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China Shenghuo Pharmaceutical Holdings, Inc. Reports Unaudited Financial Results for the Full Year 2012



3/25/2013 9:11:48 AM

KUNMING, CHINA--(Marketwire - March 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 
                                               =============  ============= 
                                                                            

Company Contact:

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


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