x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
CHINA
SKY ONE MEDICAL, INC.
|
(Exact
name of registrant as specified in its
charter)
|
Nevada
|
87-0430322
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
No.
2158, North Xiang An Road, Song Bei District,
Harbin,
People’s Republic of China
|
150028
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Registrant’s
telephone number, including area code:
|
86-451-87032617
(China)
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
(Do
not check if a smaller reporting company)
|
Smaller
reporting company o
|
|
·
|
for
the fiscal quarter ended March 31, 2009, included in the March 2010 Form
10-Q;
|
|
·
|
for
the fiscal quarter ended June 30, 2009, included in its Quarterly Report
on Form 10-Q filed with the SEC on August 14, 2009 (the “June 2009 Form
10-Q”); and
|
|
·
|
for
the fiscal quarter ended September 30, 2009, included in its Quarterly
Report on Form 10-Q filed with the SEC on November 16, 2009 (the
“September 2009 Form 10-Q” and, collectively with the March 2010 Form 10-Q
and June 2009 Form 10-Q, the “Form
10-Qs”),
|
|
·
|
file
this Amended Form 10-Q, which will contain restated financial information
for the fiscal quarter ended March 31, 2009 reflecting the corrections
made in response to these accounting errors;
and
|
|
·
|
include
restated financial information in the Company’s upcoming June 30, 2010 and
September 30, 2010 Form 10-Qs, which will incorporate corrections made in
response to these accounting errors, and restate the Company’s financial
statements for the three and six months ended June 30, 2009 and three and
nine months ended September 30, 2009, marking each 2009 period as
restated.
|
Three Months Ended March 31,
2009
|
||||||||
As
Previously
Recorded
|
As
Restated
|
|||||||
Change
in fair value of derivative warrant liability
|
$ |
-
|
$ |
2,239
|
||||
Total
other income (expense)
|
$ |
12
|
$ |
2,251
|
||||
Net
Income Before Provision for Income Tax
|
$ |
9,063
|
$ |
11,302
|
||||
Net
Income
|
$
|
7,243
|
$
|
9,482
|
||||
Basic
Earnings Per Share
|
$
|
0.44
|
$
|
0.58
|
||||
Diluted
Earnings Per Share
|
$
|
0.43
|
$
|
0.57
|
||||
Other
Comprehensive Income
|
||||||||
Foreign
currency translation adjustment
|
$ | 117 | $ | 117 | ||||
Net
Income
|
$
|
7,243
|
$
|
9,482
|
||||
Comprehensive
Income
|
$
|
7,360
|
$
|
9,599
|
Three Months Ended March
31, 2009
|
||||||||
As
Previously
Recorded
|
As
Restated
|
|||||||
Net
Income
|
$
|
7,243
|
$
|
9,482
|
||||
Change
in fair value of derivative liability
|
-
|
(2,239)
|
||||||
Total:
|
$
|
7,243
|
$
|
7,243
|
PAGE
|
|||||
PART I
|
-
|
FINANCIAL
INFORMATION
|
|||
Item
1.
|
Financial
Statements
|
2
|
|||
Condensed
Consolidated Statements of Operations and Comprehensive Income for
the Three Months Ended March 31, 2010 (unaudited) and 2009
(unaudited) (restated)
|
2
|
||||
Condensed
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
31, 2009 (restated)
|
3
|
||||
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended
March
31, 2010 (unaudited) and 2009 (unaudited) (restated)
|
4
|
||||
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
5
|
||||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
27
|
|||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
40
|
|||
Item
4.
|
Controls
and Procedures
|
40
|
|||
PART II
|
-
|
OTHER
INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
41
|
|||
Item
1A.
|
Risk
Factors
|
41
|
|||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
41
|
|||
Item
3.
|
Defaults
Upon Senior Securities
|
41
|
|||
Item
4.
|
Removed
and Reserved
|
41
|
|||
Item
5.
|
Other
Information
|
41
|
|||
Item
6.
|
Exhibits
|
41
|
|||
Signatures
|
42
|
Three Months Ended March
31,
|
||||||||
2010
|
2009
(restated)
|
|||||||
Revenues
|
$ | 28,903 | $ | 24,834 | ||||
Cost
of Goods Sold
|
7,275 | 6,041 | ||||||
Gross
Profit
|
21,628 | 18,793 | ||||||
Operating
Expenses
|
||||||||
Depreciation
and amortization
|
841 | 451 | ||||||
Research
and development
|
3,764 | 2,413 | ||||||
Selling
|
5,911 | 5,967 | ||||||
General
and administrative
|
990 | 911 | ||||||
Total
operating expenses
|
11,506 | 9,742 | ||||||
Income
from Operations
|
10,122 | 9,051 | ||||||
Other
Income (Expense)
|
||||||||
Interest
income
|
29 | 12 | ||||||
Change
in fair value of derivative warrant liability
|
4,927 | 2,239 | ||||||
Total
other income (expense)
|
4,956 | 2,251 | ||||||
Net
Income Before Provision for Income Tax
|
15,078 | 11,302 | ||||||
Provision
for Income Taxes
|
2,489 | 1,820 | ||||||
Net
Income
|
$ | 12,589 | $ | 9,482 | ||||
Basic
Earnings Per Share
|
$ | 0.75 | $ | 0.58 | ||||
Basic
Weighted Average Shares Outstanding
|
16,776,864 | 16,413,920 | ||||||
Diluted
Earnings Per Share
|
$ | 0.74 | $ | 0.57 | ||||
Diluted
Weighted Average Shares Outstanding
|
16,955,535 | 16,665,221 | ||||||
Other
Comprehensive Income
|
||||||||
Foreign
currency translation adjustment
|
$ | 21 | $ | 117 | ||||
Net
Income
|
12,589 | 9,482 | ||||||
Comprehensive
Income
|
$ | 12,610 | $ | 9,599 |
|
March 31,
|
December 31,
|
||||||
2010
|
2009
|
|||||||
|
(Unaudited)
|
(Restated)
|
||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 65,399 | $ | 52,756 | ||||
Accounts
receivable, net
|
18,583 | 21,146 | ||||||
Inventories
|
2,223 | 2,413 | ||||||
Prepaid
and other current assets
|
98 | 74 | ||||||
Total
current assets
|
86,303 | 76,389 | ||||||
Property
and equipment, net
|
15,319 | 15,491 | ||||||
Intangible
assets, net
|
24,438 | 25,114 | ||||||
Construction
in progress
|
12,932 | 12,932 | ||||||
Land
use rights, net
|
4,577 | 4,586 | ||||||
Construction
deposit
|
5,851 | 5,851 | ||||||
Total
Assets
|
$ | 149,420 | $ | 140,363 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 5,329 | $ | 4,186 | ||||
Taxes
payable
|
4,011 | 3,873 | ||||||
Derivative
warrant liability
|
5,636 | 11,435 | ||||||
Total
current liabilities
|
14,976 | 19,494 | ||||||
Commitments
and Contingencies
|
- | - | ||||||
Stockholders'
Equity
|
||||||||
Preferred
stock ($0.001 par value, 5,000,000 shares authorized, none issued and
outstanding)
|
- | - | ||||||
Common
stock ($0.001 par value, 50,000,000 shares authorized, 16,790,851 and
16,714,267 issued and outstanding, respectively)
|
17 | 17 | ||||||
Additional
paid-in capital
|
38,154 | 37,188 | ||||||
Retained
earnings
|
90,374 | 77,785 | ||||||
Accumulated
other comprehensive income
|
5,900 | 5,879 | ||||||
Total
stockholders' equity
|
134,445 | 120,869 | ||||||
Total
Liability and Shareholders' Equity
|
$ | 149,420 | $ | 140,363 |
|
Three Months Ended March 31,
|
|||||||
|
2010
|
2009
(restated)
|
||||||
Cash
flows from operating activities
|
||||||||
Net
Income
|
$ | 12, 589 | $ | 9,482 | ||||
Adjustments
to reconcile net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
and amortization
|
944 | 588 | ||||||
Change
in fair value of derivative liability
|
(4,927 | ) | (2,239 | ) | ||||
Net
change in assets and liabilities
|
||||||||
Accounts
receivable
|
2,563 | 912 | ||||||
Inventories
|
190 | (857 | ) | |||||
Prepaid
expenses and other current assets
|
(24 | ) | 36 | |||||
Accounts
payable and accrued expenses
|
1,143 | 736 | ||||||
Taxes
payable
|
138 | (165 | ) | |||||
Net
cash provided by operating activities
|
12,616 | 8,493 | ||||||
Cash
flows from investing activities
|
||||||||
Purchase
of fixed assets
|
(77 | ) | (66 | ) | ||||
Purchase
of intangible assets
|
- | (4 | ) | |||||
Net
cash used in investing activities
|
(77 | ) | (70 | ) | ||||
Cash
flows from financing activities
|
||||||||
Proceeds
from warrants conversion
|
94 | 29 | ||||||
Net
cash provided by financing activities
|
94 | 29 | ||||||
Effect
of exchange rate changes on cash and cash equivalents
|
10 | 48 | ||||||
Net
increase in cash and cash equivalents
|
12,643 | 8,500 | ||||||
Cash
and cash equivalents at beginning of period
|
52,756 | 40,288 | ||||||
Cash
and cash equivalents at end of period
|
$ | 65,399 | $ | 48,788 | ||||
Supplemental
disclosure of cash flow information
|
||||||||
Interest paid | $ | - | $ | - | ||||
Taxes
paid
|
$ | 2,452 | $ | 2,107 |
($ in thousands)
|
||||
Fixed
assets
|
$ | 6,315 | ||
Intangible
assets – SFDA licenses for drug batch numbers
|
1,787 | |||
Other
|
170 | |||
Net
assets acquired
|
$ | 8,272 |
($ in thousands)
|
||||
Cash
|
$ | 84 | ||
Intangible
assets – Goodwill
|
353 | |||
Net
assets acquired
|
$ | 437 |
($ in thousands)
|
||||
Fixed
assets
|
$ | 4,177 | ||
Intangible
assets - SFDA licenses for drug batch numbers
|
2,917 | |||
Net
assets acquired
|
$ | 7,094 |
|
·
|
for
the fiscal quarter ended March 31, 2009, included in the March 2010 Form
10-Q;
|
|
·
|
for
the fiscal quarter ended June 30, 2009, included in its Quarterly Report
on Form 10-Q filed with the SEC on August 14, 2009 (the “June 2009 Form
10-Q”); and
|
|
·
|
for
the fiscal quarter ended September 30, 2009, included in its Quarterly
Report on Form 10-Q filed with the SEC on November 16, 2009 (the
“September 2009 Form 10-Q” and, collectively with the March 2010 Form 10-Q
and June 2009 Form 10-Q, the “Form
10-Qs”),
|
|
·
|
file
this Amended Form 10-Q, which will contain restated financial information
for the fiscal quarter ended March 31, 2009 reflecting the corrections
made in response to these accounting errors;
and
|
|
·
|
include
restated financial information in the Company’s upcoming June 30, 2010 and
September 30, 2010 Form 10-Qs, which will incorporate corrections made in
response to these accounting errors, and restate the Company’s financial
statements for the three and six months ended June 30, 2009 and three and
nine months ended September 30, 2009, marking each 2009 period as
restated.
|
|
Three Months Ended March 31,
2009
|
|||||||
|
As Previously
Recorded
|
As Restated
|
||||||
Change
in fair value of derivative warrant liability
|
$ |
-
|
$ |
2,239
|
||||
Total
other income (expense)
|
$ |
12
|
$ |
2,251
|
||||
Net
Income Before Provision for Income Tax
|
$ |
9,063
|
$ |
11,302
|
||||
Net
Income
|
$
|
7,243
|
$
|
9,482
|
||||
Basic
Earnings Per Share
|
$
|
0.44
|
$
|
0.58
|
||||
Diluted
Earnings Per Share
|
$
|
0.43
|
$
|
0.57
|
||||
Other
Comprehensive Income
|
||||||||
Foreign
currency translation adjustment
|
$ | 117 | $ | 117 | ||||
Net
Income
|
7,243
|
|
9,482
|
|||||
Comprehensive
Income
|
$
|
7,360
|
$
|
9,599
|
|
Three Months Ended March 31, 2009
|
|||||||
|
As Previously
Recorded
|
As Restated
|
||||||
Net
Income
|
$
|
7,243
|
$
|
9,482
|
||||
Change
in fair value of derivative liability
|
-
|
(2,239)
|
||||||
Total:
|
$
|
7,243
|
$
|
7,243
|
Building
and Improvements
|
30
years
|
Land
use rights
|
50
years
|
Furniture
& Equipment
|
5
to 7 years
|
Transportation
Equipment
|
5
to 15 years
|
Machinery
and Equipment
|
7
to 14 years
|
Income Tax Rate
|
As of March 31,
|
|||||||
for Subsidiaries
|
2010
|
2009
|
||||||
TDR
|
15 | % | 15 | % | ||||
First
|
15 | % | 15 | % | ||||
Tianlong
|
15 | % | 15 | % | ||||
Haina
|
25 | % | 25 | % | ||||
Peng
Lai
|
2%
of Revenue
|
2%
of Revenue
|
a.
|
The
vendor’s performance to achieve the
milestone
|
b.
|
The
enhancement of the value of the item delivered as a result of a specific
outcome resulting from the vendor’s performance to achieve the
milestone
|
For
the Three Months Ended March 31,
|
($
in thousands)
|
2010
|
2009
|
Variance
|
||||||||||||||||||
Product Category
|
Sales
|
% of Sales
|
Sales
|
% of Sales
|
||||||||||||||||
Patches
|
$ | 8,218 | 28.4 | % | $ | 9,122 | 36.7 | % | $ | (904 | ) | |||||||||
Ointments
|
7,805 | 27.0 | % | 5,082 | 20.5 | % | 2,723 | |||||||||||||
Sprays
|
2,999 | 10.4 | % | 2,902 | 11.7 | % | 96 | |||||||||||||
Diagnostic
Kits
|
1,460 | 5.1 | % | 3,101 | 12.5 | % | (1,641 | ) | ||||||||||||
Others
|
8,421 | 29.1 | % | 4,627 | 18.6 | % | 3,795 | |||||||||||||
Total
|
$ | 28,903 | 100.0 | % | $ | 24,834 | 100.0 | % | $ | 4,069 |
For the three months ended March 31,
($ in thousands, except share and per
share data)
|
||||||||
|
2010
|
2009
(restated)
|
||||||
Numerator:
|
||||||||
Net
income used in calculation of basic and diluted earnings per
share
|
$ | 12,589 | * | $ | 9,482 | ** | ||
Denominator:
|
||||||||
Weighted-average
common shares outstanding used in calculation of basic earnings per
share
|
16,776,864 | 16,413,920 | ||||||
Effect
of dilutive securities:
|
||||||||
Warrants
and Options
|
178,671 | 251,301 | ||||||
Weighted-average
common shares used in calculation of diluted earnings per
share
|
16,955,535 | 16,665,221 | ||||||
Net
income per share:
|
||||||||
Basic
|
$ | 0.75 | $ | 0.58 | ||||
Diluted
|
$ | 0.74 | $ | 0.57 |
|
1.
|
the
Adjusted EPS of the Company for the fiscal year ending December 31, 2007
was less than $0.80 per share, as set forth in the fiscal year 2007
audited financial statements;
or
|
|
2.
|
the
Company’s accounts receivable exceeded $12.0 million at December 31, 2007,
as set forth in the fiscal year 2007 audited financial
statements.
|
Weighted
|
Weighted
|
|||||||||||||||
average
|
average
|
|||||||||||||||
Shares
|
Exercise
|
Shares
|
Exercise
|
|||||||||||||
Underlying
|
Price
|
underlying
|
Price
|
|||||||||||||
Warrants
|
Warrants
|
Options
|
Options
|
|||||||||||||
Outstanding
as of March 31, 2009
|
900,000 | $ | 9.50 | 113,500 | $ | 3.45 | ||||||||||
Exercised
|
(150,000 | ) | 2.00 | (113,500 | ) | 3.65 | ||||||||||
Outstanding
as of December 31, 2009
|
750,000 | 12.50 | - | - | ||||||||||||
Exercised
|
(156,200 | ) | 12.50 | - | - | |||||||||||
Outstanding
as of March 31, 2010
|
593,800 | $ | 12.50 | - | $ | - |
|
·
|
The
Class A Warrants became exercisable beginning on the six-month anniversary
of the closing of the January 2008 Offering and will expire July 31,
2011.
|
|
·
|
Commencing
on one-year anniversary of the Closing Date, in the event the Warrant
Shares may not be freely sold by the holders of the Class A Warrants due
to the Company’s failure to satisfy its registration requirements, and an
exemption for such sale is not otherwise available to the Warrantholders
under Rule 144, the Class A Warrants will be exercisable on a cashless
basis. Commencing January 1, 2009, the Company accounts for this warrant
derivative liability in accordance with ASC
815-40.
|
|
·
|
The
Exercise Price and number of Warrant Shares are subject to adjustment for
standard dilutive events, such as dividends or distributions on the
Company’s common stock paid in shares of common stock, reclassifications
or reorganizations of the common stock, distributions of indebtedness or
assets (other than cash) to all holders of the common stock, a merger or
consolidation with another corporation in which the Company is not the
survivor, or sale, transfer or other distribution of all or substantially
all of the Company’s assets to another corporation to prevent dilution to
the holders of the Class A Warrants as a result of such
event. The Exercise Price is also subject to adjustment on a
weighted-average basis for issuance of common stock, or securities
convertible into or exercisable for shares of common stock, at a price per
share, or conversion or exercise price per share less than the Class A
Warrant exercise price of $12.50 per share (a “Trigger
Issuance”). In the event of a Trigger Issuance, the
then-existing Exercise Price shall be reduced, as of the close of business
on the effective date of the Trigger Issuance, to a price determined as
follows:
|
|
where
|
|
§
|
At
anytime following the date a Registration Statement covering the Warrant
Shares is declared effective, we will have the ability to call the Class A
Warrants at a price of $0.01 per Class A Warrant, upon thirty (30) days
prior written notice to the holders of the Class A Warrants, provided (i)
the closing price of the Common stock exceeded $18.75 for each of the ten
(10) consecutive trading days immediately preceding the date that the call
notice is given by the Company, and (ii) the Company has attained an
Adjusted EPS of at least $1.75 per share for the fiscal year ending
December 31, 2008, as set forth in our audited financial statements of the
Company.
|
|
§
|
If,
among other things, the Company fails to cause a Registration Statement
covering the Warrant Shares to be declared effective prior to the
applicable dates set forth in the Registration Rights Agreement, the
expiration date of the Class A Warrants shall be extended one day for each
day beyond the Effectiveness Deadlines. The registration rights
do not require a cash settlement and the Class A Warrants can be settled
in unregistered shares. Therefore, paragraphs 14-18 of EITF
00-19 does not apply to the registration rights associated with the Class
A Warrants. As a result, no liability accounting is
required.
|
($ in thousands)
|
||||||||
March 31, 2010
(Unaudited)
|
December 31, 2009
(Restated)
|
|||||||
Raw
Material
|
$ | 1,070 | $ | 1,192 | ||||
Work-in-Process
|
553 | 578 | ||||||
Finished
Products
|
600 | 642 | ||||||
Total
Inventories
|
$ | 2,223 | $ | 2,413 |
($
in thousands)
|
||||||||
March
31,
|
|
|||||||
2010
(Unaudited)
|
December
31,
2009
|
|||||||
Buildings
and improvements
|
$ | 11,076 | $ | 10,570 | ||||
Machinery
and equipment
|
5,433 | 5,868 | ||||||
Transportation
equipment
|
956 | 955 | ||||||
Furniture
and equipment
|
335 | 325 | ||||||
Total
Property and Equipment
|
17,800 | 17,718 | ||||||
Less:
Accumulated Depreciation
|
(2,481 | ) | (2,227 | ) | ||||
Property
and Equipment, Net
|
$ | 15,319 | $ | 15,491 |
Intangible
Assets as of March 31, 2010, net
($
in thousands) (Unaudited)
|
||||||||||||||||||||||||
Item
|
TDR
|
Haina
|
Tianlong
|
First
|
Peng
Lai
|
Total
|
||||||||||||||||||
Proprietary
Technologies
|
$ | 1,237 | $ | - | $ | 4,907 | $ | 11,520 | $ | - | $ | 17,664 | ||||||||||||
SFDA
licenses for drug batch numbers
|
- | - | 1,699 | - | 4,315 | 6,014 | ||||||||||||||||||
Goodwill
|
406 | 354 | - | - | - | 760 | ||||||||||||||||||
Total
|
$ | 1,643 | $ | 354 | $ | 6,606 | $ | 11,520 | $ | 4,315 | $ | 24,438 |
Intangible Assets as of December 31, 2009,
net
($ in thousands)
|
||||||||||||||||||||||||
Item
|
TDR
|
Haina
|
Tianlong
|
First
|
Peng Lai
|
Total
|
||||||||||||||||||
Proprietary
Technologies
|
$ | 1,275 | $ | - | $ | 5,034 | $ | 11,854 | $ | - | $ | 18,163 | ||||||||||||
SFDA
licenses for drug batch numbers
|
- | - | 1,751 | - | 4,441 | 6,192 | ||||||||||||||||||
Goodwill
|
406 | 353 | - | - | - | 759 | ||||||||||||||||||
Total
|
$ | 1,681 | $ | 353 | $ | 6,785 | $ | 11,854 | $ | 4,441 | $ | 25,114 |
($
in thousands)
|
||||||||
March
31, 2010
(Unaudited)
|
December
31, 2009
|
|||||||
Value
Added Tax, net
|
$ | 1,404 | $ | 1,291 | ||||
Enterprise
Income Tax
|
2,489 | 2,452 | ||||||
City
Tax
|
56 | 43 | ||||||
Other
Taxes and additions
|
62 | 86 | ||||||
Total
Taxes Payable
|
$ | 4,011 | $ | 3,873 |
As of March 31,
|
||||||||
Income Tax Rate
|
2010
|
2009
|
||||||
TDR
|
15 | % | 15 | % | ||||
First
|
15 | % | 15 | % | ||||
Tianlong
|
15 | % | 15 | % | ||||
Haina
|
25 | % | 25 | % | ||||
Peng
Lai
|
2%
of Revenue *
|
2%
of Revenue
|
|
*
|
Reflects
a 25% Tax rate on 8% of Peng Lai’s revenue, regardless of its taxable
income. As authorized by Peng Lai Municipal Tax Bureau, Peng Lai was not
required to pay tax on the remaining 98% of
revenue.
|
($ in thousands)
|
||||||||||||
Three Months Ended March 31,
2010
|
||||||||||||
China
|
U.S.
|
Total
|
||||||||||
Pre
tax income
|
$ | 10,600 | $ | 4,500 | $ | 15,100 | ||||||
Effective
statutory tax rate
|
25 | % | 34 | % | ||||||||
Provision
for statutory income tax
|
2,700 | 1,500 | 4,200 | |||||||||
Other
(Special Entity, etc. )
|
(200 | ) | - | (200 | ) | |||||||
Full
valuation allowance
|
- | (1,500 | ) | (1,500 | ) | |||||||
Provision
for income taxes
|
$ | 2,500 | $ | - | $ | 2,500 | ||||||
Effective
tax rate
|
23.6 | % | - | 16.6 | % |
($ in thousands -
Restated)
|
||||||||||||
Three Months Ended March 31,
2009
|
||||||||||||
China
|
U.S.
|
Total
|
||||||||||
Pre
tax income
|
$ | 9,200 | $ | 2,100 | $ | 11,300 | ||||||
Effective
statutory tax rate
|
25 | % | 34 | % | ||||||||
Provision
for statutory income tax
|
2,300 | 700 | 3,000 | |||||||||
Other
(Special Entity, etc. )
|
(500 | ) | - | (500 | ) | |||||||
Full
valuation allowance
|
- | (700 | ) | (700 | ) | |||||||
Provision
for income taxes
|
$ | 1,800 | $ | - | 1,800 | |||||||
Effective
tax rate
|
20.1 | % | - | 15.9 | % |
|
·
|
Patches (5
products);
|
|
·
|
Ointments
(18 products);
|
|
·
|
Sprays
(15 products);
|
|
·
|
Diagnostic
Kit (3 products);
|
|
·
|
Others
(48 products)
|
Major Research and Development Expenses during the Three Months Ended March 31, 2010
($ in thousands)
|
||||||||||||||||
Projects
|
Expense
|
% of total
R&D
|
Aggregate
Expense Since
Commencement
of Project
|
Estimated
Additional Cost
to Complete
Research
|
||||||||||||
Diagnostic
Kits - 6 products
|
$ | 488 | 13.0 | % | $ | 3,218 | $ | 300 | ||||||||
Breast
Cancer Technology
|
497 | 13.2 | % | 2,767 | 8,300 | |||||||||||
Clindamycin
Phosphate for Injection
|
424 | 11.3 | % | 475 | 1,000 | |||||||||||
Levofloxacin
Hydrochloride Eye Drops
|
410 | 10.9 | % | 450 | 500 | |||||||||||
Nimesulide
Granules
|
439 | 11.7 | % | 455 | 800 | |||||||||||
Optimization
Experiments for Three Products
|
622 | 16.5 | % | 780 | 1,500 | |||||||||||
Total
|
$ | 2,880 | 76.6 | % | $ | 8,145 | $ | 12,400 |
Major Research and Development Expenses during the Three Months Ended March 31, 2009
($ in thousands)
|
||||||||||||||||
Projects
|
Expense
|
% of total
R&D
|
Aggregate
Expense Since
Commencement
of Project
|
Estimated
Additional Cost
to Complete
Research
|
||||||||||||
Tiopronin
for Injection
|
$ | 526 | 21.8 | % | $ | 526 | $ | 800 | ||||||||
Omeprazole
Sodium for Injection
|
540 | 22.4 | % | 540 | 1,000 | |||||||||||
Ozagrel
Sodium for Injection
|
183 | 7.6 | % | 183 | 1,000 | |||||||||||
Monoclonal
Antibody
|
964 | 40.0 | % | 3,162 | 2,000 | |||||||||||
Total
|
$ | 2,213 | 91.8 | % | $ | 4,411 | $ | 4,800 |
|
·
|
Each
project will go through multi stages before being submitted to the
SFDA.
|
|
·
|
Different
drugs require for different amount of testing samples or trials which will
result in different time span for the testing and approval
process.
|
|
·
|
R&D
expense is incurred at different stages of the process based on our
agreement signed with the third party (qualified hospitals or professional
research institutions).
|
|
·
|
Since
different drugs require different stages of process or different amount of
samples to be collected, the same R&D stage for different drugs result
in different time span and different
expense.
|
|
·
|
In
some cases, after we submit the completed document to the SFDA, we may be
required to supply additional testing or document, which will result in
longer time span and increased
expense.
|
|
·
|
For
the R&D projects that are conducted internally, we only record the
related personnel and material
costs.
|
For the Three Months Ended March
31,
($ in thousands)
|
||||||||||||
2010
|
2009
|
Variance
|
||||||||||
Revenues
|
$ | 28,903 | $ | 24,834 | 16.4 | % | ||||||
Cost
of Goods Sold
|
7,275 | 6,041 | 20.4 | % | ||||||||
Gross
Profit
|
$ | 21,628 | $ | 18,793 | 15.1 | % | ||||||
Gross
Profit Margin
|
74.8 | % | 75.7 | % | -0.9 | % |
For the Three Months Ended March 31,
($ in thousands)
|
||||||||||||||||||||
2010
|
2009
|
Variance
|
||||||||||||||||||
Product
Category
|
Sales
|
%
of Sales
|
Sales
|
%
of Sales
|
||||||||||||||||
Patches
|
$ | 8,218 | 28.4 | % | $ | 9,122 | 36.7 | % | $ | (904 | ) | |||||||||
Ointments
|
7,805 | 27.0 | % | 5,082 | 20.5 |