KUNMING, China, Aug. 14 /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 second quarter ended June 30, 2009.
Second Quarter 2009 Financial Highlights -- Total revenues
decreased 5.37% year-over-year to $8.13 million -- Gross margin
rose to 70.55% from 65.22% in the same period of 2008 -- Net cash
provided by operations was $981,447 compared with negative cash
flow of $ 556,090 for the six months ended June 30, 2009 and 2008,
respectively. Mr. Gui Hua Lan, Chief Executive Officer of China
Shenghuo, commented, "Despite the revenues for the second quarter
of 2009 decreasing 5.37% compared to the revenues for the same
period in 2008, revenues increased 20.08% when compared to the
revenues for the first quarter of 2009. Our flagship Xuesaitong
Soft Capsule and the innovative 12 Ways cosmetics products
continued to produce meaningful growth in a difficult market
environment." Second Quarter 2009 Financial Results Revenues for
the second quarter of 2009 decreased 5.37% to $8.13 million
compared to $8.59 million for the same period in 2008. The decrease
in revenues was primarily due to the decrease of $0.4 million in
the sales of other brands' non-prescription pharmaceuticals, and
approximately $0.03 million decrease in the sales of cosmetic
products and export of our products, respectively. Gross profit for
the second quarter of 2009 increased 2.36% to $5.74 million over
$5.6 million for the same period in 2008. Gross margin for the
three months ended June 30, 2009 was 70.55%, compared with 65.22%
for the same period in 2008. The increase in gross margin
percentage was primarily due to the above-mentioned reduction of
the sales of non-prescription pharmaceuticals of other brands.
Selling expenses for the second quarter of 2009 were $6.22 million
compared with $4.04 million for the same period of 2008. The
primary reason for the increase in selling expenses was the change
in our marketing policy. Our main product has been sold to patients
through hospitals, which customer relationships were cultivated by
sales representatives. However, we believe it is in our long term
interest to grow our operations through the over-the-counter
("OTC") market, which we anticipate will produce higher profit
margins, and have decided to begin developing the OTC market in
2009. Although we are focusing our operations on the OTC market, we
have adopted a policy to absorb a significantly higher percentage
of costs incurred by our sales representatives than in the past in
order to foster their cooperation in developing the OTC market. The
costs to be borne by us are being accrued in selling expenses.
Previously, the Company advanced selling expenses to the sales
representatives to develop the market. Starting in 2009, due to the
new policy, the Company accrues a fixed amount of selling expenses
to the sales representatives for each sale. The Company reimburses
the sales representatives their selling and marketing expenses when
they submit the appropriate documentation to be reimbursed and
their sales are collected. The accrued sales expenses are due
within six months. General and administrative expenses increased
15.00% to $3.12 million in the second quarter of 2009 compared with
$2.71 million for the same period in 2008, primarily due to the
increase of expense related to our status as a public company with
its securities traded on a U.S. national exchange. Loss from
operations for the second quarter of 2009 was $3.61 million
compared with operating loss of $1.22 million for the same period
of 2008. Net loss for the second quarter of 2009 was $3.78 million,
or $ (0.19) per basic and diluted share. This compares to a net
loss of $1.54 million, or $(0.08) per basic and diluted share for
the same period of 2008. Balance Sheet As of June 30, 2009, the
Company's total cash and cash equivalents amounted to $0.7 million
as compared with $1.6 million as of December 31, 2008. Total
shareholders' equity amounted to $0.7 million as of June 30, 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: Drugs Name Intended
Use Anticipated Approval Year Levofloxacin Hydrochloride Soft
Capsule Antibiotic applications 2009 Brufen Soft Capsule Fever and
headache 2009 caused by influenza, colds and acute pharyngitis
Dencichine Hemostat Anti-hemorrhagic applications 2011 Wei Dingkang
Soft Capsule Peptic ulcer 2011 Business Update Mr. Lan concluded,
"Strong product-development capabilities, existing product
pipelines and those products entering into clinical-research stages
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. On the other hand, we believe
it is in our best-long term interest to grow our operations through
the over-the-counter ("OTC") market, which will produce higher
profit margins. We will therefore begin developing the OTC market
in 2009 and we can expect a further expansion of OTC market in the
second half of this year since we have achieved remarkable results
so far. 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." 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. China Shenghuo Pharmaceutical Holdings,
Inc. Condensed Consolidated Balance Sheets (Unaudited) June 30,
December 31, 2009 2008 ASSETS: Current Assets: Cash and cash
equivalents $717,134 $1,612,054 Accounts and notes receivable, less
allowance for doubtful accounts of $5,969,399and $4,834,745,
respectively 10,144,096 9,108,703 Sales representative advances,
less allowance for doubtful accounts of $3,289,200 and $2,955,516,
respectively 6,877,678 8,637,653 Advances to suppliers 554,828
446,168 Inventory, net of reserve for obsolescence of $148,181 and
$147,978, respectively 3,360,899 4,287,462 Other current assets
29,971 41,177 Total Current Assets 21,684,606 24,133,217 Property,
plant and equipment, net of accumulated depreciation of $5,714,934
and $5,341,933, respectively 7,534,993 7,581,664 Intangible assets,
net of accumulated amortization of $179,620 and $71,456,
respectively 558,808 665,959 Long-term sales representative
advances, less allowance for doubtful accounts of $667,725 and
$664,532, respectively 1,515,858 663,433 TOTAL ASSETS $31,294,265
$33,044,273 LIABILITIES AND STOCKHOLDERS' EQUITY: Current
Liabilities: Accounts payable $1,702,841 $1,293,460 Accrued
expenses 8,733,930 2,721,082 Deposits 5,259,457 5,550,502 Payable
to related parties 39,666 148,575 Short-term notes payable
11,324,701 9,850,211 Advances from customers 813,879 222,609 Taxes
and related payables 1,296,596 1,236,574 Current portion of
long-term debt 1,460,963 3,245,685 Total Current Liabilities
30,632,033 24,268,698 Long-Term Debt -- 1,131,193 Total Liabilities
30,632,033 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 (7,340,619) (603,572) Accumulated other comprehensive
income, foreign currency translation 1,659,933 1,656,812
Noncontrolling Interest -- 248,224 Total Stockholders' Equity
662,232 7,644,382 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$31,294,265 $33,044,273 China Shenghuo Pharmaceutical Holdings,
Inc. Condensed Consolidated Statements of Operations and
Comprehensive Loss (Unaudited) Three Months Ended June 30, Six
Months Ended June 30, 2009 2008 2009 2008 Sale of Products
$8,130,333 $8,591,297 $14,900,859 $14,077,765 Cost of Products Sold
2,394,530 2,988,119 4,696,055 5,087,581 Gross Profit 5,735,803
5,603,178 10,204,804 8,990,184 Operating Expenses: Selling expense
6,221,263 4,035,573 12,616,840 5,677,075 General and administrative
expense 3,120,299 2,714,259 4,166,741 5,181,837 Research and
development expense 6,640 70,213 13,921 189,189 Total Operating
Expenses 9,348,202 6,820,045 16,797,502 11,048,101 Loss from
Operations (3,612,399) (1,216,867) (6,592,698) (2,057,917) Other
Income (Expense): Interest income 431 1,848 1,312 5,113 Income from
research and development activities 119,611 75,588 145,179 338,625
Interest expense (268,324) (435,114) (520,014) (691,196)
Non-operating expenses (15,137) (65,337) (19,191) (138,482) Net
Other (Expense) (163,419) (423,015) (392,714) (485,940) Loss Before
Income Taxes (3,775,818) (1,639,882) (6,985,412) (2,543,857)
Benefit from (provision for) income taxes -- 2,163 -- (13) Minority
interest in loss of subsidiaries 43 100,250 248,365 153,741 Net
Loss $(3,775,775) $(1,537,469) $(6,737,047) $(2,390,129) Foreign
currency translation adjustment 2,939 217,091 3,121 690,175
Comprehensive Loss $(3,772,836) $(1,320,378) $(6,733,926)
$(1,700,056) Loss Per Share Basic $(0.19) $(0.08) (0.34) (0.12)
Diluted $(0.19) $(0.08) (0.34) (0.12) Weighted-Average Shares
Outstanding Basic 19,679,400 19,679,400 19,679,400 19,679,400
Diluted 19,679,400 19,679,400 19,679,400 19,679,400 China Shenghuo
Pharmaceutical Holdings, Inc. Condensed Consolidated Statements of
Cash Flows (Unaudited) Six months ended June 30, 2009 2008 Cash
Flows from Operating Activities: Net loss $(6,737,047) $(2,390,129)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 473,840 429,102
Noncontrolling interest in loss of subsidiaries (248,365) (165,334)
Change in current assets and liabilities: Allowance for doubtful
accounts 1,460,256 1,962,910 Accounts and notes receivable
(2,212,347) -- Sales representative advances 588,553 (134,786)
Advances to suppliers (505,648) 30,685 Inventory 932,665 409,441
Other current assets 11,265 129,901 Accounts payable 805,273
642,217 Accrued expenses 6,001,346 (1,220,462) Deposits (298,736)
-- Advances from customers 652,055 2,362 Taxes and related payables
58,337 (251,997) Net Cash Provided by (Used in) Operating
Activities 981,447 (556,090) Cash Flows from Investing Activities:
Capital expenditures (308,654) (137,079) Receivable from related
parties -- 87,223 Net Cash Used in Investing Activities (308,654)
(49,856) Cash Flows from Financing Activities: Payable to related
parties (108,835) (93,864) Proceeds from short and long-term loans
3,653,246 5,655,605 Payments on short and long-term loans
(5,114,544) (7,140,201) Net Cash Used in Financing Activities
(1,570,133) (1,578,460) Effect of exchange rate changes on cash
2,420 128,340 Net Decrease in Cash and Cash Equivalents (894,920)
(2,056,066) Cash and Cash Equivalents at Beginning of Period
1,612,054 2,800,641 Cash and Cash Equivalents at End of Period
$717,134 $744,575 Supplemental Information Cash paid for interest
$582,854 $691,196 Cash paid for income taxes -- -- For further
information, please contact: China Shenghuo Pharmaceutical
Holdings, Inc. Miss Shujuan Wang Director of Securities Affairs
Department Email: DATASOURCE: China Shenghuo Pharmaceutical
Holdings, Inc. CONTACT: China Shenghuo Pharmaceutical Holdings,
Inc., Miss Shujuan Wang, Director of Securities Affairs Department,
Web site: http://www.shenghuo.com.cn/
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