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Renhuang Pharmaceuticals, Inc. Announces Solid Fourth Quarter and Fiscal Year 2007 Results

HARBIN, China, May 29 /Xinhua-PRNewswire-FirstCall/ -- Renhuang Pharmaceuticals, Inc. (Pink Sheets: RHGP) ("Renhuang" or "the Company"), a leading pharmaceutical company in the People's Republic of China ("PRC"), today reported solid financial results for the fourth quarter and fiscal year ended October 31, 2007.

Fourth Quarter Fiscal 2007 Highlights

-- Total revenues increased to $7.1 million, up 5% from the fourth

quarter of 2006

-- Gross profit reached $3.6 million, up 19% from the fourth quarter of


-- Gross margin was 51%, up from 45% in the fourth quarter of 2006

-- Operating income totaled $1.1 million

-- Net income was $1.1 million, or $0.03 per diluted share

Full Year 2007 Highlights

-- Total revenues in 2007 were $28.0 million

-- Gross profit in 2007 was $14.3 million

-- Gross margin was 51%

-- Operating income was $9.6 million

-- Net income increased to $9.6 million, or $0.27 per fully diluted share

"This was a very key year for Renhuang Pharmaceuticals. We performed well on promotions and advertisements and enhanced our production processes. We also focused on our best selling product, Acanthopanax, and continued to work with scientific institutions to enhance our research and development capabilities," said Mr. Shaoming Li, Chairman and CEO of Renhuang. "We will continue to maintain this strategy in the year ahead and plan to explore new markets and increase sales."

Fourth Quarter 2007 Results

Renhuang's total revenues in the fourth quarter were $7.1 million, a slight increase of 5% over the fourth quarter of 2006. This was attributed to sales of its Acanthopanax products, which accounted for about 51% of the total revenues

Gross profit in the fourth quarter of 2007 was $3.6 million, an increase of 19% over the fourth quarter of 2006. Gross margin for the quarter increased to 51% from 45% in the fourth quarter of 2006. This decrease in the cost of production is mainly due to improvements in manufacturing procedures that eliminated unnecessary processes.

Operating expenses in the fourth quarter of 2007 were $2.5 million, up 74% from $1.4 million in the fourth quarter of 2006. This increase was due to higher selling, general and administrative expenses ("SG&A") attributed to the promotion of the Company's top selling Acanthopanax products. Research and development ("R&D") expenses also increased, as the Company initiated development of new products.

Operating expenses represented 35% of total revenues in the fourth quarter of 2007, up from 21% in the fourth quarter of 2006.

Operating income was $1.1 million in the fourth quarter of 2007, down 30% from $1.6 million in first quarter of 2007. Operating margin was 15.5%, as compared to 23.5% during the same period a year ago.

Net income for the fourth quarter of 2007 was $1.1 million, or $0.03 per diluted share, down from $1.6 million, or $0.05 per diluted share in the fourth quarter of 2006.

"During the fourth quarter, we experienced a slight decrease in our net income due to the increase in SG&A and R&D expenses. However, we remain optimistic in our ability to deliver outstanding results for our investors, as we expect to commercialize new products soon, and for our investments in our top selling product, Acanthopanax, to yield increased market share," concluded Mr. Li.

Full Year 2007 Results

For the full year 2007, total revenues were $28.0 million. Gross profit for the full year 2007 was $14.3 million. Gross profit margin was 51% in 2007. Operating income was $9.6 million in 2007. Operating margin was 34% in 2007. Net income for 2007 was $9.6 million or $0.27 per diluted share.

Financial Condition

As of October 31, 2007, Renhuang had approximately $10.2 million in cash and equivalents. Working capital was about $18.8 million, compared to $7.8 million as of October 31, 2006. Stockholders' equity as of October 31, 2007 was $21.4 million, an increase of 101% over the $10.6 million recorded as of October 31, 2006. For the fiscal year ended October 31, 2007, cash provided by operating activities was $8.9 million.

Comparability of Results

On September 7, 2006, the Company completed a share exchange transaction through which it acquired Harbin Renhuang Pharmaceutical Company Limited ("Old Renhuang") and its wholly owned subsidiary, Harbin Renhuang Pharmaceutical Co., Ltd. ("Renhuang China"). The Company was deemed to be the acquirer for accounting purposes. Therefore, the financial statements in this press release are those of Renhuang China for all periods prior to the acquisition on September 7, 2006 and the financial statements of the consolidated companies from the acquisition date forward. On December 5, 2006, the Company changed its fiscal year end from April 30 to October 31. Therefore, the Company's Annual Report on Form 10-K for the period ended October 31, 2006 was a transition report, and included information for the six-month transitional period from May 1, 2006 to October 31, 2006. As a result, this press release includes comparative financial information for the statement of income and statement of cash flows for the six month period ended October 31, 2006, and not for the twelve months ended October 31, 2006.

About Renhuang Pharmaceuticals, Inc.

Founded in 1996, Renhuang Pharmaceuticals, Inc, produces western, traditional Chinese medicines (TCM), and branded pharmaceuticals, using its GMP-certified facilities in China. The Company's GMP-certified manufacturing facilities, containing cutting-edge technologies and advanced equipment, are capable of producing as many as 200 types of pharmaceuticals. Additionally, Renhuang distributes raw materials and finished pharmaceutical products using its extensive distribution channels and third party distributors throughout China. The Company's distribution network includes approximately 25 independent sales distributors, representing over 3,000 sales representatives in 70 sales centers across 24 districts, covering over 50% of the greater China. The Company also exports its products to Russia and Southeast Asia. For more information, visit .

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. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the 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 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.

For more information, please contact:

Renhuang Pharmaceuticals, Inc.

Ms. Shuang Tan, IR Contact

Phone: +86-451-5392-5461


CCG Elite Investor Relations Inc.

Mr. Crocker Coulson, President

Phone: +1-646-213-1915 (New York)





Unaudited Consolidated Statements of Operations

Three Months Ended October 31,

2007 2006

Revenues $ 7,149,518 $ 6,833,614

Cost of Goods Sold (3,508,912) (3,783,774)

Gross Profit 3,640,606 3,049,840

Operating Expenses

Selling and distribution expenses (31,943) (211,487)

Advertising expenses (1,178,631) (677,390)

General and administrative (1,261,108) (369,878)

Research and development (282,009) (121,272)

Provision for doubtful accounts 312,448 18,793

Depreciation and amortization (79,957) (88,909)

Income from operations 1,119,406 1,599,697

Other income 18,353 3,502

Income Before Provision for Income Tax 1,137,759 1,603,199

Net Income (Loss) $ 1,137,759 $ 1,603,199

Basic Earnings Per Share $ 0.03 $ 0.05

Diluted Earnings Per Share $ 0.03 $ 0.05

Basic Weighted Average Shares

Outstanding 35,039,310 35,000,181

Diluted Weighted Average Shares

Outstanding 35,039,550 35,000,181


Audited Consolidated Statements of Operations

Year Ended Six Months Ended

October 31, 2007 October 31, 2006

Revenues $ 28,040,174 $ 12,247,489

Cost of Goods Sold (13,693,892) (6,143,277)

Gross Profit 14,346,282 6,104,212

Operating Expense:

Selling and distribution expenses (166,567) (299,484)

Advertising expenses (1,358,900) (677,390)

General and administrative (2,553,541) (657,574)

Research and development (282,009) (121,272)

Provision for doubtful accounts (130,634) --

Depreciation and Amortization (293,637) (131,760)

Income from operations 9,560,994 4,216,732

Other Income 35,638 8,482

Income Before Income Taxes 9,596,632 4,225,214

Net Income $ 9,596,632 $ 4,225,214

Basic Earnings Per Share $ 0.27 $ 0.12

Diluted Earnings Per Share $ 0.27 $ 0.12

Basic Weighted Average Shares Outstanding 35,039,310 35,000,181

Diluted Weighted Average Shares

Outstanding 35,039,550 35,000,181


Audited Consolidated Balance Sheets

October 31, 2007 and 2006

2007 2006

Current Assets

Cash and cash equivalents $ 10,153,603 $ 1,021,267

Accounts receivable, net 10,480,549 7,566,096

Inventories 969,672 622,144

Prepayments 9,917 102,473

Other receivables, net 669,445 1,143,834

Deferred expenses -- 115,823

Total current assets 22,283,186 10,571,637

Property and equipment, net 2,606,285 2,610,285

Construction in process -- 106,610

Total Assets $ 24,889,471 $ 13,288,532

Current Liabilities

Accounts payables

-due to related parties $ -- $ 419,910

-due to third parties 188,600 366,805

Other payables

-due to related parties

-due to third parties 3,307,371 1,877,042

Total current liabilities 3,495,971 2,663,757

Total Liabilities 3,495,971 2,663,757

Stockholders' Equity

Common stock-Authorized common shares

100,000,000, outstanding number of shares

35,096,681 (35,000,181 in 2006) at par

value of 0.001; authorized preferred

shares 1,000,000 outstanding number of

share nil (nil in 2006) 35,097 35,000

Additional paid-in capital 6,627,099 6,310,822

Reserves 1,841,734 847,133

Retained earnings 11,980,112 3,378,081

Accumulated other comprehensive income 909,458 53,739

Total stockholders' equity 21,393,500 10,624,775

Total Liabilities and Shareholders'

Equity $ 24,889,471 $ 13,288,532



Year Ended Six Months Ended

October 31, 2007 October 31, 2006


Net income $9,596,632 $4,225,214

Adjustments to reconcile net income

from operations to net cash from

operating activities

Depreciation and amortization 293,637 131,760

Provision for bad debts 444,609 --

Fair value of warrants issued 31,699 --

Fair value of shares issued 284,675 --

Changes in assets and liabilities:

Accounts receivable (2,574,916) (7,566,096)

Inventories (305,926) (622,144)

Other receivables, net 206,548 (1,143,834)

Due from Related Parties (430,146) --

Deferred expenses 118,647 (115,823)

Prepayments 95,325 (102,473)

Accounts payable and accruals

-Related Parties -- 419,910

-Third Parties (191,388) 366,805

Other Payable 1,306,967 1,877,042


OPERATING ACTIVITIES 8,876,363 (2,529,639)


Acquisition of property, plant and

equipment (45,741) (76,800)

Construction in progress -- (106,610)


ACTIVITIES (45,741) (183,410)


Increase of paid-in capital -- 3,680,577

Due to related parties -- --




EQUIVALENTS 8,830,622 967,528



CASH - beginning of year 1,021,267 --

CASH - end of year 10,153,603 1,021,267



Issuance of common shares for

financing services 284,675 --

Warrants of 25,000 granted to a

director for services 31,699 --

Property, plant and equipment

received from shareholders as part

of paid-in capital -- 2,665,245

SOURCE Renhuang Pharmaceuticals, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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