-over-year basis. This was primarily the result of strong performance associated with the Company’s continued efforts to develop its sales distribution channels. Product sales increased 237.5% year-over-year to $9.3 million, or 73.5% of total revenues. Contract sales increased 188.2% year-over-year to $3.4 million and accounted for 26.5% of revenues in the fourth quarter of 2007.
Gross profit in the fourth quarter of 2007 was $9.9 million, an increase of 201% on year-over-year basis. Gross margin was 77.7% of total revenues, down from 83.2% of total revenues in the fourth quarter of 2006. The decline in gross margin was due to high production efficiency of core products according to the market demand, which resulted in a temporary, unusually high gross margin in the fourth quarter of 2006.
Operating expenses in the fourth quarter of 2007 were $4.9 million, up 30% from $3.8 million in the fourth quarter of 2006. This increase was much less than the increase in sales, although it was primarily the result of higher selling, general and administrative expenses associated with the Company’s sales growth. Research and development expenses were $1.4 million in the fourth quarter, compared with $37,327 in the fourth quarter of 2006. Operating expenses were 38.8% of total revenues in the fourth quarter of 2007, improved from 96.7% in the fourth quarter of 2006 due to efficiencies as the Company grows in scale.
Operating income was $4.9 million, compared with a loss of $532,262 in the fourth quarter of 2006. Operating margin was 38.9%, compared to negative 13.5% in the fourth quarter of 2006.
Provision for income taxes was $0.9 million in the fourth quarter of 2007, compared to $0.3 million in the same quarter of the previous year.
Net income for the fourth quarter of 2007 was $4.1 million, or $0.31 per diluted share, compared to loss of $1.0 million, or ($0.08) per diluted share, in the fourth quarter of 2006.
Full Year 2007 Results
For the full year 2007, total revenues were $49.3 million, up 148% from $19.8 million in 2006. Product sales increased 171% year-over-year to $36.3 million, or 74% of total revenues, and contract sales increased 104%
year-over-year to $13.0 million, or 26% of total revenues, in 2007. Gross profit for the full year 2007 was $38.4 million, an increase of 159% from $14.8 million in 2006. Gross profit margin increased from 74.5% in 2006 to 77.8% in 2007. Operating income was $18.6 million, up 863% from $1.9 million in 2006. Operating margin was 37.7%, up from 9.7% in 2006. Net income for 2007 was $15.3 million or $1.15 per diluted share, compared to $0.6 million, or $0.05 per diluted share, in 2006.
Financial Condition
As of December 31, 2007, China Sky One had $9.2 million in cash and equivalents, approximately $15.4 million in working capital, and no debt. Stockholders’ equity at December 31, 2007 was $32.2 million, a 125% increase over the $14.3 million recorded at December 31, 2006. The Company generated $11.6 million in net cash flow from operating activities in 2007, up from $5.2 million in 2006.
In February 2008, the Company completed a private placement of its common stock and warrants generating $25.0 million in gross proceeds.
Recent Events
In February 2008, China Sky signed an agreement to acquire Heilongjiang Tianlong Pharmaceutical, Inc. (“Tianlong”), an external-use drug manufacturing specialty pharmaceutical company, through which the Company will obtain $8.3 million in assets, which include $0.5 million in inventory, land use rights, GMP-certified manufacturing facilities, state-of-the-art production equipment, a research and development center, a portfolio of 69 approved drugs (in 98 forms) and a pipeline of 38 new drugs, all of which have been submitted to the SFDA for approval. The acquisition is subject to a due diligence review of Tianlong, as well as approval by the appropriate regulatory authorities in the PRC. In 2007, Tianlong generated revenue of $5.2 million with a net profit margin of 13%. China Sky One Medical expects Tianlong to be accretive to earnings, generating revenues of approximately $7.5 million and net profit of approximately 30% in 2008.
In March 2008, the Company appointed four new independent directors to its board: Song Chun Fang, Jiang Qi Feng, Zhao Jie and Qian Xu Feng. As a result, the number of directors has increased from three to seven and the majority of the Company’s directors are now independent. The Company also formed finance, executive, compensation and corporate governance and nominating committees.
In March 2008, the Company filed an application to list its shares on the American Stock Exchange.
2008 Outlook
“In 2008, we expect to see continued growth in sales and anticipate a growing contribution from sales of our proprietary products. We plan to utilize the capital raised in our private placement to fund our exciting new R&D initiatives and to make strategic acquisitions. We anticipate completing complete our acquisition of Tianlong, which will not only be accretive to earnings, but will expand our product lines and improve our production and R&D capabilities. Additionally, we plan to use our sales and marketing expertise and the benefits of scale to improve profitability,” said Mr. Liu.
Conference Call
The Company will conduct a conference call at 11:00 a.m. Eastern Time on Thursday, April 3, 2008 to discuss the fourth quarter and fiscal year 2007 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-552-2116. International callers should dial 706-634-2457. The Conference ID for this call is 42056418. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Thursday, April 3, 2008 at 12:30 p.m. Eastern Time. To access the replay, dial 800-642-1687, international callers dial 706-645-9291, conference ID 42056418.
About China Sky One Medical, Inc.
China Sky One Medical, Inc., a Nevada corporation, is engaged in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic products. Through its wholly-owned subsidiaries, Harbin Tian Di Ren Medical Science and Technology Company (“TDR”) and Harbin First
Bio-Engineering Company Limited ("First"), the Company manufactures and distributes over-the-counter pharmaceutical products as its primary revenue source. For more information, visit http://www.skyonemedical.com .
Safe Harbor Statement
Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. The Company cannot provide any assurance that its application to list on the American Stock Exchange will be approved or that the liquidity and marketability of its shares will improve. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the inability of the company to meet the listing standards, risks associated with the effect of changing economic conditions in The People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
--Financial Tables Follow--
China Sky One Medical, Inc. and Subsidiaries
Audited Consolidated Statements of Operations
Years Ended December 31,
2007 2006
Revenues $ 49,318,308 $ 19,881,715
Cost of Goods Sold 10,939,531 5,063,084
Gross Profit 38,378,777 14,818,631
Operating Expenses
Selling, general and administrative 16,163,577 10,738,285
Depreciation and amortization 443,063 121,522
Research and development 3,158,351 2,026,788
Total operating expenses 19,764,991 12,886,595
Other Income (Expense)
Other income 48,889 --
Interest expense (10,557) (227,857)
Total other income (expense) 38,332 (227,857)
Net Income Before Provision for Income Tax 18,652,118 1,704,179
Provision for Income Taxes
Current 3,319,173 764,462
Deferred -- 315,302
3,319,173 1,079,764
Net Income $ 15,332,945 $ 624,415
Basic Earnings Per Share $ 1.27 $ 0.05
Diluted Earnings Per Share $ 1.15 $ 0.05
Basic Weighted Average Shares Outstanding 12,094,949 12,031,536
Diluted Weighted Average Shares Outstanding 13,370,528 12,941,283
The Components of Other Comprehensive
Income
Net Income $ 15,332,945 $ 624,415
Foreign currency translation adjustment 1,849,724 364,565
Comprehensive Income $ 17,182,669 $ 988,980
China Sky One Medical, Inc. and Subsidiaries
Audited Consolidated Statements of Operations
Three Months Ended December 31,
2007 2006
Revenues $ 12,723,375 3,940,786
Cost of Goods Sold 2,835,176 660,957
Gross Profit 9,888,199 3,279,829
Operating Expenses
Selling, general and administrative 3,365,194 3,788,636
Depreciation and amortization 166,556 (13,872)
Research and development 1,406,727 37,327
Total operating expenses 4,938,477 3,812,091
Other Income (Expense)
Other income 34,580 --
Interest expense 5,937 (199,573)
Total other income (expense) 40,517 (199,573)
Net Income Before Provision for Income Tax 4,990,239 (731,835)
Provision for Income Taxes
Current 885,209 (17,707)
Deferred -- 315,302
885,209 297,595
Net Income $ 4,105,030 $ (1,029,430)
Basic Earnings Per Share $ 0.34 $ (0.09)
Diluted Earnings Per Share $ 0.31 $ (0.08)
Basic Weighted Average Shares Outstanding 12,094,949 12,031,536
Diluted Weighted Average Shares Outstanding 13,370,528 12,941,283
The Components of Other Comprehensive Income
Net Income $ 4,105,030 $ (1,029,430)
Foreign currency translation adjustment 995,154 364,565
Comprehensive Income $ 5,100,184 $ (708,333)
China Sky One Medical, Inc. and Subsidiaries
Audited Consolidated Balance Sheets
December 31, 2007 and 2006
2007 2006
Current Assets
Cash and cash equivalents $ 9,190,870 $ 6,586,800
Accounts receivable, net 10,867,106 3,199,026
Other receivables 40,200 --
Inventories 371,672 278,562
Prepaid expenses 17,707 103,734
Total current assets 20,487,555 10,168,122
Property and equipment, net 6,861,432 4,503,397
8,003,205
Intangible assets, net 1,933,014 2,009,517
$ 37,285,206 $16,681,036
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 2,845,308 $ 822,786
Wages payable 381,482 260,290
Welfare payable 221,911 141,489
Taxes Payable 1,567,188 566,416
Deferred revenue 24,504 67,541
Notes Payable -- 511,672
Total current liabilities 5,040,393 2,370,194
Stockholders’ Equity
Preferred stock ($0.001 par value, 5,000,000
shares authorized, none issued
and outstanding) -- --
Common stock ($0.001 par value, 20,000,000
shares authorized, 12,228,363 and
12,031,536 issued and outstanding, respectively) 12,228 12,032
Additional paid-in capital 9,572,608 8,821,502
Accumulated other comprehensive income 2,271,843 422,119
Retained earnings 20,388,134 5,055,189
Total stockholders’ equity 32,244,813 14,310,842
$ 37,285,206 $16,681,036
China Sky One Medical, Inc. and Subsidiaries
Audited Consolidated Statements of Cash Flows
Years Ended December 31,
2007 2006
Cash flows from operating activities
Net Income $ 15,332,945 $ 624,415
Adjustments to reconcile net cash provided by
operating activities
Depreciation and amortization 443,063 246,556
Share-based compensation expense 235,468 2,878,031
Preferential conversion feature of note -- 177,803
Net change in assets and liabilities
Accounts receivables and other receivables (7,478,964) (1,994,678)
Inventories (73,142) 105,655
Construction in progress -- 2,517,215
Prepaid expenses and other 93,463 (87,979)
Accounts payable and accrued liabilities 1,963,542 101,698
Related party payable -- (18,540)
Wages payable 102,534 141,776
Welfare payable 70,280 45,056
Taxes payable 960,170 433,419
Deferred revenue (47,879) 12,112
Net cash provided by operating activities 11,601,480 5,182,539
Cash flows from investing activities
Purchases of fixed assets (2,222,448) (3,022,448)
Land deposit (8,003,205) --
Purchase of intangible assets (35,280) (1,574,059)
Net cash used in investing activities (10,260,933) (4,596,507)
Cash flows from financing activities
Sale of common stock for cash -- 2,715,000
Issuance of convertible notes -- 200,000
Proceeds from short-term loan -- 15,832
Proceeds from warrants conversion 515,834 --
Payment to short-term loan (548,350) --
Net cash provided by (used in) financing
activities (32,516) 2,930,832
Effect of exchange rate 1,296,039 132,603
Net increase in cash 2,604,070 3,649,467
Cash and cash equivalents at beginning of year 6,586,800 2,937,333
Cash and cash equivalents at end of year $ 9,190,870 $6,586,800
Supplemental disclosure of cash flow information
Interest paid $ 10,457 $ 36,429
Taxes paid $ 2,359,003 $ 767,701
Non-cash Investing and financing activities:
Cashless exercise of warrants $ 5 $ --
For more information, please contact:
China Sky One Medical, Inc.
Ms. Xiaoyan Han, CFO
Tel: +86-133-5999-3681
Email: tdrhan@163.com
CCG Elite Investor Relations Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com