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China Sky One Medical Reports Second Quarter 2007 Financial Results

2007-08-15 10:47 536

HARBIN, China, Aug. 15 /Xinhua-PRNewswire-FirstCall/ -- China Sky One Medical, Inc. (OTC Bulletin Board: CSKI), a manufacturer, marketer and distributor of pharmaceutical, medicinal and diagnostic products in China, today announced financial results for the three month and six month periods ending June 30, 2007. The Company plans to file its 10Q today.

Financial Highlights from the second quarter of 2007 include:

-- Revenue increased 181% to $14.6 million from $5.2 million in 2Q06

-- Gross profit increased 190% to $11.3 million from $3.9 million in 2Q06

-- Gross margin increased 140 basis points to 77.4% compared to 76.0% in

2Q06

-- Operating income increased to $5.2 million compared to an operating

loss of $1.2 million in 2Q06

-- Net income increased to $4.2 million, or $0.34 per diluted share,

compared to a net loss of $1.2 million in 2Q06

Mr. Liu Yan-Qing, Chief Executive Officer and President of China Sky One Medical, Inc. stated, "We are pleased with our strong performance in the second quarter of 2007. Our revenue increased 181% to $14.6 million, which exceeded our revenue guidance forecast of $12.8 million to $14.2 million. The increase in revenue is attributable to continued expansion of our salesforce and channels of distribution, as well as the addition of a new line of contract sale service in 2006 to sell other manufactured brands through our distribution channel."

Mr. Liu added, "In addition to our current portfolio of externally-applied plant and herb-based medicinal products, we will implement great efforts to develop biological products in the future. Some of our new biological products, such as Urinate Micro Albumin Examination Testing kit and AMI Test Kits, began to contribute to our revenue growth in the second quarter of 2007. At the same time, we began to construct the workshop, R&D center and offices for our new biotech engineering project. We are confident these initiatives will position us well for long-term growth."

Second Quarter Ended June 30, 2007

Revenue for the second quarter increased 181% to $14.6 million from $5.2 million in the second quarter of 2006, which is mainly due to continued sales growth of the Company's own product line and a contract service line of manufacturer's products sold through the Company's distribution channel. During the second quarter, the Company experienced a large increase in export sales of Slim Patch, which contributed $4.3 million of revenue, up significantly from approximately $372,000 in the second quarter of 2006. Sales of other manufactured brands through the Company's distribution network contributed $3.6 million of revenue during the second quarter, up from $1.8 million in the same period of 2006.

Gross profit increased 190% to $11.3 million from $3.9 million in the second quarter of 2006. Gross margin in the second quarter 2007 increased 140 basis points to 77.4% compared to 76.0% in the prior year's period, which was in line with management's expectation. Management believes that the Company can improve its gross margin from second quarter 2007 results through the expansion of the Company's production capacity and the growth in sales volume of other branded products.

Operating income in the second quarter of 2007 was $5.2 million compared to an operating loss of $1.2 million in the same period of 2006. Operating margin was 35.3%. Selling, general and administrative expenses increased 78% to $5.7 million from $3.2 million in the second quarter of 2006, which is the result of increased headcount and the expansion of the Company's sales and marketing activities.

Net income was $4.2 million, or $0.34 per diluted share, in the second quarter of 2007 compared to net loss of $1.2 million in the second quarter of 2006. Net margin was 28.8%. Net income slightly missed the Company's previous expectation of $5 million to $5.5 million, due to the expenditure related to a twelve month marketing campaign, which is non-recurring for the remaining two quarters of 2007.

Mr. Liu noted, "During the second quarter 2007, we spent approximately $2.0 million to implement a marketing campaign to promote our brand and full- line products for the next twelve months. While this resulted in a miss to our net income guidance for the second quarter, the marketing program we now have in place positions us well for increased consumer awareness and product demand. We expect the efforts related to our marketing campaign will continue to benefit our financial results for the second half of 2007."

Six Months Ended June 30, 2007

For the six months ended June 30, 2007, revenue increased 116% to $19.8 million from $9.2 million in the first six months of 2006. During this same time period, gross profit improved 121% to $15.4 million from $7.0 million. Gross margin of 77.6% compared to 76.1% in the first six months of 2006. Operating income in the first six months of 2007 was $7.1 million compared to an operating loss of $131,000 in the same period of 2006. Net income was $5.8 million, or $0.46 per diluted share, compared to a net loss of $148,000, or ($0.01) per diluted share, in the first six months of 2006.

Balance Sheet

As of June 30, 2007, the Company had $5.2 million of cash, compared to $6.7 million at March 31, 2007. The $1.4 million decrease is primarily attributable to cash used in investing activities for the purchase of land use rights in the Song Bei District of Harbin and the start of construction of the Company's new biotech engineering project. As of June 30, 2007, the Company had working capital of $4.7 million and no long-term debt.

"Our working capital and borrowing capabilities are adequate to cover our current operating and capital requirements. We will make sure to leverage the funds to meet future liquidity and capital needs and take advantage of new investment opportunities," concluded Liu.

Business Update

-- The Company has been recognized as an "Innovative Enterprise" by the

Government of Harbin. As part of this recognition, the Company will

receive an annual grant of RMB 4.0 million (approximately USD $525,000)

for the next three years, beginning June 2007 through June 2010. The

grant will support the Company's new product research and development

efforts. In addition to the annual grant described above, the local

government set aside RMB 6.0 million (approximately USD $787,000) per

Company for future investment in the area. This additional support

would, for example, be paid to research institutes for technology

consulting or educational programs which, ultimately, would benefit the

recipients.

-- Eight of the Company's new diagnosis kit products entered into the

clinical trial stage in August 2007, including: Rapid Diagnosis Kit for

Human Urine Microalbumin, Urine One Step LH Test, Rapid Detect Kit for

Prealbumin, Rapid Detect Kit for APO B, Rapid Detect Kit for APO A1,

Rapid Detect Kit for Magnesium Ion, Semi-quantitive Uterine Cancer One

Step Test, and Semi-quantitive Calcium Ion.

-- Construction of new facilities for the new biotech engineering project.

During the quarter, the Company entered into an agreement with the

Development and Construction Administration Committee of Harbin Song

Bei New Development district to purchase the land use rights for 50

years for development of a new biotech engineering facility. Terms of

the agreement called for a deposit of 30% of the total land price

within 15 days after signing the agreement, a 40% payment 7 days prior

to the start of construction and the balance 7 days after getting the

formal land use right. The project consists of two phases:

-- A main workshop, R&D center and office using land area of 30,000

square meters; construction started in May 2007 with projected

completion by June 2008.

-- A second workshop and show room using land area of 20,000 square

meters; construction starting in September 2008 with projected

completion by December 2009.

About China Sky One Medical, Inc.

China Sky One Medical, Inc., a Nevada corporation, is a holding company whose principal operations are through its subsidiaries, which are engaged in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic kit 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's principal revenue source is the manufacture and sale of over-the-counter pharmaceutical products. 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. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the 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.

CONTACT

In the United States:

Ashley Ammon MacFarlane and Bill Zima

Integrated Corporate Relations, Inc.

203-682-8200 (Investor Relations)

In Asia:

Xuyang Zhang

Integrated Corporate Relations, Inc.

86 10 8523 3087 (Investor Relations)

(financial tables to follow)

China Sky One Medical, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2007 and 2006

(Unaudited)

For the Three Months For the Six Months

Ended June 30, Ended June 30,

2007 2006 2007 2006

(Restated) (Restated)

Revenues $14,645,247 $5,189,235 $19,824,363 $9,168,354

Cost of Goods Sold 3,308,648 1,245,156 4,435,343 2,194,754

Gross Profit 11,336,599 3,944,079 15,389,020 6,973,600

Operating Expenses

Selling, general

and administrative 5,654,199 3,169,857 7,697,975 5,065,823

Depreciation and

amortization 137,587 98,857 220,942 105,013

Research and

development 380,630 1,910,229 395,840 1,933,375

Total operating

expenses 6,172,416 5,178,943 8,314,757 7,104,211

Other Income (Expense)

Interest income and

other income 7,228 - 12,027 -

Interest expense - (8,180) (16,494) (17,332)

Total other income

(expense) 7,228 (8,180) (4,467) (17,332)

Net Income Before

Provision for Income

Tax 5,171,411 (1,243,044) 7,069,796 (147,943)

Provision for Income

Taxes

Current 943,887 265,198 1,288,152 468,666

Deferred - (265,198) - (468,666)

943,887 - 1,288,152 -

Net Income $4,227,524 $(1,243,044) $5,781,644 $(147,943)

Basic Earnings

Per Share $0.35 $(0.11) $0.48 $ (0.01)

Basic Weighted Average

Shares Outstanding 12,084,938 10,929,370 12,060,865 10,929,370

Diluted Earnings

Per Share $0.34 $(0.11) $0.46 $ (0.01)

Diluted Weighted

Average Shares

Outstanding 12,531,385 10,929,370 12,504,845 10,929,370

The Components of Other

Comprehensive Income

Net Income $4,227,524 $(1,243,044) $5,781,644 $(147,943)

Foreign currency

translation

adjustment 327,771 36,321 586,537 55,388

Comprehensive Income $4,555,295 $(1,206,723) $6,368,181 $(92,555)

China Sky One Medical, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

June 30, 2007

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents $5,154,329

Accounts receivable, net 3,733,184

Other receivables 53,358

Inventories 1,099,749

Prepaid expenses 12,195

Total current assets 10,052,815

Property and equipment, net 6,657,646

Intangible assets, net 1,966,950

Deposit on Land 7,664,751

$26,342,162

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable and accrued expenses $2,737,252

Wages payable 665,554

Welfare payable 175,973

Taxes Payable 1,779,121

Notes payable -

Total current liabilities 5,357,900

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, 12,106,696 issued and

outstanding) 12,107

Additional paid-in capital 8,948,881

Accumulated other comprehensive income 1,008,656

Retained earnings 11,014,618

Total stockholders' equity 20,984,262

$26,342,162

Source: China Sky One Medical, Inc.
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