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Lotus Pharmaceuticals, Inc. Reports Strong First Quarter 201

2019-02-01 10:20

Announces 2010 Earnings Guidance

BEIJING, May 15 /PRNewswire-Asia/ -- 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") today reported its financial results for the first quarter ended March 31, 2010.

First Quarter 2010 Highlights and Recent Developments:

-- Diluted EPS of $0.09, up 27% from first quarter 2009

-- Net revenues of $14.9 million, up 26% from first quarter 2009

-- Net income of $4.9 million, up 38% from first quarter 2009

-- Gross margin of 58%, as compared with 56% from first quarter of 2009

-- Net margin of 33%, as compared with 30% from first quarter of 2009

-- Reduced our current liability under the outstanding Series A Preferred

Stock from $2,477,433 on March 31, 2010 to $621,333 May 13, 2010 due to

the conversion of preferred shares to common stocks

-- Added five prescription drugs under the National Health Insurance

Program to deliver through the wholesale channel nationwide, achieving

the goal of increasing product for 2010

-- Continued Sarbanes-Oxley compliance project, to be fully and timely

compliant in 2010

-- Commenced construction of the Beijing building complex which is

scheduled for completion in 2010

-- Received SFDA's approval for R-Bambuterol(R) Hydrochloride Tablets to

commence clinical trials as a Class 1 New Drug for special/fast track

review

-- Approved extension of contract term from 10 years to 30 years between

Lotus Pharmaceuticals, Inc.'s wholly-owned foreign enterprise and two

operating entities in China

Revenues for the first quarter of 2010 increased 26% to $14.9 million, up from $11.8 million in the first quarter of 2009. As compared to the first quarter of 2009, wholesale revenues, which were 77% of total net revenues for the first quarter of 2010, increased 29%; and retail revenues, which were 22% of total net revenues for the first quarter of 2010, increased 52% for the first quarter of 2010. The increase in wholesale revenues was mainly attributed to strong sales from two areas: 1) sales increases in the three core prescription drugs-Valsartan Capsules, Brimonidine Tartrate Eye Drops and Yipubishan-Octreotide Acetate Injection resulting from increased demand from existing channels and an expanded sales network. These three drugs continue to gain popularity in the market for their safety, efficacy and stability; and 2) revenues contributed from five new prescription drugs added this quarter. For 2010, the Company has not raised prices for its prescription drugs and maintains its pricing from 2009. However, if the market price demands adjustment, the Company will act accordingly.

The increase in retail revenues was attributable to direct sales to Over-the-Counter ("OTC") drug outlets in Beijing. Currently, the Company has established direct sales to over 1000 drug stores in Beijing with nearly 1000 over-the-counter drugs produced by third party manufacturers. The Company has exclusive distribution rights to 40% of such drugs. This new segment is expected to grow with our strong and experienced sales team recruited at the end of 2009 and the opportunities in Beijing. Once the 10,000sqm storage facility is built and fully utilized, it can fully support the expansion of direct sales to OTC drug stores as well as hospitals.

Gross profit in the first quarter increased 31% year over year to $8.7 million from $6.6 million. Gross margin increased to 58% in the first quarter 2010 from 56% in the prior year corresponding period.

Net income for the 2010 first quarter was $4.9 million, or $0.09 per diluted share, compared with $3.6 million, or $0.07 per diluted share, in the first quarter of 2009. Net margin increased to 33% in the first quarter 2010 from 30% in the prior year comparable period.

The Company's cash position at the end of the first quarter was $1.1 million, as compared to $3.9 million at the end of 2009. Its adjusted working capital ratio was 1.0X due to its adjusted current liabilities calculation. The adjusted current liability amount is $7,286,444 instead of $9,142,544 because current liabilities under Series A convertible redeemable preferred stock have been reduced to $621,333 as of May 13, 2010 after conversion of preferred shares to common shares.

CEO Dr. Liu commented, "We have delayed the buildup in Inner Mongolia to focus on our efforts in Beijing. We use our internally generated cash to fund the construction of the Beijing new building complex so that our dispersed operating units can be consolidated into one single location. We are positioning to capture the fast growing demand in the pharmaceutical sector by establishing the foundations of a modern facility, a pipeline of innovative drugs under patent protection and an excellent sales network."

2010 Earnings Guidance

Looking forward for the balance of 2010, the Company continues to expect to grow its revenues and net income by 20-30% compared to its performance in 2009. The growth drivers are growth in direct sales to OTC drug stores and hospitals, increased medical equipment sales and increased prescription drug sales.

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.

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.

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of

March 31, 2010 December 31, 2009

(Unaudited) (Audited)

ASSETS

CURRENT ASSETS:

Cash $1,125,181 $3,945,740

Accounts receivable 1,669,704 1,784,194

Other receivable 16,135 16,132

Inventories 3,301,050 1,039,867

Prepaid expenses and other assets -

current 1,091,909 856,691

Deferred debt costs -- 52,226

Total Current Assets 7,203,979 7,694,850

PROPERTY AND EQUIPMENT - net of

depreciation 21,309,774 16,223,775

OTHER ASSETS

Prepaid expenses - noncurrent 1,169,167 1,359,583

Deposits and Installments on

intangible assets 9,215,781 9,214,299

Intangible assets, net of accumulated

amortization 49,458,233 49,888,428

Total Assets $88,356,934 $84,380,935

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable and accrued expenses $301,442 $427,924

Other payables 1,418,234 2,262,760

Taxes payable 2,481,808 3,131,908

Unearned revenue 795,620 1,163,771

Due to related parties - current 1,668,007 1,490,649

Series A convertible redeemable

preferred stock, $.001 par value;

10,000,000 shares authorized;

2,847,623 and 4,967,959 shares

issued and outstanding at March 31,

2010 and December 31, 2009,

respectively, net of discount 2,477,433 4,170,572

Total Current Liabilities 9,142,544 12,647,584

LONG-TERM LIABILITIES:

Due to related parties - noncurrent 859,819 866,102

Notes payable - related parties 5,069,839 5,069,023

Total Liabilities 15,072,202 18,582,709

STOCKHOLDERS' EQUITY:

Common stock ($.001 par value;

200,000,000 shares authorized;

50,863,217 and 47,306,332 shares

issued and outstanding at March 31,

2010 and December 31, 2009,

respectively) 50,863 47,306

Additional paid-in capital 18,192,431 15,649,328

Statutory reserves 6,240,202 5,674,324

Retained earnings 44,429,076 40,066,036

Accumulated other comprehensive

income 4,372,160 4,361,232

Total stockholders' Equity 73,284,732 65,798,226

Total Liabilities and Stockholders'

Equity $88,356,934 $84,380,935

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

For the Three Months Ended

March 31,

2010 2009

NET REVENUES:

Wholesale $11,498,086 $8,940,405

Retail 3,252,392 2,137,188

Other revenues 198,434 746,694

Total Net Revenues 14,948,912 11,824,287

COST OF SALES 6,243,629 5,186,158

GROSS PROFIT 8,705,283 6,638,129

OPERATING EXPENSES:

Selling expenses 2,168,953 1,701,799

General and administrative 1,021,857 747,206

Total Operating Expenses 3,190,810 2,449,005

INCOME FROM OPERATIONS 5,514,473 4,189,124

OTHER INCOME (EXPENSE):

Debt issuance costs (52,226) (99,517)

Interest income 1,280 1,319

Interest expense (432,402) (448,097)

Total Other Income (Expense) (483,348) (546,295)

INCOME BEFORE INCOME TAXES 5,031,125 3,642,829

INCOME TAXES 102,207 74,727

NET INCOME $4,928,918 $3,568,102

COMPREHENSIVE INCOME:

NET INCOME 4,928,918 3,568,102

OTHER COMPREHENSIVE INCOME:

Foreign currency translation gain 10,928 62,111

COMPREHENSIVE INCOME $4,939,846 $3,630,213

NET INCOME PER COMMON SHARE:

Basic $0.10 $0.08

Diluted $0.09 $0.07

WEIGHTED AVERAGE COMMON SHARES

OUTSTANDING:

Basic 49,559,184 43,048,060

Diluted 53,708,923 49,254,950

LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

March 31,

2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $4,928,918 $3,568,102

Adjustments to reconcile net income

from operations to net cash

provided by operating activities:

Depreciation and amortization 444,812 362,467

Amortization of deferred debt

issuance costs 52,226 99,517

Amortization of discount on

convertible redeemable preferred

stock 151,553 288,783

Amortization of prepaid expense

attributable to warrants -- 14,849

Interest expense attributable to

beneficial conversion feature of

preferred shares 184,660 --

Stock-based compensation 23,000 --

Changes in assets and liabilities:

Accounts receivable 114,778 4,744,877

Inventories (2,261,039) 66,423

Prepaid expenses and other current

assets 208,214 1,329,083

Accounts payable and accrued expenses 194,827 (666,522)

Other current payables (844,890) --

Taxes payable (650,611) (3,027,383)

Unearned revenue (368,342) 228,143

Due to related parties 90,697 --

NET CASH PROVIDED BY OPERATING

ACTIVITIES 2,268,803 7,008,339

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments on intangible assets -- (4,965,976)

Purchase of property and equipment (5,090,025) (2,153,243)

NET CASH USED IN INVESTING ACTIVITIES (5,090,025) (7,119,219)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from related party advances -- 59,314

NET CASH PROVIDED BY FINANCING

ACTIVITIES -- 59,314

EFFECT OF EXCHANGE RATE ON CASH 663 1,527

NET DECREASE IN CASH (2,820,559) (50,039)

CASH - beginning of period 3,945,740 1,278,808

CASH - end of period $1,125,181 $1,228,769

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION:

Cash paid for:

Interest $-- $--

Income taxes $-- $--

Non-cash investing and financing

activities:

Common stock issued for services $253,000 $249,000

Common stock issued for conversion of

convertible redeemable preferred

stock $2,166,000 $--

Convertible redeemable preferred

stock issued for dividend payable $321,308 $400,000

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