Lotus Pharmaceuticals Announces Second Quarter Fiscal 2011 Financial Results

News provided by

Lotus Pharmaceuticals, Inc.

Aug 15, 2011, 09:00 ET

BEIJING, Aug. 15, 2011 /PRNewswire-Asia-FirstCall/ -- Lotus Pharmaceuticals, Inc. (OTCBB: LTUS) ("Lotus" or the "Company"), a profitable developer, manufacturer and seller of medicine and drugs in the People's Republic of China ("PRC"), today announced its financial results for the quarter ended June 30, 2011. Summary financial data is provided below:

Second Quarter Financial Highlights

  • Revenues for the three months ended June 30, 2011 decreased by 1.1% year-over-year to $18.7 million, down from $18.9 million in the second quarter of 2010
    • Wholesale revenues were $14.6 million, or 78% of total revenues
    • Retail revenues were $4.1 million, or 22% of total revenues
  • Gross profit for the second quarter was $4.9 million, a decrease of 50.1% compared to $9.8 million in the second quarter of 2010. Gross margin was 26.1% and 51.8% for the three months ended June 30, 2011 and 2010, respectively
  • Net income for the quarter decreased 71.9% to $1.8 million, compared to $6.3 million in the second quarter of 2010
  • Earnings per diluted share were $0.06 for the quarter, compared with diluted EPS of $0.24 achieved in the same period a year ago

Mr. Zhongyi Liu, Chairman and CEO of Lotus, stated, "Our 2011 second quarter results, especially those of the wholesale segment, were negatively impacted by changes in the competitive landscape and increases in labor costs. Retail sales continue to deliver solid results with 19.2% growth in revenue versus the same period in 2010. The increase in the retail segment was driven primarily by our Over-the-Counter division's sales. Construction of our Beijing facility continues to progress, and we anticipate additional capacity for growth and significant efficiency improvements once we move into the new building by the end of the year."

Mr. Liu continued, "We plan to focus our capital expenditures in the foreseeable future on the completion of our Beijing facility and our core business in Beijing. Lotus has a well-established nationwide sales and distribution network, and strong product development capabilities. With the completion of our new headquarters, we believe we are well positioned with respect to the ongoing consolidation of the Chinese pharmaceutical industry."

Second Quarter Results of Operations

Revenues

Revenues for the quarter ended June 30, 2011 were $18.7 million, compared to $18.9 million in the second quarter of 2010. The decrease of 1.1%, or $0.2 million, was primarily due to decreased sales from the Company's wholesale distribution channel, partially offset by the growth in its retail sales segment. Wholesale revenue decreased 5.6% year-over-year to $14.6 million, or 78% of total revenues. Retail revenues increased 19.2% year-over-year to $4.1 million, or 22% of total revenues. The growth in the retail segment was mainly due to an increase in revenue from our direct sales to other Over-the-Counter drug stores in Beijing.

Gross Profit

Gross profit for the second quarter ended June 30, 2011 was $4.9 million or 26.1% of total net revenues, as compared to $9.8 million or 51.8% of total net revenues for the quarter ended June 30, 2010.  The decrease of 50.1%, or $4.9 million, was primarily attributable to lower product prices in 2011 compared to 2010.

Income from Operations

Operating income amounted to $1.8 million for the quarter ended June 30, 2011 as compared to operating income of $6.4 million for the second quarter of 2010. The decrease of 71.8%, or $4.6 million, was due largely to decreased gross profit.

Net Income

Net income for the quarter ended June 30, 2011 was $1.8 million as compared to $6.3 million for the quarter ended June 30, 2010, due to the reasons set forth above. Earnings per diluted share were $0.06 for the quarter, compared with diluted EPS of $0.24 for the second quarter of 2010.

Liquidity and Capital Resources

As of June 30, 2011, the Company's current assets were $7.2 million and current liabilities were $10.9 million. Cash and cash equivalents totaled $0.9 million as of June 30, 2011. The Company's shareholders' equity at June 30, 2011 was $ 97.2 million. The Company generated $6.7 million in cash from operating activities in the first half of fiscal 2011, compared to $8.9 million in the same period of 2010. The Company used $7.1 million cash for investing activities during the first half of fiscal 2011, compared to $11.8 million in the same period of 2010.

Recent Business Highlights

  • The Company continues to make progress in the construction of its headquarters building in Chaoyang District, Beijing. Currently the project is in its final interior furnishing stage. Once completed, this state-of-the-art building will host the Company's GMP manufacturing facility, a storage warehouse, an R&D center, a sales and marketing center, and administrative offices, as well as employee apartments. The Company reiterates the plan to complete and move into the facility by the end of the year.

Business Outlook for 2011

Management expects that 2011 will be a transitional year for Lotus Pharmaceuticals, as the Company will be completing and moving into its new headquarters and shifting its focus to the wholesale business in Beijing and the surrounding areas. After the completion of the headquarters, the Company expects growth will resume, primarily driven by the wholesale business in Beijing starting in 2012.

Conference Call and Webcast

Management will host a conference call to discuss these financial results on Wednesday, August 17, 2011 at 10:00 a.m. EDT (7:00 a.m. PDT).

To participate in the call, please dial (877) 941-4774, or (480) 629-9760 for international calls, approximately 10 minutes prior to the scheduled start time.

A replay of the call will be available for two weeks from 1:00 p.m. EDT on August 17, 2011, until 11:59 p.m. EDT on August 31, 2011. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4466487.

About Lotus Pharmaceuticals, Inc.

Lotus Pharmaceuticals, Inc. is a profitable developer and producer of drugs and a licensed national seller of pharmaceutical items in the People's Republic of China (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 diseases, 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.

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission.

Contacts:

Xing Shen, Ph.D.

VP of Corporate Development

Lotus Pharmaceuticals, Inc.

Ph: 415-690-7688

Email: [email protected]

Web: http://www.lotuspharma.com

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



June 30, 

December 31,

2011

 2010

ASSETS


CURRENT ASSETS:


   Cash

$886,445

$1,339,972

   Accounts receivable

4,877,745

1,973,150

   Inventories

895,176

634,583

   Prepaid expenses and other current assets

539,847

593,759




       Total Current Assets

7,199,213

4,541,464




PROPERTY AND EQUIPMENT, net

47,248,484

39,337,935




OTHER ASSETS


   Land use right held for development or sale

29,905,396

29,236,891

   Deposits and Installments on intangible assets

9,746,287

9,528,419

   Land use rights, net

13,066,530

12,932,421

   Other intangible assets, net

7,327,634

7,607,485




       Total Assets

$114,493,544

$103,184,615




LIABILITIES AND SHAREHOLDERS' EQUITY






CURRENT LIABILITIES:


   Accounts payable

$20,111

$37,829

   Other payables and accrued liabilities

802,431

3,441,466

   Taxes payable

7,321,783

2,024,565

   Unearned revenue

534,231

504,442

   Dividend payable

3,308

-

   Due to related parties

2,186,596

2,042,376




       Total Current Liabilities

10,868,460

8,050,678




LONG-TERM LIABILITIES:


   Due to related parties

1,014,586

869,067

   Notes payable - related parties

5,361,684

5,241,829




       Total Liabilities

17,244,730

14,161,574




COMMITMENTS AND CONTIGENCIES






STOCKHOLDERS' EQUITY:


   Preferred stock ($.001 par value; 10,000,000 shares authorized;


   619,824 and 607,107 shares issued and outstanding




   at June 30, 2011 and December 31, 2010, respectively)

620

607

   Common stock ($.001 par value; 100,000,000 shares authorized;


   27,747,131 and 26,763,485  shares issued and outstanding




   at June 30, 2011 and December 31, 2010, respectively)

27,747

26,763

   Additional paid-in capital

23,785,665

21,679,147

   Retained earnings

57,919,584

53,925,101

   Statutory reserves

6,240,202

6,240,202

   Accumulated other comprehensive income

9,274,996

7,151,221




       Total stockholders' Equity

97,248,814

89,023,041




       Total Liabilities and Stockholders' Equity

$114,493,544

$103,184,615





LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)











For the Three Months Ended

For the Six Months Ended


June 30,

June 30,


2011

2010

2011

2010









NET REVENUES:







 Wholesale

$14,590,654

$15,464,138

$23,309,677

$26,962,224

 Retail

4,103,783

3,442,355

8,302,000

6,694,747









   Total Net Revenues

18,694,437

18,906,493

31,611,677

33,656,971









COST OF REVENUES:







 Wholesale

10,679,431

6,613,650

14,431,940

10,526,848

 Retail

3,127,962

2,492,101

6,139,759

4,822,532









   Total Cost of Revenues

13,807,393

9,105,751

20,571,699

15,349,380









GROSS PROFIT

4,887,044

9,800,742

11,039,978

18,307,591









OPERATING EXPENSES:







    Selling expenses

737,165

2,375,159

2,140,711

4,544,112

    Research and development expenses

691,793

-

1,419,224

-

    General and administrative expenses

1,669,887

1,075,348

3,442,186

2,097,205









       Total Operating Expenses

3,098,845

3,450,507

7,002,121

6,641,317









INCOME FROM OPERATIONS

1,788,199

6,350,235

4,037,857

11,666,274









OTHER INCOME (EXPENSE):







    Debt issuance costs

-

-

-

(52,226)

    Other income

47,100

198,508

93,614

396,942

    Interest income

876

906

1,566

2,186

    Interest expense

(62,404)

(59,428)

(124,033)

(491,830)









       Total Other Income (Expense)

(14,428)

139,986

(28,853)

(144,928)









INCOME BEFORE INCOME TAXES

1,773,771

6,490,221

4,009,004

11,521,346









INCOME TAXES

-

167,959

149

270,166









NET INCOME

1,773,771

6,322,262

4,008,855

11,251,180









OTHER COMPREHENSIVE INCOME:







    Foreign currency translation gain

1,546,706

323,270

2,123,775

334,198









COMPREHENSIVE INCOME

3,320,477

6,645,532

$6,132,630

$11,585,378









NET INCOME PER COMMON SHARE:







   Basic

$    0.06

$    0.24

$    0.14

$    0.44

   Diluted

$    0.06

$    0.24

$   0.14

$    0.42









WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:







   Basic

27,747,131

26,503,188

27,619,320

25,646,151

   Diluted

28,057,043

26,934,693

27,929,627

26,838,338

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Six Months Ended

June 30,

2011

2010




CASH FLOWS FROM OPERATING ACTIVITIES:


   Net income

$4,008,855

$11,251,180

   Adjustments to reconcile net income from operations to net cash


   provided by operating activities:


       Depreciation

211,297

12,920

       Amortization of intangible assets

607,476

876,619

       Amortization of deferred debt issuance costs

-

52,226

       Amortization of discount on convertible redeemable preferred stock

-

151,553

       Interest expense attributable to beneficial conversion feature of preferred shares

-

184,660

       Common shares issued for service

708,350

120,450

       Common shares issued for compensation

1,388,101

109,500

   Changes in assets and liabilities:


       Accounts receivable

(2,822,719)

(3,240,293)

       Inventories

(242,920)

(637,828)

       Prepaid expenses and other current assets

66,602

354,472

       Accounts payable

(18,344)

64,675

       Other payables and accrued liabilities

(2,679,315)

(630,615)

       Taxes payable

5,183,422

592,024

       Unearned revenue

18,020

(519,697)

       Due to related parties

225,364

166,492




NET CASH PROVIDED BY OPERATING ACTIVITIES

6,654,189

8,908,338




CASH FLOWS USED IN INVESTING ACTIVITIES:


       Purchase of property and equipment

(7,132,250)

(11,780,895)




NET CASH USED IN INVESTING ACTIVITIES

(7,132,250)

(11,780,895)




CASH FLOWS FROM FINANCING ACTIVITIES:






NET CASH PROVIDED BY  FINANCING ACTIVITIES

-

-




EFFECT OF EXCHANGE RATE ON CASH

24,534

5,541




NET DECREASE IN CASH

(453,527)

(2,867,016)




CASH  - beginning of period

1,339,972

3,945,740




CASH - end of period

$886,445

$1,078,724




SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:


   Cash paid for:


       Interest

$    -

$    -

       Income taxes

$3,672

$3,746




   Non-cash investing and financing activities:


       Common stock issued for services

$    -

$397,050

       Common stock issued for conversion of convertible redeemable preferred stock

$    -

$4,048,200

       Convertible redeemable preferred stock reclassified to permanent equity

$    -

$595,233

       Convertible preferred stock issued for dividend payable

$11,064

$321,308

SOURCE Lotus Pharmaceuticals, Inc.

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