EX-99.1 2 v114950_ex99-1.htm Unassociated Document
Exhibit 99.1
Press Release
Source: Genesis Pharmaceuticals Enterprises, Inc.
 
Genesis Pharmaceuticals Reports Results for the Third Quarter of Fiscal Year 2008
 
Thursday May 15, 5:57 pm ET 
 
LAIYANG, China, May 15 /Xinhua-PRNewswire-FirstCall/ -- Genesis Pharmaceuticals Enterprises, Inc. (OTC Bulletin Board: GTEC - News; "Genesis" or the "Company"), a U.S. pharmaceutical company with its principal operations in the People's Republic of China, today announced its financial results for the quarter ended March 31, 2008, the Company's third quarter of its fiscal year ended June 30, 2008. A 10QSB Form was filed for the quarter with the U.S. Securities Exchange Commission that is available through the Company's website and from the SEC.
 
Third Quarter 2008 Highlights:
-- Revenue totaled $28.1 million, up 48.5% year-over-year
-- Gross profit totaled $21.8 million, up 60.7% year-over-year
-- Gross margin was 77.4%, compared to 71.5% a year ago
-- Net income rose to $4.5 million, up 138.46% from the quarter ended March 31, 2007, $0.01 per basic and diluted share
-- Engaged Moore Stephens Wurth Frazer & Torbet, LLP as independent auditor
 
"We are pleased to report financial results that confirm the growing popularity of our products. Our best selling products continue to be Clarithromycin sustained-release tablets and Itopride Hydrochloride granules. Sales for Baobaole chewable tablets, our first Chinese herbal over the counter drug product, have grown rapidly since we introduced it at the end of 2007," said Mr. Cao Wubo, Chairman and CEO of Genesis Pharmaceuticals Enterprises, Inc. "We have several new drugs that are still in various stages of approval from China's State Food and Drug Administration, and we believe that we will be able to introduce four new drugs in the near future."
 
Third Quarter of Fiscal Year 2008 Results
 
Total revenue in the third quarter ended March 31, 2008 was $28.1 million, up 48.5% from $18.9 million in the prior year's period. This increase in revenue was mostly due to increased sales of the Company's two most popular products, Clarithromycin sustained-release tablets and Itopride Hydrochloride Granules as well as sales of Baobaole chewable tablets, which grew rapidly from the time the product was first launched in the second quarter of fiscal year 2008.
 
Gross profit in the third quarter ended March 31, 2008 totaled $21.8 million, an increase of 60.7% from $13.5 million in the prior year's period. Gross margin was 77.4%, compared to 71.5% in the prior year's period. The increase of gross profit was due to increased sales of higher profit margin products, better control over raw material purchases and more efficient manufacturing.
 
Research and development expenses in the third quarter ended March 31, 2008 totaled $1.0 million, up slightly from the prior year's period. These research and development expenses were related primarily to payments to the two research institutes with which the Company has collaborative agreements.
 
Selling, general and administrative expenses in the third quarter ended March 31, 2008 totaled $12.1 million, up 25.6% from $9.7 million in the prior year's period. The majority of this increase was because of an increase in commissions to sales representatives. Starting January, 2008, the Company increased its sales commissions to provide better incentives to its sales representatives. Administrative expenses related to being a public company also increased in fiscal year 2008.
 
Operating income in the third quarter ended March 31, 2008 totaled $8.7 million, a 195.8% increase from $2.9 million in the prior year's period, representing operating margin of 30.8%.
 
Other expenses in the third quarter ended March 31, 2008 totaled $2.0 million, compared to $80,000 in the prior year's period. The significant increase in the Company's other expense was related primarily to a $1.2 million unrealized loss on trading securities, a $0.5 million amortization expense on discounted debt and a $0.2 million loss from discontinued operations.
 
Net income for the third quarter ended March 31, 2008 totaled $4.5 million, which is $0.01 per basic and fully diluted share, up 138.46% from net income of $1.9 million, which was $0.02 per basic and fully diluted share for the corresponding period in fiscal year 2007. This decrease in earnings per basic and fully diluted shares was due to additional shares and warrants being issued in connection with the reverse merger that took place in October 2007, subscriptions and exercised options.
 
 
 
 
 
Nine Month Operating Highlights
 
Total revenue in the first nine months of fiscal year 2008 was $71.3 million, up 27.6% from $55.8 million in the nine month period ended March 31, 2007. Gross profit was $53.5 million, up 33.4% from $40.1 million in the prior year's period. Gross margin was 75.1%, up from 71.8% in the prior year's period. Operating income totaled $22.1 million, a 97.4% increase from $11.2 million in the prior year's period. The Company's operating margin increased to 31.0%, up from 20.0% in the prior year's period. Net income in the nine month period ended March 31, 2008 totaled $12.9 million, or $0.05 per fully diluted share, up 73.7% from net income of $7.4 million, or $0.08 per fully diluted share, in the nine month period ended March 31, 2007. The decrease in earnings per basic and fully diluted shares was due primarily to an increase in shares outstanding in the nine months ended March 31, 2008.
 
Financial Condition
 
As of March 31, 2008, the Company had $21.6 million in cash and $3.5 million in restricted cash. Working capital was $30.8 million, up from $16.0 million as of June 30, 2007. Current liabilities were $25.8 million, and long- term debt consisted of $0.7 million in convertible debt, net of a $4.3 million discount. Research and Development Obligations were $11.9 million to be paid over the next five years. Shareholder's equity was $54.1 million. The Company generated $17.7 million in cash flow from operating activities in the first nine months of fiscal 2008. Capital expenditures totaled $8.6 million, due primarily to the purchase of the land use rights for future manufacture facility expansion.
 
Business Outlook
 
Genesis Pharmaceuticals Enterprises, Inc. has five drugs currently approved by the Chinese State Food and Drug Administration, three of which are listed on the national insurance catalog for reimbursement. In addition, sales of the newly launched, Traditional Chinese Medicine over the counter drug, Baobaole chewable tablets, are expected to increase. The Company has several new drugs waiting for government manufacturing and sales approvals.
 
"We are pleased to report another strong quarter of operations," stated Mr. Cao. "We look forward to receiving approvals for several new drugs that we have submitted to the government for manufacturing and distribution approval. We are increasing the efficiency of our manufacturing processes, and believe that our extensive sales network will allow us to further increase sales of our products throughout China. We look forward to continuing to generate positive financial results."
 
Conference Call
 
Genesis Pharmaceuticals Enterprises, Inc. management will host a conference call at 10:00 a.m. Eastern on Friday, May 16, 2008 to discuss financial results for the quarter ended March 31, 2008. The conference call will include Mr. Cao Wubo, Chairman and Chief Executive Officer; Mr. Haibo Xu, COO; and Ms. Elsa Sung, CFO. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 482-0024. International callers should call (617) 801-9702. The Conference Passcode is 514 344 81. If you are unable to participate in the call at that time, replay of the conference call will be available from 12:00 p.m. Eastern on May 16 through Friday, May 30. To access the replay, please call (888) 286-8010. International callers should call (617) 801-6888. The Conference Passcode is 91325898.
 
 
 
 
 
About Genesis Pharmaceuticals Enterprises, Inc.
 
Genesis Pharmaceuticals Enterprises, Inc. is a U.S. public company engaged in the research, development, production, marketing and sales of pharmaceutical products in the People's Republic of China. Its operations are located in Northeast China in an Economic Development Zone in Laiyang City, Shandong province. Genesis is a major pharmaceutical company in China producing tablets, capsules, and granules for both western and Chinese herbal- based medical drugs. For more information about the Company, refer to http://www.Genesis-China.net .
 
Safe Harbor Statement
 
Certain statements in this press release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the Company's actual results and financial position to differ materially from those included within the forward-looking statements. Forward-looking statements involve risks and uncertainties, including those relating to the Company's ability to introduce, manufacture and distribute new drugs. Actual results may differ materially from predicted results, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company's ability to obtain raw materials needed in manufacturing, the continuing employment of key employees, the failure risks inherent in testing any new drug, the possibility that regulatory approvals may be delayed or become unavailable, patent or licensing concerns that may include litigation, direct competition from other manufacturers and product obsolescence. More information about the potential factors that could affect the Company's business and financial results is included in the Company's filings, available via the United States Securities and Exchange Commission.
 
 
 
 


GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)

   
Three months ended
  
Nine months ended
  
 
  
March 31
  
March 31
  
 
  
2008
  
2007
  
2008
  
2007
  
REVENUES:
                  
Sales
 
$
26,231,191
  
$
18,472,649
  
$
66,648,051
  
$
52,876,082
  
Sales - related party
   
1,869,092
    
455,580
    
4,611,849
    
2,963,871
  
TOTAL REVENUE
   
28,100,283
    
18,928,229
    
71,259,900
    
55,839,953
  
                           
COST OF SALES
   
6,337,822
    
5,388,811
    
17,744,379
    
15,724,047
  
                           
GROSS PROFIT
   
21,762,461
    
13,539,418
    
53,515,521
    
40,115,906
  
                           
RESEARCH AND DEVELOPMENT EXPENSE     967, 930      953, 560      2,170,240      10,441,060   
                           
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
   
12,136,164
    
9,658,803
    
29,269,330
    
18,491,304
  
                           
INCOME FROM OPERATIONS
   
8,658,367
    
2,927,055
    
22,075,951
    
11,183,542
  
                           
OTHER (INCOME)
                          
EXPENSE, NET
                          
Other expenese, net
   
1,217,477
    
--
    
1,136,534
    
--
  
Non-operating (income) expense
   
(529
)
  
11,224
    
(232
)
  
5,642
  
Interest expense, net
   
526,509
    
69,233
    
925,993
    
204,671
  
Loss from discontinued business
   
228,812
    
--
    
341,743
    
--
  
OTHER EXPENSE,
                          
NET
   
1,972,269
    
80,457
    
2,404,038
    
210,313
  
                           
INCOME BEFORE PROVISION FOR INCOME TAXES
   
6,686,098
    
2,846,598
    
19,671,913
    
10,973,229
  
                           
PROVISION FOR INCOME TAXES
   
2,211,265
    
970,025
    
6,808,625
    
3,567,857
  
                           
NET INCOME
   
4,474,833
    
1,876,573
    
12,863,288
    
7,405,372
  
                           
OTHER COMPREHENSIVE INCOME:
                          
Unrealized (loss) gain on marketable securities
   
(270,351
)
  
--
    
1,347,852
        
Foreign currency translation adjustment
   
1,960,948
    
368,537
    
3,428,779
    
673,047
  
                           
COMPREHENSIVE INCOME
 
$
6,165,430
  
$
2,245,110
  
$
17,639,919
  
$
8,078,419
  
                           
WEIGITED AVERAGE
                          
NUMBER OF SHARES:
                          
Basic
   
389,605,134
    
84,545,655
   
260,297,377
    
84,131,121 
  
Diluted
   
393,292,698
    
90,950,796
   
263,271,624
    
89,658,922 
  
                           
EARNINGS PER SHARE:
                          
Basic
 
$
0.01
  
$
0.02
  
$
0.05
  
$
0.09
  
Diluted
 
$
0.01
  
$
0.02
  
$
0.05
  
$
0.08
  

 
 
 
 
GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2008

ASSETS
CURRENT ASSETS:
  
 (Unaudited)
  
Cash
 
$
21,574,044
  
Restricted cash
   
3,488,604
  
Marketable equity securities
   
2,112,500
  
Accounts receivable, net of allowance for doubtful accounts of $62,625
   
20,589,289
  
Accounts receivable - related parties
   
2,019,278
  
Inventories
   
5,542,846
  
Other receivables
   
284,908
  
Other receivables - related parties
   
85,680
  
Advances to suppliers
   
894,741
  
Other assets
   
2,271
  
Total current assets
   
56,594,161
  
         
PLANT AND EQUIPMENT, net
   
11,081,056
  
         
OTHER ASSETS:
        
Restricted marketable securities
   
2,826,413
  
Debt issuance cost, net
   
306,825
  
Intangible assets, net
   
9,777,832
  
Total other assets
   
12,911,070
  
         
Total assets
 
$
80,586,287
  
 
 
 
 

LIABILITIES AND
SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
      
Accounts payable
 
$
3,448,086
  
Short term bank loans
   
2,713,200
  
Notes payable
   
3,488,604
  
Other payables
   
3,736,397
  
Other payables - related parties
   
28,560
  
Accrued liabilities
   
545,885
  
Liabilities assumed from reorganization
   
1,352,997
  
Taxes payable
   
10,521,050
  
Total current liabilities
   
25,834,779
  
 
        
CONVERTIBLE DEBT, net of discount $4,328,704 as of March 31, 2008
   
671,296
  
         
COMMITMENTS AND CONTINGENCIES
   
--
  
         
SHAREHOLDERS' EQUITY:
        
Common Stock ($0.001 par value, 600,000,000 shares authorized, 390,478,760 shares issued and outstanding)
   
390,480
  
Paid-in-capital
   
22,803,151
  
Capital contribution receivable
   
(7,711,000
)
Retained earnings
   
28,934,053
  
Statutory reserves
   
3,740,456
  
Accumulated other comprehensive income
   
5,923,072
  
Total shareholders' equity
   
54,080,212
  
Total liabilities and shareholders' equity
 
$
80,586,287
  

 
 
 

GENESIS PHARMACEUTICALS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
    2008  
2007 
  
Net income
  
$
12,863,288
  
$
7,405,372
  
Loss from discontinued operations
    
341,743
    
--
  
Income from continued operations
    
13,205,031
    
7,405,372
  
Adjustments to reconcile net income to cash provided by (used in) operating activities:
              
Depreciation
    
375,456
    
253,063
  
Amortization of intangible assets
    
113,578
    
75,772
  
Amortization of debt issuance costs
    
47,583
    
--
  
Amortization of debt discount
   
671,296
    
--
  
Allowance for bad debts
    
(112,459
)
      
Loss on sale of marketable securities
   
19,819
    
--
  
Unrealized loss on marketable securities
   
1,150,516
    
--
  
Deferred compensation expense
    
28,750
    
--
  
Change in operating assets and
liabilities
              
Accounts receivable
    
(7,246,740
)
  
(3,308,650
)
Accounts receivable - related parties
   
(1,403,383
)
  
(245,420
)
Notes receivables
    
59,790
    
(29,473
)
Inventories
    
27,542
    
1,065,113
  
Other receivables
   
(254,886
)
  
(937
)
Other receivables - related parties
   
(81,384
)
      
Advances to suppliers
    
(488,064
)
  
(10,316
)
Other assets
    
96,538
    
1,282,175
  
Accounts payable
    
1,159,105
    
(2,324,940
)
Accrued liabilities
   
301,290
    
58,191
  
Other payables
    
2,146,659
    
(1,355,440
)
Other payables - related parties
    
(962,509
)
  
(592,232
)
Liabilities from discontinued operations
    
(1,162,133
)
  
--
  
Taxes payable
   
10,006,057
    
2,011,128
  
Net cash provided by operatingactivities
   
17,697,452 
    
4,283,404 
  
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Proceeds from sale of marketable securities
    
605,882
    
--
  
Payment for land use right
    
(8,246,830
)
  
--
  
Purchase of equipment
   
(401,302
)
  
(58,469
)
Cash receipt from reverse acquisition
   
534,950
    
--
  
Net cash used in investing activities
    
(7,507,300
)
  
(58,469
)
               
CASH FLOWS FINANCING ACTIVITIES:
              
Proceeds from sale of common stock
    
337,500
    
--
  
Proceeds from sale of treasury stock
   
1,977
    
--
  
Payments for dividend
   
(10,520,000
)
  
--
  
Payments for debt issuance cost
    
(354,408
)
  
--
  
Proceeds from convertible debt
    
5,000,000
    
--
  
Proceed from officers
   
27,128
    
--
  
Payments for bank loans
   
(5,425,600
)
  
(1,273,300
)
Proceeds from bank loans
   
3,255,360
    
--
  
Notes payable
   
5,361,849
    
725,702
  
Restricted cash
   
(5,361,849
)
  
(725,702
)
Net cash used in financing activities
   
(7,678,043
)
  
(1,273,300
)
               
EFFECTS OF EXCHANGE RATE CHANGE IN CASH
    
1,324,727
    
166,101
  
               
INCREASE IN CASH
    
3,836,836
   
3,117,736
  
               
CASH, beginning of the period
    
17,737,208
    
3,371,598
  
               
CASH, end of the period
  
$
21,574,044
  
$
6,489,334
  

 
 
 

For more information, please contact:

Genesis Pharmaceuticals Enterprises, Inc.
Ms. Elsa Sung CFO
Tel: +1-954-727-8436
Email: genesispharm@gmail.com
Web: http://www.genesis-china.net

CCG Elite Investor Relations, Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgelite.com


Source: Genesis Pharmaceuticals Enterprises, Inc.