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
