SOURCE: China Shenghuo Pharmaceutical Holdings, Inc

China Shenghuo Pharmaceutical Holdings, Inc

March 25, 2013 08:00 ET

China Shenghuo Pharmaceutical Reports Unaudited Financial Results for the Full Year 2012

KUNMING, CHINA--(Marketwire - Mar 25, 2013) -  China Shenghuo Pharmaceutical Holdings, Inc. (PINKSHEETS: CKUN) ("China Shenghuo" or the "Company") today announced unaudited financial results for the year ended December 31, 2012. Such unaudited financial results were prepared by management in compliance with United States Generally Accepted Accounting Practices, except for the absence of notes to the financial statements. 

Full Year 2012 Highlights (unaudited)

  • Total revenue was approximately $52 million, an increase of 18% from approximately $44.2 million for the year 2011.
  • Gross profit as a percentage of revenues was approximately 54.9%, as compared to 61.5 % in 2011.
  • Net loss attributable to stockholders was approximately $2.5 million, as compared to net income of approximately $0.1 million for the year ended December 31, 2011.
  • Net loss per share was $0.13 compared to net income per share of $0.01 in 2011.
  • Stockholders' equity was approximately $(0.4) million as of December 31, 2012.

Full Year 2012 Results (unaudited)

Sales: Sales for the year ended December 31, 2012 were approximately $52 million, an increase of approximately $7.8 million, or 18%, from approximately $44.2 million for the year ended December 31, 2011. The increase in sales was primarily due to an increase in sales of Xuesaitong, the Company's main product, and an increase of $871,053 in revenue from Zhonghuang Hotel, which was designed as per four-star hotel standards and operated by the Company since January of 2011.

Cost of sales: Our cost of sales for the year ended December 31, 2012 was approximately $23.5 million, an increase of approximately $6.5 million, or 38%, from approximately $17.0 million for the year ended December 31, 2011. The increase in cost of sales was due to the increase in sales volume together with increases in the costs of purchasing Sanqi, the principal raw material of our main product Xuesaitong. Although we started to grow our own captive sources of Sanqi in 2011, we will not be able to harvest our own Sanqi until 2014 because it has a three year growth cycle. In addition, the Zhonghuang Hotel has contributed $1.8 million to the cost of sales.

Gross profit: Our gross profit for the year ended December 31, 2012 was approximately $28.5 million compared with approximately $27.2 million for the year ended December 31, 2011. Gross profit as a percentage of revenues was approximately 54.9% for the year ended December 31, 2012, a decrease of 6.6% from 61.5% for the year ended December 31, 2011. The decrease in gross profit percentage was primarily due to the increase in cost of sales set forth above.

Selling expenses: Selling expenses were approximately $24.7 million for the year ended December 31, 2012, an increase of approximately $4.9 million, or 24%, from approximately $19.8 million for the year ended December 31, 2011. The primary reason for the increase in selling expenses was due to an increase in sales commission to sales representatives due to higher sales volumes.

We reimburse our sales representatives for selling and marketing expenses when they submit the appropriate documentation. We reimburse our sales representatives for their accrued selling expenses when related accounts receivable are collected.

General and administrative expenses: General and administrative expenses were approximately $5.1 million for the year ended December 31, 2012, an increase of approximately $0.1 million, or 2%, from approximately $5.0 million for the year ended December 31, 2011. The increase was mainly due to increased travel expense and expenses related to the commencement of operations in 2012 by Shilin Shenghuo Pharmaceutical Co., a subsidiary of the Company engaged in the business of medicinal herb planting and wellness tourism.

Research and development expenses: Research and development expense for the year ended December 31, 2012 was approximately $0.63 million as compared to approximately $0.71 million for the year ended December 31, 2011. The decrease was primarily due to an absence of clinical testing expenses for Sh1002 in America in 2012. We conducted Phase I clinical tests of Sh1002 in America in 2011 but did not proceed with Phase II testing in 2012.

Net other expense: Net other expense, which includes interest income, subsidy income, interest expense, other income and other expense, was approximately $1.1 million for the year ended December 31, 2012 as compared to approximately $1.5 million for the year ended December 31, 2011, a decrease of approximately $0.4 million, or 27%. The decrease was mainly due to an increase in subsidy income from the provincial government as compared to the same period in 2011 and less interest expenses in 2012.

Income tax benefit: Income tax benefit was $494,313 for the year ended December 31, 2012 as compared to income tax benefit $11,765 for the year ended December 31, 2011. The tax benefit was mainly from the medicine business of the Company, deferred tax benefits from accrued expenses and provisions for inventory.

Net (loss) income attributable to stockholders: We incurred a net loss attributable to stockholders of approximately $2.5 million for the year ended December 31, 2012 as compared to net income attributable to stockholders of approximately $0.1 million for the year ended December 31, 2011. The net loss attributable to stockholders was primarily due to the increase of cost of sales described above.

About China Shenghuo

Founded in 1995, China Shenghuo is primarily engaged in the research, development, manufacture, and marketing of Sanqi-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. At present, China Shenghuo incorporates a sales network of agencies and representatives throughout China, which markets Sanqi-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, Tajikistan, Russia and Kyrgyzstan.

China Shenghuo is also expanding into the businesses of the hotel, hospitality and wellness tourism. For more information, please visit http://www.shenghuo.com.cn.

As previously announced, the Board of Directors of China Shenghuo received a preliminary, non-binding proposal from Lan's Int'l Medicine Investment Co., Limited ("LIMI"), in which LIMI proposed that the Board consider a "going private" transaction to cash out the public shareholders of the Company at a price of $0.15 per share, to be funded by LIMI if necessary. LIMI currently owns approximately 77.3% of the Company's outstanding common stock.

Safe Harbor Statement

This press release may contain certain "forward-looking statements". All statements other than statements of historical fact included herein are "forward-looking statements." These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects," or similar expressions. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports previously filed with the Securities and Exchange Commission. The Company is no longer a reporting company under the U.S. Securities Exchange Act of 1934 and 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.AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS (UNAUDITED)  
(Amounts in USD)  
   
    December 31,     December 31,  
2012     2011  
    (unaudited)        
Assets:                
Current Assets:                
      Cash and cash equivalents   $ 4,147,796     $ 1,247,230  
  Restricted Cash     529,760       794,115  
  Accounts and notes receivable, net     19,825,583       18,076,050  
      Other receivables, net     3,068,855       4,084,102  
  Advances to suppliers, net     355,210       542,153  
      Inventories, net     2,547,486       2,695,388  
  Due from related parties     153,111       574,899  
      Current deferred tax assets     1,634,018       1,394,101  
  Other current assets     379,375       199,929  
    Assets to be disposed of     232,498       -  
Total Current Assets     32,873,692       29,607,967  
                 
      Property, plant and equipment, net     26,792,347       25,873,670  
  Intangible assets, net     1,388,442       1,473,074  
  Deposits for long-live assets     258,484       1,078,846  
  Non-current deferred tax assets     601,785       275,677  
  Investment     318,193       -  
    $ 62,232,943     $ 58,309,234  
Liabilities and Equity:                
Current Liabilities:                
  Accounts payable   $ 13,521,426     $ 9,395,483  
    Other payables and accrued expenses     16,615,568       11,819,179  
  Sales representative deposits     5,207,784       6,106,287  
  Due to related parties     18,459       18,414  
  Short-term borrowings     16,906,422       15,858,895  
    Advances from customers     4,826,591       1,090,668  
  Taxes payable and other current liabilities     2,159,888       2,255,322  
    Current portion of long-term borrowings     -       6,253,075  
    Liabilities to be disposed of     294,510       -  
Total Current Liabilities     59,550,648       52,797,323  
Commitments and Contingencies                
Equity:                
  Common stock, $0.0001 par value, 100,000,000 shares authorized and 19,679,400 shares issued and outstanding    
1,968
      1,968  
  Additional paid-in capital     6,014,688       6,014,688  
    Appropriated retained earnings     147,023       147,023  
  Accumulated deficit     (8,276,666 )     (5,790,759 )
    Accumulated other comprehensive income     1,745,980       1,743,393  
  Total stockholder's equity     (367,007 )     2,116,313  
Noncontrolling interest     3,367,495       3,395,598  
Due from noncontrolling interest for hotel project     (318,193 )     -  
Total noncontrolling interest     3,049,302       -  
Total Equity     2,682,295       5,511,911  
Total liabilities and equity   $ 62,232,943     $ 58,309,234  
   
   
   


CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS  
AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)  
(Amounts in USD, except shares)  
   
    Years Ended December 31,  
2012     2011  
Sales   $ 52,008,642     $ 44,158,182  
Cost of Goods Sold     23,476,147       16,980,006  
Gross Margin     28,532,495       27,178,176  
Operating Expenses:                
    Selling expenses     24,683,880       19,838,582  
  General and administrative expenses     5,116,105       5,015,534  
    Research and development expense     628,402       710,361  
      30,428,387       25,564,477  
(Loss) Income from Operations     (1,895,892 )     1,613,699  
Other Income (Expenses):                
  Subsidy income     875,222       536,013  
    Interest and other expense     (2,019,395 )     (2,029,770 )
      (1,144,173 )     (1,493,757 )
(Loss) Income Before Income Tax Expenses     (3,040,065 )     119,942  
Income tax benefit (expense)     494,313       11,765  
Income or (loss) from continuing operations     (2,545,752 )     131,707  
Discontinued operations                
Loss/gain from operations of the discontinued component, including gain/loss on the disposal of Nil     40,311       -  
Income tax/benefit     (8,690 )     -  
Net gain/loss on discontinued operation     31,621       -  
Income/(loss) before extraordinary items     (2,514,131 )     131,707  
Less: Net loss attributable to non-controlling interests     (28,224 )     (17,973 )
Net (Loss) Income Attributable to Stockholders   $ (2,485,907 )   $ 149,680  
Comprehensive (Loss) Income:                
Net (Loss) Income     (2,514,131 )     131,707  
Foreign currency translation adjustment     2,708       187,150  
Comprehensive (Loss) Income   $ (2,511,423 )   $ 318,857  
Less: Comprehensive loss attributable to non-controlling interests     (28,103 )     63,893  
Comprehensive (Loss) Income Attributable to Stockholders     (2,483,320 )     254,964  
Weighted-average number of shares outstanding-basic and diluted   $ 19,679,400     $ 19,679,400  
Basic and diluted (loss) earnings per share     (0.13 )     0.01  
                 
                 
                 
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  
(Amounts in USD)  
   
    Years Ended December 31,  
    2012     2011  
Net Cash Provided by Operating Activities:                
Net income (loss)   $ (2,514,131 )   $ 131,707  
Adjustments to reconcile net loss to net cash provided by operating activities:                
Deferred income tax     (559,530 )     (398,459 )
Depreciation and amortization     1,666,103       1,494,985  
Bad debt provision and allowance     (40,213 )     380,825  
Gain on disposal of fixed assets     -       -  
Change in current assets and liabilities:                
Accounts and notes receivable     (1,411,865 )     (5,980,478 )
Other receivables     825,564       233,585  
Amounts due from/to related parties     421,386       (365,393 )
Advances to suppliers     187,466       (88,842 )
Inventories     188,605       �22,393�  
Other current assets     (178,190 )     18,351  
Accounts payable     4,085,373       �26,097 )
Other payables and accrued expenses     5,040,290       1,584,229  
Advances from customers     3,717,283       �124,047
Deposits payable     (909,556 )     895,308  
Taxes and related payables     (100,528 )     1,296,310  
Net Cash (Used in) Provided by Operating Activities     10,418,057       (970,409 )
Cash Flows from Investing Activities:                
Purchase of long-lived assets     (1,927,212 )     (2,299,690 )
Equity investment     (316,832 )     -  
Due from noncontrolling interest for hotel project     (318,193 )     -  
Process from disposal of long-lived assets     -       4,753  
Net Cash Used in Investing Activities     (2,562,237 )     (2,294,937 )
                 
Cash Flows from Financing Activities:                
Increase in restricted cash     265,162       (794,115 )
Proceeds from borrowings     37,658,614       25,897,076  
Payments on borrowings     (42,895,842 )     (22,352,041 )
Net Cash Provided by (Used in) Financing Activities     (4,972,066 )     2,750,920  
                 
Effect of exchange rate changes on cash and cash equivalents     16,812       92,269  
Net Increase (Decrease) in Cash and Cash Equivalents     2,900,566       (422,157 )
Cash and Cash Equivalents at Beginning of Period     1,247,230       1,669,387  
Cash and Cash Equivalents at End of Period   $ 4,147,796     $ 1,247,230  
                 

Contact Information

  • Company Contact:

    China Shenghuo Pharmaceutical Holdings, Inc.
    Ms. Shujuan Wang
    Secretary of Board of Directors
    +86-871-67282698