(Mark
One)
|
|
||
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
For the quarterly period ended:
|
June 30, 2008
|
OR
|
|||
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
||
For
the transition period from _______________ to ______________
|
Commission file number:
|
000-26059
|
CHINA
SKY ONE MEDICAL, INC.
|
(Exact
Name of Registrant as Specified in its Charter)
|
Nevada
|
87-0430322
|
||
(State
or Other Jurisdiction of Incorporation or
Organization)
|
(I.R.S.
Employer Identification No.)
|
||
Room 1706, No. 30 Di Wang Building, Gan Shui Road,
Nangang District, Harbin, People’s Republic of China 150001
|
|||
(Address of Principal Executive Offices)
|
(Zip Code)
|
||
86-451-53994073
(China)
|
|||
(Registrant’s
Telephone Number, Including Area Code)
|
|||
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
|
|
PAGE
|
|
PART I
|
-
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
|
Financial
Statements
|
1
|
Condensed
Consolidated Balance Sheets as of June 30, 2008 (unaudited) and
December
31, 2007
|
1
|
||
Condensed
Consolidated Statements of Income for the Three and Six Months
Ended June
30, 2008 and 2007 (unaudited)
|
2
|
||
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended
June 30,
2008 and 2007 (unaudited)
|
3
|
||
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
4
|
||
Item
2.
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
19
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
29
|
|
Item
4.
|
|
Controls
and Procedures
|
29
|
|
|||
PART II
|
-
|
OTHER
INFORMATION
|
|
|
|||
Item
1.
|
|
Legal
Proceedings
|
31
|
Item
1A.
|
Risk
Factors
|
31
|
|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
32
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
|
32
|
Item
5.
|
|
Other
Information
|
32
|
Item
6.
|
|
Exhibits
|
32
|
|
|||
Signatures
|
33
|
||
|
|||
Exhibit
Index
|
|
June
30, 2008
|
December 31, 2007*
|
||||||
(Unaudited)
|
|||||||
ASSETS
|
|||||||
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
|
* |
Derived from audited financial
statements for
the year ended December 31, 2007 (see Form 10-KSB Annual Report
filed with
the Securities and Exchange Commission on March 31,
2008).
|
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
(expense) income
|
(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
|
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 expenses
|
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
revenues
|
(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
|
$
|
-
|
|||
On
April 3, 2008, the Company acquired a 100% ownership interest
in
Heilongjiang Tianlong Pharmaceutical. Approximate net assets
acquired (see
note 2) consisted of the following:
|
|||||||
Fixed
assets
|
$
|
6,314,871
|
|||||
Intangible
assets
|
1,786,990
|
||||||
Other
|
170,000
|
||||||
Net
assets acquired
|
$
|
8,271,861
|
|||||
On
April 18, 2008, the Company acquired Heilongjiang Haina Pharmaceutical
Inc. ("Haina"). Approximate net assets acquired (see note 2)
consisted of
the following:
|
|||||||
Intangible
assets
|
$
|
437,375
|
1.
|
Description
of Business
|
2.
|
Acquisition
of Businesses
|
Fixed
assets
|
$
|
6,314,871
|
||
Intangible
assets
|
1,786,990
|
|||
Other
|
170,000
|
|||
Net
assets acquired
|
$
|
8,271,861
|
Intangible
assets
|
$
|
437,375
|
2008
|
2007
|
||||||
Revenues | $ | 36,723,407 | $ | 20,895,559 | |||
Operating Income | $ | 15,065,026 | $ | 7,249,262 | |||
Net Income | $ | 12,052,245 | $ | 5,935,209 | |||
Basic Earnings Per Share | $ | 0.85 | $ | 0.49 | |||
Diluted Earnings Per Share | $ | 0.78 | $ | 0.47 |
3.
|
Basis
of Preparation of Financial
Statements
|
4.
|
Summary
of Significant Accounting
Policies
|
Buildings
|
|
30 years
|
Land use rights
|
|
50 years
|
Furniture & equipment
|
|
5 to 7 years
|
Transportation
equipment
|
|
5 to 15 years
|
Machinery
|
|
7 to 14 years
|
4.
|
Summary
of Significant Accounting Policies
(continued)
|
4.
|
Summary
of Significant Accounting Policies
(continued)
|
4.
|
Summary
of Significant Accounting Policies
(continued)
|
4.
|
Summary
of Significant Accounting Policies
(continued)
|
In
February 2007, the FASB issued Statement No. 159 “The Fair Value Option
for Financial Assets and Financial Liabilities” (SFAS 159). This statement
permits companies to choose to measure many financial assets
and
liabilities at fair value. Unrealized gains and losses on items
for which
the fair value option has been elected are reported in earnings.
SFAS 159
is effective for fiscal years beginning after November 15, 2007.
The
adoption of SFAS 159, effective January 1, 2008, did not have
a material
impact on the Company’s financial statements.
|
In
September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157,
Fair Value Measurements
(“SFAS 157”). The statement provides enhanced guidance for using
fair value to measure assets and liabilities and also responds
to
investors’ requests for expanded information about the extent to which
company’s measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements
on
earnings. While the standard applies whenever other standards
require (or permit) assets or liabilities to be measured at fair
value, it
does not expand the use of fair value in any new circumstances.
Statement No. 157 is effective for financial statements issued
for fiscal
periods beginning after November 15, 2007. This statement did
not have a
material impact on the Company’s financial statements.
|
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) will change the accounting for
business combinations. Under SFAS No. 141(R), an acquiring entity
will be required to recognize all the assets acquired and liabilities
assumed in a transaction at the acquisition-date fair value with
limited
exceptions. SFAS No. 141(R) will change the accounting treatment and
disclosure for certain specific items in a business combination.
SFAS
No. 141(R) applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first
annual
reporting period beginning on or after December 15, 2008. SFAS 141(R)
will impact the Company in the event of any acquisition after
December 31,
2008.
|
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements—an amendment of Accounting Research
Bulletin No. 51” (“SFAS 160”). SFAS 160 establishes new accounting and
reporting standards for the non-controlling interest in a subsidiary
and
for the deconsolidation of a subsidiary. SFAS No. 160 is effective
for fiscal years beginning on or after December 15, 2008. The Company
does not believe that SFAS 160 will have a material impact on
the
Company’s financial statements.
|
In
March 2008, the FASB issued Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities
("SFAS 161"). This Statement will require enhanced disclosures
about
derivative instruments and hedging activities to enable investors
to
better understand their effects on an entity's financial position,
financial performance, and cash flows. It is effective for financial
statements issued for fiscal years and interim periods beginning
after
November 15, 2008, with early application encouraged. We are
assessing the impact of the adoption of this
Statement.
|
5.
|
Concentrations
of Business and Credit
risk
|
6.
|
Earnings
per Share
|
6.
|
Earnings
per share
(continued)
|
|
Three months ended June 30,
|
||||||
|
2008
|
2007
|
|||||
Numerator:
|
|||||||
Net
income used in calculation of basic and diluted earnings per
share
|
$
|
8,110,667
|
$
|
4,227,524
|
|||
|
|||||||
Denominator:
|
|||||||
Weighted-average
common shares outstanding used in calculation of basic earnings
per
share
|
14,971,652
|
12,084,938
|
|||||
Effect
of dilutive securities:
|
|||||||
Stock
options and equivalents
|
1,118,559
|
446,447
|
|||||
Weighted-average
common shares used in calculation of diluted earnings (loss)
per
share
|
16,090,211
|
12,531,385
|
|||||
|
|||||||
Net
income per share:
|
|||||||
Basic
|
$
|
0.54
|
$
|
0.35
|
|||
Diluted
|
$
|
0.50
|
$
|
0.34
|
|
Six months ended June 30,
|
||||||
|
2008
|
2007
|
|||||
Numerator:
|
|||||||
Net
income used in calculation of basic and diluted earnings per
share
|
$
|
11,975,578
|
$
|
5,781,644
|
|||
|
|||||||
Denominator:
|
|||||||
Weighted-average
common shares outstanding used in calculation of basic earnings
per
share
|
14,253,547
|
12,060,865
|
|||||
Effect
of dilutive securities:
|
|||||||
Stock
options and equivalents
|
1,118,559
|
443,980
|
|||||
Weighted-average
common shares used in calculation of diluted earnings per
share
|
15,
372,106
|
12,504,845
|
|||||
|
|||||||
Net
income per share:
|
|||||||
Basic
|
$
|
0.84
|
$
|
0.48
|
|||
Diluted
|
$
|
0.78
|
$
|
0.46
|
7.
|
Equity
and Share-based Compensation
|
8.
|
Securities
Purchase Agreement and Related
Transaction
|
|
·
|
The
right to receive additional shares of common stock from China
Sky One in
the event that the Company sells shares (or convertible securities
or
warrants convertible into or exercisable for common stock) prior
to
January 31, 2009 at per share price (or exercise or conversion
price) of
less than $10.00, in such amount so as to reduce the average
price paid by
such shareholder to the price per share being paid by the new
investors,
and
|
|
·
|
The
right to receive up to 3,000,000 shares deposited into escrow
by the
Company’s principal shareholder, in the event that fails to attain
Earnings Per Share, as adjusted of at least (i) $1.05 per share
for fiscal
year ended December 31, 2007 based on fully diluted shares outstanding
before the January 2008 offering (an aggregate of 13,907,696),
and/or (ii)
$1.63 per share for fiscal year ending December 31, 2008 based
on fully
diluted shares outstanding after the January 2008 Offering (an
aggregate
of 16,907,696 shares). While the Company has satisfied the criterion
of
(i) above for 2007, no assurance can be made that we will satisfy
our
earnings goal for 2008.
|
9.
|
Outstanding
Warrants and Options
|
|
Shares
Underlying
Warrants
|
Weighted
average
Exercise
Price
Warrants
|
Shares
underlying
Options
|
Weighted
average
Exercise
Price
Options
|
|||||||||
Outstanding as of January
1, 2006
|
25,000
|
$
|
1.50
|
-
|
|||||||||
Granted
|
1,650,000
|
2.58
|
163,500
|
$
|
3.45
|
||||||||
Exercised
|
-
|
-
|
-
|
-
|
|||||||||
Expired
or cancelled
|
-
|
-
|
-
|
-
|
|||||||||
Outstanding
as of December 31, 2006
|
1,675,000
|
2.57
|
163,500
|
$
|
3.45
|
||||||||
Granted
|
-
|
-
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
-
|
-
|
|||||||||
Expired
or cancelled
|
(161,667
|
)
|
3.19
|
-
|
-
|
||||||||
Outstanding
as of December 31, 2007
|
1,513,333
|
$
|
2.48
|
163,500
|
$
|
3.45
|
|||||||
Granted
|
750,000
|
12.50
|
-
|
-
|
|||||||||
Exercised
|
(277,502
|
)
|
3.03
|
-
|
-
|
||||||||
Expired
or cancelled
|
-
|
-
|
-
|
-
|
|||||||||
Outstanding
as of June 30, 2008
|
1,985,831
|
$
|
6.14
|
163,500
|
$
|
3.45
|
9.
|
Outstanding
Warrants and Options
(continued)
|
Exercise
Price
|
|
Outstanding
June 30,,
2008
|
|
Weighted
Average
Remaining
Life in
Years
|
|
Number
exercisable
|
|
|
$
|
2.00
|
|
1,000,000
|
|
1.08
|
|
1,000,000
|
|
$
|
3.50
|
|
235,831
|
|
.28
|
|
235,831
|
|
$
|
12.50
|
|
750,000
|
|
2.75
|
|
-
|
|
|
|
1,985,831
|
|
|
1,235,831
|
|
|
·
|
The
Class A Warrants are 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 Warrant-holders
under Rule 144, the Class A Warrants will be exercisable on a
cashless
basis.
|
|
·
|
The
Exercise Price and number of Warrant Shares will be subject to
adjustment
for standard dilutive events, including the 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.
|
|
·
|
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 $1.63 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, we fail 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.
|
9.
|
Outstanding
Warrants and Options
(continued)
|
|
·
|
If
a Warrant-holder exercises its Put Right under the Put Agreement
(as
previously defined above), such Warrant-holder’s right to exercise the
Class A Warrants shall be suspended, pending the satisfaction
of our
obligations to pay the Warrant-holder the applicable Repurchase
Price.
Upon receipt of the Repurchase Price in full by the Warrant-holder,
the
Warrant-holder’s right to exercise the Class A Warrants shall
automatically and permanently terminate and expire, and the Class
A
Warrants shall be immediately cancelled on the books of the
Company.
|
Exercise
Price
|
|
Outstanding
June 30 ,
2008
|
|
Weighted
Average
Remaining
Life in
Years
|
|
Exercisable
Options
|
|
Unvested
Options
|
|
|
$
|
3.00
|
|
50,000
|
|
.28
|
|
50,000
|
|
-
|
|
$
|
3.65
|
|
113,500
|
|
3.50
|
|
54,150
|
|
59,350
|
|
|
|
163,500
|
|
|
|
104,150
|
|
59,350
|
|
10.
|
Inventories
|
|
June 30, 2008
|
December 31,
2007
|
|||||
Raw
Material
|
$
|
296,666
|
$
|
252,318
|
|||
Supplemental
Material
|
233,152
|
32,296
|
|||||
Work-in-Process
|
411,108
|
57,337
|
|||||
Finished
Products
|
483,229
|
29,721
|
|||||
Total
Inventories
|
$
|
1,424,155
|
$
|
371,672
|
11.
|
Property
and Equipment
|
|
June 30, 2008
|
December 31,
2007
|
|||||
Buildings
|
$
|
7,120,444
|
2,861,011
|
||||
Machinery
and equipment
|
3,166,352
|
1,568,958
|
|||||
Land
use rights
|
1,148,066
|
563,469
|
|||||
Transportaion
equipment
|
786,718
|
318,779
|
|||||
Furniture
and equipment
|
228,693
|
96,501
|
|||||
Construction
in progress
|
2,248,177
|
2,113,957
|
|||||
Total
Property and Equipment
|
14,698,450
|
7,522,675
|
|||||
Less:
Accumulated Depreciation
|
(809,583
|
)
|
(661,243
|
)
|
|||
Property
and Equipment, Net
|
$
|
13,888,867
|
$
|
6,861,432
|
12.
|
Intangible
Assets
|
|
June 30, 2008
|
December 31,
2007
|
|||||
Patents
|
$
|
3,741,859
|
$
|
1,599,814
|
|||
Distribution
rights and customer lists
|
747,485
|
333,200
|
|||||
Total
Intangible Assets, net
|
$
|
4,489,344
|
$
|
1,933,014
|
13.
|
Taxes
Payable
|
|
June 30, 2008
|
December 31,
2007
|
|||||
Value Added Tax, net
|
$
|
1,433,931
|
$
|
612,602
|
|||
Enterprise
Income Tax
|
1,887,104
|
940,819
|
|||||
City
Tax
|
27,563
|
4,789
|
|||||
Other
Taxes and additions
|
55,100
|
8,978
|
|||||
Total
Taxes Payable
|
$
|
3,403,698
|
$
|
1,567,188
|
14.
|
Land
Use Rights Purchase
Agreement
|
(1)
|
Construction
of main workshop, R&D center and office using land area of 30,000
square meters. Construction started in May 2007 and is projected
to be
completed by end of 2008.
|
14.
|
Land
Use Rights Purchase Agreement
(continued)
|
(2)
|
Construction
of Second workshop and show room using land area of 20,000 square
meters.
Construction is expected to start in September 2008 to be completed
by
December 2009.
|
15.
|
Commitments
and Contingencies
|
|
June
30
|
|||||||||
|
2008
|
Variance
|
2007
|
|||||||
REVENUES
|
||||||||||
Product
Sales (net of sales allowance)
|
$
|
21,901,582
|
103
|
%
|
$
|
10,773,940
|
||||
Contract
Sales
|
1,847,010
|
(52
|
)%
|
3,871,307
|
||||||
Total
revenues
|
|
23,748,592
|
62
|
%
|
14,645,247
|
|||||
|
||||||||||
COST
OF GOOD SOLD
|
||||||||||
Cost
of good sold
|
5,522,314
|
67
|
%
|
3,308,648
|
||||||
Gross
Profit
|
$
|
18,226,278
|
61
|
%
|
$
|
11,336,559
|
|
Three
Months Ended June 30,
|
|
||||||||||||||||||||
|
2008
|
2007
|
Period-on-
|
|||||||||||||||||||
Product
category
|
Units
|
Sales
USD
|
%
of
Sales
|
Units
|
Sales
USD
|
%
of
Sales
|
period
Unit
Variance
|
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Spray
|
1,135,436
|
$ |
3,100,075
|
13
|
%
|
1,045,658
|
$ |
2,587,016
|
18
|
%
|
89,778
|
|||||||||||
Plaster
|
849,287
|
2,012,726
|
8
|
%
|
152,226
|
408,364
|
3
|
%
|
697,061
|
|||||||||||||
Ointment
|
3,538,944
|
6,559,479
|
28
|
%
|
464,170
|
807,126
|
6
|
%
|
3,074,774
|
|||||||||||||
Cleaning
liquid
|
550,237
|
796,469
|
3
|
%
|
380,716
|
487,920
|
3
|
%
|
169,521
|
|||||||||||||
Lose
weight series
|
1,086,170
|
6,013,639
|
25
|
%
|
404,109
|
4,270,031
|
29
|
%
|
682,061
|
|||||||||||||
Antihypertension
|
153,030
|
1,259,624
|
5
|
%
|
218,320
|
2,102,988
|
14
|
%
|
(65,290
|
)
|
||||||||||||
Contract
products
|
1,250,670
|
1,861,225
|
8
|
%
|
2,020,422
|
3,573,381
|
24
|
%
|
(769,752
|
) | ||||||||||||
Biochemical
products
|
429,943
|
2,145,355
|
10
|
%
|
177,950
|
408,421
|
3
|
%
|
251,993
|
|||||||||||||
Total
|
8,993,717
|
$ |
23,748,592
|
100
|
%
|
4,863,571
|
$ |
14,645,247
|
100
|
%
|
4,130,146 |
|
Three
Months Ended March 31,
|
|||||||||||||||||||||
|
2008
|
2007
|
Period-on-
|
|||||||||||||||||||
Product
category
|
Units
|
Sales
USD
|
%
of
Sales
|
Units
|
Sales
USD
|
%
of
Sales
|
period
Unit
Variance
|
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Spray
|
723,142
|
$ |
1,870,457
|
15
|
%
|
534,729
|
$ |
1,349,377
|
26
|
%
|
188,413
|
|||||||||||
Plaster
|
126,623
|
356,053
|
3
|
%
|
101,099
|
269,893
|
5
|
%
|
25,524
|
|||||||||||||
Ointment
|
1,163,937
|
1,476,118
|
12
|
%
|
417,680
|
618,889
|
12
|
%
|
746,257
|
|||||||||||||
Cleaning
liquid
|
353,423
|
495,714
|
4
|
%
|
245,810
|
296,365
|
6
|
%
|
107,613
|
|||||||||||||
Lose
weight series
|
261,100
|
1,984,588
|
16
|
%
|
9,127
|
64,503
|
1
|
%
|
251,973
|
|||||||||||||
Antihypertension
|
136,969
|
1,419,747
|
11
|
%
|
93,187
|
886,171
|
17
|
%
|
43,782
|
|||||||||||||
Contract
products
|
1,525,670
|
2,974,847
|
24
|
%
|
952,481
|
1,691,548
|
33
|
%
|
573,189
|
|||||||||||||
Biochemical
products
|
278,320
|
1,835,905
|
15
|
%
|
19,622
|
2,371
|
0
|
%
|
258,698
|
|||||||||||||
Total
|
4,569,184
|
$ |
12,413,430
|
100
|
%
|
2,373,735
|
$ |
5,179,116
|
100
|
%
|
2,195,449 |
|
Three
months ended June 30,
|
|||||||||
|
2008
|
Variance
|
2007
|
|||||||
Total
sales
|
$
|
23,748,592
|
62
|
%
|
$
|
14,645,247
|
||||
Cost
of goods sold
|
$
|
5,522,314
|
67
|
%
|
$
|
3,308,648
|
||||
Product
gross margin
|
77
|
%
|
77
|
%
|
|
Three
months ended June 30,
|
|||||||||
|
2008
|
Variance
|
2007
|
|||||||
Operating
Expenses
|
||||||||||
Research
and development
|
$
|
1,372,579
|
261
|
%
|
$
|
380,630
|
||||
Selling,
general and administrative
|
6,587,059
|
16
|
%
|
5,654,199
|
||||||
Depreciation
and amortization
|
139,004
|
1
|
%
|
137,587
|
||||||
Total
operating expenses
|
$
|
8,098,642
|
31
|
%
|
$
|
6,172,416
|
|
June
30
|
|||||||||
|
2008
|
Variance
|
2007
|
|||||||
REVENUES
|
||||||||||
Product
Sales (net of sales allowance)
|
$
|
32,797,580
|
133
|
%
|
$
|
14,098,586
|
||||
Contract
Sales
|
3,364,442
|
(41
|
)%
|
5,725,777
|
||||||
Total
revenues
|
|
36,162,022
|
82
|
%
|
19,824,363
|
|||||
|
||||||||||
COST
OF GOOD SOLD
|
||||||||||
Cost
of good sold
|
8,382,742
|
89
|
%
|
4,435,343
|
||||||
Gross
Profit
|
$
|
27,779,280
|
81
|
%
|
$
|
15,389,020
|
Six
Months Ended June 30,
|
||||||||||||||||||||||
2008
|
2007
|
Period-on-
|
||||||||||||||||||||
Product
category
|
Units
|
Sales
USD
|
%
of
Sales
|
Units
|
Sales
USD
|
%
of
Sales
|
period
Unit
Variance
|
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Spray
|
1,858,578
|
4,970,532
|
14
|
%
|
1,580,387
|
3,936,393
|
20
|
%
|
278,191
|
|||||||||||||
Plaster
|
975,910
|
2,368,779
|
7
|
%
|
253,325
|
678,256
|
3
|
%
|
722,585
|
|||||||||||||
Ointment
|
4,702,881
|
8,035,597
|
22
|
%
|
881,850
|
1,426,015
|
7
|
%
|
3,821,031
|
|||||||||||||
Cleaning
liquid
|
903,660
|
1,292,183
|
4
|
%
|
626,526
|
784,285
|
4
|
%
|
277,134
|
|||||||||||||
Lose
weight series
|
1,347,270
|
7,998,228
|
22
|
%
|
413,236
|
4,334,534
|
22
|
%
|
934,034
|
|||||||||||||
Antihypertension
|
289,999
|
2,679,371
|
7
|
%
|
311,507
|
3,989,159
|
15
|
%
|
(21,508
|
)
|
||||||||||||
Contract
sales
|
2,776,340
|
4,836,072
|
13
|
%
|
2,972,903
|
5,264,929
|
27
|
%
|
(196,563
|
)
|
||||||||||||
Bio-chemical
Products
|
708,263
|
3,981,260
|
11
|
%
|
197,572
|
410,791
|
2
|
%
|
510,691
|
|||||||||||||
Total
|
13,562,901
|
36,162,022
|
100
|
%
|
7,237,306
|
19,824,363
|
100
|
%
|
6,325,595 |
|
Six
Months Ended June 30,
|
|||||||||
|
2008
|
Variance
|
2007
|
|||||||