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Tiens Biotech Group (USA), Inc. (TBGU.OB) Q2 Net Income Falls


8/14/2008 6:56:09 AM

NEW YORK, Aug. 14 /Xinhua-PRNewswire/ -- Tiens Biotech Group (USA), Inc. , http://www.tiens-bio.com , announced financial results for the second quarter and six months ended June 30, 2008.

For the second quarter ended June 30, 2008, revenue was $19.7 million, an increase of 37.2% compared to $14.3 million for the same period in 2007.

Net income for the second quarter of 2008 was $4.6 million, compared to net income of $5.0 million for the second quarter of 2007. Earnings per share for the second quarter of each of 2008 and 2007 were $0.07.

For the six months ended June 30, 2008, revenue was $32.5 million, an increase of 6.3% compared to $30.6 million for the same period in 2007.

Net income for the six months ended June 30, 2008 was $8.3 million, compared to net income of $11.5 million for the first six months of 2007. Earnings per share for six months ended June 30, 2008 were $0.12 compared to $0.16 for the first six months of 2007.

The significant growth in revenue during the second quarter of 2008 includes an increase in both domestic and international revenue for the period. Revenue in China increased 65.6% to $8.5 million, compared to $5.1 million for the second quarter of 2007, reflecting successful marketing efforts in China and the increase in the value of the renminbi against the dollar. In addition, international revenue rose 21.4% to $11.1 million for the second quarter, compared to $9.2 million for the same period in 2007, reflecting a reduction on export restrictions in that period by China's Administration of Quality Supervision, Inspection and Quarantine ("AQSIQ") which announced an ongoing national campaign in China against unsafe food and substandard products in August 2007. It is important to note that to date, no problems have been identified with any of Tiens' products.

Results for the six months ended June 30, 2008 were affected by a 15% decrease in revenue in China during the first quarter of 2008. During the first quarter of 2008, we believe that sales in China were negatively impacted by continued uncertainty in China regarding the impact of direct selling regulations and uncertainty regarding the timing of the direct selling license application process and approval which has been submitted by Tianjin Tianshi Biological Engineering Co., Ltd. ("Tianshi Engineering"), an affiliated Chinese company.

Revenue by Region

As stated above, revenue in China for the second quarter of 2008 increased 65.6% to $8.5 million, compared to $5.1 million for the second quarter of 2007. International revenue for the second quarter of 2008 increased 21.4% to $11.1 million, compared to $9.2 million for the second quarter of 2007. For the six months ended June 30, 2008, revenue in China was $14.6 million, an 18.4% increase compared to $12.3 million for the same period in 2007. For the six months ended June 30, 2008, international revenue was $17.9 million, a decrease of 1.9% compared to $18.2 million for the same period in 2007. This decrease in international revenue reflects the impact of the export restrictions which were introduced in third quarter of 2007 and impacted results for subsequent quarters, including the first quarter of 2008. The increase in international revenue in the second quarter of 2008 reflects a reduction on the export restrictions in that period.

Background

In August 2007, AQSIQ announced an ongoing national campaign in China against unsafe food and substandard products. As a result of this campaign by the AQSIQ, there has been a general slow-down and backlog of export clearances for Chinese food products, and, from August 2007 through the first quarter of 2008, we experienced significant delays in obtaining export clearance for all of the products which we sell to our international affiliates. Beginning in the second quarter of 2008, these export restrictions were reduced for exports to countries in Africa and Asia, but remained in place for exports to countries in Europe and the Americas. To facilitate the export of our product in the future, in May 2008 we established a new subsidiary, Dongfeng Tianshi Biological Development Co., Ltd. ("Dongfeng Biological") in Liaoyuan, Jilin Province. To date, Dongfeng Biological has not yet conducted any operations.

In China, Tiens sells its products to Tianjin Engineering, an affiliated Chinese company. In order to qualify for a direct selling license in China, Tianshi Engineering is required to produce a part of the products that it sells in China. As a result, in 2006, Tiens began to sell semi-finished products to Tianshi Engineering, which jointly shares licenses with Tiens to produce, manufacture and sell the products. The semi-finished products, which Tiens is now exclusively selling in China, have lower sales prices than the finished products Tiens had previously sold to Tianshi Engineering.

The application of Tianshi Engineering for a direct selling license in China is still pending.

Other Highlights

Cost of sales for the second quarter of 2008 increased 39.3% to $6.2 million, compared to $4.5 million for the same period in 2007. The rise in cost of sales reflects increases in both sales and the value of the renminbi against the dollar. For the six months ended June 30, 2008, cost of sales increased 15.2% to $10.2 million, compared to $8.9 million for the same period in 2007. Cost of sales for the period reflects greater raw materials costs.

Gross profit for the second quarter of 2008 increased 36.3% to $13.5 million, compared to $9.9 million for the same period in 2007. For the six months ended June 30, 2008, gross profit increased 2.6% to $22.2 million, compared to $21.7 million for the same period in 2007. The gross profit margin for the second quarter of 2008 was 68.4%, compared to 68.9% for the same period in 2007. For the six months ended June 30, 2008, the gross profit margin was 68.5%, compared to 70.9% for the same period in 2007. This modest decrease reflects the increase in the cost of raw materials while the price at which we sell our products has remained constant.

Selling, general and administrative expenses were $5.1 million for the second quarter of 2008, an increase of 50.2% compared to $3.4 million for the same period in 2007. The selling and administrative expenses as a percentage of sales were 25.9% for the second quarter of 2008 compared to 23.7% for the same period in 2007. For the six months ended June 30, 2008, selling, general and administrative expenses were $8.3 million, an increase of 25.3% compared to $6.7 million in the same period in 2007. For the six months ended June 30, 2008, selling, general and administrative expenses as a percentage of sales was 25.7%, compared to 21.8% for the same period in 2007. This increase was primarily due to increases in general administration costs related to the construction of the Life Resources project, salary and insurance expenses, advertising, research and development expenses and the appreciation of the renminbi.

Tiens continues to strive to expand its market share in China through the branches, chain stores, and Chinese affiliated companies of Tianshi Engineering. To enhance its position in this competitive market, Tianshi Engineering continues to increase its marketing activities in China, including opening additional branches across China, developing a nation-wide advertising campaign, encouraging media coverage and strengthening the Tiens brand.

As of June 30, 2008, Tiens had $86.9 million of retained earnings and total shareholders' equity of $128.3 million.

Jinyuan Li, Chairman, President and CEO of Tiens, said, "We are pleased with the increase in both domestic and international revenues over last year's second quarter and our sequential growth compared to the first quarter of 2008. We are committed to gaining greater market share in China for our high quality products and are beginning to reap the benefit of reduced international export restrictions. The further reduction of these restrictions represents an opportunity for Tiens to meet the demands of its growing international customer base. We remain optimistic for long term domestic and international growth."

About Tiens Biotech Group (USA), Inc. http://www.tiens-bio.com .

Tiens Biotech Group (USA), Inc. conducts its business operations from Tianjin, People's Republic of China. Tiens primarily engages in the research, development, manufacturing, and marketing of nutrition supplement products, including wellness products and dietary supplements.

Tiens derives its revenues principally from product sales to affiliated companies in China and internationally in 52 countries. Since its establishment, Tiens has developed and produced 33 nutrition supplements, which include wellness products and dietary supplements. Tiens develops its products at its own product research and development center, which employs highly qualified professionals in the fields of pharmacology, biology, chemistry and fine chemistry. Tiens has obtained all required certificates and approvals from government regulatory agencies to manufacture and sell its products in China.

In China, Tiens conducts the marketing and sales of its products through its affiliated company, Tianshi Engineering. Tianshi Engineering markets and sells Tiens' products in China through chain stores, domestic affiliated companies, and its 100 branches. Outside of China, Tiens sells its products to affiliated companies in 52 countries who in turn sell through an extensive direct sales force, or multi-level marketing sales force. The Company's direct sales marketing program is subject to governmental regulation in each of these countries.

Certain statements in this press release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Such forward- looking statements are not necessarily indicative of future financial results, and may involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to: (i) the Company's ability to obtain sufficient capital or a strategic business arrangement to fund its expansion plans; (ii) the Company's ability to build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Company's control; (iv) whether the Company continues to experience delays in the export clearance of its products; (v) whether Tianshi Engineering, the Company's affiliate which sells its products in China, obtains a direct selling license in China; and (vi) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission which are available for review at http://www.sec.gov under "Search for Company Filings."

TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

Accounts receivable, trade -

related parties, net of

allowance for doubtful accounts

of $109,415 and $71,700, as of

June 30, 2008 and December 31,

Accounts receivable, trade -

Other receivables - related

TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CURRENT LIABILITIES:

Advances from customers - related

Current portion of long term debt,

NON-CURRENT LIABILITIES

Long term debt, net of current

SHAREHOLDERS' EQUITY:

Common stock, $0.001 par value,

250,000,000 shares authorized,

71,333,586 issued and outstanding,

Accumulated other comprehensive income 23,059,672 15,960,044

TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CONTACT: Investor Relations - Tiens Biotech Group (USA), Inc., +86-22-
8213-7915, or fax, +86-22-8213-7667, or investor@tiens-bio.com; Carl Hymans
of G. S. Schwartz & Co., +1-212-725-4500, or fax, +1-212-725-9188, or
carlh@schwartz.com

Web site: http://www.tiens-bio.com/



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