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Weikang Bio-Technology Reports First Quarter 2010 Financial Results

HARBIN, China, May 18 /PRNewswire-Asia-FirstCall/ -- Weikang Bio-Technology Group Co., Inc. (OTC Bulletin Board: WKBT) ("Weikang" or the "Company"), a leading developer, manufacturer and marketer of Traditional Chinese Medicine (TCM), Western prescription pharmaceuticals and other health and nutritional products in the People's Republic of China, today announced its financial results for the first quarter of fiscal year 2010 ended on March 31, 2010.

    First Quarter Highlights
    -- Revenue increased 38.1% year-over-year to a record $14.0 million
    -- Gross profit was a record $8.3 million with gross margin of 59.6%
    -- Net income increased 18% year-over-year to a record $4.5 million
    -- Fully diluted earnings per share were $0.17
    -- Non-GAAP net income was $5.5 million for non-GAAP fully diluted
       shares of $0.20
    -- Raised $2.5 million in private placement

"We are pleased to have achieved a record quarter in terms of revenue and net income. Moreover, we believe the strong quarter demonstrates our solid competitive position with our portfolio of proprietary therapeutics and ability to consistently expand our market penetration," commented Mr. Yin Wang, Chairman & CEO of Weikang Bio-Technology Group Co., Inc. "Both Tianfang and Weikang had strong sales growth as a result of our increased distribution network and market coverage."

Revenue was a record $14.0 million for the first quarter of 2010, up 38.1% from revenue of $10.1 million in the first quarter of 2009. Revenue from Tianfang was $8.9 million, or 64% of total sales, up 42.6% from revenue of $6.3 million in the first quarter of 2009. Tianfang increased market coverage by 20% throughout forty second- and third-tier cities. Revenue from Weikang was $5.0 million, or 36% of total sales, up 30.6% from revenue of $3.9 million in the first quarter of 2009.

Gross profit for the quarter increased 47.2% to $8.3 million from $5.6 million in the same period of 2009. Gross profit for Tianfang and Weikang was $4.7 million and $3.6 million, respectively. Gross margin for first quarter of 2010 was 59.6% compared to 55.9% in the first quarter of 2009. The increase in gross margin is the result of increased sales of higher margin products for both Tianfang and Weikang. Gross margin for Tianfang and Weikang was 53.0% and 71.3%, respectively.

Operating expenses were $2.0 million, or 14.0% of sales, compared to $0.6 million, or 6.3% of sales, in the first quarter of 2009. The increase in operating expenses was attributable to an increase in investor relations and consulting expenses. Adjusting for non-cash, stock-based compensation of $912,000, operating expenses were $1.0 million, or 7.5% of sales. The non-cash, stock-based compensation relates to the private placement done on January 20, 2010 and associated investor relation expense. The Company recorded $1.8 million as deferred compensation and amortized $912,000 as non-cash stock based compensation.

Operating income for the first quarter was $6.4 million, up 27.1% from $5.0 million in the first quarter of 2009. Operating margin was 45.6% compared to 49.6% in the same period a year ago. Adjusting for the previously mentioned non-cash, stock-based compensation, non-GAAP operating income was $5.5 million in the first quarter of 2010.

Net income was $4.5 million in the first quarter of 2010, up 17.8% from $3.9 million in net income from the same period a year ago. Net income for Tianfang and Weikang was $3.0 million and $2.5 million, respectively. Fully diluted earnings per share were $0.17 compared to fully diluted earnings per share of $0.15 in the first quarter of 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the first quarter of 2010 was $5.4 million and $0.20, respectively.

Financial Condition

As of March 31, 2010, Weikang Bio-Technology Group Co., Inc. had $18.1 million in cash and cash equivalents, $8.7 million in working capital and $14.2 million in total liabilities. Net cash provided by operating activities for the first quarter of 2010 was $4.9 million. Shareholders' equity stood at $31.1 million, up from $23.4 million at year-end 2009.

Recent Events

Mr. Ren Hu was appointed as Vice President of Finance as of May 5, 2010. Mr. Hu reports directly to the Chairman and CEO of the Company and is responsible for the public company capital market operations, including investor relations, SEC compliance and financing. Mr. Hu has over eleven years of work experience in Wall Street, including over five years in working for China based US public companies.

Business Outlook

Weikang intends to continue developing new products and expanding its distribution network throughout 2010. The Company has 10 therapeutics in various stages of the SFDA approval process and expects to launch its 10-HDA in the third quarter of 2010 and ShuangBaoGu by the end of 2010.

"The market opportunity for Traditional Chinese Medicine and Western medicine continues to expand in China as consumers' medical expenditure is estimated to double annually over the next two decades. We remain focused on our long-term growth and expanding our distribution network by increasing our wholesale network and dedicated sales force," Mr. Wang continued. "We also welcome Mr. Hu to the Weikang Bio-Technology executive team who will assist us in increasing our visibility in the investment community and enhancing our shareholder value as we continue to expand our market penetration."

About Weikang Bio-Technology Group Co., Inc.

Weikang Bio-Technology Group Co., Inc. is principally engaged in developing, manufacturing and distributing Traditional Chinese Medicine (TCM), and health and nutritional supplements in China, in compliance with requisite Chinese licenses and approvals. The Company is also expanding its business scope to develop, manufacture and distribute Chinese herbal extract products and GMP certified western prescription pharmaceuticals through its acquisition of Tianfang. For more information, please visit .

Use of Non-GAAP Financial Measures

To supplement Weikang Bio-Technology Group Co condensed consolidated financial statements presented on a GAAP basis, Weikang is providing certain income statement information that is not calculated according to GAAP. Weikang believes that its non-GAAP disclosures are useful in evaluating its operating results as this information supplies the user with another view of the matching of costs and expenses. A reconciliation of the adjustments to GAAP results for the three-month periods ended March 31, 2010 is included below. The non-GAAP information presented is supplemental and is not purported to be a substitute for information prepared in accordance with GAAP.

Non-GAAP financial results for the three month periods ended March 31, 2010 discussed in this release reflect operating results excluding the impact of the non-cash, stock-based compensation recognized under general and administrative expenses in connection to deferred compensation and associated investor relation expense related to its private placement financing in January 2010.

Safe Harbor Statement

This press release contains certain statements that may include "forward looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website ( All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

                           - FINANCIAL TABLES FOLLOW -

                    FOR THE THREE MONTHS ENDED MARCH 31, 2010

                                                        Three months ended
    Adjusted Net income                                   March 31, 2010
    Net Income (Loss) and Diluted EPS                 Net Income   Diluted EPS
    Adjusted Amount Non-GAAP                           5,453,445        0.20
      Non-cash compensation adjustment (1)               912,000        0.03
    Amount per consolidated statement
     of operations                                     4,541,445        0.17

    (1) Non-cash compensation expense in connection with the private placement
        done on January 20, 2010 and associated investor relation expense, the
        Company recorded $1.8 million as deferred compensation and amortized
        $912,000 as non-cash stock based compensation.

                            CONSOLIDATED BALANCE SHEETS

                                                   March 31,     December 31,
                                                     2010            2009
    ASSETS                                       (Unaudited)

         Cash & cash equivalents                 $18,098,606     $11,380,019
         Advances to suppliers and other
          receivables                                895,936          24,334
         Inventory                                   470,754         285,395
         Due from management                           1,745           1,745

            Total current assets                  19,467,041      11,691,493

         Property and equipment, net               9,945,642      10,162,946
         Construction in progress                    445,238              --
         Intangible assets                        15,488,871      15,558,731

            Total noncurrent assets               25,879,751      25,721,677

    TOTAL ASSETS                                 $45,346,792     $37,413,170


         Accounts payable                            $13,599         $12,668
         Unearned revenue                                 --          11,716
         Taxes payable                             2,453,471       2,247,410
         Other payables                            7,634,863       7,620,321
         Due to related party                         24,903              --
         Advance from officer                        650,000         650,000

             Total current liabilities            10,776,836      10,542,115


    DEFERRED TAX LIABILITY                         3,427,129       3,450,005

         Common stock, $.00001 par value;
          authorized shares 100,000,000;
          issued and outstanding shares
          27,984,388 and 25,486,800 at
          March 31, 2010 and December 31,
          2009, respectively                             280             255
         Additional paid in capital                4,781,720         139,245
         Deferred compensation                    (1,467,791)             --
         Statutory reserve                         1,321,806       1,069,507
         Accumulated other comprehensive
          income                                     850,151         844,526
         Retained earnings                        25,656,661      21,367,517

             Total stockholders' equity           31,142,827      23,421,050

     EQUITY                                      $45,346,792     $37,413,170


                                          THREE MONTHS ENDED MARCH 31,
                                 2010 Non-GAAP        2010           2009

    Net sales                     $13,958,540     $13,958,540    $10,111,207
    Cost of goods sold              5,640,302       5,640,302      4,461,585

    Gross profit                    8,318,238       8,318,238      5,649,622

    Operating expenses
         Selling expenses             691,259         691,259        432,843
         General and
          administrative expenses     348,179       1,260,179        206,469

         Total operating expenses   1,039,438       1,951,438        639,312

    Income from operations          5,454,800       6,366,800      5,010,310

    Non-operating income
        Interest income                16,244          16,244            245
         Financial expense               (522)           (522)          (110)
         Other income                     193             193        256,278
         Other expenses                  (161)           (161)       (12,859)

         Total non-operating
          income, net                  15,754          15,754        243,554

    Income before income tax        5,470,554       6,382,554      5,253,864
    Income tax                      1,841,109       1,841,109      1,400,259

    Net income                      5,453,445       4,541,445      3,853,605

    Other comprehensive income
         Foreign currency
          translation gain (loss)       9,307           9,307         (3,140)

    Comprehensive Income            5,479,861      $4,550,752     $3,850,465

    Basic and diluted weighted
     average shares outstanding    27,360,062      27,360,062     25,229,800

    Basic and diluted net earnings
     per share                          $0.20           $0.17          $0.15


                                                  THREE MONTHS ENDED MARCH 31,
                                                     2010            2009
         Net income                               $4,541,445      $3,853,605
         Adjustments to reconcile net
          income to net cash provided by
          operating activities:
         Depreciation and amortization               301,286         293,452
         Stock issued for consulting
          expenses                                    65,200              --
         Deferred compensation                       912,009              --
         Changes in deferred tax                     (23,834)        (25,204)
             (Increase) decrease in
              current assets:
         Advances to suppliers and
          other receivables                         (871,532)         (6,195)
                  Inventory                         (185,263)       (296,952)
             Increase (decrease) in
              current liabilities:
                  Accounts payable                       927              --
                  Unearned revenue                   (11,718)        (36,573)
                  Accrued liabilities and
                   other payable                      14,541           8,519
                  Taxes payable                      205,418         727,431

         Net cash provided by
          operating activities                     4,948,479       4,518,083

                  Construction in progress          (445,199)             --
                  Acquisition of property &
                   equipment                          (6,989)             --

         Net cash used in investing
          activities                                (452,188)             --

                  Changes in due from management          --         245,785
                  Net proceeds from shares
                   Issued                          2,197,500              --
                  Payment for purchase of
                   Tianfang                               --      (3,811,898)
                  Changes in due from related
                   party                              24,901              --

                Net cash provided by (used
                 in) financing activities          2,222,401      (3,566,113)

     CASH EQUIVALENTS                                   (105)          5,893

    INCREASE IN CASH & CASH EQUIVALENTS            6,718,587         957,863

     PERIOD                                       11,380,019          16,927

    CASH & CASH EQUIVALENTS, END OF PERIOD       $18,098,606        $974,790

    For more information, please contact:

    Company contact:
     Ren Hu, VP
     WeiKang Bio-Technology Group Co., Inc.
     US Tel: +1-201-887-0415
     China cell: +86-137-1872-8163

    Investors Relation contact:
     John Marco, Partner, Elite IR
     Tel:   +1-310-819-2948

     Leslie J. Richardson, Partner, Elite IR
     Tel:   +852-3183-0283

SOURCE Weikang Bio-Technology Group Co., Inc.
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