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Lotus Pharmaceuticals second-quarter net income increases 32% to $6.3 million

March 28, 2017

Gross margins for the second quarter of 2010 decreased to 52.3% as compared to 57.9% in the second quarter of 2009. The decrease in gross profit margin was attributable to the increase in cost of sales as a higher percentage of total net revenues than during the prior year's period. The increase in cost of sales as a percentage of total net revenues is a result of reducing sales price per unit by increasing inventory turnover. The management reduced average sales prices per unit to speed up inventory turnover because our warehouse space was insufficient due to 1) the removal of one of the Company's warehouses during construction of our new facility in Beijing, and 2) humidity-related problems occurring in spring and summer that increased the need for warehouse space.

Total operating expenses for the second quarter of 2010 were $3.5 million, a 34% increase from the second quarter of 2009. The increase resulted from the increase of selling expenses mainly as a result of our increase of sales activities in relation to direct sales to OTC drug stores in Beijing, as well as increases in professional fees.

Net income for the second quarter of 2010 was $6.3 million, or $0.12 per diluted share, compared to $4.8 million, or $0.10 per diluted share, in the second quarter of 2009.

Financial Condition

Cash for operations and liquidity needs are funded through cash flows from operations. Cash and cash equivalents were approximately $1.1 million as of June 30, 2010. Current assets and current liabilities as of June 30, 20010, were $9.0 million and $7.8 million, yielding a current ratio of 1.1X. For the six months ended June 30, 2010, net cash provided by operating activities was approximately $8.9 million, which resulted primarily from the Company's organic growth and effective management of cash flow.

Six-Month Results

For the six-month period ended June 30, 2010, total revenues were $34.1 million, an increase of 34% from $25.5 million in the same period last year. Gross profit was $18.7 million, up 28.8% from gross profit of $14.5 million for the six months of 2009. Gross margin was 54.9 %, compared to 57.1% for the first six months of 2009. Operating income was $12.1 million, compared to $9.5 million for the six months ended June 30, 2009.

Net income for the period was $11.3 million, an increase of 35% from $8.4 million during the same period last year. Earnings per share (diluted) for the first half of 2010 was $0.21, as compared to $0.17 in the first half of 2009.

Fiscal Year 2010 Guidance

Lotus both reiterates its prior guidance for the fiscal year 2010, and also provides exact guidance for the fiscal year 2010 due to its growth in the first half of 2010. Lotus expects net revenues to increase from approximately $57.8 million in 2009 to $73.6 million in 2010 and for net income to rise from $16.4 million in 2009 to $21.4 million in 2010.

SOURCE Lotus Pharmaceuticals, Inc.