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Lotus Pharmaceuticals, Inc. Reports Strong First Quarter 2010 Financial Results
Date:5/14/2010

BEIJING, May 14 /PRNewswire-Asia-FirstCall/ -- Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or "the Company"), a growing developer, manufacturer and seller of medicine and drugs in the People's Republic of China (the "PRC") today reported its financial results for the first quarter ended March 31, 2010.

    First Quarter 2010 Highlights and Recent Developments:
    -- Diluted EPS of $0.09, up 27% from first quarter 2009
    -- Net revenues of $14.9 million, up 26% from first quarter 2009
    -- Net income of $4.9 million, up 38% from first quarter 2009
    -- Gross margin of 58%, as compared with 56% from first quarter of 2009
    -- Net margin of 33%, as compared with 30% from first quarter of 2009
    -- Reduced our current liability under the outstanding Series A Preferred
       Stock from $2,477,433 on March 31, 2010 to $621,333 May 13, 2010 due to
       the conversion of preferred shares to common stocks
    -- Added five prescription drugs under the National Health Insurance
       Program to deliver through the wholesale channel nationwide, achieving
       the goal of increasing product for 2010
    -- Continued Sarbanes-Oxley compliance project, to be fully and timely
       compliant in 2010
    -- Commenced construction of the Beijing building complex which is
       scheduled for completion in 2010
    -- Received SFDA's approval for R-Bambuterol(R) Hydrochloride Tablets to
       commence clinical trials as a Class 1 New Drug for special/fast track
       review
    -- Approved extension of contract term from 10 years to 30 years between
       Lotus Pharmaceuticals, Inc.'s wholly-owned foreign enterprise and two
       operating entities in China

Revenues for the first quarter of 2010 increased 26% to $14.9 million, up from $11.8 million in the first quarter of 2009. As compared to the first quarter of 2009, wholesale revenues, which were 77% of total net revenues for the first quarter of 2010, increased 29%; and retail revenues, which were 22% of total net revenues for the first quarter of 2010, increased 52% for the first quarter of 2010. The increase in wholesale revenues was mainly attributed to strong sales from two areas: 1) sales increases in the three core prescription drugs-Valsartan Capsules, Brimonidine Tartrate Eye Drops and Yipubishan-Octreotide Acetate Injection resulting from increased demand from existing channels and an expanded sales network. These three drugs continue to gain popularity in the market for their safety, efficacy and stability; and 2) revenues contributed from five new prescription drugs added this quarter. For 2010, the Company has not raised prices for its prescription drugs and maintains its pricing from 2009. However, if the market price demands adjustment, the Company will act accordingly.

The increase in retail revenues was attributable to direct sales to Over-the-Counter ("OTC") drug outlets in Beijing. Currently, the Company has established direct sales to over 1000 drug stores in Beijing with nearly 1000 over-the-counter drugs produced by third party manufacturers. The Company has exclusive distribution rights to 40% of such drugs. This new segment is expected to grow with our strong and experienced sales team recruited at the end of 2009 and the opportunities in Beijing. Once the 10,000sqm storage facility is built and fully utilized, it can fully support the expansion of direct sales to OTC drug stores as well as hospitals.

Gross profit in the first quarter increased 31% year over year to $8.7 million from $6.6 million. Gross margin increased to 58% in the first quarter 2010 from 56% in the prior year corresponding period.

Net income for the 2010 first quarter was $4.9 million, or $0.09 per diluted share, compared with $3.6 million, or $0.07 per diluted share, in the first quarter of 2009. Net margin increased to 33% in the first quarter 2010 from 30% in the prior year comparable period.

The Company's cash position at the end of the first quarter was $1.1 million, as compared to $3.9 million at the end of 2009. Its adjusted working capital ratio was 1.0X due to its adjusted current liabilities calculation. The adjusted current liability amount is $7,286,444 instead of $9,142,544 because current liabilities under Series A convertible redeemable preferred stock have been reduced to $621,333 as of May 13, 2010 after conversion of preferred shares to common shares.

CEO Dr. Liu commented, "We have delayed the buildup in Inner Mongolia to focus on our efforts in Beijing. We use our internally generated cash to fund the construction of the Beijing new building complex so that our dispersed operating units can be consolidated into one single location. We are positioning to capture the fast growing demand in the pharmaceutical sector by establishing the foundations of a modern facility, a pipeline of innovative drugs under patent protection and an excellent sales network."

2010 Earnings Guidance

Looking forward for the balance of 2010, the Company continues to expect to grow its revenues and net income by 20-30% compared to its performance in 2009. The growth drivers are growth in direct sales to OTC drug stores and hospitals, increased medical equipment sales and increased prescription drug sales.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," "project," "intent," "forecast," "anticipate," "plan," "planning," "expect," "believe," "will likely," "should," "could," "would," "may," or words or expressions of similar meaning. Such statements are not guarantees of future performance and could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including, but not limited to, changes from anticipated levels of sales, future national or regional economic and competitive and regulatory conditions, changes in relationships with customers, access to capital, increased costs, difficulties in developing and marketing new products, marketing existing products, customer acceptance of existing and new products, the time to get new drugs approved by the State Food and Drug Administration and other factors. Additional information regarding risks can be found in the Company's Annual Report on Form 10K and its other filings with the SEC. Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.

About Lotus Pharmaceuticals, Inc. (http://www.lotuspharma.com )

Lotus Pharmaceuticals, Inc. is a growing developer and producer of drugs and a licensed national seller of pharmaceutical items in the PRC. Lotus operates its business through its two controlled entities: Liang Fang Pharmaceutical, Ltd. and En Ze Jia Shi Pharmaceutical, Ltd. Lotus' current drug development is focused on the treatment of cerebro-cardiovascular disease, asthma, and diabetes. Liang Fang sells drugs directly and indirectly through its national sales channels to hospitals, clinics and drugs stores in 30 provinces of the PRC.

    For further information, please contact:

    Lotus Pharmaceuticals, Inc.
     Yan ZENG, CFO
     Tel:   +86-010-6389-9868
     Email: zy@lotuspharma.com



                    LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                                       As of
                                           March 31, 2010  December 31, 2009
                                              (Unaudited)        (Audited)
    ASSETS
    CURRENT ASSETS:
    Cash                                        $1,125,181        $3,945,740
    Accounts receivable                          1,669,704         1,784,194
    Other receivable                                16,135            16,132
    Inventories                                  3,301,050         1,039,867
    Prepaid expenses and other assets -
     current                                     1,091,909           856,691
    Deferred debt costs                                 --            52,226

    Total Current Assets                         7,203,979         7,694,850

    PROPERTY AND EQUIPMENT - net of
     depreciation                               21,309,774        16,223,775

    OTHER ASSETS
    Prepaid expenses - noncurrent                1,169,167         1,359,583
    Deposits and Installments on
     intangible assets                           9,215,781         9,214,299
    Intangible assets, net of accumulated
     amortization                               49,458,233        49,888,428

    Total Assets                               $88,356,934       $84,380,935

    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:
    Accounts payable and accrued expenses         $301,442          $427,924
    Other payables                               1,418,234         2,262,760
    Taxes payable                                2,481,808         3,131,908
    Unearned revenue                               795,620         1,163,771
    Due to related parties - current             1,668,007         1,490,649
    Series A convertible redeemable
     preferred stock, $.001 par value;
     10,000,000 shares authorized;
     2,847,623 and 4,967,959 shares
     issued and outstanding at March 31,
     2010 and December 31, 2009,
     respectively, net of discount               2,477,433         4,170,572



    Total Current Liabilities                    9,142,544        12,647,584

    LONG-TERM LIABILITIES:
    Due to related parties - noncurrent            859,819           866,102
    Notes payable - related parties              5,069,839         5,069,023

    Total Liabilities                           15,072,202        18,582,709


    STOCKHOLDERS' EQUITY:
    Common stock ($.001 par value;
     200,000,000 shares authorized;
     50,863,217 and 47,306,332 shares
     issued and outstanding at March 31,
     2010 and December 31, 2009,
     respectively)                                  50,863            47,306


    Additional paid-in capital                  18,192,431        15,649,328
    Statutory reserves                           6,240,202         5,674,324
    Retained earnings                           44,429,076        40,066,036
    Accumulated other comprehensive
     income                                      4,372,160         4,361,232

    Total stockholders' Equity                  73,284,732        65,798,226

    Total Liabilities and Stockholders'
     Equity                                    $88,356,934       $84,380,935




              LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
    UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

                                                 For the Three Months Ended
                                                         March 31,
                                                   2010               2009

    NET REVENUES:
     Wholesale                                  $11,498,086        $8,940,405
     Retail                                       3,252,392         2,137,188
     Other revenues                                 198,434           746,694

     Total Net Revenues                          14,948,912        11,824,287

    COST OF SALES                                 6,243,629         5,186,158

    GROSS PROFIT                                  8,705,283         6,638,129

    OPERATING EXPENSES:
     Selling expenses                             2,168,953         1,701,799
     General and administrative                   1,021,857           747,206

     Total Operating Expenses                     3,190,810         2,449,005

    INCOME FROM OPERATIONS                        5,514,473         4,189,124

    OTHER INCOME (EXPENSE):
     Debt issuance costs                            (52,226)          (99,517)
     Interest income                                  1,280             1,319
     Interest expense                              (432,402)         (448,097)

     Total Other Income (Expense)                  (483,348)         (546,295)

    INCOME BEFORE INCOME TAXES                    5,031,125         3,642,829

    INCOME TAXES                                    102,207            74,727

    NET INCOME                                   $4,928,918        $3,568,102

    COMPREHENSIVE INCOME:
     NET INCOME                                   4,928,918         3,568,102

     OTHER COMPREHENSIVE INCOME:
     Foreign currency translation gain               10,928            62,111

    COMPREHENSIVE INCOME                         $4,939,846        $3,630,213

    NET INCOME PER COMMON SHARE:
     Basic                                            $0.10             $0.08
     Diluted                                          $0.09             $0.07

    WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING:
     Basic                                       49,559,184        43,048,060
     Diluted                                     53,708,923        49,254,950




                 LOTUS PHARMACEUTICALS, INC. AND SUBSIDIARIES
               UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                               For the Three Months Ended
                                                          March 31,
                                                   2010              2009

    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                  $4,928,918        $3,568,102
    Adjustments to reconcile net income
     from operations to net cash
     provided by operating activities:
    Depreciation and amortization                  444,812           362,467
    Amortization of deferred debt
     issuance costs                                 52,226            99,517
    Amortization of discount on
     convertible redeemable preferred
     stock                                         151,553           288,783
    Amortization of prepaid expense
     attributable to warrants                           --            14,849
    Interest expense attributable to
     beneficial conversion feature of
     preferred shares                              184,660                --
    Stock-based compensation                        23,000                --
    Changes in assets and liabilities:
    Accounts receivable                            114,778         4,744,877
    Inventories                                 (2,261,039)           66,423
    Prepaid expenses and other current
     assets                                        208,214         1,329,083
    Accounts payable and accrued expenses          194,827          (666,522)
    Other current payables                        (844,890)               --
    Taxes payable                                 (650,611)       (3,027,383)
    Unearned revenue                              (368,342)          228,143
    Due to related parties                          90,697                --

    NET CASH PROVIDED BY OPERATING
     ACTIVITIES                                  2,268,803         7,008,339

    CASH FLOWS FROM INVESTING ACTIVITIES:
    Payments on intangible assets                       --        (4,965,976)
    Purchase of property and equipment          (5,090,025)       (2,153,243)

    NET CASH USED IN INVESTING ACTIVITIES       (5,090,025)       (7,119,219)

    CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from related party advances                --            59,314

    NET CASH PROVIDED BY FINANCING
     ACTIVITIES                                         --            59,314

    EFFECT OF EXCHANGE RATE ON CASH                    663             1,527

    NET DECREASE IN CASH                        (2,820,559)          (50,039)

    CASH - beginning of period                   3,945,740         1,278,808

    CASH - end of period                        $1,125,181        $1,228,769

    SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
    Cash paid for:
    Interest                                          $--                $--
    Income taxes                                      $--                $--

    Non-cash investing and financing
     activities:
    Common stock issued for services              $253,000          $249,000
    Common stock issued for conversion of
     convertible redeemable preferred
     stock                                      $2,166,000               $--
    Convertible redeemable preferred
     stock issued for dividend payable            $321,308          $400,000


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SOURCE Lotus Pharmaceuticals, Inc.
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