CSY China Sky One Medicl

HARBIN, China, Aug. 12 /Xinhua-PRNewswire-FirstCall/ -- China Sky One Medical, Inc. ("China Sky One Medical" or "the Company") (AMEX:CSY), a China based developer, manufacturer, marketer and international distributor of pharmaceutical, medicinal and diagnostic products, today announced record financial results for the second quarter ended June 30, 2008. Second Quarter 2008 Highlights: -- Total revenues increased 62.1% to $23.7 million -- Gross profit increased 60.8% to $18.2 million; gross margin remained stable at 77% -- Operating income increased 96.1% to $10.1 million; operating margin improved to 42.6% from 35.2% -- Net income increased 91.9% to $8.1 million, or $0.50 per diluted share -- Completed acquisitions of Heilongjiang Tianlong Pharmaceutical Inc. and Heilongjiang Haina Pharmaceutical Inc. -- Entered into agreement to acquire pharmaceutical manufacturer Peng Lai Jin Chuang Company -- Received State Food and Drug Administration of China (SFDA) approval for six new drugs and five new patches -- Recognized by the Science and Technology Institute of Heilongjiang -- Began trading on American Stock Exchange "We continued to see strong growth in product sales during the second quarter of 2008 and are very pleased with our record results," said Mr. Yan- Qing Liu, Chairman, CEO and President of China Sky One Medical, Inc. "By category, sales of ointments increased sharply during the second quarter, accounting for 28% of revenues. Top selling branded products included our Compound Camphor Cream and our Hemorrhoids Ointment. Sales of weight loss products, which include our top selling Slim Patch, also increased during the quarter, making up 25% of sales. That was followed by increases in sales of sprays, which made up 13% of revenues in the quarter, and sales of biochemical products, such as our diagnostic kits, which made up 10% of revenues." "In addition to our continued strong sales momentum during the quarter, we realized a number of significant accomplishments, including the listing of our common shares on the American Stock Exchange under the symbol "CSY," said Mr. Yan-Qing Liu. "We completed the acquisitions of Heilongjiang Tianlong Pharmaceutical, Inc., which has a state-of-the-art manufacturing capabilities and a portfolio of 69 (SFDA) approved drugs with a strong pipeline, and Heilongjiang Haina Pharmaceutical, Inc., which has a Good Supply Practice (GSP) license that will allow us to expand our sales of medicinal products." During the quarter, the Company also received approval from the (SFDA) for six new drugs, and five new patches. On June 12, the Company entered into an agreement to acquire Peng Lai Jin Chuang Company ("Jin Chuang") for $4.6 million in China Sky One common stock and $2.5 million in cash. The Jin Chuang acquisition brings a portfolio of 20 approved drugs that are taken internally, an important addition to the Company's portfolio of products. Second Quarter 2008 Results Total revenues for the second quarter of 2008 grew 62.1% to $23.7 million from $14.6 million in the second quarter of 2007. This was primarily the result of strong performance associated with the Company's continued efforts to develop its sales distribution channels. Product sales increased 103% year- over-year to $21.9 million, accounting for 92.2% of total revenues. Contract sales decreased 52.3% to $1.8 million and accounted for 7.8% of revenues in the second quarter. In 2008, the Company began to discontinue contract sales as part of its strategic goals. Gross profit in the second quarter of 2008 was $18.2 million, an increase of 60.8% over the same period a year ago. Gross margin was 76.7% of total revenues, in line with a gross margin of 77.4% for the second quarter of 2007. Operating expenses in the second quarter of 2008 were $8.1 million, up 33% from $6.1 million in the second quarter of 2007. This increase was less than the increase in sales, and was primarily a result of higher selling, general and administrative expenses associated with the Company's sales growth. Research and development expenses were $1.3 million in the second quarter, compared to $0.3 million in the second quarter of 2007. Operating expenses were 34.1% of total revenues in the second quarter of 2008, down from 42.1% in the second quarter of 2007, due to efficiencies as the Company grows in scale. Operating income was $10.1 million, compared with $5.2 million in the second quarter of 2007. Operating margin was 42.6%, compared to 35.2% in the second quarter of 2007. Provision for income taxes was $1.8 million in the second quarter of 2008, compared to $0.9 million in the same quarter of the previous year. Net income for the second quarter of 2008 increased 91.9% to $8.1 million, or $0.50 per diluted share, compared to $4.2 million, or $0.34 per diluted share, in the second quarter of 2007. Fully diluted weighted average shares increased to 16,090,211 from 12,531,385 in the second quarter of 2007 due to common stock associated with the Company's private placement in February 2008 and the conversion of warrants. Six Month Results For the first half of 2008, revenues increased to $36.2 million, up 82.4% from $19.8 million in the corresponding period of 2007. Gross profit increased 80.5% to $27.8 million in the first six months of 2008, versus $15.4 million in the same period a year ago. Gross margin was 76.8% in the first half of 2008 compared to 77.6% during the first half of 2007. Operating income in the first half of 2008 grew 111.7% to $15 million compared to $7.1 million in the first half 2007. Net income for the first six months of 2008 was $12 million or $ 0.78 per diluted share, up 107.1% from $5.8 million, or $0.46 per diluted share in the first half of 2008. Financial Condition As of June 30, 2008, China Sky One had $42.5 million in cash and equivalents, approximately $44.9 million in working capital, and no debt. Stockholders' equity at June 30, 2008 was $71.7 million, a 122.5% increase over $32.2 million recorded at December 31, 2007. The Company generated $17.8 million in net cash flow from operating activities in the first half of 2008, up from $8.4 million in the same quarter of 2007. Recent Events On July 8, 2008, China Sky One Medical announced the development of a propyl gallate injection for the treatment of acute cerebral infarction, coronary heart disease, thrombosis, dysmenorrheal and nephropathy. The Company is now in the last stage before formal production and expects to launch the product in the middle of August. It estimates that sales of the propyl gallate injection will add at least $3 million in revenue to the fourth quarter. On July 10, 2008, the Company announced that 11 new drugs entered into clinical trials, including seven that are administered by injection. China Sky One Medical has a history of successfully producing external use drugs and is now committed to developing drugs for injection, a market where it sees significant potential. These newly developed drugs have the potential to expand the Company's market share and increase profitability going forward. On July 15, 2008, China Sky One Medical signed an agreement with Harbin Baolong Pharmaceutical Company. Under the agreement, Baolong will distribute China Sky One's prescription drugs. Prescription drugs manufactured by China Sky One have doubled as a result of recent acquisitions, and now make up approximately 30% of its total product line. The agreement, which initially runs over five years, has a total estimated value of approximately $9 million. To date, China Sky One Medical has been selling five of its prescription drugs through Baolong's distribution network, which it expects to generate sales of approximately $3 million from August 2008 to December 2008. Business Outlook "We made significant progress during the second quarter while further positioning the company for future growth, said Mr. Yan-Qing Liu. "As a result of the synergies we will realize from our strategic acquisitions, and by focusing on developing high-quality products and expanding our sales and marketing efforts globally, we expect to see a significant increase in our profitability in the coming years." As a result of recent acquisitions, the Company expects full-year 2008 gross revenue in the range of $81 million to $83 million, and gross margins of approximately 78.5%. The Company estimate net income for 2008 to be in the range of $25.9 million to $26.6 million, or $1.68 to $1.73 per fully diluted share based on 15,372,106 diluted shares outstanding for the six month period ended June 30, 2008. Net margin for the year is expected to be approximately 32%. Conference Call The Company will conduct a conference call at 10 a.m. Eastern Time on Tuesday, August 12, 2008 to discuss the second quarter 2008 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 866-573-1052 International callers should dial 702- 696-4500. The Conference ID for this call is 59672695. If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Tuesday, August 12, 2008 at 12:00 p.m. Eastern Time. To access the replay, dial 800-642-1687, international callers dial 706-645-9291, conference ID 59672695. About China Sky One Medical, Inc. China Sky One Medical, Inc., a Nevada corporation, is engaged in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic products. Through its wholly-owned subsidiaries, Harbin Tian Di Ren Medical Science Technology Company, Harbin First Bio- Engineering Company Limited, Heilongjiang Tianlong Pharmaceutical, Inc.,") and Heilongjiang Haina Pharmaceutical Inc., the Company manufactures and distributes over-the- counter pharmaceutical products as its primary revenue source. For more information, visit http://www.skyonemedical.com/ . Safe Harbor Statement Certain of the statements made in the press release constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Additional statements that are necessarily forward looking in nature also include, without limitation, statements relating to our research and development activities, expected revenues or sales margins, results of recent acquisitions and our ability to increase sales and expand our presence in the global market place, and risks or uncertainties relating to PRC socioeconomic issues. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. The Company cannot provide any assurance that it will be able to establish listing of its securities on any national or regional securities exchange or market system. Actual results could differ materially from the expectations reflected in such forward- looking statements as a result of a variety of factors, including the inability of the company to meet listing standards of an exchange, risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners both in China and throughout the world and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time. -FINANCIAL TABLES FOLLOW- China Sky One Medical, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Three Months Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $23,748,592 $14,645,247 $36,162,022 $19,824,363 Cost of Goods Sold 5,522,314 3,308,648 8,382,742 4,435,343 Gross Profit 18,226,278 11,336,599 27,779,280 15,389,020 Operating Expenses Selling, general and administrative 6,587,059 5,654,199 10,543,854 7,697,975 Depreciation and amortization 139,004 137,587 215,352 220,942 Research and development 1,372,579 380,630 2,042,412 395,840 Total operating expenses 8,098,642 6,172,416 12,801,618 8,314,757 Other Income (Expense) Other income (expense) (35,539) 7,228 27,509 12,027 Interest expense (132,495) -- (133,642) (16,494) Total other income (expense) (168,034) 7,228 (106,133) (4,467) Net Income Before Provision for Income Tax 9,959,602 5,171,411 14,871,529 7,069,796 Provision for Income Taxes Current 1,848,935 943,887 2,895,951 1,288,152 Net Income $8,110,667 $4,227,524 $11,975,578 $5,781,644 Basic Earnings Per Share $0.54 $0.35 $0.84 $0.48 Basic Weighted Average Shares Outstanding 14,971,652 12,084,938 14,253,547 12,060,865 Diluted Earnings Per Share $0.50 $0.34 $0.78 $0.46 Diluted Weighted Average Shares Outstanding 16,090,211 12,531,385 15,372,106 12,504,845 The Components of Other Comprehensive Income Net Income $8,110,667 $4,227,524 $11,975,578 $5,781,644 Foreign currency translation adjustment 3,743,618 327,771 5,364,134 586,537 Comprehensive Income $11,854,285 $4,555,295 $17,339,712 $6,368,181 China Sky One Medical, Inc. and Subsidiaries Condensed Consolidated Balance Sheet ASSETS June 30, 2008 December 31, 2007 (Unaudited) Current Assets Cash and cash equivalents $42,531,405 $9,190,870 Accounts receivable 9,307,335 10,867,106 Other receivables 6,572 40,200 Inventories 1,424,155 371,672 Prepaid expenses 32,314 17,707 Total current assets 53,301,781 20,487,555 Property and equipment, net 13,888,867 6,861,432 Land deposit 8,507,202 8,003,205 Intangible assets, net 4,489,344 1,933,014 $80,187,194 $37,285,206 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $4,193,102 2,845,308 Wages payable 633,203 381,482 Welfare payable 210,730 221,911 Taxes payable 3,403,698 1,567,188 Deferred revenues -- 24,504 Total current liabilities 8,440,733 5,040,393 Stockholders' Equity Preferred stock ($0.001 par value, 5,000,000 shares authorized, none issued and outstanding) -- -- Common stock ($0.001 par value, 20,000,000 shares authorized, 14,982,531 and 12,228,363 issued and outstanding, respectively) 14,982 12,228 Additional paid-in capital 33,940,144 9,572,608 Accumulated other comprehensive income 7,635,977 2,271,843 Retained earnings 30,155,358 20,388,134 Total stockholders' equity 71,746,461 32,244,813 $80,187,194 $37,285,206 China Sky One Medical, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2008 2007 (Unaudited) (Unaudited) Cash flows from operating activities Net Income $11,975,578 $5,781,644 Adjustments to reconcile net cash provided by operating activities Depreciation and amortization 352,833 251,441 Share-based compensation expense 20,234 215,239 Net change in assets and liabilities Accounts receivables and other receivables 1,972,239 (587,516) Inventories (807,993) (821,187) Prepaid expenses (14,607) 91,539 Accounts payable and accrued liabilities 2,217,365 1,914,466 Advances by customers -- (67,541) Wages payable 268,274 405,264 Welfare payable (11,181) 34,484 Taxes payable 1,872,324 1,212,705 Deferred revenue (24,504) -- Net cash provided by operating activities 17,820,563 8,430,538 Cash flows from investing activities Purchases of fixed assets (667,432) (2,304,372) Land deposit -- (7,664,751) Purchases of subsidiaries (8,437,375) -- Purchase of intangible assets (7,139) (58,751) Net cash used in investing activities (9,111,946) (10,027,874) Cash flows from financing activities Sale of common stock for cash, net of offering costs 23,487,963 -- Proceeds from warrants conversion 840,000 90,000 Proceeds from short-term loan -- (511,672) Net cash provided by (used in) financing activities 24,327,963 (421,672) Effect of exchange rate 303,955 586,537 Net increase (decrease) in cash 33,340,535 (1,432,471) Cash and cash equivalents at beginning of period 9,190,870 6,586,800 Cash and cash equivalents at end of period $42,531,405 $5,154,329 Supplemental disclosure of cash flow information Interest paid $1,157 $5,940 Taxes paid $6,366,350 $-- For more information, please contact: Company Contact: China Sky One Medical, Inc. Mr. Yu-bo Hao, Board Secretary Tel: +86-451-5399-4069 Email: Investor Relations Contact: CCG Investor Relations Mr. Crocker Coulson, President Tel: +1-646-213-1915 Email: Mr. Richard Micchelli, Financial Writer Tel: +1-646-454-4516 Email: Web: http://www.ccgir.com/ DATASOURCE: China Sky One Medical, Inc. CONTACT: Company Contact: China Sky One Medical, Inc. - Mr. Yu-bo Hao, Board Secretary, +86-451-5399-4069, or ; Investor Relations Contact: CCG Investor Relations - Mr. Crocker Coulson, President, +1-646-213-1915, or ; Mr. Richard Micchelli, Financial Writer, +1-646-454-4516, or Web Site: http://www.skyonemedical.com/ http://www.ccgir.com/

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