BEIJING, Nov. 16 /PRNewswire-Asia/ -- Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company") a growing developer and producer of prescriptions drugs and licensed national seller of pharmaceutical products in the People's Republic of China, today reported third-quarter 2009 net earnings were $5.4 million, or $0.11 per diluted share, compared with $3.2 million, or $0.07 per diluted share, in 2008. Net revenues were $14.5 million during the third quarter of 2009, compared with $16.7 million in the third quarter of 2008.
The third quarter was highlighted by continued strong performance in the Company's wholesale business. Profitability increased due to increased sales demand and successful cost-reduction actions.
Third-Quarter 2009 Results
-- Earnings Before Interest and Taxes (EBIT) for the third quarter ended
September 30, 2009, were $6.0 million, compared with EBIT of $3.7
million during the same period in 2008.
-- EBIT was $15.3 million for the first nine months of 2009, compared with
EBIT of $7.8 million during the same period of 2008.
-- Gross margin as a percentage of net revenues was 59 percent in the
third quarter of 2009, compared with 51 percent in the same period of
2008.
-- Selling expenses were $1.9 million, less than for the same period in
2008.
"I'm pleased with our strong third-quarter results," said Dr. Zhong Yi Liu, chairman and chief executive officer. "By slowing down our buildup of new manufacturing facility in Inner Mongolia, we have set our priority in improving our operational efficiency in Beijing by preparing for moving the separated operation units into one single location. We will maintain our focus on improving operation efficiency and maintaining client relationships, and believe we will finish the year well-positioned to enter 2010."
Outlook
Lotus believes it is on track to meet its earnings guidance for 2009. The Company improved its cash position in the third quarter, which stood at $2.6 million as of September 30th, 2009, as compared to $1.3 million as of December 31, 2008.
In the wholesale segment which accounted for 80% of net revenues in the third quarter, the Company believes demand will continue to increase given the increases in distributor and product offerings, as well as increasing demand from existing distributors. In response to market conditions, unit average price of wholesale drugs in this segment decreased to follow deflation in raw material costs from the beginning of this year. As a result of our success in reducing purchase prices for drugs we sell but produced by third parties, prices we offer to our distributors have reduced and remained stable since the beginning of 2009, indirectly increasing incentives for them to promote our drugs. In addition, our cost reductions have proven to be effective as we managed to reduce selling expenses by reducing commissions paid to our sales representatives. Offsetting the impact of a 42% decrease in average unit selling price resulted in higher sales volume by 39% in the past nine months. The impact of these combined efforts resulted in EBIT margin in this quarter being 41%, compared to 22% in the same period last year.
In the retail segment which accounted for 19% of net revenues in the third quarter, although there was a 4% decrease from the same period last year, Lotus believes the demand for drugs treating influenza is expected to increase through the remainder of 2009 due to the upcoming of influenza season.
About Lotus Pharmaceuticals, Inc. ( http://www.lotuspharma.com )
Lotus Pharmaceuticals, Inc. is a growing developer and producer of prescription drugs and a licensed national seller of pharmaceutical items in the People's Republic of China. Lotus operates Liang Fang Pharmaceutical, Ltd. and En Ze Jia Shi Pharmaceutical, Ltd. Lotus's current drug development pipeline is focused on the treatment of cerebro-cardiovascular disease, asthma, and diabetes. More than 8,000 products are sold by Liang Fang directly and indirectly through its national sales channels to hospitals, clinics and drugs stores in 30 provinces.
Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. 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," "intent," "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 could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including, but not limited to, changes from anticipated levels of sales, future national or regional economic and competitive and regulatory conditions, changes in relationships with customers, access to capital, increased costs, difficulties in developing and marketing new products, marketing existing products, customer acceptance of existing and new products, the time to get new drugs approved by the SFDA and other factors. Additional information regarding risks can be found in the Company's Annual Report on Form 10K and its older filings with the SEC. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.
For more information, please contact:
Lotus Pharmaceuticals, Inc.
Yan ZENG, CFO
Tel: +86-10-6389-9868
Email: zy@lotuspharma.com
LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2009 December 31,2008
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $2,561,489 $1,278,808
Accounts receivable, net of
allowance for doubtful accounts 1,765,390 6,132,912
Other receivable 16,131 15,757
Other receivable-related party -- 2,027,954
Inventories, net of reserve for
obsolete inventory 2,994,995 3,787,802
Prepaid expenses and other assets 123,695 121,274
Deferred debt costs 153,024 398,067
Total Current Assets 7,614,724 13,762,574
PROPERTY AND EQUIPMENT - Net 22,872,484 7,554,817
OTHER ASSETS
Deposit and Installments on
intangible assets 41,924,067 41,093,053
Intangible assets, net of
accumulated amortization 8,429,005 1,231,730
Deferred debt costs -- 66,344
Total Assets $80,840,280 $63,708,518
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $477,619 $895,283
Other payables 1,305,565 1,274,882
Taxes payable 6,751,037 5,015,908
Unearned revenue 630,475 565,629
Due to related parties 1,968,158 1,588,689
Series A convertible redeemable
preferred stock, $.001 par value;
10,000,000 shares authorized;
5,748,271 and 5,747,118 shares
issued and outstanding at September
30, 2009 and December 31, 2008,
respectively, net 4,534,129 --
Total Current Liabilities 15,666,983 9,340,391
LONG-TERM LIABILITIES:
Due to related parties 329,063 525,225
Notes payable - related parties 5,068,726 5,056,451
Series A convertible redeemable
preferred stock, $.001 par value;
10,000,000 shares authorized;
5,748,271 and 5,747,118 shares
issued and outstanding at
September 30, 2009 and December
31, 2008, respectively, net -- 3,652,341
Total Liabilities 21,064,772 18,574,408
STOCKHOLDERS' EQUITY:
Common stock ($.001 par value;
200,000,000 shares authorized;
44,239,095 and 42,420,239 shares
issued and outstanding on
September 30, 2009 and December
31, 2008, respectively) 44,239 42,420
Additional paid-in capital 12,318,895 11,554,381
Statutory reserves 5,296,804 3,750,529
Retained earnings 37,755,694 25,557,537
Accumulated other comprehensive
income 4,359,876 4,229,243
Total stockholders' Equity 59,775,508 45,134,110
Total Liabilities and
Stockholders' Equity $80,840,280 $63,708,518
LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
NET REVENUES:
Wholesale $11,606,288 $12,191,037 $31,220,411 $34,863,680
Retail 2,708,071 2,831,030 7,604,678 8,492,107
Other revenues 198,345 1,681,817 1,143,631 4,442,886
Total Net
Revenues 14,512,704 16,703,884 39,968,720 47,798,673
COST OF SALES 5,993,176 8,219,358 16,922,500 25,684,501
GROSS PROFIT 8,519,528 8,484,526 23,046,220 22,114,172
OPERATING EXPENSES:
Selling expenses 1,895,901 4,293,704 5,398,935 11,291,590
Research and
development -- 12,448 -- 1,193,916
General and
administrative 610,519 420,716 2,126,828 1,589,176
Total Operating
Expenses 2,506,420 4,726,868 7,525,763 14,074,682
INCOME FROM OPERATIONS 6,013,108 3,757,658 15,520,457 8,039,490
OTHER INCOME (EXPENSE):
Debt issuance
costs (112,355) (99,516) (311,388) (261,919)
Registration
rights penalty -- -- -- (650)
Interest income 1,295 9,032 47,407 11,620
Interest expense (436,481) (453,498) (1,355,129) (1,399,507)
Total Other
Income (Expense) (547,541) (543,982) (1,619,110) (1,650,456)
INCOME BEFORE INCOME
TAXES 5,465,567 3,213,676 13,901,347 6,389,034
INCOME TAXES 74,770 -- 156,915 --
NET INCOME $5,390,797 $3,213,676 $13,744,432 $6,389,034
COMPREHENSIVE INCOME:
NET INCOME 5,390,797 3,213,676 13,744,432 6,389,034
OTHER COMPREHENSIVE
INCOME:
Unrealized
foreign
currency
translation
gain 65,626 127,833 130,633 2,173,475
COMPREHENSIVE
INCOME $5,456,423 $3,341,509 $13,875,065 $8,562,509
NET INCOME PER COMMON
SHARE:
Basic $0.12 $0.08 $0.32 $0.15
Diluted $0.11 $0.07 $0.28 $0.13
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 43,997,079 42,420,239 43,527,746 42,269,997
Diluted 49,745,350 48,167,357 49,186,167 48,017,115
LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
September 30,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $13,744,432 $6,389,034
Adjustments to reconcile net income
from operations to net cash
provided by operating activities:
Depreciation and amortization 1,081,953 469,455
Amortization of deferred debt
issuance costs 311,388 261,545
Amortization of debt discount -- 208,355
Amortization of discount on
convertible redeemable preferred
stock 880,788 592,966
Amortization of prepaid expense
attributable to warrants 14,849 --
Stock-based compensation 113,834 392,341
Warrants revaluation -- 74,593
Decrease in allowance for doubtful
accounts and sales returns -- (490,310)
Recognition of unearned revenue (594,738) --
Changes in assets and liabilities:
Accounts receivable 4,379,267 8,244,225
Inventories 801,428 (4,880,418)
Prepaid expenses and other current
assets 2,018,565 1,080,576
Accounts payable and accrued
expenses 230,951 1,032,245
Other current payables (287,905) --
Taxes payable 1,721,716 2,637,331
Unearned revenue 658,165 26,139
Due to related parties 178,047 --
NET CASH PROVIDED BY OPERATING
ACTIVITIES 25,252,740 16,038,077
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits on patent right -- (2,857,608)
Deposits on land use right -- (16,768,445)
Payments on intangible assets (8,622,567) (3,429)
Purchase of property and equipment (15,352,107) (1,430,894)
NET CASH USED IN INVESTING ACTIVITIES (23,974,674) (21,060,376)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of convertible debt -- (2,520,000)
Proceeds from sale of convertible
redeemable stocks -- 5,000,000
Payment of debt issuance costs -- (468,568)
Proceeds from related party
advances -- 860,916
NET CASH PROVIDED BY FINANCING
ACTIVITIES -- 2,872,348
EFFECT OF EXCHANGE RATE ON CASH 4,615 248,764
NET INCREASE (DECREASE) IN CASH 1,282,681 (1,901,187)
CASH - beginning of period 1,278,808 4,557,957
CASH - end of period $2,561,489 $2,656,770
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $-- $103,250
Income taxes $-- $--
Non-cash investing and financing
activities:
Warrants issued for prepaid
financing costs and consulting
service $-- $505,752
Common stock issued for prior
services $249,000 $318,551
Common stock issued for future
services $4,500 $--
Common stock issued for conversion
of convertible debt $-- $250,000
Common stock issued for conversion
of convertible redeemable
preferred stock $399,000 $--
Debt discount for grant of
warrants and beneficial
conversion feature $-- $2,033,025
Increase in payable for
construction-in-progress $315,473 $--
Preferred stock issued for
dividend payable $400,000 $--
