KUNMING, China, May 15 /PRNewswire-Asia-FirstCall/ -- China
Shenghuo Pharmaceutical Holdings, Inc. (NYSE Amex Equities: KUN)
("China Shenghuo" or the "Company"), which is engaged in the
research, development, manufacture, and marketing of
pharmaceutical, nutritional supplement and cosmetic products in the
People's Republic of China ("PRC"), today reported unaudited
financial results for the first quarter ended March 31, 2009. First
Quarter 2009 Financial Highlights -- Total revenues increased 23.4%
year-over-year to $6.8 million -- Gross margin rose to 66% from
61.7% in the same period of 2008 -- Net cash provided by operations
was $890,299 compared with negative cash flow of 391,880 in the
same period of 2008 Mr. Gui Hua Lan, Chief Executive Officer of
China Shenghuo, commented, "Despite a seasonally slow first
quarter, which included the Chinese New Year holiday in early
February, we are pleased with our double-digit top-line growth and
our gross margin expansion, as they reflected our customer growth,
expanding distribution network, and diversified product portfolio.
Our flagship Xuesaitong Soft Capsule and the innovative 12 Ways
cosmetics products continued to produce meaningful growth in a
difficult market environment." First Quarter 2009 Financial Results
Revenues for the first quarter of 2009 increased 23.4% to $6.8
million compared to $5.5 million for the same period in 2008. The
improvement was primarily due to increased sales of the Company's
main product, Xuesaitong Soft Capsules, as well as the 12 Ways
cosmetics products. Gross profit for the first quarter of 2009
increased 32% to $4.5 million over $3.4 million for the same period
in 2008. Gross margin for the first three months of 2009 was 66%,
compared with 61.7% for the same period in 2008. The increase in
gross margin was primarily due to the improved sales of both
Xuesaitong and 12 Ways cosmetics products, which carry higher
profit margin. Sales and marketing expenses for the first quarter
of 2009 were $6.4 million compared with $1.6 million for the same
period of 2008. The Company's main product has been sold to
patients through hospitals developed by sales representatives,
however, the Company believes it is in its best long term interest
to grow its operations in the OTC market which will produce higher
profit margins and has decided to expand into the OTC market in
2009. In connection with the Company moving its operations towards
the OTC market, the Company has adopted a policy to absorb a
significantly higher percentage of costs incurred by sales
representatives than in the past in order to get sales
representatives' cooperation in developing the OTC market. The
costs to each sale to be borne by the Company are being accrued in
Selling Expenses. General and administrative expenses decreased
57.6% to $1 million in the first quarter of 2009 compared with $2.5
million for the same period in 2008, primarily due to the decrease
in bad debt expenses on accounts receivables and sales
representative advances. Beginning in 2009, however, instead of
advancing sales representatives money to sustain or develop a
particular market, we reimburse those sales representatives selling
and marking expenses when they present proper expense vouchers. The
Company believes this provides better control of its expenses.
Total operating loss for the first quarter of 2009 was $2.9 million
compared with operating loss of $841,050 for the same period of
2008. Net loss for the first quarter of 2009 was $2.9 million, or
$0.15 per diluted share. This compares to a net loss of $852,660,
or $0.04 earnings per diluted share for the same period of 2008.
Balance Sheet As of March 31, 2009, the Company's total cash and
cash equivalents amounted to $908,596 as compared with $1.6 million
as of December 31, 2008. Total shareholders' equity amounted to
$4.4 million as of March 31, 2009. Drugs Pipeline China Shenghuo
has a number of drugs currently in phase II clinical trials with
the State Food and Drug Administration (SFDA) for prescription use.
The Company's drug portfolio development strategy mainly focuses on
three major markets - cardio- and cerebro-vascular diseases, peptic
ulcer diseases and general health products. Below is the list of
drugs and their anticipated SFDA approval timetable: Anticipated
Approval Drugs Name Intended Use Year Levofloxacin Hydrochloride
Soft Capsule Antibiotic applications 2009 Brufen Soft Capsule Fever
and headache caused by influenza, colds and acute pharyngitis 2009
Dencichine Hemostat Anti-hemorrhagic applications 2011 Wei Dingkang
Soft Capsule Peptic ulcer 2011 Business Update Mr. Lan concluded,
"Strong product development and business initiatives are helping to
generate meaningful year-over-year top-line growth, as we continue
our efforts on expanding market share in the vast cardio- and
cerebro-vascular market. Going forward, we believe the RMB
850-billion (US$125-billion) healthcare reforms in China will
create significant long-term opportunities for domestic drug
manufacturers that focused in traditional Chinese medicine (TCM).
We are well-positioned in this area because of our diversified
product portfolio, our growing scale, our R&D capabilities, and
our high quality of standards. In addition, our 12 Ways cosmetics
products give us greater revenue diversification that we did not
have before. We are building a solid foundation which will help us
to increase profitability and increase shareholder value going
forward." Upcoming Event The Company announced on April 30, 2009
that it will host its annual meeting of stockholders at 10:00 A.M.
Beijing Time on Monday, June 15, 2009 at its corporate offices
located at No. 2, Jing You Road, Kunming National Economy &
Technology Developing District, People's Republic of China 650217.
Stockholders of record at the close of business on April 24, 2009
will be entitled to notice of the annual meeting and to vote upon
matters considered at the meeting. About China Shenghuo Founded in
1995, China Shenghuo is a specialty pharmaceutical company that
focuses on the research, development, manufacture and marketing of
Sanchi-based medicinal and pharmaceutical, nutritional supplement
and cosmetic products. Through its subsidiary, Kunming Shenghuo
Pharmaceutical (Group) Co., Ltd., it owns thirty SFDA (State Food
and Drug Administration) approved medicines, including the flagship
product Xuesaitong Soft Capsules, which has already been listed in
the Insurance Catalogue. At present, China Shenghuo incorporates a
sales network of agencies and representatives throughout China,
which markets Sanchi-based traditional Chinese medicine to
hospitals and drug stores as prescription and OTC drugs primarily
for the treatment of cardiovascular, cerebrovascular and peptic
ulcer disease. The Company also exports medicinal products to Asian
countries such as Indonesia, Singapore, Japan, Malaysia, and
Thailand and to European countries such as the United Kingdom,
Tajikstan, Russia and Kyrgyzstan. For more information, please
visit http://www.shenghuo.com.cn/ . Safe Harbor Statement This
press release may contain certain "forward-looking statements," as
defined in the United States Private Securities Litigation Reform
Act of 1995, that involve a number of risks and uncertainties.
There can be no assurance that such statements will prove to be
accurate, and the actual results and future events could differ
materially from management's current expectations. Such factors
include, but are not limited to, risks of litigation and
governmental or other regulatory proceedings arising out of or
related to any of the matters described in recent press releases,
including arising out of the restatement of the Company's financial
statements; the Company's ability to refinance or repay loans
received; the Company's uncertain business condition; the Company's
continuing ability to satisfy any requirements which may be
prescribed by the Exchange for continued listing on the Exchange;
risks arising from potential weaknesses or deficiencies in the
Company's internal controls over financial reporting; the Company's
reliance on one supplier for Sanchi; the possible effect of adverse
publicity on the Company's business, including possible contract
cancellation; the Company's ability to develop and market new
products; the Company's ability to establish and maintain a strong
brand; the Company's continued ability to obtain and maintain all
certificates, permits and licenses required to open and operate
retail specialty counters to offer its cosmetic products and
conduct business in China; protection of the Company's intellectual
property rights; market acceptance of the Company's products;
changes in the laws of the People's Republic of China that affect
the Company's operations; cost to the Company of complying with
current and future governmental regulations; the impact of any
changes in governmental regulations on the Company's operations;
general economic conditions; and other factors detailed from time
to time in the Company's filings with the United States Securities
and Exchange Commission and other regulatory authorities. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. For more information, please contact:
China Shenghuo Pharmaceutical Holdings, Inc. Mr. Changhua Mu
Securities Affairs Representative Email: Grayling Eddie Cheung
Investor Relations Tel: +1-646-284-9414 Email: China Shenghuo
Pharmaceutical Holdings, Inc. Condensed Consolidated Balance Sheets
(Unaudited) March 31, December 31, 2009 2008 ASSETS: Current
Assets: Cash and cash equivalents $908,596 $1,612,054 Accounts and
notes receivable, less allowance for doubtful accounts of
$4,949,009 and $4,834,745, respectively 10,490,378 9,108,703 Sales
representative advances, less allowance for doubtful accounts of
$3,026,086 and $2,955,516, respectively 7,453,244 8,637,653
Advances to suppliers 508,627 446,168 Inventory, net of reserve for
obsolescence of $148,163 and $147,978, respectively 3,784,385
4,287,462 Other current assets 31,714 41,177 Total Current Assets
23,176,944 24,133,217 Property, plant and equipment, net of
accumulated depreciation of $5,531,158 and $5,341,933, respectively
7,438,145 7,581,664 Intangible assets, net of accumulated
amortization of $125,572 and $71,456, respectively 612,769 665,959
Long-term sales representative advances, less allowance for
doubtful accounts of $667,647 and $664,532, respectively 1,288,088
663,433 TOTAL ASSETS $32,515,946 $33,044,273 LIABILITIES AND
STOCKHOLDERS' EQUITY: Current Liabilities: Accounts payable
$1,896,131 $1,293,460 Accrued expenses 6,861,907 2,721,082 Deposits
5,219,941 5,550,502 Payable to related parties 42,836 148,575
Short-term notes payable 11,323,378 9,850,211 Advances from
customers 269,730 222,609 Taxes and related payables 1,006,165
1,236,574 Current portion of long-term debt -- 3,245,685 Total
Current Liabilities 26,620,088 24,268,698 Long-Term Debt 1,460,792
1,131,193 Total Liabilities 28,080,880 25,399,891 Stockholders'
Equity: Common stock, $0.0001 par value, 100,000,000 shares
authorized, 19,679,400 and 19,679,400 outstanding, respectively
1,968 1,968 Additional paid-in capital 6,193,927 6,193,927
Statutory reserves 147,023 147,023 Retained deficit (3,564,844)
(603,572) Accumulated other comprehensive income, foreign currency
translation 1,656,992 1,656,812 Noncontrolling Interest -- 248,224
Total Stockholders' Equity 4,435,066 7,644,382 TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $32,515,946 $33,044,273 China Shenghuo
Pharmaceutical Holdings, Inc. Condensed Consolidated Statements of
Operations and Comprehensive Loss (Unaudited) March 31, March 31,
2009 2008 Sale of Products $6,770,526 $5,486,468 Cost of Products
Sold 2,301,525 2,099,462 Gross Profit 4,469,001 3,387,006 Operating
Expenses: Selling expense 6,395,577 1,641,502 General and
administrative expense 1,046,442 2,467,578 Research and development
expense 7,281 118,976 Total Operating Expenses 7,449,300 4,228,056
Loss from Operations (2,980,299) (841,050) Other Income (Expense):
Interest income 881 3,265 Income from research and development
activities 25,568 263,037 Interest expense (251,690) (256,082)
Non-operating expenses (4,054) (73,145) Net Other (Expense)
(229,295) (62,925) Loss Before Income Taxes (3,209,594) (903,975)
Income tax expense -- (2,176) Net loss attributable to
noncontrolling interest 248,322 53,491 Net Loss $(2,961,272)
$(852,660) Foreign currency translation adjustment 182 472,982
Comprehensive Loss $(2,961,090) $(379,678) Loss Per Share Basic
$(0.15) $(0.04) Diluted $(0.15) $(0.04) Weighted-Average Shares
Outstanding Basic 19,679,400 19,679,400 Diluted 19,679,400
19,679,400 DATASOURCE: China Shenghuo Pharmaceutical Holdings, Inc.
CONTACT: China Shenghuo Pharmaceutical Holdings, Inc., Mr. Changhua
Mu, Securities Affairs Representative, or Grayling, Eddie Cheung,
Investor Relations, +1-646-284-9414, for China Shenghuo
Pharmaceutical Holdings, Inc. Web site: http://www.shenghuo.com.cn/
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