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Lotus Pharmaceuticals, Inc. Reports Full Year 2009 Financial Results

Thursday, April 1, 2010 General News J E 4
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BEIJING, April 1 /PRNewswire-Asia-FirstCall/ -- Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company"), a growing developer, manufacturer and seller of medicine and drugs in the People's Republic of China (the "PRC") reported that its 2009 net earnings were approximately $16.4 million, or $0.33 per diluted share, compared with approximately $12.8 million, or $0.27 per diluted share, in 2008. Net revenues were approximately $57.8 million in 2009 compared with $73.8 million in 2008.

    Full Year 2009 Results
    -- Earnings Before Interest and Taxes (EBIT) in 2009, were approximately
       $19.0 million, an increase of 29%, as compared with EBIT of $14.7
       million in 2008.
    -- Gross margin as a percentage of net revenues was 56 percent in 2009 as
       compared with 45 percent in 2008.
    -- Selling expenses were approximately $8.0 million in 2009 as compared to
       approximately $14.9 million in 2008.

For the year ended December 31, 2009, wholesale revenues accounted for 78% of net revenues a decrease of 17% compared to the year ended December 31, 2008. This decrease was a result of the reduced unit prices of wholesale drugs in 2009 as a result of deflation in raw material prices, and reduced commissions paid to our sales representatives. Eight products accounted for approximately 84% of the our total wholesale revenues for the year ended December 31, 2009, including Maixin (Valsartan), Junxin (Levofloxacin Lactate for Injection), Muxin (Brimonidine), Ni Mai Jiao Lin (Nicergoline for Injection), Yipubishan (Octreotide Acetate Injection Solution), Recombinant Human Erythropoietin Injection, Recombinant Human Granulocyte Colony Stimulating Factor Injection, Recombinant Human Interleukin-2 for Injection. Offsetting the impact of a 37% decrease in average unit selling prices for these eight wholesale products was an increase in the sales quantities of these eight drugs by approximately 18% compared to 2008. The impact of these efforts resulted in EBIT margin in 2009 being 33%, compared to 20% in 2008.

Our retail sales accounted for 20% of net revenues in 2009, a decrease of 17% as compared to 2008. Lotus believes that this decrease was due to increased competition in Beijing.

Liquidity and Capital Resources

As of December 31, 2009, the Company had approximately $4.0 million in cash, compared to approximately $1.3 million as of December 31, 2008. Net cash provided by operating activities was approximately $31.4 million in 2009 as compared to approximately $37.4 million in 2008.

The Company believes that its internal cash flows and external financings will be able to support its proposed capital expenditures in 2010.

Outlook

"I'm pleased with our strong results for 2009," said Dr. Zhong Yi Liu, chairman and chief executive officer. "China's pharmaceutical sector presents us with tremendous growth opportunities. We have maintained strong relationships with our clients, leading research and development institutes and leading drug makers. At such time as we begin to use our new Beijing building complex, we hope to increase our sales and achieve both top and bottom line growth."

Based on information available to management at this time, Lotus anticipates its EBIT of fiscal year 2010 to grow by 15-20%, because its direct sales of drugs to third-party pharmacies in Beijing are expected to generate additional earnings.

About Lotus Pharmaceuticals, Inc. ( http://www.lotuspharma.com )

Lotus Pharmaceuticals, Inc. is a growing developer and producer of drugs and a licensed national seller of pharmaceutical items in the PRC. Lotus operates its business through its two controlled entities: Liang Fang Pharmaceutical, Ltd. and En Ze Jia Shi Pharmaceutical, Ltd. Lotus' current drug development is focused on the treatment of cerebro-cardiovascular disease, asthma, and diabetes. Liang Fang sells drugs directly and indirectly through its national sales channels to hospitals, clinics and drugs stores in 30 provinces of the PRC.

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 State Food and Drug Administration and other factors. Additional information regarding risks can be found in the Company's Annual Report on Form 10K and its other 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.



                   LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                     As of December 31,
                                                   2009               2008
    ASSETS
    CURRENT ASSETS:
       Cash                                     $3,945,740         $1,278,808
       Accounts receivable                       1,784,194          6,132,912
       Other receivable                             16,132             15,757
       Other receivable-related party                   --          2,027,954
       Inventories                               1,039,867          3,787,802
       Prepaid expenses and other assets
        - current                                  856,691            121,274
       Deferred debt costs - current                52,226            398,067

           Total Current Assets                  7,694,850         13,762,574

    PROPERTY AND EQUIPMENT - net of
     depreciation                               16,223,775          6,896,886

    OTHER ASSETS
       Prepaid expenses - noncurrent             1,359,583                 --
       Deposits and Installments on
        intangible assets                       41,926,520         41,093,053
       Intangible assets, net of
        accumulated amortization                17,176,207          1,889,661
       Deferred debt costs - noncurrent                 --             66,344

           Total Assets                        $84,380,935        $63,708,518

    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:
       Accounts payable and accrued
        expenses                                  $427,924           $895,283
       Other payables                            2,262,760          1,274,882
       Taxes payable                             3,131,908          5,015,908
       Unearned revenue                          1,163,771            565,629
       Due to related parties - current          1,490,649          1,224,339
       Series A convertible redeemable
        preferred stock, $.001 par
        value; 10,000,000 shares
        authorized; 4,967,959 and
        5,747,118 shares issued and
        outstanding at December 31,
        2009 and 2008, respectively,
        net of discount                          4,170,572                 --

           Total Current Liabilities            12,647,584          8,976,041

    LONG-TERM LIABILITIES:
       Due to related parties -
        noncurrent                                 866,102            889,575
       Notes payable - related parties           5,069,023          5,056,451
       Series A convertible redeemable
        preferred stock, $.001 par
        value; 10,000,000 shares
        authorized; 4,967,959 and
        5,747,118 shares issued and
        outstanding at December 31,
        2009 and 2008, respectively,
        net of discount                                 --          3,652,341

           Total Liabilities                    18,582,709         18,574,408


    STOCKHOLDERS' EQUITY:
       Common stock ($.001 par value;
        200,000,000 shares authorized;
        47,306,332 and 42,420,239 shares
        issued and outstanding at December
        31, 2009 and 2008, respectively)            47,306             42,420
       Additional paid-in capital               15,649,328         11,554,381
       Statutory reserves                        5,674,324          3,750,529
       Retained earnings                        40,066,036         25,557,537
       Accumulated other comprehensive
        income                                   4,361,232          4,229,243

           Total stockholders' Equity           65,798,226         45,134,110

           Total Liabilities and
            Stockholders' Equity               $84,380,935        $63,708,518



                  LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

                                                  For the Years Ended
                                                      December 31,
                                                  2009              2008

    NET REVENUES:
         Wholesale                             $44,842,525       $54,067,149
          Retail                                11,639,923        14,034,389
          Other revenues                         1,342,197         5,701,491

            Total Net Revenues                  57,824,645        73,803,029

    COST OF SALES                               25,353,714        40,651,042

    GROSS PROFIT                                32,470,931        33,151,987

    OPERATING EXPENSES:
         Selling expenses                        8,040,161        14,902,646
         Research and development                       --         1,200,194
         Loss on fixed assets impairment         1,719,884                --
         General and administrative              3,391,875         1,979,203

            Total Operating Expenses            13,151,920        18,082,043

    INCOME FROM OPERATIONS                      19,319,011        15,069,944

    OTHER INCOME (EXPENSE):
         Debt issuance costs                      (412,184)         (361,436)
         Registration rights penalty                    --              (650)
         Interest income                            48,520            12,626
         Interest expense                       (2,154,373)       (1,929,836)

            Total Other Income (Expense)        (2,518,037)       (2,279,296)

    INCOME BEFORE INCOME TAXES                  16,800,974        12,790,648

    INCOME TAXES                                   368,680                --

    NET INCOME                                 $16,432,294       $12,790,648

    COMPREHENSIVE INCOME:
          NET INCOME                            16,432,294        12,790,648

          OTHER COMPREHENSIVE INCOME:
              Foreign currency
               translation gain                    131,989         2,247,686

    COMPREHENSIVE INCOME                       $16,564,283       $15,038,334

    NET INCOME PER COMMON SHARE:
        Basic                                        $0.37             $0.30
        Diluted                                      $0.33             $0.27

    WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING:
        Basic                                   44,209,856        42,307,762
        Diluted                                 50,046,381        48,054,880



                  LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    For the Years Ended
                                                        December 31,
                                                   2009              2008

    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                               $16,432,294       $12,790,648
      Adjustments to reconcile net income
       from operations to net cash provided
       by operating activities:
        Depreciation and amortization            1,986,361           634,347
        Loss on fixed assets impairment          1,719,884                --
        Amortization of deferred debt
         issuance costs                            412,184           361,062
        Amortization of debt discount                   --           208,355
        Amortization of discount on
         convertible redeemable preferred
         stock                                   1,196,106           962,604
        Amortization of prepaid expense
         attributable to warrants                   14,849           163,338
        Stock-based compensation                   282,083           318,551
        Interest expenses caused by
         escrow shares transfer                    337,500                --
        Warrants revaluation                            --            74,593
        Decrease in allowance for
         doubtful accounts and sales
         returns                                        --          (575,781)
      Changes in assets and liabilities:
        Accounts receivable                      4,361,619        16,001,384
        Inventories                              2,755,869          (145,910)
        Prepaid expenses and other
         current assets                          2,043,209           939,654
        Accounts payable and accrued
         expenses                                  213,431         1,360,568
        Other current payables                     668,662                --
        Taxes payable                           (1,895,451)        4,336,947
        Unearned revenue                           596,414           (36,276)
        Due to related parties                     237,452                --

    NET CASH PROVIDED BY OPERATING
     ACTIVITIES                                 31,362,466        37,394,084

    CASH FLOWS FROM INVESTING ACTIVITIES:
        Deposits on patent right                        --        (2,872,635)
        Deposits on land use right                      --       (32,124,672)
        Payments on intangible assets          (17,581,071)       (5,465,762)
        Purchase of property and
         equipment                             (11,118,884)       (1,438,419)

    NET CASH USED IN INVESTING ACTIVITIES      (28,699,955)      (41,901,488)

    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                                       --           965,986
        Repayments of related party
         advances                                       --        (1,996,481)

    NET CASH PROVIDED BY FINANCING
     ACTIVITIES                                         --           980,937

    EFFECT OF EXCHANGE RATE ON CASH                  4,421           247,318

    NET INCREASE (DECREASE) IN CASH              2,666,932        (3,279,149)

    CASH - beginning of year                     1,278,808         4,557,957

    CASH - end of year                          $3,945,740        $1,278,808

    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 services        $2,370,250          $318,551
        Common stock issued for conversion
         of convertible debt                           $--          $250,000
        Common stock issued for
         conversion of convertible
         redeemable preferred stock             $1,110,000                $-
        Debt discount for grant of
         warrants and beneficial
         conversion feature                            $--        $2,310,263
        Convertible redeemable preferred
         stock issued for dividend
         payable                                  $432,125               $--


    For more information, please contact:

    Lotus Pharmaceuticals, Inc.
     Yan ZENG, CFO
     Tel:   +86-10-6389-9868
     Email: zy@lotuspharma.com

SOURCE Lotus Pharmaceuticals, Inc.

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