KUNMING, China, Nov. 16 /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 third quarter ended September 30, 2009.
Third Quarter 2009 Financial Highlights -- Total revenues increased
by 45% year-over-year to $10.56 million; -- Gross margin decreased
to 72.08% from 72.89% in the same period of 2008; -- Net cash
provided by operations was $0.88 million compared with negative
cash flow of $ 0.23 million for the nine months ended September 30,
2009 and 2008, respectively. Mr. Gui Hua Lan, Chief Executive
Officer of China Shenghuo, commented, "Sales for the three months
ended September 30, 2009 was approximately $10.56 million, an
increase by 45.00 % from $7.28 million for the three months ended
September 30, 2008. The increase in sales was primarily due to the
Company's implementation of a new sales policy that has stimulated
the enthusiasm of sales representatives, resulted in the increased
sales of products. Our primary products, Xuesaitong Soft Capsules
and the innovative 12 Ways cosmetic products continued to produce
meaningful growth in a difficult market environment." Third Quarter
2009 Financial Results Revenues for the third quarter of 2009
increased by 45% to $10.56 million compared to $7.28 million for
the same period in 2008. The increase in revenues was primarily due
to the Company's implementation of a new sales policy that has
stimulated the enthusiasm of sales representatives and resulted in
increased sales of products. Gross margin for the third quarter of
2009 increased by 43.41% to $7.61 million from $5.30 million for
the same period in 2008. Gross margin for the three months ended
September 30, 2009 was 72.09%, compared with 72.89% for the same
period in 2008. The decrease in gross margin percentage was
primarily due to the increasing price of raw material. Selling
expense for the third quarter of 2009 was $6.99 million compared
with $2.99 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
best interest to grow our operations through the over-the-counter
("OTC") market, which we anticipate will produce higher profit
margins. Accordingly, we began developing the OTC market in 2009
and as of September 30, 2009, revenue from the OTC market comprises
approximately 10% of the total sales revenue for Medicine. As of
September 30, 2009, we estimate that our expenditures for
developing the Company's presence in the OTC market through such in
2009 are approximately RMB 10 million and that we will have to
dedicate significant funds in the future to continue to develop in
the OTC market. 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 being borne by us with respect to developing the
OTC market are being accrued in selling expenses. 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 selling
expenses are due within one to six months. The Company reimburses
the sales representatives their accrued selling expenses when
related accounts receivable are collected. General and
administrative expenses decreased by 41.53% to $1.06 million in the
third quarter of 2009 compared with $1.82 million for the same
period in 2008, primarily due to (i) reduction of the professional
service fee relating to maintain our status as a public company
with its securities traded on a U.S. national exchange; and (ii)
our strengthened budget control over expense disbursements to
reduce unnecessary expense. Loss from operations for the third
quarter of 2009 was $0.45 million compared with operating income of
$0.43 million for the same period of 2008. Net (Loss) Income
attributable to shareholders for the third quarter of 2009 was
$0.03 million, or $ (0.00) per basic and diluted share. This
compares to a net income of $0.15 million, or $ 0.01 per basic and
diluted share for the same period of 2008. Balance Sheet As of
September 30, 2009, the Company's total cash and cash equivalents
amounted to $2.72 million as compared with $1.6 million as of
December 31, 2008. Total shareholders' equity amounted to $0.56
million as of September 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:
Anticipated Drugs Name Intended Use Approval Year Levofloxacin
Hydrochloride Antibiotic applications 2010 Soft Capsule Dencichine
Hemostat Anti-hemorrhagic applications 2012 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 therefore began developing the OTC market in
2009 and we can expect a further expansion of OTC market in the
fourth quarter 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. For further information, please
contact: China Shenghuo Pharmaceutical Holdings, Inc. Miss Shujuan
Wang Director of Securities Affairs Department Email: CHINA
SHENGHUO PHARMACEUTICAL HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2009 2008 Assets: Unaudited Audited
Current Assets: Cash and cash equivalents $ 2,723,716 $ 1,612,054
Accounts and notes receivable, less allowance for doubtful accounts
of $1,650,774 and $4,834,745, for 2009 and 2008, respectively
13,721,541 9,108,703 Other receivables, less allowance for doubtful
accounts of $2,495,914 and $2,955,516, respectively 7,212,920
8,637,653 Advances to suppliers 271,132 446,168 Inventories, net of
allowance for obsolescence of $148,335 and $147,978, respectively
3,485,225 4,287,462 Receivables from related parties 164,044 --
Other current assets 10,543 41,177 Total Current Assets 27,589,121
24,133,217 Property, plant and equipment, net of accumulated
depreciation of $5,761,407 and $5,341,933, respectively 7,345,163
7,581,664 Intangible assets, net of accumulated amortization of
$186,951 and $71,456, respectively 1,134,697 665,959 Deferred tax
assets 401,300 -- Long-term other receivables, less allowance for
doubtful accounts of nil and $664,532, respectively -- 663,433 $
36,470,281 $ 33,044,273 CHINA SHENGHUO PHARMACEUTICAL HOLDINGS,
INC. CONSOLIDATED BALANCE SHEETS (CONTINUTED) September 30,
December 31, 2009 2008 LIABILITIES AND STOCKHOLDERS' Unaudited
Audited EQUITY: Current Liabilities: Accounts payable $ 3,228,171 $
1,293,460 Other payables and accrued expenses 8,143,224 2,721,082
Deposits 6,379,811 5,550,502 Payables to related parties -- 148,575
Short-term notes payable 5,337,043 9,850,211 Advances from
customers 1,304,861 222,609 Taxes and related payables 1,440,571
1,236,574 Current portion of long-term notes payable 3,802,504
3,245,685 Total Current Liabilities 29,636,185 24,268,698 Long-term
notes payable 6,435,006 1,131,193 Total Liabilities 36,071,191
25,399,891 Equity: Common stock, par value $0.0001; 100,000,000
shares authorized; 19,679,400shares outstanding, both periods 1,968
1,968 Additional paid-in capital 6,193,927 6,193,927 Statutory
reserves 147,023 147,023 Accumulated deficit (7,372,543) (603,572)
Accumulated other comprehensive income 1,587,438 1,656,812 Total
shareholder's equity 557,813 7,396,158 Noncontrolling interest
(158,723) 248,224 Total equity 399,090 7,644,382 $ 36,470,281 $
33,044,273 CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME /
(LOSS) Three months ended Nine months ended September 30, September
30, 2009 2008 2009 2008 Unaudited Unaudited Unaudited Unaudited
Sales $10,558,218 $7,281,384 $25,459,077 $21,359,149 Cost of Sales
2,947,511 1,973,865 7,643,566 7,061,446 Gross Margin 7,610,707
5,307,519 17,815,511 14,297,703 Operating Expenses: Selling
expenses 6,988,017 2,989,486 19,604,857 8,666,561 General and
administrative expenses 1,063,981 1,819,573 5,230,722 7,001,410
Research and development expenses 10,534 66,052 24,455 255,241
8,062,532 4,875,111 24,860,034 15,923,212 (Loss) / Income from
Operations (451,825) 432,408 (7,044,523) (1,625,509) Other Income /
(Expense): Interest income 1,349 588 2,661 5,701 Income from
research and development activities 49,723 5,745 194,902 344,370
Interest expense (184,228) (272,002) (704,242) (963,198)
Non-operating expenses (2,847) (330) (22,038) (138,812) (136,003)
(265,999) (528,717) (751,939) (Loss) / Income Before Income Tax
(Expense) Benefit and Non-controlling Interest (587,828) 166,409
(7,573,240) (2,377,448) Income tax benefit / (expense) 401,012
(4,471) 401,012 (4,484) Net (Loss) / Income (186,816) 161,938
(7,172,228) (2,381,932) Net loss / (income) attributable to
noncontrolling interest 154,892 (7,652) 403,257 146,089 Net (Loss)
/ Income Attributable to Shareholders $(31,924) $154,286
$(6,768,971) $(2,235,843) Basic and Diluted Earnings / (Loss) per
Share $(0.00) $0.01 $(0.34) $(0.11) Weighted-average Number of
Shares Outstanding - Basic and Diluted 19,679,400 19,679,400
19,679,400 19,679,400 Comprehensive (Loss) / Income: Net (Loss) /
Income (186,816) 161,938 (7,172,228) (2,381,932) Foreign currency
translation adjustment (76,185) 54,116 (73,064) 744,189
Comprehensive (Loss) / Income (263,001) 216,054 (7,245,292)
(1,637,743) Comprehensive (Loss) / Income attributable to
noncontrolling interest 158,739 (10,385) 406,947 108,507
Comprehensive (Loss) Income Attributable to Shareholders (104,262)
205,669 (6,838,345) (1,529,236) CHINA SHENGHUO PHARMACEUTICAL
HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months
ended September 30, 2009 2008 Unaudited Unaudited Cash Flows from
Operating Activities: Net loss $ (6,768,971) $ (2,235,843)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: Depreciation and amortization 542,040 619,402
Deferred income taxes (401,012) -- Non-controlling interest in loss
of subsidiaries (403,257) (146,089) Allowance for doubtful accounts
1,454,131 3,596,319 Change in current assets and liabilities:
Accounts and notes receivable (5,749,846) (919,991) Other
receivables 1,783,691 (1,465,805) Advances to suppliers 175,993
(60,460) Inventories 812,063 333,486 Other current assets 30,709
143,282 Accounts payable 1,930,185 655,989 Accrued expenses and
deposits 6,191,182 (538,712) Advances from customers 1,080,935
119,991 Taxes and related payables 200,851 (334,217) Net Cash
Provided by (Used in) Operating Activities 878,694 (232,648) Cash
Flows from Investing Activities: Capital expenditures (738,350)
(218,780) Receivables from related parties (163,926) (3,957) Net
Cash Used in Investing Activities (902,276) (222,737) Cash Flows
from Financing Activities: Payables to related parties (181,445)
87,385 Proceeds from short and long-term notes payable 21,227,417
5,715,216 Payments on short and long-term notes payable
(19,915,434) (7,215,461) Net Cash Provided by (Used in) Financing
Activities 1,130,538 (1,412,860) Effect of foreign currency
exchange rate fluctuation on Cash and Cash Equivalents 4,706
148,328 Net Change in Cash and Cash Equivalents 1,111,662
(1,719,917) Cash and Cash Equivalents at Beginning of Period
1,612,054 2,800,641 Cash and Cash Equivalents at End of Period $
2,723,716 $ 1,080,724 Supplemental Information Cash paid for
interest $ 704,242 $ 963,198 Cash paid for income taxes $ -- $ --
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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