omniture

Lotus Pharmaceuticals, Inc. Announces First Quarter 2008 Results

2008-05-22 06:19 933

BEIJING, May 22 /Xinhua-PRNewswire/ -- Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company"), a pharmaceutical company in the People's Republic of China ("PRC"), today announced financial results for the first quarter ended March 31, 2008.

First Quarter 2008 Highlights

-- Total revenues increased to $11.7 million, up 41.3% from the first

quarter of 2007

-- Gross profit reached $3.9 million, up 50.0% from the first quarter of

2007

-- Gross margin was 33.7%, up from 31.7% in the first quarter of 2007

-- Operating income totaled $1.5 million, up 26.3% from $1.2 million in

the first quarter of 2007

-- Net income was $1.0 million, or $0.02 per diluted share, up 19.0% from

$0.8 million, or $0.02 per diluted share, in the first quarter of 2007

-- Excluding non-cash financing costs, adjusted net income was $1.4

million, or $0.03 per fully diluted share, up 33.7% from adjusted net

income of $1.1 million, or $0.02 per fully diluted share, in the first

quarter of 2007

"We are pleased with our results in the first quarter of 2008. In one of our seasonally slowest quarters of the year, we achieved revenue growth in excess of 41.3% as well as a improvement in gross margin and net income. We focused our sales efforts on our top selling products, Brimonidine Tartrate Eyes Drops and VALSARTAN Capsules, and continued to distribute higher-margin, third party pharmaceutical products," said Mr. Zhongyi Liu, Chairman and CEO of Lotus Pharmaceuticals, Inc.

First Quarter 2008 Results

Lotus Pharmaceutical's total revenue in the first quarter was $11.7 million, an increase of 41.3% on year-over-year basis. Wholesale revenue increased 93.5% year-over-year to $9.8 million, or 83% of total revenue, and was due to strong sales of Brimonidine Tartrate Eyes Drops for the treatment of glaucoma and the Company's hypertension drug, VALSARTAN Capsules. Revenues from the distribution of third party manufactured pharmaceutical products also increased. Other revenues decreased 54.2% year-over-year to $1.3 million, or 11% of revenue in the first quarter of 2008, due primarily to fewer contracts for third party manufacturing services and a reduction in the amount of space at the Company's retail stores that was leased to third parties. Retail revenue was $0.7 million in the first quarter of 2008, up 36.4% year-over-year, due to the Company's continuous efforts to include more variety and better quality products at its retail stores.

Gross profit in the first quarter of 2008 was $3.9 million, an increase of 50.0% on year-over-year basis. Gross margin was 33.7%, up from 31.7% in the first quarter of 2007, primarily due better purchase pricing management.

Operating expenses in the first quarter of 2008 were $2.5 million, up 69.2% from $1.5 million in the first quarter of 2007. This increase was primarily the result of a 100.9% increase in selling expenses to $1.1 million from $0.6 million in the first quarter of 2007. The increase in selling expenses was due to higher incentive commissions for sales representatives and travel-related expenses associated with the Company's sales growth. Research and development expenses were $0.7 million in the first quarter of 2008, compared with $0.1 in the first quarter of 2007. General and administrative expenses were $0.6 million, down from $0.8 million a year ago. Operating expenses were 21.0% of total revenue in the first quarter of 2008, up from 17.5% in the first quarter of 2007.

Operating income was $1.5 million, up 26.3% from $1.2 million in the first quarter of 2007.

Net income for the first quarter of 2008 was $1.0 million, or $0.02 per diluted share, compared to $0.8 million, or $0.02 per fully diluted share, in the first quarter of 2007. Adjusting net income for non-cash financing costs associated with its convertible notes and convertible preferred stock, adjusted net income was $1.4 million, or $0.03 per fully diluted share, in the first quarter of 2008, up 33.4% from adjusted net income of $1.1 million, or $0.02 per fully diluted share, in the first quarter of 2007.

Financial Condition

As of March 31, 2008, Lotus had $3.6 million in cash and equivalents, approximately $32.2 million in working capital, notes payable of $4.9 million and $3.1 million in convertible mandatorily redeemable preferred stock (net of discount of $1.9 million). Stockholders' equity at March 31, 2008 was $31.9 million, up 19.6% from $26.6 million at December 31, 2007.

In February 2008, the Company received net proceeds from the sale of shares of its Series A Convertible Mandatorily Redeemable Preferred Stock of approximately $4.6 million. The Company used approximately $2.6 million to repay in full all of its outstanding obligations under its 14% secured convertible notes, the remainder was used for working capital purposes.

Recent Event

In May 2008, Lotus signed the technology transfer agreement for Laevo- Bambutero with Dongguan Kaifa Biomedicine, Inc. ("Dongguan Kaifa"). Under the terms of agreement, Lotus obtained the patent and the exclusive production rights for Laevo-Bambutero in China in exchange for a cash payment cash payment of RMB 48 million and a 3% royalty on products sales. The Company has already paid RMB 20 million. The Company intends to market Laevo-Bambutero as a better alternative to Bambutero for the treatment of asthma, since it is uses an integrated method of composition and has fewer side effects. Lotus plans to launch the drug by 2012, pending on the approval from SFDA.

2008 Outlook

"We began 2008 on strong footing and expect continued growth throughout the year. In the coming months, we plan to continue advertising and promoting our best selling proprietary products. We recently obtained the patent and exclusive production rights to a promising new asthma treatment, Laevo-Bambutero, and plan to launch the drug in 2012, pending approval from the SFDA. We are excited about this new drug, as it has a large addressable patient population and few side effects," said Mr. Liu. "We will continue to seek opportunities to further diversify our product pipeline and improve profitability in the long term. We are also actively pursuing strategic acquisitions to improve our position in the growing pharmaceutical market in China."

Conference Call

The Company will conduct a conference call at 10:00 a.m. Eastern Time on Tuesday, May 27, 2008 to discuss the first quarter of 2008 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-481-7939. International callers should dial 617-847-8707. The passcode for this call is 45954238. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Tuesday, May 27, 2008 at 12:00 p.m. Eastern Time. To access the replay, dial 888-286-8010, international callers dial 617-801-6888, passcode 82020022.

Use of Non-GAAP Financial Information

GAAP results for the three month periods ended March 31, 2008 and March 31, 2007 include certain non-cash debt financing expenses related to the Company's convertible notes and convertible mandatorily redeemable preferred stock. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, which are adjusted net income and adjusted earnings per share, excluding the impact of these items in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments to GAAP results appears below. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

About Lotus Pharmaceuticals, Inc.

Lotus Pharmaceuticals, Inc. ("Lotus") controls and operates Liangfang Pharmaceutical, Ltd. ("Liangfang") and Enzhe Jiashi Pharmaceutical, Ltd. ("En zhe"), two Chinese pharmaceutical companies located in Beijing (together "Lotus East"). Lotus East is a comprehensive enterprise, which deals in an integration of the production, trade, sales and marketing of pharmaceuticals. The Company possesses some of the most advanced pharmaceutical-production equipment used in China, workshops authenticated by the National GMP, a suite of various medicines produced by Lotus East, and a number of high-tech personnel. Lotus East has business and office facilities of 2,000 square meters, warehouse of 1,000 square meters and operates ten retail pharmacies in the Beijing area. Lotus East performs scientific research on new medicines, and the production, wholesale and retail sale of medicines through 10 retail pharmacy location through Beijing. For more information, visit http://www.LotusEast.com.

Safe Harbor Statement

Certain statements set forth in this press release constitute "forward-looking statements". Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning," "expect," "believe," "will likely," "should," "could," "would," "may" or words or expressions of similar meaning. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the Company's actual results and financial position to differ materially from those included within the forward-looking statements. The potential risks and uncertainties include, among others, the Company's limited operating history, the limited financial resources, domestic or global economic conditions -- especially those relating to China, activities of competitors and the presence of new or additional competition, and changes in Federal or State laws, restrictions and regulations on doing business in a foreign country, in particular China, and conditions of equity markets. More information about the potential factors that could affect the Company's business and financial results is included in the Company's filings, available via the United States Securities and Exchange Commission.

-FINANCIAL TABLES FOLLOW-

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the Three Months Ended March 31,

2008 2007

(As Restated)

NET REVENUES:

Wholesale $ 9,770,097 $ 5,049,121

Retail 683,748 501,242

Other revenues 1,255,332 2,739,172

Total Net Revenues 11,709,177 8,289,535

COST OF SALES 7,768,425 5,662,916

GROSS PROFIT 3,940,752 2,626,619

OPERATING EXPENSES:

Selling expenses 1,122,337 558,724

Research and development 710,225 91,822

General and administrative 626,417 802,865

Total Operating Expenses 2,458,979 1,453,411

INCOME FROM OPERATIONS 1,481,773 1,173,208

OTHER INCOME (EXPENSE):

Debt issuance costs (62,886) (29,340)

Registration rights penalty -- (54,000)

Interest income 561 --

Interest expense (423,349) (252,567)

Total Other Income (Expense) (485,674) (335,907)

INCOME BEFORE INCOME TAXES 996,099 837,301

INCOME TAXES -- --

NET INCOME $ 996,099 $ 837,301

COMPREHENSIVE INCOME:

NET INCOME $ 996,099 $ 837,301

OTHER COMPREHENSIVE INCOME:

Unrealized foreign currency

translation gain 1,454,203 123,517

COMPREHENSIVE INCOME $ 2,450,302 $ 960,818

NET INCOME PER COMMON SHARE:

Basic $ 0.02 $ 0.02

Diluted $ 0.02 $ 0.02

WEIGHTED AVERAGE COMMON SHARES

OUTSTANDING:

Basic 42,035,958 41,280,000

Diluted 47,783,076 44,280,000

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31, December 31,

2008 2007

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash $ 3,589,377 $ 4,557,957

Accounts receivable, net of allowance for

doubtful accounts and sale returns 21,344,090 20,430,827

Inventories, net of reserve for obsolete

inventory 6,782,982 3,410,739

Prepaid expenses 461,381 1,009,382

Deferred debt costs -- 29,340

Other receivable 2,825,321 --

Total Current Assets 35,003,151 29,438,245

PROPERTY AND EQUIPMENT - Net 6,311,684 6,169,966

OTHER ASSETS

Intangible assets, net of accumulated

amortization 1,307,619 1,291,322

Deferred debt costs 762,961 --

Total Assets $ 43,385,415 $ 36,899,533

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Convertible debt, net of debt discount $ -- $ 2,561,645

Accounts payable and accrued expenses 638,464 764,491

Value-added and service taxes payable 638,691 572,200

Advances from customers -- 34,531

Unearned revenue 774,606 530,063

Due to related parties 701,805 323,178

Total Current Liabilities 2,753,566 4,786,108

LONG-TERM LIABILITIES:

Due to related parties 768,990 738,300

Notes payable - related parties 4,935,479 4,738,508

Series A convertible redeemable preferred

stock, $.001 par value; 10,000,000 shares

authorized; 5,747,118 and -0- shares issued

and outstanding at March 31, 2008

and December 31, 2007, respectively 3,051,684 --

Total Liabilities 11,509,719 10,262,916

SHAREHOLDERS' EQUITY:

Common stock ($.001 par value; 200,000,000

shares authorized; 42,044,200 and 41,794,200

shares issued and outstanding at March 31,

2008 and December 31, 2007, respectively) 42,044 41,794

Additional paid-in capital 10,884,375 8,095,848

Statutory reserves 2,318,356 2,161,505

Retained earnings 15,195,161 14,355,913

Other comprehensive gain - cumulative foreign

currency translation adjustment 3,435,760 1,981,557

Total Shareholders' Equity 31,875,696 26,636,617

Total Liabilities and Shareholders' Equity $ 43,385,415 $ 36,899,533

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Three Months Ended

March 31,

2008 2007

(As Restated)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 996,099 $ 837,301

Adjustments to reconcile net income from

operations to net cash provided by

(used in) operating activities:

Depreciation and amortization 148,884 124,634

Amortization of deferred debt issuance costs 62,512 29,340

Amortization of debt discount 208,355 144,578

Amortization of discount on convertible

redeemable preferred stock 84,709

Increase in allowance for doubtful accounts

and sales returns 53,305 --

Changes in assets and liabilities:

Accounts receivable (115,927) 214,114

Inventories (3,161,360) (1,159,619)

Prepaid expenses and other current assets 752,227 (98,927)

Other receivable (2,764,883) --

Accounts payable and accrued expenses (98,515) 35,097

Value-added and service taxes payable 41,792 427,048

Unearned revenue 217,749 256,493

Advances from customers (35,197) (144,365)

NET CASH (USED IN) PROVIDED BY OPERATING

ACTIVITIES (3,610,250) 665,694

CASH FLOWS FROM INVESTING ACTIVITIES:

Collections from related party advances -- 259,575

Purchase of property and equipment -- (366,218)

NET CASH USED IN INVESTING ACTIVITIES -- (106,643)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net (payments) proceeds from convertible debt

(2,520,000) 2,950,000

Proceeds from sale of convertible redeemable

preferred stocks 5,000,000 --

Payment of debt issuance costs (468,568) (231,526)

Proceeds from related party advances 357,382 2,866

Repayments of related party advances -- (232,744)

Repayments of notes payable - related parties

-- (700,866)

NET CASH PROVIDED BY FINANCING ACTIVITIES 2,368,814 1,787,730

EFFECT OF EXCHANGE RATE ON CASH 272,856 20,122

NET (DECREASE) INCREASE IN CASH (968,580) 2,366,903

CASH - beginning of period 4,557,957 2,089,156

CASH - end of period $ 3,589,377 $ 4,456,059

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION:

Cash paid for:

Interest $ -- $ 55,489

Income taxes $ -- $ --

Non-cash operating, investing and financing

activities:

Warrants issued for prepaid financing costs

and consulting expenses $ 505,752 $ --

Common stock issued for conversion of

convertible debt $ 250,000 $ --

Debt discount for grant of warrants and

beneficial conversion feature $ 2,033,025 $ --

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL DATA

For the Three Months For the Three Months

Ended Ended

Adjusted Net income March 31, 2008 March 31, 2007

($ in thousands except per

share data)

Net Income (Loss) Diluted Diluted Diluted

EPS Net Income EPS Net Income EPS

Adjusted Amount 1,351,675 0.03 1,011,219 0.02

Adjustments

Non-cash debt

financing costs(1) 355,576 0.01 173,918 0.00

Amount per consolidated

statement of operations 996,099 0.02 837,301 0.02

(1) Non cash debt financing costs for Q1 2008 includes amortization of

debt issuance costs of $62,512, amortization of debt discount of

$208,355 and amortization of discount on convertible redeemable

preferred stock of $84,709; Non cash debt financing costs for Q1 2007

includes amortization of debt issuance costs of $29,340 amortization

of debt discount of $144,578.

Source: Lotus Pharmaceuticals, Inc.
Related Stocks:
OTC:LTUS
collection